CONTENTS
vii Abbreviations
ix Definitions of Evaluation Terms
xi Acknowledgments
xiii Foreword
xv Avant-propos
xvii Prologo
xix Executive Summary
xxv Resume analytique i
xxxiii Resumen
xxxix IFC Management Response to IEG-IFC
xliii Chairperson's Summary: Committee on Development Effectiveness (CODE)
1 1 Study Objective, Report Organization, and Methodology
3 Key Evaluative Questions
3 Evaluation Scope, Methodology, and Study Limitations
7 2 IFC Support of MSMEs in Frontier Countries, FY94-FY06
9 Supporting MSMEs Is Pivotal for Private Sector Development
9 Paradigm Shift Helped IFC's Entry and Current Major Role in Global Microfinance
11 IFC Strategic Priorities: MSME Supportand a Focus on Frontier Countries
12 MSME-FI Operations in Frontier Countries Are Consistent with Strategic Priorities
13 Project Design Parameters for Commercially Oriented MFIs
14 Different Types of Financial Entities Used to Support Microenterprises
15 Introduction of MFI Holding Company Structure
16 IFC's Recent (Not Operationally Mature) MFI Projects
18 IFC Support Involves a Combination of Financing and Advisory Services
21 3 Evaluation of the MFI Projects
23 MFIs Maintain High-Quality Loan Portfolios and Many Clients 26 MFIs Achieved Early Profitability
28 Foreign Currency Loans Are Crucial for MFIs but Have Consequences
29 Successful Development Outcome Ratings for High Percentage of Projects
29 Savings Services for Poor Households and Small Businesses
30 The Need to Transition Out of Donor Dependency
30 IFC Equity Investment Returns in MFIs
32 Regions with Better Development and IFC Equity Outcomes
33 Seven Major Factors Contributed to High Development-Outcome Success Rates
33 IFC's Role and Contribution
37 4 Evaluation of the SME-FI Projects
39 SME-FI Borrower Base and Returns on Equity
39 SME-FI Development Outcome Success Rate
42 Savings Services for Households and Businesses, and Credit for SMEs
43 IFC's Investment Outcome Success Rate in the SME-FIs
43 Performance of IFC Equity Investments in the SME-FIs
44 Regional SME-FI Success Rates
44 Advisory Services Contributed to Success
45 Six Major Factors Drive the Development Outcome Success Rate
45 IFC Work Quality and Contribution Played Major Roles
47 5 EHS Performance of Projects in the Evaluated Populations
49 EHS Requirements for MSME-FIs and Their Subprojects
50 EHS Compliance Requirements and Rates
50 MSME-FI Subprojects Achieved Higher EHS Compliance Rates
51 EHS Appraisal Work and Supervision
52 Subprojects with Medium Risk in IFC's EHS Framework
52 Developing the Use of Local EHS Consultant Capacity
53 EHS Success Factors for MSMEs
53 New EHS Inititatives to Improve Supervision
55 6 Main Findings and Recommendations
57 Evaluation Findings and Conclusions
59 Findings and Conclusions Specific to MFIs
60 Findings and Conclusions Specific to SME-FIs
60 Recommendations
63 Appendixes
65 A: List of Frontier Countries
69 B: Evaluation Ratings of MSME-FI Projects
71 C: lEG's Evaluation Methodology and Guidelines for Project Performance Ratings
75 D: Indicators Used for Evaluating the Development Outcomes of MSME-FI
Projects
77 E: Brief Descriptions of MFl and SME-FI Lending Techniques
79 Endnotes
85 References
Boxes
25 3.1 Microenterprises Use Loans to Expand Business
34 3.2 Success Drivers Also Apply to Public Sector MFIs
42 4.1 SMEs in Frontier Countries Use Loans to Expand Business
46 4.2 IEG Findings on World Bank Lines-of-Credit Operations
Figures
12 2.1 IFC's Annual Net Commitments to Microfinance Intermediaries, FY94-FY06
13 2.2 IFC's Annual Net Commitments to SME-FIs, FY94-FY06
13 2.3 Regional Distribution of IFC Net Commitments to MSME-FIs and Other Commercial Banks, FY94-FY06
17 2.4 Ownership and Funding Sources for Profit-Oriented MFIs: Holding Company Structure
18 2.5 Ownership and Funding Sources for Profit-Oriented MFIs; Financial
Institution or NGO Sponsor Structure
26 3.1 Advisory Services Funding to MFIs in the Evaluated Population
41 4.1 Development and Investment Outcomes of SME-FIs, by Project Type
43 4.2 Investment-Outcome Success Rate Results for SME-FIs, by Asset Size
Tables
5 1.1 WBG Definitions of Micro, Small, and Medium Enterprises
5 1.2 Regional Distribution of SME-FIs in the Evaluated Population and Subgroup
24 3.1 Financial Performance Data for MFIs in the Evaluated Population
27 3.2 Returns on Invested Capital for MFIs
31 3.3 Outcome Success Rates for Proj'ects in the MFI Evaluated Population
32 3.4 Outcome Success Rates for Aggregate Regional SME-FI Projects
40 4.1 Financial Performance Data for a Subgroup of 36 SME-FIs in the Evaluated Population
41 4.2 Outcome Success Rates for Regional SME-FI Projects
44 4.3 Advisory Services to SME-FIs in the Evaluated Population Improved
Development Outcome Success Rates
45 4.4 High IFC Appraisal Work Quality Is Another Development Outcome
Success Driver
51 5.1 EHS Satisfactory Ratings