Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review
MSME Access to Finance Project (P152276)

Report Number: ICRR0023579

1. Project Data

Project ID Project Name
P152276 MSME Access to Finance Project

Country Practice Area(Lead)
Belarus Finance, Competitiveness and Innovation

L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD)
IBRD-86960 31-Dec-2022 59,187,417.57

Bank Approval Date Closing Date (Actual)
28-Sep-2017 31-Dec-2022

IBRD/IDA (USD) Grants (USD)

Original Commitment 60,000,000.00 0.00

Revised Commitment 59,940,000.00 0.00

Actual 59,187,417.57 0.00

Prepared by Reviewed by ICR Review Coordinator Group
Burcin Pamuksuz Avjeet Singh Avjeet Singh IEGSD (Unit 4)

2. Project Objectives and Components

DEVOBJ_TBL
a. Objectives
According to Schedule 1 of the Loan Agreement (p.5), the project development objective (PDO) was “to
improve access to finance for MSMEs and enhance the governance and institutional capacity of the
Borrower.” The Project Appraisal Document-PAD (p.5) emphasized the MSMEs as “private MSMEs.” The
Borrower is defined as the Development Bank of the Republic of Belarus (DBRB).

This review will assess the project outcome based on the objective parsed as follows:

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MSME Access to Finance Project (P152276)

Objective 1: To improve access to finance for MSMEs

Objective 2: To enhance the governance and institutional capacity of the Borrower

b. Were the project objectives/key associated outcome targets revised during implementation?
No

c. Will a split evaluation be undertaken?
No

d. Components
The project consisted of three components and was to be implemented by DBRB.

Component 1: Line of Credit to MSMEs (Estimated Cost at Appraisal: US$ 56.2 million; Estimated Cost
After Restructuring: US$ 59.4 million; Actual Cost at Closing: US$ 58.94 million): This component was to
provide funds to DBRB for on-lending through Participating Financial Institutions (PFIs) to Micro, Small and
Medium Enterprises (MSMEs). The DBRB was to select PFIs for on-lending to MSMEs (pursuant to criteria
agreed with the World Bank). The line of credit (LoC) was to be open for participation by all banks meeting
the eligibility criteria. The selected PFIs were, in turn, to finance MSMEs (the final beneficiaries of the credit
line), which were to be determined according to the criteria agreed with the World Bank. The sub-loans
were originally in USD. The credit risk of MSMEs was to be assumed by the PFIs. The LoC was to finance
longer-term investments and working capital. The interest rates for the sub-loans extended to final
beneficiaries were to be market-based. In addition, interest and sub-loan repayments were to fund a
Revolving Fund to finance additional sub-projects using the same eligibility criteria and terms as the original
LoC.

Component 2: Institutional Strengthening of DBRB (Estimated Cost at Appraisal: US$ 3.25 million;
Estimated Cost After Restructuring: US$ 0.6 million; Actual Cost at Closing: US$ 0.05 million): This
component was to finance technical assistance (TA) activities as well as procurement of hardware,
software, and system design services for DBRB. These activities were to build on the World Bank (WB)
assessments (2014 Development Module Financial Sector Assessment Program-FSAP and 2016
International Monetary Fund/WB FSAP Update). The areas of TA were to include: (a) strengthening the
functioning of DBRB, including establishing robust operating principles, policies, procedures, and
governance; design and roll-out of new finance instruments; setting up and implementing monitoring,
disclosure, and evaluation practices, and impact assessment methodologies; (b) implementation of DBRB’s
IT strategy to enhance internal systems and ICT processes; and (c) knowledge and awareness-raising
activities (d) capacity building activities to support PFIs and MSMEs.

Component 3: Project Management and Implementation (Estimated Cost at Appraisal: US$ 0.55 million;
Estimated Cost After Restructuring: None; Actual Cost at Closing: None): This component was to support
day-to-day functions of the project implementation unit (PIU) established within the DBRB and related
operational costs. The component was to finance operating costs related to the supervision of
environmental safeguards, financial management, procurement, project management, monitoring, and
translation and interpretation services. It was also to invest in software and hardware to create an MSME
support program database for project monitoring and reporting.

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Revised Components: The activities related to procuring hardware, software, and design of the budgeting
system under Component 2 were realized using the Borrower’s resources. In addition, the project
management activities originally envisioned under Component 3 had been carried out by DBRB’s
staff. These changes necessitated a restructuring and reallocating funds from Components 2 and 3 to
Component I but did not impact the project's scope (please see paragraph on Restructurings below for
details). To increase attractiveness and accelerate disbursements, the Bank and the PIU made some
adjustments in implementing the LoC. Firstly, flexibility to on-lend funds in Euros and US Dollars was
introduced—this increased demand from exporting MSMEs with EUR earnings, which would be hedged
against foreign-exchange risk. Secondly, one of the eligibility criteria for sub-borrowers (coverage ratio) was
replaced by the current ratio, considering the other credit line implementations of the World Bank in the
region. Lastly, the grace periods were extended. These latter three adjustments were not part of the
Restructuring.

e. Comments on Project Cost, Financing, Borrower Contribution, and Dates
Project Cost: The project cost estimated at appraisal was US$60 million. The actual cost at closing was
US$ 58.99 million. According to the ICR data sheet, the actual disbursement amount is US$ 59.18 million.
According to the information provided by the project team, this results from differences in the exchange rate
between the Euro and the US dollar, which varied significantly during the operation’s lifetime.

Financing: The project was financed through an IBRD loan, and the Republic of Belarus issued a payment
guarantee. The Bank’s financing estimated at appraisal was US$ 60 million. At project closing, actual
disbursements were US$ 58.99 million.

Borrower’s Contribution: At appraisal, no Borrower’s contribution was foreseen, and none materialized at
closing.

Dates: The project was approved on September 28, 2017, and became effective on April 19, 2018. The
project was closed on the initially envisaged date, December 31, 2022.

Restructurings:

The project had one restructuring (April 15, 2020). The purpose of the restructuring was to reallocate a total
of US$3.2 million from Components 2 and 3 to Component 1. The ICR reports that a large share of activities
under Component 2 were related to the procurement of IT hardware software and the design of a budgeting
system. These activities were carried out using the Borrower’s own resources for a total amount of US$4.5
million. (ICR, p.9). Furthermore, the allocated amount under Component 3 for project management was not
used, as the relevant activities were implemented by DBRB’s staff without using external TA services. With
the reallocation, the budget for Component 1 reached US$59.4 million, while the budget for Component 2
was reduced to US$0.6 million to finance remaining institutional activities. According to the information
provided by the TTL, the remaining funds under Component 2 (roughly US$233,000) were intended to
support strategic initiatives in line with DBRB’s business plan, including a) strengthening the capacity of
DBRB to develop and implement venture financing and conduct a diagnostic and training on export
financing line with the bank’s strategic plan, b) supporting knowledge events and capacity building for
SMEs, and c) capacity building for PFIs (see Table 3 below). The onset of the COVID pandemic and
sanctions against Belarus slowed the implementation of these activities, which were eventually canceled as

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part of the suspension of the loan cancellation after the war in Ukraine. These reallocations did not impact
the project's scope (ICR, p.10).

3. Relevance of Objectives

Rationale
Country Context: The project development objective aligned well with the Government of Belarus (GoB)’s
priorities at appraisal and closing. At the time of project preparation, the GoB was already pursuing a
comprehensive financial sector reform agenda. The financial sector transformation was identified as one of
the key components of the structural Reform Roadmap of 2015 prepared by the National Bank of the
Republic of Belarus (NBRB). The country’s five-year Financial Market Development Strategy, adopted in
2017, aimed to develop further and diversify the financial sector while enhancing competition, enhancing
financial stability, and correcting imbalances such as directed lending. In addition, the more recent
regulations like “Public Finance Management and Regulation of the Financial Market for the period of 2020-
2025 and the Program for Socio-Economic Development of the Republic of Belarus for the period of 2021-
2025 aimed to improve further financial markets in the country including securities market, insurance, and
auditing. The PDO remained highly relevant with respect to the GoB’s policy priorities and MSMEs. The
strategy for MSME Development (2018) and “Small and Medium Entrepreneurship” State Program
for 2021-2025 aimed at supporting small and medium enterprises by creating a favorable business
environment.

World Bank Strategy: The Project contributed to the World Bank’s twin goals of eliminating poverty and
boosting shared prosperity by supporting Belarus in achieving a more inclusive and stable financial system.
Therefore, through increasing access to finance, the project was to impact the growth of the MSMEs and
employment positively. At appraisal, the project development objective aligned with the Country Partnership
Strategy (CPS FY14-FY17). The PDO was highly relevant to the first pillar (Improving the competitiveness
of the economy by supporting structural reforms, including reducing the role of the state, transforming the
State-Owned Economic Enterprises (SOE) sector, promoting private and financial sector development and
integration into the global economy) of the strategy and its second results area (deepening financial
intermediation on market-based terms). At closing, the PDO remained well aligned with the first focus area
of the CPS (CPS FY18-FY22), which aimed to create opportunities for the private sector to grow and for
more efficient public investment. In addition, the PDO directly supported Objective 1B (improved access to
finance for enterprises) of the strategy.

Previous Sector Experience: The technical assistance component of the project was built on the
assessment conducted by the World Bank (WB) under the 2014 Development Module FSAP and the 2016
International Monetary Fund (IMF) /WB FSAP Update related to institutional, regulatory and supervisory
strengthening of DBRB. Accordingly, specifically targeted support areas were defined in the project,
including governance, risk management, internal control, performance assessment, and investment in
management information systems. Regarding the line of credit component, the project incorporated lessons
from ongoing and previous WB and donor projects and benefited from the World Bank OP 10.00 Guidelines
on Financial Intermediary Financing. The design also took into account good practices identified in the 2006
Independent Evaluation Group (IEG) evaluation of World Bank Lending for Lines of Credit, which

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highlighted the importance of simple and flexible design, intensive monitoring of indicators, use of qualified
eligibility criteria for selecting PFIs and use of sound analysis and data on financial performance of PFIs.

The state's role in the Belarusian economy has been significant in productive and financial sectors. The
state-owned banks and enterprises (State-owned enterprises-SOEs) have been closely connected as the
state-owned banks provided subsidized (preferential) loans to SOEs while distorting the operation of the
financial system as well as the real sector as sometimes these operations resulted in unproductive
allocation of capital and failed to increase revenues and productivity also limiting the access of private
MSMEs to finance. To implement a transition from a state-driven to a market-based economic model, GoB
started to pursue a comprehensive financial sector reform agenda recognizing the strong link between a
well-functioning financial sector and private-sector-led growth. In parallel, it was also intended that DBRB
scale up its wholesale lending and its lending to private enterprises through wholesale channels. Within this
context, the PDO was appropriately pitched for development status and constraints in the operational
context. However, the second aspect of the PDO related to enhancing the governance and institutional
capacity of DBRB, and the related outcomes were slightly ambitious given the activities planned under the
project. Overall, the relevance of the project's objectives is rated Substantial.

Rating Relevance TBL

Rating
Substantial

4. Achievement of Objectives (Efficacy)

EFFICACY_TBL

OBJECTIVE 1
Objective
Objective 1: To improve access to finance for MSMEs

Rationale
Theory of Change:

The casual links between project activities, outputs, and outcomes were direct. According to the theory of
change, the World Bank would disburse the LoC of US$ 56.2 million (after restructuring US$59.4 million) to
DBRB for on-lending to eligible PFIs. As output, the PFIs would get access to line of credit to on-lend sub-
loans to eligible MSMEs in either US dollars or in Euros (as a result of the adjustments introduced during the
implementation) depending on the need of the MSME. As an outcome, the MSMEs get access to longer-term
sub-loans to cover their working capital and investment needs, supporting them to invest and grow. In
addition, due to transparent eligibility criteria, implementing LoC would promote the efficient allocation of
financial resources to productive private sector projects. The critical assumptions for the project were that
there would be demand by the PFIs for the offered funds by the DBRB and they would adequately support the
implementation of the LoC.

The PDO indicator for this objective (number of MSME beneficiaries that obtained credit under the project)
and the three intermediate results indicators defined in the results framework were all sound. The gender

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indicator did not have a target value. In addition, if conducted, an economic impact assessment on the LoC
could have provided solid evidence and better captured the impact of the intervention.

Outputs:

Achievements as reported in the Results Framework:

 Volume of loans disbursed under the project (US$, millions): A total of US$58.94 million funds were
disbursed under the LoC through the PFIs during the implementation of the project, achieving and
exceeding the target of US$56.2 million.
 Number of active PFIs under the project (cumulative): Nine PFIs participated under the operation’s
LoC during the implementation and exceeded the target of five PFIs. The nine PFIs accounted for
81.5 percent of banking sector assets by December 2020. The PFIs were subsequently reappraised
annually, with all PFIs remaining eligible for participation throughout the implementation of the project
(ICR, p. 11).
 Citizen Engagement: MSMEs that report that project sub-finance reflected their needs (Percentage):
According to the ICR, ninety-six percent of MSMEs (56.8 percent response rate) reported that the sub-
loans under the LoC reflected their needs, exceeding the target of 90 percent.
 The share of business beneficiaries that obtained credit under the project with at least 15 percent
female workforce participation reached 50.6 percent by project closing. There was no specific target
for this indicator, and the data was collected for analytical purposes (ICR, p.17).

Additional output achievements reported in the ICR:

 Through the LoC, 459 sub-loans were financed, 62 percent of which was below EUR 100,000.
 The composition of sub-loan portfolio was highly diverse in terms of geographical location (all five
regions were covered), type of industry (all industries represented, with transport and manufacturing
accounting 58.4 percent and 18.1 percent respectively), MSME segment (share of micro and small
enterprises benefitted from the LoC were 47.7 percent and 37.7 percent respectively, sub-loans to
individual entrepreneurs accounted for 10 percent, with medium-sized enterprises having a share of
4.6 percent only).
 The funds under the LoC were used for both working capital and investments. The investments in
equipment, vehicles, and buildings accounted for 85.4 percent of total disbursed funds.
 The result of the interviews conducted with the PFIs during ICR preparation indicated that the LoC had
provided a successful demonstration for PFIs on the potential lending opportunities, especially for
long-term loans to MSMEs, encouraging the DBRB as well as PFIs to allocate additional resources to
this type of products. This result reflected the 17 percent increase in the DBRB’s MSME-oriented
portfolio (outcome indicator for Objective 2) through PFIs during the operation’s lifetime (ICR, p.18).
 As of January 1, 2022, the revolving funds accumulated from interest payments and sub-loan
repayments had financed MSMEs with a total of EUR14.7 million and US$ 0.7 million.

Outcomes:

Achievements as reported in the Results Framework:

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 Number of MSME beneficiaries that obtained credit under the project: By project closing, 344 MSME
beneficiaries obtained sub-loans under the LoC, achieving and exceeding the target of 150 MSME
beneficiaries.

Additional outcome achievements reported in the ICR:

 Increased maturity of sub-loans: Sub-loans under the LoC were highly favorable compared to other
options in Belarus. Specifically, 92.8 percent of MSME sub-loans under the operation had a maturity
of 3 years or more compared to only 2.9 percent of foreign-currency loans in the domestic banking
sector for January- June 2022. The average maturity of all MSME sub-loans in the LoC portfolio was
six years (ICR, p.12).
 According to the ICR, the number of employees among beneficiary MSMEs that received sub-loans in
2019 or 2020 grew by 13 percent between 2020 and 2021. Belarusian MSMEs exhibited a 1.73
percent drop during the same period. Similarly, the beneficiary MSMEs increased their annual
revenues by 25.6 percent, whereas all Belarusian MSMEs experienced an increase of 15.04 percent
during the same period. (ICR, Annex 4).

Overall, the project’s efficacy in achieving the first objective is rated High. The project achieved and exceeded
all outcome and output indicators in the results framework defined under this first objective. In addition, the
LoC facilitated access of MSMEs to finance with longer maturity and with significant diversity in terms of
geography, size of MSMEs, and type of industry, contributing to the expansion of activities and job creation
during difficult macroeconomic conditions and restrictive conditions imposed by COVID-19. The LoC also
contributed to the efficient allocation of financial resources to MSMEs through the use of transparent and
predictable eligibility criteria. However, as mentioned in the ICR, the LoC was small relative to the size of the
MSME finance gap, limiting the overall impact of the facility (ICR, p. 25). The loan maturity, interest rate, wide
industry diversification, working capital financing, and a grace period were the primary factors that contributed
positively to the Project implementation (ICR, Annex 5, Borrower Comments).

Rating
High

OBJECTIVE 2
Objective
Objective 2: To enhance the governance and institutional capacity of the Borrower (DBRB)

Rationale
Theory of Change:

This objective and its related TA activities are built on WB's assessment results in the 2014 Development
Module FSAP and the 2016 IMF/WB FSAP Update. Some of the activities for the realization of this objective
were strengthening supervisory board practices and procedures, developing a risk management framework
and internal control systems in line with international best practices and applicable NBRB regulations,
designing and roll-out new finance instruments, setting up and implementing monitoring, disclosure, and

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evaluation practices and impact assessment methodologies, investment in internal systems and information
and communication technology (ICT) processes, and knowledge and awareness-raising activities targeting
PFIs, MSMEs and also DBRB staff. These activities were expected to result in outputs such as strengthened
monitoring and evaluation functions, enhanced internal systems and ICT processes in the DBRB,
strengthened governance functions, increased PFI capacity in risk management and operational processes,
and the DBRB capacity on financial instruments. These outputs were expected to contribute to the outcome
of improved functioning of the financial sector and indirectly to private sector-led growth. The critical
assumptions were political commitment to pursue financial sector reform and support DBRB to strengthen its
role in wholesale financing operations and lending to private enterprises.

The two PDO indicators for this objective were sound. However, the intermediate results indicators were
limited to the financial performance of the DBRB. The M&E design did not include adequate indicators to
capture outputs and outcomes from TA activities. Overall, the causal pathways from TA and investments
(inputs) to expected results (increased governance and institutional capacities) were valid. However, the
outcomes seemed ambitious compared to the activities that were designed to be implemented.

Outputs:

Achievements as reported in the Results Framework:

 Portfolio Quality: Portfolio at risk (percent): No target was specified. The project achieved 2.08 percent
as of July 2022, whereas the baseline ratio was 13.3 percent.
 Financial Sustainability: Return on Assets (percent): No target was specified. The baseline ratio was
3.2 percent. The project achieved 2.1 percent in line with national standards established by the NBRB
by July 2022 (ICR, p.14).
 Financial Sustainability: Return on Equity (percent): No target was specified. The project achieved
14.1 percent as of July 2022. The baseline value was 14.4 percent.
 DBRB complied with prudential regulation as of July 2022.

Additional output achievements reported in the ICR:

 As indicated in the Restructurings section, some new activities were intended to be implemented
under Component 2. However, only some activities were implemented due to conditions imposed by
COVID-19 and sanctions against Belarus. These activities were: (i) legal services on venture financing
and senior management training and (ii) TA to strengthen the DBRB’s capacity for venture financing,
including the revision of the legal framework and the preparation of a list of products and operational
plans for subsidiary venture financing. The operation supported preparing the initial draft of the
Presidential Decree on venture financing, which was shared with the Council of Ministers and
Presidential Administration (ICR p. 16).
 Capital adequacy:19.9 percent was above the minimum target of 10 percent (ICR, p.14).
 Net stable funding ratio: The project achieved 113.2 percent, above the minimum requirement of 100
percent (ICR, p.14).

Outcomes:

Achievements as reported in the Results Framework:

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 Growth of DBRB MSME loan portfolio provided through participating financial institutions (PFIs)
(percent): The DBRB’s wholesale MSME loan portfolio provided through PFIs grew by 543 percent
during the implementation of the project, exceeding the target of 170. This growth rate, which
included all the DBRB's financing activities to commercial banks in support of private MSMEs (the LoC
and the DBRB's own MSME lending), points to the overall expansion of the DBRB‘s commercial
lending for MSMEs. As of January 1, 2017, DBRB’s outstanding portfolio to commercial banks
supporting private MSMEs amounted to US$33 million, corresponding to the baseline of 0 percent
(ICR, Footnote 18, p.15). The ICR reports that the achievement was possible due to amendments
(enacted in 2019,2020 and 2021) in the legal framework regulating DBRB. The World Bank Group
actively participated in the discussions and contributed to these amendments (ICR, p.14). However,
this result is not directly attributed to project activities under this component.
 Governance and business model of DBRB strengthened: In the results framework, the criteria for
meeting this indicator was defined. Accordingly, the DBRB met the following requirements: (i)operates
on a financially sustainable basis: Two financial sustainability ratios were in line with national
standards (ii) in compliance with applicable NBRB regulations, (iii) operates increasingly on a
wholesale basis: 17 percent increase in the DBRB’s MSME-oriented portfolio through PFIs was
achieved during the operation’s lifetime (ICR, p.18), (iv) has a majority of independent supervisory
board members: At project closing, six out of nine members of the supervisory board were
independent, and NBRB no longer had a representative in the board, and (v) NBRB exited the
supervisory board and divested from its equity stakes: In July 2019, the NBRB divested from the
DBRB, with the DBRB purchasing the shares that had been under the operational management of the
NBRB (ICR, p.14).

Additional outcome achievements reported in the ICR:

 A mid-term beneficiary survey was conducted with the nine PFIs to assess their level of satisfaction.
All PFIs indicated they were satisfied with the level of collaboration with the DBRB. The quality and
timeliness of the support they received and the terms of depositing funds by the DBRB were
satisfactory. The high satisfaction of PFIs with the DBRB’s performance was reiterated during the ICR
interviews (ICR, p.15).
 DBRB’s Supervisory Board, corporate governance system, and efficiency of operations received the
highest marks as a result of an external audit conducted by a leading international auditing firm in
2019, concluding that DBRB corporate governance was in full compliance with the national
requirements and line with best international practices of corporate governance in banks (ICR,
Footnote 15, p.14).

The ICR reports that the project contributed to the achievements with regard to enhanced governance and
institutional capacity through i) WB’s contribution to the discussions and subsequent policy changes related to
the DBRB’s governance ii) DBRB’s active engagement in Belarus’s financial sector through analytical work
(FSAP) iii) ongoing technical assistance funded by the European Union which also followed
recommendations from the FSAP update iv) learning by doing from the implementation of the LoC as well as
leverage through the sizable lending under the project. IEG agrees with the ICR that these elements could
have contributed to achieving the project’s second objective and the indicators in the results framework.
However, there is insufficient evidence to attribute the results achieved to the activities under Component 2
since some of the activities related to this objective were foreseen at appraisal, and the new activities
introduced with the Restructuring were not implemented.

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Although all targets against the project’s indicators were achieved, due to insufficient evidence to
demonstrate the linkage between the project activities and the results, the project’s efficacy in achieving the
second objective is rated Modest.

Rating
Modest

OVERALL EFF TBL

OBJ_TBL

OVERALL EFFICACY
Rationale
The project’s efficacy in improving access to finance for MSMEs was High. The project’s efficacy in
enhancing the governance and institutional capacity of the Borrower (DBRB) was Modest due to indirect
attribution and insufficient evidence. Overall efficacy is rated Substantial with moderate shortcomings.

Overall Efficacy Rating
Substantial

5. Efficiency
Economic and Financial Analysis:

A quantitative economic and financial analysis was not conducted at appraisal as the sub-projects were not pre-
identified, and the projects’ costs were not defined (PAD, p.12). However, by providing access to finance, the
project was expected to increase MSMEs’ ability to grow, become more productive, and contribute to job
creation. At closing, the ICR did not provide an economic and financial analysis either, due to a lack of available
data. The ICR reports that 85.4 percent of funds under the LoC, which were disbursed to 459 sub-projects for
344 MSMEs, were utilized for investments. The ICR provides a comparison between the LoC beneficiaries and
overall Belarusian MSMEs. According to the ICR, the number of employees among beneficiary MSMEs that
received sub-loans in 2019 or 2020 grew by 13 percent between 2020 and 2021. Belarusian MSMEs exhibited a
1.73 percent drop during the same period. Similarly, The ICR reports a contrast in the increase in annual
revenues between 2020 and 2021 among beneficiary MSMEs that received sub-loans in 2019 or 2020 and that
of all Belarusian MSMEs, equivalent to 25.6 percent and 15.15 percent, respectively. Although the difference
could not be attributable to the intervention, it indicates a significant improvement (ICR, p.17).

Administrative and Operational Efficiency:

Overall, the DBRB, motivated through its strong ownership of the reform process, contributed to the successful
implementation of the project. The PIU, staffed from the DBRB’s MSME department, ensured the smooth
implementation of the project, benefitting from established relationships with the PFIs. Under Component 1, the
issue of slow disbursements, which could have resulted in implementation delays, was addressed by the World

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Bank team and the PIU. The terms and conditions of the LoC were adjusted according to the country’s
conditions, and these expedited disbursements. Under Component 2, envisaged activities were not
implemented, and accordingly, the unutilized funds were reallocated to Component 1. All funds were disbursed
except for the cancelled amount of approximately US$ 1 million.

An economic and financial analysis was not conducted at appraisal and closing. However, the ICR provides
information on the impact of the LoC on the final beneficiaries. An assessment of the economic and financial
impact of the LoC could have been conducted. Overall, the efficiency is rated as Substantial.

Efficiency Rating
Substantial

a. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal
and the re-estimated value at evaluation:
Rate Available? Point value (%) *Coverage/Scope (%)
0
Appraisal 0
 Not Applicable
0
ICR Estimate 0
 Not Applicable

* Refers to percent of total project cost for which ERR/FRR was calculated.

6. Outcome

The relevance of the Project Development Objectives is rated as Substantial. The project’s efficacy in achieving
the objective is Substantial, with moderate shortcomings. The project’s efficiency is also substantial. Given the
moderate shortcomings in achieving the second objective, the overall outcome is rated Moderately Satisfactory.

a. Outcome Rating
Moderately Satisfactory

7. Risk to Development Outcome

Macroeconomic and Financial Risks: According to the ICR, and supported by the surveys and the
interviews conducted with the PFIs and the MSMEs, the LoC provided a successful demonstration for PFIs
and encouraged DBRB as well as PFIs to allocate additional resources to this type of products. However,
deteriorating macroeconomic conditions and increasing isolation constitute a significant risk to development
outcomes. Demand for investments might decrease under slowing economic growth, and sanctions imposed
on Belarus might negatively impact DBRB’s ability to raise capital in the global markets.

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Governance Risk: The DBRD has increased its governance and institutional capacity through support
provided by analytical work pursued within the framework of FSAP, TA funded by donors, and hands-on
experience gained by implementing the LoC under the project. Several legal amendments improved the
regulatory framework and strengthened DBRB’s position as a national financial institution and its ability to
continue to mobilize financing for large investment projects, finance exports, and provide access to financing
to MSMEs under transparent and efficient terms and conditions. For these developments to be sustained,
commitment to the financial reform process and transition from a state-driven to a market-based economic
model by the GoB must continue.

8. Assessment of Bank Performance

a. Quality-at-Entry
The project had strategic relevance as it supported the Government of Belarus’s financial sector reform
agenda and commitment to follow recommendations provided through the 2014 Development Module
Financial Sector Assessment Program-FSAP and 2016 FSAP Update. The recommendations were
embedded in the project design. A detailed financial intermediary assessment of the DBRB was
conducted at the project’s design stage (PAD, p.9). In addition, the project design reflected the World
Bank’s in-depth knowledge of the country, which was accumulated due to more than two decades of
engagement with the country. The implementation arrangements at appraisal were sufficient. The PIU
established within the DBRB was responsible for the management and supervision of the project. At
appraisal, macroeconomic risk was rated Substantial, and it materialized during the implementation. The
risk for institutional capacity for Implementation and sustainability was also rated substantial as the DBRB
did not have implementation experience with the World Bank Projects, particularly with safeguards and
procurement procedures. This was mitigated by hiring qualified and experienced staff at the PIU during
the implementation of the activities. Accordingly, this rating was downgraded from "Substantial" to
"Moderate" in June 2020 (ICR, p. 14). The World Bank’s inputs and processes were overall sufficient.
With respect to the M&E arrangements, the second aspect of the PDO and related outcomes were
relatively ambitious, and the design did not include sufficient indicators to capture outputs and outcomes
related to TA activities.

Quality-at-Entry Rating
Satisfactory

b. Quality of supervision
The World Bank team’s focus on development results was demonstrated by their effort to address the slow
disbursement of funds under Component 1. The team and the PIU introduced some adjustments to
accelerate disbursements and smooth operation of the LoC. Also, due to the Borrower’s realization of
some of the planned through its resources, the World Bank team initiated a restructuring of the project to
reallocate undisbursed funds from Component 2 to Component 1 for full utilization of the loan proceeds.
The project was subjected to regular supervision missions during the implementation, including field visits
to PFIs and sub-borrowers. Main findings and implementation progress were recorded in the

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Implementation Status and Results Reports and Aide Memoires. The project team engaged with the DBRB
and the PFIs helped identify problems, and provided solutions to tackle them on time. The continuity of the
Task Team Leader throughout the implementation and having a member of the World Bank team based in
the country contributed to the Project’s robust supervision (ICR, p.24).

Quality of Supervision Rating
Satisfactory

Overall Bank Performance Rating
Satisfactory

9. M&E Design, Implementation, & Utilization

a. M&E Design
The project’s theory of change was sound, and the objectives were clear. It was primarily reflected in the
results framework. The PAD defined three PDO indicators, two related to the project’s second objective.
Although the two PDO indicators were clearly defined, the results framework could have included
intermediate indicators to capture the achievements of the TA activities. Also, the Results Framework could
have benefitted from additional indicators on the performance of PFIs, performance, and profile of MSMEs.
However, This weakness was partly addressed through monitoring and collecting data on the composition
of the sub-loan portfolio, including data on the type of industry-financed, MSME segments, use of funds,
and geographical location. In addition, a mid-term satisfaction survey was planned among the beneficiary
MSMEs and the PFIs to assess the LoC's positive impact in expanding access to finance. On the other
hand, an economic impact assessment of LoC could have also been foreseen. To improve the accuracy of
the project’s attribution of the capacity-building activities, the M&E design could have included indicators of
beneficiary (DBRB) feedback. Given that the operation was demand-driven (i.e., the portfolio of sub-loans
was undetermined at the time of preparation), some of the indicators related to LoC performance (i.e.,
number of PFIs, portfolio volume) did not have a baseline or end-targets (ICR, p.22).

The M&E design and arrangements were well-embedded institutionally. The DBRB’s PIU was responsible
for monitoring the PDO and intermediate indicators of the Results Framework. The PIU was to prepare
semiannual project reports. The financial performance of the DBRB was to be monitored through
independent auditors ’reports.

b. M&E Implementation
During the implementation, the PIU closely monitored the project's progress against the indicators in the
results framework and reported these achievements under bi-annual Project Performance Reports.
These reports also provided information on the MSME portfolio based on data collected by the PFIs on
the LoC sub-borrowers. The progress during the implementation and guidance were recorded in
Implementation Status Reports and Aide Memoires.

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c. M&E Utilization
As a result of close monitoring of project activities and disbursements, some adjustments to LoC terms
and conditions were introduced to address slow disbursements. The results of the mid-term survey on
Citizen Engagement provided feedback from the MSME beneficiaries on their satisfaction with the sub-
financing. The PIU discussed the survey results with the PFIs, and the results informed the project
implementation as appropriate. Annual PFI eligibility reassessments helped monitor PFI compliance with
the NBRB’s regulations and their financial health (ICR, p.22).

M&E Quality Rating
Substantial

10. Other Issues

a. Safeguards
The project was an Environmental Category B project. The project triggered the Environmental Assessment
OP/BP 4.01 policy only. The project did not pose significant environmental or social risks or impacts, as only
Environmental Category B and C projects were eligible for financing under the LoC. The sub-loans under
the LoC were mainly used for the purchase of equipment. The Environmental Management Framework
(EMF) to manage environmental and social risks was developed in 2017 and was updated by DBRB in
2021. The PIU has a full-time safeguard specialist who screens sub-loan applications and supervises all
civil works (ICR, p.23).

b. Fiduciary Compliance
Financial Management: The financial management and disbursement arrangements were carried out
satisfactorily during the implementation of the project. The PIU established within the DBRB was staffed
with qualified and experienced personnel on all financial management and disbursement aspects. The PIU
managed funds, maintained detailed project records, and prepared periodic reports. According to ICR, the
submission of periodic reports was sometimes delayed, but yearly audit reports were submitted timely. The
Financial Management rating was Satisfactory at project closing.

Procurement: The procurement activities were carried out per the agreed World Bank procedures. The
PIU had adequate procurement capacity. The ICR reports adequate procurement and contract
management training was provided throughout the implementation period. However, some delays in the
procurement process for the institutional capacity-building activities were experienced (ICR, p.21). The
procurement rating was Satisfactory at the project closing.

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c. Unintended impacts (Positive or Negative)
None.

d. Other
None.

11. Ratings
Reason for
Ratings ICR IEG
Disagreements/Comment
Moderately
Outcome Moderately Satisfactory
Satisfactory
Bank Performance Satisfactory Satisfactory

Quality of M&E Substantial Substantial

Quality of ICR --- High

12. Lessons

The following three lessons are taken from the ICR with some adaptation of language:

 Implementing an LOC project as part of a broader structural reform agenda can yield
more significant and sustainable results. The design of the LoC was informed by sound
analytical work, including FSAP, and implementation results reflected increasing access to
finance by the MSMEs. A more significant impact and sustainable results could have been
achieved if the LoC were carried out in tandem with broader structural reforms in the country.
 When implementing a LoC, an established and smooth relationship between the
implementing agency and the PFIs can contribute to a more successful project
implementation and achieving results. The operation was implemented on the existing
relationship between the DBRB and the PFIs, which helped close cooperation on and
monitoring the LoC. The bottlenecks were addressed promptly, and necessary adjustments
were made to the terms and conditions of the LoC.
 A flexible LoC design that accommodates changes promptly and efficiently can help
improve the implementation. In the case of the project, while taking feedback from the
PFIs and the beneficiaries, the PIU and the World Bank team adjusted the terms and
conditions of the LoC. This was possible due to the flexible design, which did not require a
long procedural process, helped address barriers, and expedited disbursements.

13. Assessment Recommended?

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14. Comments on Quality of ICR

The ICR is very well-written and candid. It provides a detailed overview of the project. It is candid in explaining
the issues encountered at different phases of implementation. The report is concise and follows the guidelines.
It is internally consistent. There is a logical linking of the various parts of the report. The ICR is result-oriented,
providing evidence based on measuring the indicators in the results framework and the interviews conducted at
the ICR preparation stage. In addition, the ICR makes a genuine effort to provide evidence outside of the M&E
system (i.e., the impact of the LoC on revenue and employment of beneficiary MSMEs). The ICR can be
especially praised for adequately following the Bank's guidance with regard to the ratings, which reflect the
level of contribution of the project to observed outcomes as well as “best judgment.” The discussion in the
Lessons and Recommendations section is clear, useful, and primarily based on the evidence outlined in the
ICR, but some are more in the form of findings and facts rather than lessons. Overall, the ICR quality is rated as
High.

a. Quality of ICR Rating
High

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