Document of
The World Bank
Report No: ICR2355
IMPLEMENTATION COMPLETION AND RESULTS REPORT
(IDA-38390)
ON A
CREDIT
IN THE AMOUNT OF SDR 22.3 MILLION
(US$32 MILLION EQUIVALENT)
TO THE
FEDERAL REPUBLIC OF NIGERIA
FOR A
MICRO, SMALL AND MEDIUM ENTERPRISE PROJECT
June 26, 2012
Finance and Private Sector Development
Western and Central Africa
Africa Region
CURRENCY EQUIVALENTS
(Exchange Rate Effective as of May 14, 2012)
Currency Unit = Nigerian Naira (NGN)
US$ 1.00 = 155.3 NGN
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
ADR Alternative Dispute Resolution
ATF Access to Finance
BDS Business Development Services
CAC Corporate Affairs Commission
CB Credit Bureau
CPS Country Partnership Strategy
DCA Development Credit Agreement
ELAN Equipment Leasing Association of Nigeria
FIRS Federal Inland Revenue Service
FM Financial Management
GEL Grooming Enterprise Leadership Program
ICR Implementation Completion Report
IDA International Development Association
IFC International Finance Corporation
IRR Internal rate of return
ISR Implementation Supervision Report
M&E Monitoring and Evaluation
MFI Micro-finance Institution
MSME Micro, Small and Medium Enterprise
NGO Non Government Organization
NIPC Nigerian Investment Promotion Commission
NPL Non-Performing Loan
NPV Net present value
PAD Project Appraisal Document
PIU Project Implementation Unit
PMU Project Management Unit
PDO Project Development Objectives
SIL Specific investment loan
SME Small and Medium Scale Enterprises
DA Development Agency of Nigeria
TA Technical Assistance
UNDP United Nations Development Program
YouWiN Youth Enterprise with Innovation in Nigeria
ii
Vice President: Makhtar Diop
Country Director: Marie Francoise Marie-Nelly
Sector Manager: Paul Noumba Um
Project Team Leader: Ismail Radwan
ICR Team Leader: Andrej Popovic
iii
NIGERIA
Micro, Small and Medium Enterprise
CONTENTS
Data Sheet
A. Basic Information ....................................................................................................................... v
B. Key Dates.................................................................................................................................... v
C. Ratings Summary........................................................................................................................ v
D. Sector and Theme Codes ........................................................................................................... vi
E. Bank Staff .................................................................................................................................. vi
F. Results Framework Analysis ..................................................................................................... vii
G. Ratings of Project Performance in ISRs .................................................................................. xiii
H. Restructuring (if any)................................................................................................................ xv
I. Disbursement Profile................................................................................................................. xv
1. Project Context, Development Objectives and Design ....................................................... 1
2. Key Factors Affecting Implementation and Outcomes ....................................................... 5
3. Assessment of Outcomes ................................................................................................... 11
4. Assessment of Risk to Development Outcome ................................................................. 20
5. Assessment of Bank and Borrower Performance .............................................................. 21
6. Lessons learned ................................................................................................................. 25
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ................... 27
Annex 1. Project Costs and Financing .......................................................................................... 28
Annex 2. Outputs by Component .................................................................................................. 29
Annex 3. Economic and Financial Analysis .................................................................................. 31
Annex 4. Bank Lending and Implementation Support Supervision Processes.............................. 35
Annex 5. Beneficiary Survey Results ............................................................................................ 37
Annex 6. Stakeholder Workshop Report and Results ................................................................... 41
Annex 7. Summary of Borrower‟s ICR and / or comments on Draft ICR .................................... 42
Annex 8. Comments of Co-financiers and Other Partners/Stakeholders ...................................... 47
Annex 9. List of Supporting Documents ....................................................................................... 48
Annex 10. List of sponsored events under each component of the Project ................................... 49
Nigeria Map................................................................................................................................... 54
iv
A. Basic Information
Nigeria Micro, Small
Country: Nigeria Project Name: and Medium Enterprise
Project
Project ID: P083082 L/C/TF Number(s): IDA-38390
ICR Date: 05/15/2012 ICR Type: Core ICR
Federal Government of
Lending Instrument: SIL Borrower:
Nigeria
Original Total
XDR 22.3 million Disbursed Amount: XDR 21.8 million
Commitment:
Revised Amount: -
Environmental Category: C
Implementing Agencies:
Nigeria Investment Promotion Commission
B. Key Dates
Revised / Actual
Process Date Process Original Date
Date(s)
Concept Review: 07/09/2003 Effectiveness: 06/15/2004 12/15/2004
Appraisal: 07/15/2003 Restructuring(s): N/A N/A
Approval: 12/16/2003 Mid-term Review: 10/30/2006 05/19/2008
Closing: 06/30/2009 12/31/2011
C. Ratings Summary
C.1 Performance Rating by ICR
Outcomes: Moderately Satisfactory
Risk to Development Outcome: Moderate
Bank Performance: Moderately Satisfactory
Borrower Performance: Moderately Satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Bank Ratings Borrower Ratings
Moderately Moderately
Quality at Entry: Government:
Satisfactory Unsatisfactory
Moderately Implementing Moderately
Quality of Supervision:
Satisfactory Agency/Agencies: Satisfactory
Overall Bank Moderately Overall Borrower Moderately
Performance: Satisfactory Performance: Satisfactory
v
C.3 Quality at Entry and Implementation Performance Indicators
Implementation QAG Assessments (if
Indicators Rating
Performance any)
Potential Problem Project at Yes: Delayed Quality at Entry Moderately
any time (Yes/No) Effectiveness (QEA): N/A Satisfactory
Problem Project at any time Yes: Unsatisfactory Quality of Supervision Moderately
(Yes/No): rating during 2005 (QSA): N/A Satisfactory
DO rating before
Satisfactory
Closing/Inactive status:
D. Sector and Theme Codes
Original Actual
Sector Code (as % of total Bank financing)
Micro and SME Finance 60 60
Other Industry 15 15
Animal Production 13 13
Central government administration 7 7
Law and Justice 5 5
Theme Code (as % of total Bank financing)
Regulation and competition policy 25 25
Micro, Small and Medium Enterprise support 25 25
Legal Institutions for a market economy 24 24
Judicial and other dispute resolution mechanisms 13 13
Other financial and private sector development 13 13
E. Bank Staff
Positions At ICR At Approval
Vice President: Makhtar Diop Callisto E. Madavo
Country Director: Marie Francoise Marie-Nelly Mark D. Tomlinson
Sector Manager: Paul Noumba Um Demba Ba
Project Team Leader: Ismail Radwan Peter Mousley
Andrej Popovic
ICR Team Leader:
Andrej Popovic
ICR Primary Author:
vi
F. Results Framework Analysis
Project Development Objectives
The Micro, Small and Medium Enterprise (MSME) Project in Nigeria aimed to increase the
performance and employment levels of MSMEs in selected non-oil industry sub-sectors and in
three targeted states of the country. To achieve this, the project supported: (i) development of the
capacity of local intermediaries to deliver financial and non-financial services to MSMEs; (ii)
reduction of selected investment climate barriers that constrain MSME performance; and (iii)
mobilization of increased private investments in MSMEs and intermediaries via (i) and (ii).
Accordingly, the project had the following five components: access to finance, business
development services, investment climate, public private sector partnership development, project
management, monitoring and evaluation. The Project targeted three non-oil producing states
(Lagos, Abia, and Kaduna), while part of the investment climate component also supported
nationwide reforms.
Two impact assessments were commissioned to gauge the direct impact on project beneficiaries
of the two largest components - Access to Finance and Business Development Services. The
assessments primarily focused on determining the impact that loans and business development
services had on beneficiary MSMEs‟ sales and employment levels.
To assess the impact of these components in terms of the PDO, sales revenue of beneficiary
MSMEs (together with employment generated) was used as proxy indicators of their
performance. While the PDO indicator was originally designed to capture MSME value added, in
practice value added was difficult to calculate. More specifically, value-added is defined as the
difference between sales revenues and purchased inputs. Given that the MSMEs did not use a
standardized accounting approach for measuring these inputs, it was difficult to ensure reliable
and comparable value added calculations. These data obstacles could be to some degree
surmounted by tracking MSME sales which are generally a more reliable and easily estimated
indicator of performance. Such data do not indicate profitability but combined with employment
as a second indicator may better indicate value added.
The achievement of the Project Development Objective was assessed primarily against the
outcomes of the Access to Finance and Business Development Services components for three
reasons. First, the intermediate outcome indicators for the Access to Finance and Business
Development Services components were most closely related to the achievement of the PDO.
Second, impact assessments were conducted for these components. Third, the Access to Finance
and Business Development Services components were intended to account for two thirds of the
project funding, i.e US$22 million of IDA funds versus US$6.2 million for the other two program
components – Investment Climate and Public Private Sector Partnership Development. The actual
disbursement to the BDS and Access to Finance components was in the end 47 percent of the
total (US$15.3 million out of US$32.8 million) but they accounted for most of the project funding
excluding implementation costs, versus US$8.9 million for the other two program components.
vii
(a) PDO Indicator(s)
Original Target Formally
Values (from Revised Actual Value Achieved at Completion
Indicator Baseline Value
approval Target or Target Years
documents) Values
Indicator 1: i) Growth of MSMEs‟ value-added in participating States and sectors
i) Average monthly sales of MSMEs
increased by 44% for microfinance
Value borrowers and 84.4% for recipients of
i) MSMEs‟ value
quantitative or N/A business development services, while the
added
Qualitative) latter also experienced growth in
employment of 41.7%1
Date achieved 15-Dec-2004 21-Feb-2008 and 09-July-2009
To assess progress towards the achievement of PDO, sales revenue of beneficiary MSMEs was
used as a proxy to measure their performance, instead of originally planned value-added which
proved difficult to calculate. This is justifiable as a first approximation on the basis that the
aggregate value added percentage of output in the assisted MSMEs would not be subject to
significant variation.
The two independent impact assessment surveys on business development services (BDS) and
Comments access to finance (ATF) components showed that MSMEs which benefitted from project
(incl. % supported BDS increased employment levels by 41.7% (from 5.8 to 8.3) and expanded average
achievement) monthly sales by 84.4% (from about N243,840.58 to N449,270.4) in the observed period. Sales
of MSMEs which obtained loans from project supported MFI providers increased by 44% (by
NGN 197,385) compared to pre-intervention time. While the surveys were conducted during
the project (in 2008 and 2009), significant portion of planned grants supporting access to
finance and BDS agenda had already been utilized.
More detailed information about the findings of impact assessment studies can be found in
Annex 5.
(b) Intermediate Outcome Indicator(s)
Original Target Values Formally
Actual Value Achieved at
Indicator Baseline Value (from approval Revised Target
Completion or Target Years
documents) Values
Indicator 1: i) $15 million new private sector investments in microfinance institutions;
1
According to two independent studies: i) Impact Evaluation of Borrowers from Accion , Susu, and MIC Microfinance Banks , by
Luba Shara, IFC with data collection conducted by: BDO OFO CONSULTING LTD, 2009; and ii) Impact Survey of MSME
Beneficiares, by BDO OFO CONSULTING LTD, 2008.
viii
ii) At least two MFIs established;
iii) Three commercial banks establish MSME downscaling programs
iv) Portfolio at risk (arrears over 60 days) not greater than 5 percent after second year
of operation for both MFIs and commercial banks
v) Loan portfolio cumulative disbursed of $75 million each for MFIs and commercial
banks
i) $30.8 million (N 4.478 bn)
of equity investment ii) 4 new
MFIs established after some
delay.
i) $15 mn investments in iii) 1 commercial bank
MFIs downscaled under the project
There were no large ii) At least 2 MFIs; and at least 4 more followed
Value
scale self-sustainable iii) 3 commercial banks later without direct project
quantitative or
MFIs operating prior downscale; support but attributable iv)
Qualitative)
to project launch. iv) PAR at 60 days < PAR at 60 days for MFIs is
5% less than 2.5%2 and for the
v) $ 75 mn loan portfolio commercial bank is 5.47%
v) $49.6 mn for 4 MFIs (N
7.199bn) and $7.8 million (N
1.139 bn) for the commercial
bank3
Date achieved 15-Dec-2004 30-Jun-2010 31-Dec-2011
This component surpassed its initial targets in regards to supporting creation of MFI sector in
Nigeria although after some delay. While the initial target was to facilitate the creation of 2
MFIs, the project supported the establishment of 6 MFIs. Four of the six MFIs survived the
2008 crisis (i.e., Accion, Susu, Microcred and AB). Further, the original private sector
investment targets were doubled for MFIs, and their PAR at 60 days was satisfactory. These
achievements have to be regarded in the light of the length of time that the project required for
completion, and the possibility that attributability weakened over time as other initiatives
intervened. However the impact surveys provided good evidence of attribution.
Comments
The PAR of the microfinance portfolio of the commercial bank‟s (then Oceanic Bank) which
(incl. %
downscaled was higher than originally envisaged. The bank experienced difficulties as a result
achievement)
of the crisis and was recently bought by Ecobank. The new owner has however maintained the
MSME focus of Oceanic Bank. The project was originally supposed to support downscaling of
three commercial banks, but only Oceanic Bank expressed interest at the time. Hence, only one
bank was included in the program. However, Oceanic Bank acted as a demonstrator and at
least 4 additional banks (Stanbic, First Bank, Diamond, and UBA) downscaled their operations
without direct project engagement. The outstanding loan portfolio for MFIs and the
commercial bank is below the initial target, but the impact of the crisis needs to be taken in
consideration when assessing this outcome.
i) At least 1,000 MSMEs are supplied with BDS by participating BDS providers;
Indicator 2: ii) Up to 4,000 new (including indirect) jobs in 3-5 supply chains in selected
industries;
2
PAR at 60 days: AB 0.66%; Accion 2.3%; Microcred 0.29; Susu 1.84%, as reported by the four MFIs.
3
All financial indicators in this section were received directly from the four MFIs (Accion, Susu, Microcred and AB) and Oceanic
Bank as of December 2011.
ix
i) Approximately 3,360
MSMEs received BDS, and a
total of 20,161 MSME
workers of which 17,358 were
Value i) 1,000 MSMEs
covered under the general
quantitative or N/A ii) 4,000 new jobs
BDS program and 2,803 in 4
Qualitative)
supply chains
ii) New direct jobs in
supported supply chains
estimated at around 1,1684
Date achieved 15-Dec-2004 31-Dec-2011
Based on the available data from the PMU records and project reports, this component
exceeded the initial targets regarding the coverage of MSME beneficiaries of BDS services.
While the project originally targeted 1,000 MSMEs, it facilitated BDS support to 20,161
microenterprise workers, or estimated 3,360 MSMEs (around 2,893 under general BDS and
467 under four value chains). The estimated number of MSMEs is based on the previously
cited impact survey of BDS beneficiaries under the project, which stated that the target
MSMEs on average employed around 6 people prior to the introduction of BDS.
Comments The employment data for the supply chains could not be exactly measured due to lack of
(incl. % accessible data. Since BDS targeted to specific supply chains are more intensive than general
achievement) BDS the increase in employment per MSME attributable to the supply chain assistance would
likely exceed that of general BDS. Since the BDS study concluded that recipients of BDS
services under the project increased their employment levels from 5.8 to 8.3 employees - or on
average adding 2.5 jobs per MSME - it could be estimated that the BDS services for 467
MSMEs in four value chains supported creation of 1,168 or more new jobs. To the extent that
the total achieved is lower than the target of 4,000 jobs, one factor to be the financial crisis.
In this case a counterfactual was estimated from the survey which suggested that the assisted
MSMEs expanded employment significantly more than the sector as a whole.
i) Under both the BDS Fund and industry supply chain, at least 20 BDS providers
assisted by the Fund;
ii) At least 75% cost recovery reached by participating BDS providers within a
Indicator 3:
specific time frame;
iii) At least 20 products or services with sustained uptake improved or developed
through support from the Fund
i) 69 BDS providers (45 under
general BDS Fund and 24
Value i) 20 BDS providers through 4 value chain
quantitative or N/A ii) 75% cost recovery interventions) ii) 58% cost
Qualitative) iii) 20 products/services recovery
iii) 25 new products and
services
Date achieved 15-Dec-2004 30-Jun-2010 31-Dec-2011
Comments Based on the PMU records and project reports, the original targets were exceeded. The only
4
Estimate in line with the assumptions made based on the findings of Impact Survey of MSME Beneficiares, by BDO OFO
CONSULTING LTD. Specifically, if estimated 467 beneficiary MSMEs under the value chain program added on average 2.5 jobs,
new jobs could be estimated at 1,168.
x
(incl. % exception is the cost recovery which fell short of the target. The BDS providers reported
achievement) difficulties in getting MSMEs to pay for BDS services, both due to lack of resources as well as
perceptions that World Bank funded government programs should not require payments Also,
some of the programs were implemented during and following the crisis, which put additional
pressures on the MSME sector and could account for lower cost recovery. At the same time,
according to the previously mentioned independent BDS study covering a sample of
beneficiary MSMEs, 88% of respondents confirmed that they have actually paid for BDS.
i) Secured transactions regime introduced in each target State
ii) Regulatory framework updated for leasing industry;
iii) Framework for credit bureau established;
Indicator 4:
iv) Alternative dispute resolution mechanisms developed and implemented in up to
three States
i) Law on Secured
i)Secured transactions Transactions drafted, but not
regime introduced in each adopted ii) This activity was
i) No framework for target State dropped, as progress was
secured transactions ii)Regulatory framework reportedly made by ELAN5
ii) No framework for updated for leasing and Central Bank of Nigeria
Value leasing industry; iii) Credit Bureau (CB)
quantitative or iii) No credit bureau iii)Framework for credit regulations in place and 3 new
Qualitative) law bureau established; CBs operational iv) ADR
iv) No Alternative iv)Alternative dispute Mechanism set up - 2 new
Dispute Resolution resolution mechanisms multi-door court houses
(ADR) developed and established in Kaduna and
implemented in up to Abia States, while the existing
three States ADR centers in Lagos
received project support
Date achieved 15-Dec-2004 31-Dec-2011
At least 50% of the expected results under this indicator were achieved and were attributable to
the project. This may be regarded as a fair result in challenging circumstances. ADR
mechanisms were established, credit bureau regulations were approved, and three credit
Comments bureaus were established. The Law on Secured Transactions was not approved, but the Central
(incl. % Bank has included it in the package of laws that it will submit for Parliamentary approval in
achievement) 2012. The leasing law has been drafted and submitted to Parliament for approval. However,
this activity was dropped during project implementation, as the Equipment Leasing
Association of Nigeria (ELAN) and the Central Bank of Nigeria focused on it and did not
require project support.
i) Streamlined procedures; Integrated tax and business registration process
ii) Reduction in transaction costs for company registration with Corporate Affairs
Indicator 5:
Commission (including a reduction in the number of steps required to register a
business from 9 to 6 and reduction in time required by 30%)
Value i) No integration of i)Streamlined procedures; i) Initial report on integrating
quantitative or tax and business Integrated tax and registration process was
5
Equipment Leasing Association of Nigeria.
xi
Qualitative) registration process. business registration prepared and disseminated,
process workshop held, and hardware
ii) 44 days and 10 ii) Reduction in delivered; however,
procedures to transaction costs for integration process is still
register a business in company registration work in progress. ii) Based on
Nigeria according to with Corporate Affairs Nigeria Sub-national Doing
Doing Business Commission (including a Business 2010 results partial
2004 report. reduction in the number reduction in transaction costs
of steps required to observed both nationally and
No sub-national register a business from 9 in target states as summarized
data were available to 6 and reduction in time below, though this can only be
at the time. required by 30%) partially attributed to Project
(33 days and 9 procedures for
Abia; 31 days and 9
procedures for Kaduna; and 31
days and 8 procedures for
Lagos)
Date achieved 15-Dec-2004 31-Dec-2011
The project supported the development of streamlined and common business registration
procedures between the Corporate Affairs Commission (CAC) and Federal Inland Revenue
Service (FIRS). These procedures were adopted by the relevant entities and the agreement was
formalized in a memorandum of Understanding between the CAC, FIRS, and NIPC. The
necessary hardware was also funded under the project. However, the physical link between the
databases of CAC and FIRS was not finalized by the closing date and is expected to be
Comments
completed in the Summer of 2012. The process of business registration in Nigeria improved
(incl. %
since Doing Business 2004 Report, from 44 days and 10 procedures to 34 and 8 respectively
achievement)
according to DB 2012. Also, according to Nigeria sub-national Doing Business 2010 results,
the same indicators for target states are: 33 days and 9 procedures for Abia; 31 days and 9
procedures for Kaduna; and 31 days and 8 procedures for Lagos. However, while momentum
for improving procedures was created by the project, given that the intended streamlining of
the business registration process has not been completed yet, these improvements may only be
partially attributed to project activities.
Public-Private Sector Partnership Development
i) At least 3 MSME competitiveness conferences held (annual) and reports of
proceedings produced and disseminated;
Indicator 6: ii) Associated roundtable discussions held between Government and private sector to
disseminate lessons , best practices, success stories from the project and establish
dialogue to improve policies and programs targeted at MSMEs
i) 1 MSME conference held
i) at least 3 MSME
Value ii) 18 various events
conferences
quantitative or N/A supporting public private
ii) Roundtable
Qualitative) dialogue held, including
discussions
roundtable discussions
Date achieved 15-Dec-2004 31-Dec-2011
The purpose of this component was to develop public private dialogue as a precondition for the
Comments successful execution of private public partnerships in policy formulation and in actual
(incl. % development projects. The component supported preparation of one MSME Competitiveness
achievement) Report as well as a national conference on competitiveness which was organized in September
2011. In addition, according to the PMU‟s Completion Report, the following 18 events
xii
supporting public private dialogue were held: three roundtables for MSME financial service
providers, two stakeholder forums on private credit bureaus, one consultative forum on
commercial bank downscaling, two roundtables on investment climate, two knowledge sharing
alternative dispute resolution events, co-sponsoring of three annual Nigerian Economic
Summits, three BDS fairs, and two stakeholder forums on rice and tourism sectors.
i) Appropriate monitoring and evaluation system established to measure the project‟s
Indicator 7: impact on participating States
Value i) M&E system in place,
i) Appropriate M&E
quantitative or N/A though with some
system in place
Qualitative) shortcomings
Date achieved 15-Dec-2004
The results framework included outcomes which extend beyond the immediate impact on
project beneficiaries and not all intermediate indicators were closely related to the achievement
of the PDO.
However, the team addressed this by commissioning two impact assessments in 2008 and 2009
Comments
to gauge the impact of the two largest components - Access to Finance and BDS – both of
(incl. %
which had a direct impact on PDO. The assessments were conducted at a time when a
achievement)
significant portion of the planned grant funding for these components had been disbursed. As
explained, the actual total disbursements to these components turned out in the end to be
smaller as a percentage of the total project cost. Consequently, the ICR provides a summary
review below of the costs and benefits of the other components.
Detailed implementation reports were regularly prepared.
G. Ratings of Project Performance in ISRs
No. Date ISR DO IP Actual
Archived Disbursements
(USD Millions)
1 4/30/2004 Satisfactory Satisfactory 0
2 7/13/2004 Satisfactory Satisfactory 0
3 12/14/2004 Satisfactory Satisfactory 0
4 12/15/2004 Satisfactory Satisfactory 0
5 6/24/2005 Moderately Unsatisfactory 1.12
Satisfactory
6 12/20/2005 Unsatisfactory Unsatisfactory 1.12
7 4/26/2006 Moderately Moderately 1.92
Satisfactory Unsatisfactory
Moderately Moderately
8 6/29/2006 Satisfactory Satisfactory 2.83
9 12/20/2006 Moderately Moderately 3.7
Satisfactory Satisfactory
xiii
Moderately Moderately
10 6/27/2007 Satisfactory Satisfactory 5.46
11 12/28/2007 Moderately Moderately 7.18
Satisfactory Satisfactory
12 6/18/2008 Satisfactory Satisfactory 10.73
13 12/23/2008 Satisfactory Satisfactory 13.34
14 6/29/2009 Satisfactory Satisfactory 16.71
15 12/20/2009 Moderately Satisfactory 19.02
Satisfactory
16 5/31/2010 Satisfactory Satisfactory 21.08
17 6/28/2010 Satisfactory Satisfactory 21.32
Moderately Moderately
18 3/24/2011 Satisfactory Satisfactory 25.36
19 11/14/2011 Satisfactory Satisfactory 29.12
20 n/a n/a n/a 33.37
xiv
H. Restructuring (if any)
Project restructuring was done only to request project extensions and amend the Development
Credit Agreement. However, there was no restructuring of project activities or objectives.
Although the implementation performance dipped to less than satisfactory in 2005, it was not
considered that formal restructuring was necessary because the original composition of assistance
components remained valid and the main obstacles were in terms of implementation bottlenecks
(including an FM review) rather than the content of the assistance program as such.
I. Disbursement Profile
Disbursement under the MSME project was unexpectedly slow. This was caused by a number of
factors (see below) some of which were outside the control of the project. This situation led to
the unsatisfactory rating of 2005. However during the period of project extension (2010 to 2012)
the disbursement lag was reduced to zero and funds were finally 98% disbursed.
xv
1. Project Context, Development Objectives and Design
1.1 Context at Appraisal
1. With a GDP of about US$40 billion at the time of project preparation, Nigeria was
Africa‟s second largest economy, endowed with rich natural resources, most notably oil.
According to the Project Appraisal Document (PAD), Nigeria‟s economy however displayed a
significant dualism between oil and non-oil producing sectors, with the middle-income oil
producing economy of about five million people having a per capita income of around US$2,200.
At the same time, 70 percent of its population lived below the poverty line with an average per
capita income of US$200. Further, based on the United Nation‟s Development Program‟s
(UNDP) Human Development Index, Nigeria ranked low in the human development category –
151st out of 174 countries for which the UNDP had data, and 22nd out of 45 African countries.
2. In February 2002, the Joint Interim Strategy Update put private sector led growth at the
core of the Bank program. The strategy had three pillars: (i) improving economic governance; (ii)
creating the conditions for rapid private sector led poverty-reducing growth, particularly in the
non-oil economy; and (iii) enabling local communities to take charge of their own development.
Assistance to achieve the development objectives under the first and third pillars were to be
provided through a combination of lending and non-lending services including those for
economic management capacity building, sectoral programs on education, health, energy, water
and transport, and community driven projects.
3. The MSME Project aimed at supporting growth potential of MSMEs. Project components
included: access to finance, business development services, investment climate, public private
sector partnership development, project management, monitoring and evaluation. The Project
targeted three non-oil producing states (Lagos, Abia, and Kaduna), except for part of investment
climate component which also supported nationwide reforms. The MSME project was
complemented by the IDA Privatization Support Project, which was successfully implemented
and closed in December 2009.
4. The MSME Project was part of the joint IDA-IFC MSME Development Pilot Program
for Africa. The Program aimed at unlocking private sector growth in selected African countries
by supporting MSMEs, which taken together account for the vast majority of private sector
activities in most of the continent. Projects under this Pilot Program were meant to differ from
previous private sector development projects in three ways: (i) they would address MSME
constraints in a holistic manner, i.e., by tackling regulatory obstacles, as well as facilitating access
to finance and the creation of a market for business development services; (ii) they would rely on
a range of private sector partners for implementation, (iii) they would provide a framework for
collaboration between the Bank and IFC. The initial pilot included the following seven countries:
Ghana, Kenya, Madagascar, Mali, Nigeria, Tanzania and Uganda. The program was later
extended outside the Africa region to Cambodia and Papua New Guinea.
1.2 Original Project Development Objectives (PDO) and Key Indicators
5. The PDO aimed to increase the performance and employment levels of MSMEs in
selected non-oil industry sub-sectors and in three targeted states of the country. To achieve the
PDOs the project supported three sets of interventions (i) development and strengthening of the
capacity of local intermediaries to deliver financial and non-financial services to MSMEs; (ii)
1
reduction of selected investment climate barriers that constrain MSME performance; and (iii)
mobilization of increased private investments in MSMEs and intermediaries via (i) and (ii).
Key performance indicators included the following:
PDO Indicator: i) Growth of MSMEs‟ value-added in participating States and sectors
Intermediate Outcome Indicators:
Component 1- Access to Finance:
i) US$15 million new private sector investments in microfinance institutions;
ii) At least two MFIs established;
iii) Three commercial banks establish MSME downscaling programs;
iv) Portfolio at risk (arrears over 60 days) not greater than five percent after the second
year of operation for both MFIs and commercial banks; and
v) Loan portfolio cumulative disbursed of US$75 million each for MFIs and
commercial banks.
Component 2 – Business Development Services (BDS):
i) At least 1,000 MSMEs are supplied with BDS by participating BDS providers;
ii) Up to 4,000 new (including indirect) jobs in 3-5 supply chains in selected industries;
iii) Under both the BDS Fund and industry supply chain, at least 20 BDS providers
assisted by the Fund;
iv) At least 75 percent cost recovery reached by participating BDS providers within a
specific time frame; and
v) At least 20 products or services with sustained uptake improved or developed
through support from the Fund.
Component 3 – Investment Climate:
i) Secured transactions regime introduced in each target State;
ii) Regulatory framework updated for leasing industry;
iii) Framework for credit bureau established;
iv) Alternative dispute resolution mechanisms developed and implemented in up to three
States; and
v) Streamlined procedures; integrated tax and business registration process
Reduction in transaction costs for company registration with Corporate Affairs
Commission (including a reduction in the number of steps required to register a
business from 9 to 6 and reduction in time required by 30%).
Component 4 - Public-Private Sector Partnership Development:
i) At least three MSME competitiveness conferences held (annual) and reports of
proceedings produced and disseminated; and
ii) Associated roundtable discussions held between Government and private sector to
disseminate lessons, best practices, success stories from the project and establish
dialogue to improve policies and programs targeted at MSMEs.
Component 5 – Project Management, Monitoring and Evaluation - Project Impact Assessment:
i) Appropriate monitoring and evaluation systems established to measure project‟s
impact in participating States.
2
1.3 Revised PDO and Key Indicators, and reasons/justification
6. The PDO and key outcome indicators remained unchanged during the project as it was
considered that they were appropriate, and that the targets were by and large feasible, if
challenging in some cases.
1.4 Main Beneficiaries
7. The project supported MSMEs growth by: (i) facilitating increased access to finance; (ii)
improving business development services; (iii) enhancing the investment climate; and (iv)
supporting the dialogue between the public and private sector to facilitate MSME development.
The main targeted beneficiaries of the project included: (i) BDS providers which received grants
to improve and expand their services to MSMEs; (ii) financial institutions which received grants
to establish microfinance operations and/or downscale; (iii) supported MSMEs with better access
to finance, business development services, and improved investment climate; and (iv) the
government with better regulatory framework in selected areas, improved capacity, and expected
healthier fiscal position resulting from the growth of private sector.
1.5 Original Components
8. The project included five components: (i) access to finance; (ii) business development
services; (iii) investment climate; (iv) public-private sector partnership development; and (v)
project management, monitoring and evaluation.
9. Component 1: Access to Finance (IDA US$10 million, Other US$23 million). This
component aimed to improve access to financial services available to MSMEs. This objective was
to be achieved by using grants to support the creation or strengthening the capacity of
microfinance institutions and banks to serve the MSME segment. The component envisaged
support for the following activities: i) establishment of local commercially viable, regulated,
micro-finance companies; ii) technical skills transfer programs that incorporate new systems and
lending methodologies to support commercial banks to expand their loan portfolio to MSMEs; iii)
support for the establishment of private credit bureaus over an initial set-up period until a bureau
establishes a revenue flow from its services; and iv) specialized technical assistance to selected
firms providing long-term leasing services.
10. Component 2: Business Development Services (IDA US$12 million, Other US$4
million). This component intended to develop the market for business development services
(BDS) by supporting qualifying intermediaries via grants and technical assistance to respond to
unmet MSME demand for BDS. The component focused in the three target States. Two types of
TA and trainings were funded under this component: (i) TA and training on specific value chains;
and (ii) TA and trainings on more general business functions (i.e, accounting, marketing,
management etc). In addition, towards the very end of the project, support was provided for
implementation of two special programs – the Grooming Enterprise Leadership Program (GEL)
and the Youth Enterprise with Innovation in Nigeria (YouWiN). These two programs were not
captured under impact assessment surveys, because they were included in the project only in
2011.
11. Component 3: Investment Climate (IDA US$5.1 million, Other US$0.7 million). This
component was intended to support the Government of Nigeria in: (i) reforming the business
registration process, including upgrading and decentralizing the information systems of the
Corporate Affairs Commission (CAC); (ii) introducing and strengthening the alternative dispute
3
resolution (ADR) in three states; (iii) enhancing the existing leasing framework by providing
technical assistance for developing the laws and regulations together with a training program to
ensure full understanding by relevant stakeholders; (iv) supporting the required legal reforms for
the establishment of credit bureaus; and (v) introducing a new secured transaction system
including the laws and regulations, hardware, and software system that could be used for an
integrated registration covering various forms of moveable collateral.
12. Component 4: Public-Private Sector Partnership Development (IDA US$1 million).
Resources were allocated to fund learning events (study tours, trainings, conferences) and reports
to facilitate dialogue between the public and private sector, and thus support reforms for MSME
development. Key beneficiary institutions under this component were the Small and Medium
Scale Enterprises Development Agency of Nigeria (SMEDAN) and the Nigerian Investment
Promotion Commission (NIPC). SMEDAN would take the lead on a dialogue with business
associations, private sector and government stakeholders with a view to preparing MSME
competitiveness report on an annual basis utilizing the cost of doing business surveys and other
evaluations generated by the project and research undertaken by SMEDAN itself.
13. Component 5: Project Management, Monitoring and Evaluation (IDA US$2.3
million) Due to limited government capacity to implement the project, a decision was made to
select a private sector entity on a competitive basis, and entrust it with the management of the
project, with the exception of disbursement and FM functions which were performed by the
government run PIU. This component funded the operational cost of the PMU, as well as
equipment and other financial, audit, training and consultant assignments for both the PMU and
PIU.
1.6 Revised Components
14. The program components remained unchanged throughout the project. However, the
scope of some activities was broadened to respond to client demand and country needs. For
example, during implementation two new BDS programs were added: (i) Grooming Enterprise
Leadership Program - GEL to provide training to SMEs in 24 locations across the country; and
(ii) Youth Enterprise with Innovation in Nigeria - YouWiN to support business plan competition
for young entrepreneurs. These programs were requested by the Ministry of Finance to support
its jobs and growth agenda.
1.7 Other Significant Changes
15. The project was extended from the originally scheduled closing date of June 30, 2009 to
December 31, 2011 due to implementation delays. The project was extended three times. An
initial request was made to extend the closing date from June 30, 2009 to June 30, 2010 to ensure
completion of planned activities which were behind schedule due to delayed effectiveness. The
second extension moved the closing date to June 20, 2011 to enable the team to conclude several
activities which were already in advanced stages (i.e., $900,000 worth of matching grants under
the three value chains). A final six month extension request was made to complete the remaining
project activities, including Grooming Enterprise Leadership (GEL) program, which was included
in the project in 2011. The reasons for these delays are further set out below, section 2.2.
4
2. Key Factors Affecting Implementation and Outcomes
2.1 Project Preparation, Design, and Quality at Entry
16. The Nigeria MSME Project was one of seven joint IDA/IFC MSME pilot projects for
Africa designed to support MSME growth in a comprehensive fashion. Specifically, the projects
under this IDA-IFC program included: (i) access to financial services; (ii) business development
services and entrepreneurship development, including strengthening inter-firm linkages (both
domestic and foreign) and information access; and (iii) improvements in the business
environment for MSMEs, including strengthening business associations. An additional objective
of the pilot program was to leverage IDA and IFC resources to support project implementation.
As a result, the project was designed based on the framework for pilot programs and tailored to
respond to specific MSME needs in Nigeria.
17. The project objective was relevant to the country‟s goals and development priorities.
This was reflected in the IDA‟s Interim Strategy Update from February 2002, highlighted in
analytical work which preceded preparation, and confirmed in FY10-13 CPS and recent
analytical work6.
18. The project design was based on considerable Economic and Sector Work 7 which
revealed that the non-oil private sector in Nigeria faced major development challenges. The
findings revealed that Nigerian private sector firms suffered from high costs and lack of
competitiveness. Following a due diligence process, the Project team identified the following
MSME issues in Nigeria: (i) poor access to finance; (ii) lack of access to business development
services; (iii) constraint in the investment climate; and (iv) limitations to public-private sector
dialogue. As a result, four corresponding project components were designed.
19. The project focused on three pilot states of Lagos, Abia, and Kaduna. The PAD did not
provide detailed information about the selection process of targeted states. It is understood
however, that the geographic focus areas were previously agreed between the Government of
Nigeria and the World Bank. The three pilot states were selected to ensure geographic and socio-
economic diversity, with Lagos being the commercial capital of the country, Abia an
underdeveloped and poor, and Kaduna as an industrial center in northern Nigeria.
20. In addition, the business development services component focused on four target
industries, based on a set of selection criteria identified in the PAD. The criteria included: high
growth potential; size of the industry (contribution to GDP) and geographical distribution;
number of MSMEs in the value chain and MSME employment; potential for local MSMEs to
6
Financing SMEs in Nigeria By Gunhild Berg, Michael Fuchs, Leonardo Iacovone, Thomas Jaeggi, Andrew Lovegrov, and Carolina
Villegas Sanchez, 2012.
7
Bank Staff Assessments: 1) Results of the Nigeria Firm Survey, Regional Program on Enterprise Development (RPED Paper #118,
April 2002), World Bank. 2) The Implementation Completion Report (ICR) on the World Bank Small and Medium Enterprise
Development Project (Loan 2995-UNI), Report #16811, June 1997. 3) Africa Program Framework Paper for a Joint IDA/IFC Micro,
Small and Medium Enterprise Development Pilot Program for Africa, World Bank JIFC (considered by the Board of Executive
Directors, June 19,2003). 4) SME mapping exercise undertaken in parallel with a survey on Nigerian firms conducted under the WED
of the World Bank, October 2001. 5) “Joining the Race for Non-Oil Foreign Investment, �? conducted by the Foreign Investment
Advisory Services; 6) “Direct Support to Private Firms - Evidence of Effectiveness�?, G. Batra and S. Mahmood, 2001 and „YDA ‟s
Partnership for Poverty Reduction (FY94-FY00): An Independent Evaluation �?, OED, 200 1 , pp 31-33.
Other: 1) “Evaluation of the Mekong Project Development Facility �?, Nexus and Assocs., June, 2002 with important insights into the
best design parameters for BDS provider capacity building. 2) Guiding Principles for Donor Intervention Business Development
Services for Small Enterprises: Guiding Principles for Donor Intervention, Committee of Donor Agencies for Small Enterprise
Development, February 2001.
5
capture more value added; the potential for technical assistance to help MSMEs achieve the
above goal; and, commitment of key industry stakeholders. In this regard, catfish farming was
identified in the PAD as the first target industry, while the selection of other industries was to be
made during project implementation and based on assessment of their potential. Eventually, rice,
palm oil, and tourism sectors were included in the project.
21. The project may have been too ambitious in terms of the number of planned activities and
their scope, given its pilot nature and the challenging implementation environment. The project
design, including both IDA and IFC inputs, was consciously attempting a comprehensive
approach to MSME development in order to leverage the interrelationships of policy, institution
building, finance and technical upgrading, rather than a piecemeal approach. The team wanted to
ensure implementation of a reform agenda to address obstacles and nurture MSME development.
However, this approach came up against the inevitable problem of a complex management
structure, and it proved difficult in practice. Implementation rested on a variety of institutions
and required a high level of coordination which was difficult to ensure in a complex
implementing environment
2.2 Implementation
22. The commencement of implementation experienced significant delays and the project
lagged behind the original schedule ever since. This project faced a difficult implementation
environment which was to a significant extent outside the control of the project management. The
delay factors which impacted implementation and outcomes, included the following: (i) delayed
effectiveness; (ii) delays with the establishment of the Project Management Unit (PMU); (iii)
limited capacity of the government Project Implementation Unit (PIU) in implementing World
Bank financial management guidelines and related FM in-depth review; (iv) PMU‟s limited
exposure to World Bank‟s procurement procedures; (v) low interest from vendors to bid for
project funded activities; (vi) an amendment to the Development Credit Agreement due to lack of
counterpart funding; (vii) delayed approval of regulatory framework for MFIs; and (viii) the
security situation in Abia State. Below is a brief summary outlining each of the highlighted
factors.
23. The Project was declared effective six months after the originally planned effectiveness
target date of June 2004, which delayed commencement of project activities. Amongst other
issues, the conditions of effectiveness included signing of management contract between NIPC
and the firm appointed for project execution services, which required completion of procurement
for the private PMU. Given that the procurement process took an extended period of time, due to
low technical capacity, the effectiveness was delayed until December 2004.
24. The establishment of the privately managed Project Management Unit (PMU) took nearly
two years to complete. The PMU became fully operational only in June of 2005. This was largely
due to Nigerian Investment Promotion Commission‟s (NIPC) insufficient procurement capacity at
the time. Following a lengthy international procurement process, the contract with the winning
bidder - Nathan Associates – was signed in November 2004. However, the staffing of the PMU
took another six months and was completed only in June 2005, when the PMU finally became
fully operational.
25. Project implementation was temporarily delayed due to the PIU‟s lack of full compliance
with World Bank‟s FM guidelines, which triggered an in-depth FM review. The World Bank‟s
FM supervision mission in 2007 and 2008 flagged non-compliance with some of the FM
guidelines, such as travel without proper recording of receipts, lack of purchase orders, and so
6
forth. As the project failed to comply with required financial management procedures by the time
of expected extension in 2009, it was subject to the World Bank‟s FM review process. The FM
review included several stages and involved a dynamic interaction between the PIU and the
Bank‟s FM team. Specifically, as the PIU had to respond to FM team‟s inquiries with additional
clarifications and/or documents in each of the stages of the review, the whole process took
approximately four months to complete. According to the project team, during this period some
contractors engaged to support rice and palm oil value chains stopped working temporarily given
that their payments were not processed in a timely fashion. While the World Bank did not impose
an explicit disbursement ban during this period, withdrawal applications could not be prepared
promptly until the project financial records were sorted out internally. Following completion of
FM review, the project received a clean bill of health and implementation was put back on track.
26. Initially, the PMU had limited familiarity with the Bank procurement guidelines. At the
outset, the PMU staff responsible for procurement did not have adequate knowledge of World
Bank procedures. This translated into slower than expected implementation. The Bank‟s
procurement team reported that it took nearly two years until sufficient capacity was created with
the assistance of World Bank procurement staff who delivered training to the PMU.
27. International vendors exhibited low initial interest to bid for project work. Initially the
interest to bid for project work in Nigeria was low and a number of tenders received only limited
response. In some cases this led to retendering, which caused implementation delays. This
particularly affected the implementation of the rice and catfish value chains. This issue was not
specifically related to this project as it also affected other projects being implemented in Nigeria
over this period.
28. Project implementation was slowed down by lack of counterpart funding. This issue was
eventually addressed with the amendment of the Development Credit Agreement (DCA). In 2005,
the DCA had to be amended because the counterpart funding from the government was not made
available regularly. Initially, the DCA envisaged a split of 80 percent IDA and 20 percent
counterpart funding, but as the counterpart funds were not readily available the DCA was
amended to include 100 percent IDA financing in order to facilitate implementation.
29. Slow approval of the regulatory framework for MFIs delayed implementation of the
access to finance component. Component 1 – Access to Finance - could not commence until the
regulatory framework for microfinance, which would allow for licensing of microfinance banks,
was put in place. While the Project provided support to the development of regulatory framework
for microfinance, the Central Bank of Nigeria issued its Microfinance Guidelines (a prerequisite
for implementation), only in December 2005, and proceeded with implementation in 2006. Thus
real activity in the MFI sector only started in 2006, and the first MFI – Accion - opened in July
2007, while the last one – Microcred - was established in early 2010.
30. The deterioration of the security situation in Abia State delayed the project
implementation in the state. The challenging security situation in one of the project focus areas
between 2008-2011, including high incidence of violent crime and kidnappings, negatively
impacted project implementation. Project beneficiaries were affected by a risky environment, and
the World Bank project team could not supervise implementation in the field due to security
concerns.
31. The global financial crisis of 2008 severely affected the Nigerian financial sector. In
addition to the exceptionally difficult implementation environment, the project had to contend
with the global financial crisis at about mid-term which adversely impacted on the fulfillment of
7
some components and in particular access to finance. Nevertheless, four of the six MFIs
supported by the project withstood the crisis. Starting from November 2009 the banks‟ balance
sheets were severely affected by the drastic drop in oil prices (from $147 to $39 per barrel) and a
considerable depreciation of the Naira (from N117 to N190 to the US$ before stabilizing at
around N150)8. Further, the volume of non-performing loans (NPLs) started to rise following the
crash of the Nigeria Stock Exchange (NSE) which, by 2008, was dominated by banks accounting
for around 70 percent of market capitalization. Project implementation was thus unavoidably
affected. Out of 6 MFIs established with the project support, two failed (IMFB and MIC). In
addition, the one commercial bank – Oceanic Bank - which successfully downscaled as a result of
project support, experienced difficulties during the crisis and was acquired by another
commercial bank (Ecobank), which however maintained its MSME focus.
32. Some of the above cited implementation delays and issues may have warranted a project
restructuring. Restructuring may have been an effective measure to address the challenges that the
project experienced. This was considered at various times. However, it was decided to maintain
the integrity of the project as it was first designed, because it was considered that the issues were
associated with delay factors rather than inability to fulfill component objectives as such. The
delays in fact affected all components, ranging from funding of BDS providers to promulgation
of MFI regulations so restructuring was not indicated. However, in practice there was a
reallocation of funds introduced at the closing phase to ensure fulfillment of targets.
2.3 Monitoring and Evaluation, M&E Design, Implementation and Utilization
33. The results framework was designed to measure outcomes which extend beyond the
immediate impact on project beneficiaries. Not uncommon for projects designed 10 years ago,
both the PDO and PDO indicator lacked specificity and would have benefitted from a more direct
causal link with the supported activities. The PDO aimed to achieve the increase in the
performance and employment levels of MSMEs in participating states and sectors . Given that the
project focused on relatively limited number of beneficiaries, in line with the available resources,
and that it was designed to reach to MSMEs via intermediaries (i.e., BDS providers, microfinance
banks, etc.) the PDO was probably too ambitious. Similarly, the PDO indicator aimed to measure
MSMEs value-added in participating states and sectors, which is not necessarily directly
attributable to interventions funded under the project. In retrospect intermediate outcome targets
could have been included for capacity building activities within the MFIs and within the BDS
suppliers, as well as final outcome or impact targets in terms of performance improvement in the
MSMEs themselves.
34. Two impact assessments were commissioned to gauge direct impact on project
beneficiaries for the two largest planned components - access to finance and business
development services. In keeping with the outcome objectives these assessments focused
primarily on determining the impact that MFI finance and business development services had on
beneficiary MSMEs‟ sales and employment levels. However, ultimately the original BDS
component and the ATF component comprised a substantially lower proportion of project
expenditure than originally planned. It is important to note that the grants under these
components were performance based and were disbursed only upon meeting of certain targets. In
8
Making Finance Work for Nigeria, 2009
8
regards to ATF component, some of the initially approved grants could not be fully disbursed
given that certain grantees could not meet the performance targets (i.e. IMFB and MIC lost their
licenses to operate as microfinance banks). As far as BDS is concerned, the number of qualifying
applicants was lower than expected, and moreover these grants were also based on meeting
performance targets which in some cases could not be met. At the same time, the Investment
Climate and Public Private Sector Partnership Development components ended up comprising a
relatively larger share of project expenditures than originally planned. A review of achievements
under these two components is provided below in section 3.5.
35. To assess progress towards the achievement of PDO, sales revenue of beneficiary
MSMEs was used as a proxy to measure their performance. While the PDO indicator was
originally designed to capture MSME value added as a means of measuring performance, in
practice it was difficult to calculate. More specifically, value-added is defined as the difference
between sales revenues and purchased inputs. Because the MSMEs surveyed did not use a
standardized accounting approach for measuring these inputs, it was difficult to obtain reliable
and comparable value added calculations which would have required a detailed survey of MSME
operations. This data obstacle was addressed by tracking MSME sales as a more reliable indicator
even though it is does not measure efficiency/profitability. This was reinforced by employment
data for the beneficiary MSMEs to indicate progress towards the PDO.
36. The two impact assessments demonstrated an association between the funded
interventions under the access to finance and BDS components and the increase in employment
and sales of beneficiary MSMEs. Obtaining a loan from project supported MFIs was associated
on average with a 44 percent increase of respondents‟ monthly sales compared to the pre-
intervention time. In addition, the average monthly sales of MSMEs benefitting from BDS
supported by the project increased by 84.4 percent, while their employment level increased by
41.7 percent.
37. While the impact assessments were prepared in 2008 and 2009, a significant portion of
grants utilized to support access to finance and business development services was disbursed by
the time of the reports‟ completion. Out of the total amount of US$7.8 million and US$3.1
million9 of grants actually paid to support establishment of MFIs/bank downscaling and matching
grants for business development services respectively, 80 percent of grant resources under access
to finance and 37 percent for BDS were utilized by the time each of the impact assessments were
completed. It should also be noted that that matching grants for BDS were paid in tranches based
on performance, and so the actual disbursements may underestimate the magnitude of BDS
because the total grants were fully disbursed only after verification of agreed targets.
38. An additional source of evidence is the study Financing SMEs in Nigeria10 conducted by
the World Bank in 2012 which showed sustained gains in access to finance, the crisis
notwithstanding. Specifically, it indicated that 9.5 percent of surveyed firms (other than project
beneficiaries) had access to loans or lines of credit in 2011 compared to 5.1 percent in 2007.
Based on this information, it seems that, while still at the low overall level, access to finance for
MSMEs continued to increase from 2007 despite the crisis which severely affected the financial
sector. It is reasonable to conclude that part of this gain can be attributed to the effects of the
project.
9
This excludes a final grant of $2.5 million which was approved and disbursed only in 2011 to support implementation of new
initiatives (i.e., YouWin). This grant was for a special project which was not originally planned and which did not include a matching
component. Also, this activity was not covered with impact assessments.
10
By Gunhild Berg, Michael Fuchs, Leonardo Iacovone, Thomas Jaeggi, Andrew Lovegrove, and Carolina Villegas Sanchez, 2012.
9
2.4 Safeguards and Fiduciary Compliance
Safeguards
39. The project did not trigger any safeguards policies.
Fiduciary Compliance
The project broadly complied with FM and procurement requirements. The government PIU was
tasked with FM functions, while the private contractor (PMU) was responsible for procurement,
once it became operational. In turn, the firm managing the PMU was procured by the PIU. By the
closing date, project implementation in both procurement and FM was rated moderately
satisfactory.
40. Due to poor record keeping and high staff turnover, the project was subject to a FM
review. In 2009 the FM rating in implementation supervision report (ISR) was downgraded to
moderately unsatisfactory due to: poor filing system; high turnover of FM staff of the project;
breakdown in the computerized accounting system; delays by project management to resolve
issues identified in audited financial statements and FM supervision mission reports; absence of
internal audit activities, and inadequate staffing for the FM function.
41. However, the FM review concluded that the PIU had addressed all the previously
identified shortcomings and the project was upgraded. Following an in-depth FM supervision
mission, project compliance improved; this was formally recorded in the ISR, and FM rating was
upgraded to moderately satisfactory in May 2010. Accountability and internal controls were
improved with the hiring of two additional FM staff in the accounts unit, redeployment of the
project accountant who had been transferred to another assignment earlier, and addressing of
internal control issues raised by the previous FM supervision mission. The project rating during
the most recent FM supervision mission was moderately satisfactory.
42. While it took some time for the PMU to build internal procurement capacity, the project
in general complied with World Bank requirements in this area. The initial issues identified by
Bank‟s procurement review mission (e.g., procurement of equipment without formally approved
procurement plan, delays in payments, short deadlines for submission of bids, and inadequate
staffing of procurement function) were addressed as implementation progressed and internal
capacity was built. To address these shortcomings, the World Bank procurement team delivered
training for project procurement staff. The Bank's procurement team rated overall procurement
compliance as moderately satisfactory.
2.5 Post Completion Operation Next Phase
43. Various government institutions will continue to oversee implementation of the reforms
initiated under the project.
44. Business Registration. The project supported the development of streamlined and
common business registration procedures linking the Corporate Affairs Commission (CAC) and
Federal Inland Revenue Service (FIRS). These procedures were adopted by the relevant entities
and the agreement was formalized in a memorandum of Understanding between the CAC, FIRS,
and NIPC. Additionally, various workshops were organized to build client awareness and
institutional capacity to implement these reforms. The necessary hardware was also funded under
10
the project. However, the physical link between the databases of CAC and FIRS was not finalized
by the closing date. Final testing of the software and installed systems is underway and it is
expected that the business registration streamlining will be completed by summer, 2012, when the
new system is expected to go live. Once implemented, the time required to register a new
company will significantly decrease.
45. Secured Transactions. The Project supported the drafting of the Law on Secured
Transactions, but the Law has not been approved by Parliament. The Central Bank FSS 2020
Working Group11 has adopted the Project‟s supported draft Law and included it in the package of
laws that the Central Bank will nominate for Parliamentary approval in 2012.
46. In addition, the World Bank will continue close policy dialogue with the authorities in the
area of access to finance. Specifically, the upcoming Financial Sector Assessment Program will
cover access to finance issues, which will provide an opportunity for further engagement in the
policy area which has received project support.
47. Finally, the World Bank will also conduct a review of the joint IDA/IFC MSME pilot
program for Africa.
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation
Relevance of Objectives
48. The development objective of the project was to “increase the performance and
employment levels of MSMEs in selected non-oil industry sub-sectors and in pilot areas of the
country.�? The private sector is widely considered a key generator of economic growth and
MSMEs account for the vast majority of private sector activities and employment in Nigeria. As
such, the project rightly focused on supporting MSMEs to promote private sector led growth.
The development objective was also consistent with the Joint Interim Strategy Update for the
Federal Republic of Nigeria of February 2002, which identified private sector led growth of the
non-oil economy as key to reduce poverty (second pillar of the Strategy Update). The
Government‟s priorities in this sector were reflected in the above-mentioned strategic documents,
and in its original request for this project which specifically focused on MSMEs development.
49. This objective continues to be relevant today; hence, the project is rated high in terms of
relevance of objectives. The relevance of the project objective was confirmed in the FY 10-13
Country Partnership Strategy (CPS). Amongst others, the CPS recognized the importance of
maintaining non-oil growth and called for targeted interventions to promote private sector
involvement. In addition, the 2011 CPS progress report also stated that Nigeria requested donor
support to increase MSME access to finance. Listed instruments include: partial credit risk
guarantees, bank downscaling, entrepreneurial training and business development services, and
credit lines to support MSMEs. Finally, according to recently completed World Bank Study
Financing SMEs in Nigeria12, 96 percent of firms in the manufacturing sector are SMEs, and
while they account for 70 percent of employment they contribute only 1 percent, of GDP which
11
FSS 2020 is an independent unit of the CBN tasked with the responsibility to support Nigeria‟s transformation into one of the
twenty largest economies in the world by the year 2020.
12
By Gunhild Berg, Michael Fuchs, Leonardo Iacovone, Thomas Jaeggi, Andrew Lovegrove, and Carolina Villegas Sanchez, 2012.
11
reflects partly the country‟s dependency on extractive industries and the continuing relevance of
the project‟s focus on MSMEs and non-oil industry subsectors.
Relevance of Design and Implementation
50. The project was designed around four themes: (i) improving access to finance; (ii)
enhancing business development services; (iii) improving the investment climate; and (iv)
promoting public-private sector dialogue. These themes are essential for MSME development.
Accessible financing enables entry of start-ups and expansion of existing firms by facilitating
investments in inputs, equipment, technology, and/or labor which are all essential for growth.
Business development services are important as they contribute to improvement of management
practices which in turn have positive impact on productivity. Finally, an unfavorable investment
climate can stifle MSME growth and public-private sector dialogue can help promote business
environment reforms.
51. The importance of these themes for MSME growth was also identified in the IDA IFC
framework paper of 2003. Projects under the IDA-IFC framework recognized the need to address
obstacles for MSMEs growth in a holistic manner, specifically in three areas: i) access to finance;
ii) business development services; and iii) investment climate. The framework was designed to
respond to common issues affecting MSME performance across Africa and it envisaged relying
on private sector partners to enhance implementation. The MSME project was designed as one of
IDA-IFC pilots and as such it incorporated the recommended instruments aimed at nurturing
MSME growth. As a result, this contributed to higher relevance of project design to identified
MSME development agenda.
52. Recent analytical work confirmed the importance of investment climate and access to
finance for Nigerian MSMEs. Therefore relevance of design is rated substantial. Access to
finance remains the second largest obstacle for MSMEs according to 2011 Investment Climate
Assessment, and the importance of investment climate reforms was highlighted in the CPS as
means to support non-oil growth. Finally, the previously cited study Financing SMEs in Nigeria13
found that only 9.5 percent of surveyed SMEs had a loan or line of credit from a financial
institution in 2010. While this was a significant increase compared to 2007 when this percentage
was 5.1 percent, this nevertheless highlights the relevance of MSME access to finance agenda.
53. To implement the ambitious reform program, the project relied on implementation
mechanisms which placed private sector at the center. First, recognizing the limitations of
government capacity to implement complex projects, a decision was made to engage a private
sector project management unit. Second, the access to finance component was designed to
support the creation of a market leader (a new microfinance bank or bank that downscales) that
would eventually serve as a demonstrator to other market participants and prove that lending to
the MSME segment is a profitable venture. Third, the Bank and IFC partnered to support the
creation of a commercial microfinance bank. Fourth, the project provided support to BDS
providers (rather than MSMEs directly) to create a market for BDS providers. The innovative
design for access to finance and BDS components was instrumental for achieving the PDO.
54. Rating: Based on high relevance of objectives and substantial relevance of design and
implementation, overall relevance is rated substantial. More weight was placed on project design
and implementation, as these two areas are instrumental for achieving the stated objectives.
13
Ibid.
12
3.2 Achievements of Project Development Objectives
55. The Project Development Objective was to increase the performance and employment
levels of MSMEs in selected non-oil industry sub-sectors and in pilot areas of the country which
was largely confirmed. As stated previously, while originally the PDO monitoring indicator was
designed to capture MSME value-added, the project eventually monitored sales revenue as a
more accessible indicator of impact on MSME performance. This approach was used because
MSMEs do not use a standardized accounting approach to report on purchased inputs which is, in
addition to sales revenue, used to determine value added. Consequently, the progress towards the
PDO was measured by tracking beneficiary MSME sales and employment levels.
56. The two independent impact evaluation studies14 largely confirmed achievement of the
PDO. The studies were based on the surveys of MSMEs benefitting from activities supported
under Access to Finance and BDS Components. Both impact assessments found an association
between accessing a loan and receiving business development services, on the one hand, and an
increase in sales and employment levels of target MSMEs on the other, thus confirming the pilot
approach and likely confirming the achievement of the PDO in a sample of surveyed enterprises
by 2009. While the impact assessments were prepared in 2008 and 2009, as previously discussed
in paragraph 37, a significant portion of total grants utilized to support access to finance and
business development services were disbursed by the time impact assessments were completed.
57. The following review of achievement of PDO is divided in two parts, each focusing on
one of the specific targets, namely: (i) increase in beneficiary MSME performance measured by
increase in sales levels; and (ii) increase in beneficiary MSME employment levels.
Increase in MSME performance
58. The beneficiary MSMEs which obtained a loan from microfinance institutions
established with project support on average increased monthly sales by 44 percent compared to
pre-intervention time. According to an independent impact assessment study prepared by IFC‟s
Results Measurement Unit in 2009, based on the data collected by BDO OFO consulting covering
a stratified random sample of 450 borrowers (out of 11,000) of three microfinance institutions
supported by the project (Susu, Accion, and MIC), the Project recorded substantial impact in
improving performance of participating MSMEs. The relevant results are as follows: (i)
obtaining a loan seems to have had a substantial effect on borrowers‟ monthly sales; on average,
the monthly sales increased by NGN 197,385 or 44 percent per respondent compared to pre-
intervention time from NGN 455,388 in 2007 to NGN 652,773 in July 2008; further, more than
80 percent of respondents agreed that obtaining a loan affected their business sales and
profitability in the past year; (ii) the project succeeded in increasing access to finance for 25
percent (88 out of 354 people) of respondents who had been unable to access the loans before;
(iii) respondents reported positive change in business practices, as 94 percent agreed with a
statement that obtaining a loan led to improvements in their businesses, such as changes in
14
i) Impact Evaluation of Borrowers from Accion , Susu, and MIC Microfinance Banks , by Luba Shara, IFC with data collection
conducted by: BDO OFO CONSULTING LTD, 2009; and ii) Impact Survey of MSME Beneficiares, by BDO OFO CONSULTING
LTD, 2008.
13
keeping business records and preparing end of the year accounts15. It should be noted that while
the study of MFIs did not directly estimate a counterfactual through interviews with non-assisted
MSMEs, the interview questions did elicit views on the probable „with-without‟ scenario, so that
the stated sales increases were indicative of significant net effects.
59. The issue of attribution was addressed by directly asking respondents about the extent to
which the changes in sales were caused by obtaining the loan, and the majority of project
beneficiaries confirmed a positive link. Based on this approach, 25.5 percent of respondents
attributed the change in sales completely or to a large extent to the loan, another 39 percent stated
that accessing the loan had some effect on sales, while 36 percent claimed that the loan had no or
little effect on sales.
60. MSMEs which benefited from project supported business development services reported
an 84.2 percent increase in average monthly sales in the observed period. According to an
independent impact survey of 183 MSMEs serviced under the project, conducted by BDO in
conjunction with the IFC in 2008, the project also had a significant positive impact on sales of
MSMEs which received project supported BDS. In this case the study used a matched control
group of MSMEs to estimate net effects. Specifically, beneficiary MSMEs reported an increase of
84.2 percent on their average monthly sales (from about N243,840.58 to N449,270.4) in the
observed period, compared to an increase of only 6.2 percent (from N401,713.5 to N426,466.2)
for the control group of 72 MSMEs benefiting from other BDS providers in non-pilot states.
Further, the corresponding quarterly sales figures of beneficiary MSMEs increased by 112
percent (from N1,023,884 to N2,172,799), while the control group recorded a decrease of 3.7
percent. According to the study, and based on statistical test of significance, the changes in
beneficiary MSMEs monthly and quarterly sales were found to be statistically significant at 95
percent confidence level. At the same time, increase in monthly sales of the control group was
not statistically significant while their decrease in quarterly sales was significant16.
61. To verify findings, the survey included two other matched control groups: 225 MSMEs
without any BDS in pilot states and 295 MSMEs without any BDS assistance in non-pilot states.
In both cases, the beneficiary MSMEs experienced higher impact on sales than control groups.
Specifically, the MSMEs that operated in the same environment as beneficiary MSMEs but did
not receive any BDS, experienced a slight increase in average monthly sales of 3.5 percent (from
N263,667 to N273,008) and 11.2 percent increase in quarterly sales (from N723,000 to
N812,462); however, these increases in monthly and quarterly sales were not statistically
significant at 95 percent confidence level17. Finally, the MSMEs with no BDS in non-pilot states
recorded an insignificant decrease in monthly and quarterly sales of 16 percent (from
N1,229,584.6 to N1,022,741) and 3.6 percent (from N3,558,134 to N3,429,624) respectively18.
Issues such as attributability and sampling method remain in question as always, but even though
the trend in sales may be attributable to various factors, the finding that the increase in sales
performance of beneficiary MSMEs was significantly higher than that of three other matched
control groups suggest a robust result.
15
The number of respondents who keep business records increased by 23.4% as compared to the pre-loan time period (a rise from
66.0% to 89.4%), while the number of those who prepare end of the year accounts increased by 3.9% compared to pre-term time
period (from 31.9% to 35.8%).
16
The computed t-statistics for target group‟s monthly and quarterly sales figures was 2.021 and 2.249 respectively, and for the
control group it was 1.681 and 2.340 respectively.
17
Computed t-statistics for monthly and quarterly sales increase was 1.369 and 1.454, respectively.
18
Computed t-statistics for monthly and quarterly sales were 0.426 and 1.929, respectively.
14
Increase in MSME Employment Levels
62. According to the same independent impact survey focusing on BDS, the trend in
employment before and after BDS showed that beneficiary MSMEs experienced an increase of
about 41.7 percent in employee numbers (rising from a mean of 5.8 workers to 8.3 workers). The
control group of MSMEs that received BDS in non-pilot states experienced an increase of 16
percent (from 10.9 to 12.7). Since the control group enterprises were on average larger than the
assisted enterprises the results are not watertight. However, they are instructive since they show a
net additional employment effect of some 25 percent and they also show an absolute positive net
effect in increased number of workers (2.5 vs. 1.8). The other two control groups which did not
receive BDS (in pilot and non-pilot states) did not provide additional data for the observed
periods to enable a comparable calculation, though their average employment increased as well.
Overall, based on the employment results from the survey, it could be concluded that as a result
of project-supported BDS, beneficiary MSMEs recorded significantly greater increases in
employment than the different control groups.
Box 1: Access to Finance – Context and Achievements:
According to the PAD, even prior to commencement of project activities the Nigerian financial system
consisted of a diverse universe of banking and non-banking financial institutions. As of end 2001, it
included 89 commercial and merchant banks, over 1,000 rural-oriented community banks, 7 development
finance institutions, 229 licensed finance companies, about 195 primary mortgage institution, over 100
insurance companies, 5 discount houses, various pension schemes and over 100 exchange bureaus.
At the same time, the financial sector was overwhelmingly dominated by commercial banks, which
accounted for 93 percent of non-central bank assets. While several commercial banks began with micro-
finance pilot projects in 2001 and approximately 17 major NGOs were providing microfinance services,
there was no commercially viable and sustainable microfinance sector in Nigeria. In 2004, the Central
Bank of Nigeria raised the minimum capital requirements for commercial banks from N 2 to 25 billion,
and consolidated and strengthened the banking sector by reducing the number of banks from 89 to 25 by
2005.
The global crisis of 2008 significantly impacted Nigeria with massive drop in oil prices, currency
depreciation, crash of stock exchange, increasing NPLs, and overall pressure on the private sector. As an
illustration, out of total of 25 banks, eight experienced severe capital deficiencies and liquidity problems,
and three of those ended up being nationalized. Despite this challenging financial sector context, the
Project managed to catalyze the emergence of a growing commercial microfinance industry in Nigeria on
a sustainable basis
The project supported the Central Bank of Nigeria in developing a regulatory framework for
microfinance, which was a prerequisite for setting up commercial microfinance industry. Once the
regulatory framework was in place, the Project administrated competitive performance grants scheme
combined with first-mover approach which facilitated the establishment of 6 de novo microfinance
institutions (Accion, AB, Susu, and Microcred, IMFB, and MIC) and supported downscaling of one
commercial bank (Oceanic Bank).
The following grant amounts were disbursed: i) AB - $ 1.5 mn; ii) Accion – $ 1.5 mn; iii) Susu –
1.196mn; iv) Microcred - $ 1.5 mn; v) Oceanic - $975 k; vi) MIC - $528 k; vii) IMFB - $ 650k. Due to
the shocks caused by the global financial crisis two out of six established MFIs – IMFB and MIC – failed
and lost their license. Susu and Accion microfinance banks underwent a process of consolidation to deal
with portfolio quality problems, while AB and Microcred continue to expand. While Oceanic Bank also
experienced difficulties following the crisis, it has been recently taken over by Ecobank and thus its
microfinance portfolio has been sustained.
15
In conclusion, despite the massive financial crisis, four new MFIs ( Accion, AB, Susu, and Microcred)
were established and remain in operation and this achievement was at least partly attributable to the
project. This was achieved with a total $5,696,000 in grants which in turn mobilized over $30 million of
private equity contribution and resulted in their current loan portfolio of nearly $50 million. A grant of
$975k to Oceanic Bank supported its downscaling efforts and resulted development of microfinance
portfolio of nearly $8 million.
63. Finally, the project achieved synergy with IFC which originally committed to investing
$1.5 million and ended up committing US$10 million. The original IFC commitment was meant
to support Accion‟s venture into microfinance sector. However, this contribution was
significantly exceeded with a total IFC investment of around US$10 million. Details of IFC
project related investments are presented in the table below:
Activity Debt Equity Advisory
AB Microfinance Bank N475mn ($3.2mn) N150m ($1.03mn) -
Accion Microfinance Bank - $1.89mn -
Microcred Microfinance Bank $2mn $1mn $700k
CRC credit bureau Ltd. - - N34.5mn ($ 238k)
Total IFC Investment $5.2 mn $3.92mn $938k
64. Overall, the studies from 2008 and 2009 have confirmed a link between the project
supported activities and the impact on beneficiary MSMEs performance and employment levels.
This conclusion is always subject to caveats in terms of attribution and counterfactuals but there
is sufficient evidence to indicate that the project resulted in significant improvements in MFI and
MSME operations and profitability.
65. Rating: The results framework of the project measured outcomes which extended
beyond the immediate project beneficiaries. Nevertheless, the team measured the direct impact of
the activities funded under the two largest components through two impact assessments. While
the assessments were completed in 2008 and 2009 (three years prior to project closing), a
significant portion of grants utilized to support these two components had been utilized by then.
Intermediate outcome indicators for the other components are less closely linked to PDO
achievement, hence only the outcome of the largest two components is used in the rating. Based
on this, the achievement of PDO is rated moderately satisfactory.
3.3 Efficiency
Efficiency of Project Implementation
66. As mentioned previously this project faced some unusually difficult implementation
problems, both internal and external, which impacted on the ability of the project‟s management
to oversee rapid implementation.
67. The project experienced numerous delays throughout its lifecycle. Following Board
approval on December 16, 2003 the Project became effective only on December 13, 2004.
Further, the closing date was extended by 2.5 years, from the originally scheduled June 30, 2009
to December 31, 2011. Finally, at completion out of the total available SDR 22.3 million, SDR
473,181.82, or about 2.1 percent, remained undisbursed.
68. The delays experienced extended the planned implementation schedule by 2.5 years,
which in turn translated into significantly higher project implementation costs. Specifically, the
16
disbursements under Project Management, Monitoring and Evaluation component reached $8.6
million as of June 2012, up from originally planned US$2.3 million. Even without the delays and
associated project extension which caused the increase in implementation costs, the original
implementation budget seems to have been underestimated. The reasons for the increase in
Management costs were because the original five year contract for the project managing firm was
extended by three years and adjusted for inflation in seven contract amendments. In addition,
provision under this component was made for provision of additional technical expertise in areas
such as secured lending, in resolution of IT issues affecting the business registration databases,
and providing communications facilities which had not been originally budgeted. To cover these
additional requirements the actual cost of project management rose from the original contract
value of US$3.07 million equivalent to US$6.45 million equivalent over the project period. The
overall project budget was not however exceeded as a transfer was made from other components.
69. Some of the major delays affecting implementation were beyond the control of the
project team. For example, initial delays were related to late project effectiveness which was the
primary responsibility of the government. Further, CBN‟s slow implementation of microfinance
framework resulted in delays with implementation of access to finance activities. In addition, the
complex security situation in Abia state delayed implementation in this location.
70. The cost benefit analysis conducted at appraisal stage estimated a net present value of
about US$35.6 million corresponding to an internal rate of return of 26.2 percent. The cost-
benefit analysis as presented in the PAD included all project components as follows: (i) BDS,
which factored in some elements of the micro finance and commercial bank downscaling sub-
components; (ii) access to finance; and (iii) investment climate, which included public-private
partnership and project management components, and unallocated resources. It was also assumed
that the BDS component would create a multiplicative effect on MSME output of about five
times the norm (which resulted in a greater IRR for the BDS component, i.e., 5 percentage points
higher than the access to finance component) and produce a lasting effect for up to seven years
after project completion. Separate IRRs were calculated based on relative size of each
component: 24.3 percent for access to finance, 29 percent for BDS, and 19.5 percent for
investment climate (and other activities as listed). In summary, the weighted average of the
individual components‟ IRR of 26.2 percent was produced.
71. For the purpose of this report, and due to limited availability of data, a new cost benefit
analysis model was developed based on actual data, and focusing on two main project
components - access to finance and business development services. The new model focused on
these two components as they offered quantitative data necessary for the ex-post calculation of
the net present value and internal rate of return. It was not possible to determine direct economic
output of the investment climate and public private partnership development activities even
though the latter also had tangible impact as discussed in section 3.5.
72. Equal weights were used for both components as they ended up disbursing similar
amounts. The new model does not calculate separate economic IRRs for each component as it is
difficult to allocate the project management overhead costs by component. Finally, in
determining the direct attributable benefit flows for these two components, based on the available
data, the following variables were applied: (i) MFI equity investment inflows; (ii) the increase in
sales of borrower MSMEs; (iii) the increase in sales of MSMEs benefitting from BDS; and (iv),
the BDS providers‟ matching of received grants.
73. According to the new model and based on available data, the calculated net present value
and internal rate of return for Access to Finance and BDS components were US$11.8 million and
17
28 percent respectively. While the net present value is below the original calculation, the
combined IRR of 28 percent exceeds the overall project target of 26.2 percent. At the same time it
is important to recall that the NPV and IRR in this model are based on the outcomes of two
components only, whereas the original one focused on the entire project. Further, the new model
was based on available actual data, while the original one relied on assumptions which could not
take into account factors such as the global crisis. If data had been available to quantify the
impact of the investment climate and public private partnership development components, it is
likely that the NPV and IRR would have been higher. The details of this analysis are presented in
Annex 3. It is important also to note that the original objectives of the project included generation
of indirect output and employment resulting from the external effects on the MSME sector from
BDS upgrading. If such effects were quantified they would most likely also increase the
measured return to the project.
74. The two main components significantly exceeded the expected targets which were aimed
to be achieved with the initial investment. In support of the strong economic IRR estimate it is
worth reiterating that, while the access to finance component was aimed at supporting the
establishment of two commercially viable MFIs, the actual achievement was double the target.
Further, the BDS component reached around 3,400 MSMEs as opposed to 1,000 initially planned.
75. The project facilitated mobilization of IFC resources of around $10 million, thus far
exceeding the initially planned IFC commitment of $1.5 million. This was achieved with the
project support for the establishment of three MFIs (Accion, AB, and Microcred) which
subsequently received IFC investment. To the extent that the IDA commitment mobilized the
IFC investments this may be credited as a benefit to the project.
76. Rating: Overall, while the project experienced delays it also exceeded the originally
planned targets regarding access to finance and business development services components, and
planned IFC investments, and it achieved a substantial Economic IRR of 28 percent without
exceeding the originally planned total project budget. On the basis of these factors, efficiency is
rated substantial.
3.4 Justification of overall outcome rating
77. Despite the delays and other shortcomings, the project recorded significant achievements.
Moreover, this was accomplished in the context of the project‟s pilot nature, ambitious
development agenda, and a complex implementation environment, including a massive financial
crisis and serious security challenges. Further, the project demonstrated flexibility and was able
to quickly respond to government‟s request and broaden the scope with GEL and YouWiN
initiatives. In conclusion, based on substantial relevance, moderately satisfactory achievement of
PDO, and substantial efficiency, the overall outcome rating is moderately satisfactory.
3.5 Overarching Themes Other Outcomes and Impacts
78. The central theme of the project was focus on and engagement with the private sector,
both in terms of final beneficiaries and service providers. Whereas some programs primarily
focus on tackling institutional change as means to facilitate private sector development, the
MSME project focused directly on extending support to the private sector itself, as well as
supporting investment climate and other relevant policy reforms. As a result, the project
facilitated the creation of a commercial microfinance industry in Nigeria and introduced a new
supply model for business development services to MSMEs. Ultimately nearly 3,400 MSMEs
benefitted from the Project and a further significant number would have benefited indirectly. It
18
should also be noted that implementation of activities which relied on the private sector were
ultimately more successful than those that tried to facilitate institutional change within the
government structures.
79. The project also used the opportunities to broaden the scope of engagement. In this
regard, it supported the development of catfish value chain activities in Oyo state as well as
tourism value chain activities in Cross River state, which were not initially envisaged. As
previously mentioned, it also responded to government request to implement GEL and YouWin
programs, the latter of which had a strong focus on youth entrepreneurship. While no clear
quantifiable outcomes of this additional engagement are available at this time, the activities they
supported seem to have been well received by the government and beneficiaries.
80. While the outcomes under the Investment Climate and Public Private Partnership
Development Components could not be quantified to establish a direct link to PDO, they
nevertheless provided a significant contribution to the sustainability of MSMEs in Nigeria and
can be assessed qualitatively. The activities sponsored under these two components (as listed in
Annex 10) in the form of various capacity building workshops, training events, and study tours
directly reinforced the technical capacity of the institutions responsible for project
implementation and MSME development (i.e. NIPC, SMEDAN). Below is a summary of the
main achievements under these two components which could not be captured by the two impact
assessment studies.
81. The principal outcomes of Investment Climate component include the establishment of
Credit Bureaus (CB) and Alternative Dispute Resolution (ADR) mechanisms. By supporting the
development of a regulatory framework for CBs, and thus facilitating creation of three new CBs
in Nigeria, this component has helped to reinforce the foundations of a commercial microfinance
industry established under the project‟s access to finance component. In addition, access to
finance infrastructure in Nigeria will be further strengthened once the new Law on Secured
Transactions, also prepared with the project support, is enacted. Further, the achievements under
this component included introduction of novel dispute resolution mechanisms in Kaduna and
Abia states by supporting the establishment of two multi-door ADR courthouses, and
strengthening the existing one in Lagos, thus facilitating faster and cheaper dispute resolution
process for MSMEs.
82. In addition, noticeable progress was made regarding comprehensive reform of the
business registration process in Nigeria. As discussed in paragraph 44, the project supported the
development of streamlined and common business registration procedures which were approved
and adopted by relevant entities, organized stakeholder workshops, and provided the necessary
hardware. The only remaining activity is the establishment of a physical link between the
databases of CAC and FIRS which is expected to be completed by the summer of 2012. Once this
is done, the business registration process will be significantly enhanced. It should also be
reported that over the course of the project life, the process of business registration in Nigeria has
improved. At the beginning of project implementation, and as recorded by Doing Business 2004
Report, it took 44 days and ten procedures start a business. Today, according to Doing Business
2012 Report, it takes 34 days and eight procedures. Also, according to Nigeria‟s sub-national
Doing Business 2010 results, the same indicators for the project target states are as follows: 33
days and 9 procedures for Abia; 31 days and nine procedures for Kaduna; and 31 days and eight
procedures for Lagos. While the intended streamlining of the business registration process has yet
to be completed, these improvements may be partially attributed to the project as it has actively
supported this agenda.
19
83. The activities sponsored under Public Private Partnership Development component
supported capacity building of relevant authorities and facilitated dialogue with the private sector
to advance development of MSMEs. Under this component, 247 courses and 38 study tours
focusing on the reform topics targeted by the project, were organized for NIPC, SMEDAN, and
other federal and state level authorities. An MSME competitiveness report was also prepared, and
a national competitiveness conference was organized in September 2011. Further, an additional
18 events supporting public private dialogue were held. These included three roundtables for
MSME financial service providers, two stakeholder forums on private credit bureaus, one
consultative forum on commercial bank downscaling, two roundtables on investment climate, two
knowledge sharing alternative dispute resolution events, co-sponsoring of three annual Nigerian
Economic Summits, three BDS fairs, and two stakeholder forums on rice and tourism sectors.
4. Assessment of Risk to Development Outcome
84. While the MSME sector in general tends to be dynamic in terms of entry and exit, the
project supported activities in the area of access to finance and business development services
which seem to have had a largely sustainable impact. The gains from exposure to the project
have already been accrued in target MSMEs, as recorded in the evaluation survey. In addition, the
project supported the establishment of previously embryonic financial infrastructure in the form
of a commercial microfinance industry, which shows evidence of sustainability, thus at least
partially addressing the low access to finance which was identified as one of the principal
constraints for development of enterprises in Nigeria19. In addition, it could be argued that four
supported MFIs have already sustained the ultimate test caused by global financial crisis.
85. Further, the network of business development service providers which received project
support, and ultimately supported some 3,400 MSMEs, is expected to continue to introduce better
management practices which should in turn positively impact productivity. This causal
relationship between improved management practices and productivity increases has been
illustrated in an example from India. According to Improving Management in India20 case study21
a sample group of companies which received five months of intensive management consultancy
showed that improvements in management practices led to large increases in performance.
Specifically, their productivity levels rose by about 15% and profits by about 24 percent (an
increase of US$474,000 per firm). Based on this, it could be assumed that a similar relationship
would apply to Nigerian MSME sector as well.
86. Even in the case of exit of some MSMEs, an externality may persist in that the owners,
managers, and employees who benefitted from business development services should still be
equipped with skills to deal with business challenges and/or embark on new ventures.
Nevertheless, the potential risks for continued MSME development in Nigeria exist. They could
be broadly divided into exogenous and endogenous risks.
87. Exogenous Risks. These are the risks of a slow recovery from the global crisis and oil
price volatility. Negative trends could weaken the Nigerian economy and pose significant
19
According to the most recent World Bank Investment Climate Assessment study from 2011, low access to finance was the second
most important constraint for Nigerian SMEs, following the shortage of electricity.
20
Improving Management in India by Nick Bloom, Benn Eifert, Aprajit Mahajan, David McKenzie, and John Roberts. Finance &
PSD Impact ; Issue no. 10. April 2010. “The Lessons from DECRG-FP Impact Evaluations".
20
pressures on MSME activities and overall sector sustainability. On the other hand a sustained
reduction in the price of oil could improve the environment for MSMEs by allowing depreciation
of the real exchange rate and improving competitiveness.
88. Endogenous Risks. These are risks of failure to achieve needed policy and institutional
reforms. The extent of institutional and policy reforms in the area of business environment both at
the federal and state levels, macroeconomic stability, quality of prudential supervision, and the
access to infrastructure (such as electricity), as well as political and security situation could all
pose potential risks to the MSME sector.
89. The prospects of gradual global recovery and government announced commitment to
pursue comprehensive reforms serve as mitigating factors. Further, the recorded gains in MSMEs
sector have already been achieved in a challenging environment and in light of materialization of
practically all of the risks listed above to a certain extent. Finally, all of the mentioned challenges
are ongoing country risks endemic to Nigeria.
90. Rating: Overall, the risk to sustainable development outcomes beyond the project life is
rated as moderate.
5. Assessment of Bank and Borrower Performance
5.1 Bank Performance
a) Bank Performance in Ensuring Quality at Entry
91. The project was designed to address the key obstacles to MSME development, as
identified by considerable Economic and Sector Work 22 which preceded preparation. The
representative analytical work underpinning project design included Results of the Nigeria Firm
Survey and SME mapping exercise. These reports revealed that Nigerian private sector suffered
from high costs and lacked competitiveness due to: (i) limited access to finance; (ii) lack of
access to adequate business development services; and (iii) investment climate non conducive to
MSME growth. The project was designed to tackle specifically these obstacles. Finally, the
operation was in line with joint IDA/IFC pilot program for Africa, which aimed to develop
MSMEs in Sub-Saharan Africa by addressing obstacles to MSME growth in a comprehensive
manner.
92. The project objective was and still is highly relevant to the country‟s goals and
development priorities. This was reflected in the IDA‟s Interim Strategy Update from February
2002, highlighted in analytical work which preceded preparation, and confirmed in FY10-13 CPS,
and confirmed in recent analytical work (e.g., Making Finance work for Nigeria, 2009).
22
Bank Staff Assessments: 1) Results of the Nigeria Firm Survey, Regional Program on Enterprise Development (RPED Paper #118,
April 2002), World Bank. 2) The Implementation Completion Report (ICR) on the World Bank Small and Medium Enterprise
Development Project (Loan 2995-UNI), Report #16811, June 1997. 3) Africa Program Framework Paper for a Joint IDA/IFC Micro,
Small and Medium Enterprise Development Pilot Program for Africa, World BankJIFC (considered by the Board o f Executive
Directors, June 19,2003). 4) SME mapping exercise undertaken in parallel with a survey on Nigerian firms conducted under the WED
of the World Bank, October 2001. 5) “Joining the Race for Non-Oil Foreign Investment, �? conducted by the Foreign Investment
Advisory Services; 6) “Direct Support to Private Firms - Evidence of Effectiveness�?, G. Batra and S. Mahmood, 2001 and „YDA ‟s
Partnership for Poverty Reduction (FY94-FY00): An Independent Evaluation �?, OED, 200 1 , pp 31-33.
Other: 1) “Evaluation of the Mekong Project Development Facility �?, Nexus and Assocs., June, 2002 with important insights into the
best design parameters for BDS provider capacity building. 2) Guiding Principles for Donor Intervention Business Development
Services for Small Enterprises: Guiding Principles for Donor Intervention, Committee of Donor Agencies for Small Enterprise
Development, February 2001.
21
93. The project design relied on then innovative design features, which have by present day
become the mainstream approach for MSME projects. Specifically, this included providing direct
assistance to BDS providers, as opposed to MSMEs, in order to expand their services and
outreach, to support development of the market for business development services. Further, by
supporting first-movers in the microfinance sector and commercial bank downscaling, the project
probably created a demonstration effect. For example, following downscaling of Oceanic Bank,
at least four more banks (Stanbic, First Bank, Diamond, and UBA) followed suit without direct
project engagement.
94. The project tried to address identified problems in a very comprehensive way. This may
have been too ambitious in the context of complex implementing environment. Such a
comprehensive project required significant coordination across different government agencies,
which in practice proved difficult to achieve. In this regard, limited government capacity to
ensure implementation of a complex and comprehensive reform agenda may have been
underestimated. At the same time some issues with project management from the side of the Bank,
in particular the time required for a FM audit, and delay in procurement training, added to the
complex nature of the Bank-Government dialogue.
95. The choice of specific investment loan (SIL) was appropriate for the access to finance
and business development services components which were the main focus of the project. It was
also appropriate for delivering technical assistance to the authorities to improve business
environment (i.e. drafting laws, exposure to best practices, etc). However, a SIL may not have
been the most appropriate instrument to support approval of some of the attendant legal reforms.
A development policy loan (DPL) may have been more appropriate in this respect. However, at
the time of project approval the government was not interested in a development policy loan.
Further, a Federal level DPL supporting financial sector reforms, approved during the period of
project implementation, was processed as an emergency operation and as such had a very specific
and sharp focus. As a result, the option of including investment climate reforms could not be
considered. In light of this, and given the focus of the project on access to finance and BDS, the
choice of instrument was appropriate.
Rating: Overall, the quality at entry is rated moderately satisfactory.
b) Quality of Supervision
96. Implementation Supervision Reports (ISRs) were filed regularly and the ratings largely
reflected the project performance. The project was rated unsatisfactory from June 2005 until
April 2006 (when it was upgraded to moderately unsatisfactory) due to delays in meeting
effectiveness conditions and approval of the necessary MFI framework and licensing of Accion,
which prevented earlier commencement of access to finance activities. Additional reasons
included PMU's slow implementation progress, including inadequate procurement staff, and the
ability of NIPC to disburse resources due to a requirement to obtain its management approval on
implementation matters, contrary to agreed project implementation manual. Also, following
implementation support provided by the project team, and agreement on remedial actions with the
government and implementing entities, overall implementation progress was rated moderately
satisfactory in June 2006. At the time of FM review, due to temporary non-compliance with FM
procedures, the FM rating was justifiably rated moderately unsatisfactory.
97. At the same time, it may have been appropriate to use a more conservative rating in the
final ISR. Since the last ISR was not based on new, end-project impact assessment to reconfirm
22
previously recorded progress and given that some of the planned investment climate reforms were
not completed by that time, a more proper rating for the final ISR may have been moderately
satisfactory as opposed to the awarded satisfactory rating.
98. On account of the delays experienced, the costs under the Project Management,
Monitoring and Evaluation component reached US$8.6 million as of the June 2012 FM report, up
from the originally planned US$2.3 million. As explained in section 3.3, one of the principal
reasons for the increase was the overall extension of project by 2.5 years and adjustment for
inflation. The bulk of these costs (i.e. US$5.9 million) were project management associated costs
accrued by the PMU to cover both the extensions and some additional technical assistance. An
additional US$1.1 million was also incurred for general office expenses. The Bank supervision
team approved the increase in operating costs resulting from the delays experienced in order to
ensure the functioning of the PMU and continued implementation. Given the magnitude in the
switch in funding, a formal restructuring proposal may have been appropriate.
99. Despite the views of the dedicated project supervision team, the shortcomings during
implementation might have warranted project restructuring. The shortcomings included the FM
deficiency which triggered an in-depth FM review, performance problems with the investment
climate component, and, the substantial increase in costs for Project Management, Monitoring
and Evaluation. Early restructuring might have reduced the scale of the planned activities to
conform more to operational constraints and to allow for better monitoring of the project.
Further, restructuring might also have helped to address the identified implementation issues and
challenges, including: (i) streamlining of project components by removing underperforming
activities and providing additional support for successful pilots; and (ii) revising the PDO and
results framework to ensure that they measure direct impact of the supported activities.
100. Finally, implementation was hampered by the global crisis, which severely affected
Nigeria, and by significant security challenges. The global crisis severely hit the Nigeria financial
sector. As a result, two project supported MFIs failed and lost their license. Moreover, significant
security threats in one of the pilot states (Abia) further complicated supervision activities as the
project team could not provide on-site implementation support for extended period of time due to
high incidence of crime and kidnappings. Nevertheless, supervision was thorough and involved
adequate staffing and resources. The project team provided regular implementation support to
address the identified technical challenges; further, special procurement training was designed
and delivered to increase the capacity of implementing entities and facilitate implementation. In
addition to formal missions, the task team leader was based in the field for about three years and
was thus able to provide ongoing implementation support. The team displayed commendable
adaptability to ever changing situation and responsiveness to the client. The support for GEL and
YouWin projects is a testament of team‟s responsiveness.
101. Rating: Overall, based on the above, the quality of supervision is rated moderately
satisfactory.
c) Justification of Rating for Overall Bank Performance
102. Rating: Based on moderately satisfactory quality at entry and moderately satisfactory
quality of supervision, overall Bank performance is rated moderately satisfactory.
5.2 Borrower Performance
a) Government Performance
23
103. Due to lack of initial government pro-activity, project implementation was off to a late
start. This is illustrated by the fact that Credit Effectiveness was achieved six months after the
target date, or a year following Bank approval. In addition, the Government did not provide
agreed co-financing which then required amendment to legal documents, causing additional
delays. Also, some of the key investment climate reforms were not fully completed despite
several project extensions, while implementation of access to finance activities was initially
delayed due to slow implementation of microfinance framework. Overall, it seems that high-
level institutional coordination and the government‟s strategic guidance for project
implementation was missing. In practice, political commitment when the project was conceived
did not adequately translate into strong implementation performance – partly the result of a
fragmentation of agencies at the federal level. The lack of commitment tended to have general
effects across the project as a whole.
104. The project addressed MSME obstacles in a very comprehensive manner. The
implementation of such program required full commitment of a range of institutions, well beyond
the implementing agency. While overall commitment may have been lacking, the Nigerian
Investment Promotion Council (NIPC), where the government Project Implementation Unit was
housed, itself showed strong commitment throughout project implementation. However, NIPC
had to build its capacity upfront, and it did not have the institutional mandate and power to push
through legislative reforms which depended on actions by other entities and/or the National
Assembly. As a result, delays were recorded in implementation of the access to finance
component due to CBN‟s slow implementation of microfinance framework and subsequently
delayed licensing of Accion. Also, only partial reforms were implemented under the investment
climate component, as some of the required regulatory reforms, such as the Law on Secured
Transactions, were not enacted. Finally, streamlining of business registration process was not
fully completed.
105. Rating: Based on the above, the government performance is rated moderately
unsatisfactory.
b) Implementing Agency Performance
106. Low initial capacity of PIU and PMU in implementing some of the World Bank
procedures led to delays with project implementation, though most issues were resolved as
implementation progressed. The project implementation rested on the government PIU and
private sector PMU. The PIU was housed in the NIPC and was responsible for implementation of
IDA credit, including overseeing PMU operations, and approving its annual work plan and
budgets. Further, the PIU was responsible for financial management and disbursement. A private
firm hired under the project managed the PMU which was tasked with overall project
administration, including monitoring and evaluation, reporting, procurement, and outreach and
communications activities. During the lengthy period of selection of PMU, PIU was fulfilling this
role in the interim. The procurement process was in some cases lengthier than expected, largely
due to lack of procurement capacity within PIU/PMU, but it was generally compliant with
procedural requirements. In terms of financial management, as discussed, project implementation
was substantially delayed as a result of temporary non-compliance with FM requirements.
However, following the FM review, the project received clean bill of health, and implementation
continued.
107. Once both entities were fully operational, and following training provided by the Bank
team, project implementation was generally adequate. This was also achieved in the context of
24
objective shortcomings such as security threats in one of the targeted states. Implementation of
the investment climate reforms experienced some difficulties. Although significant preliminary
work was done, including drafting of regulations and studies, certain actions under this
component were not implemented. It should however be highlighted that this was beyond control
of the PIU, PMU, and Bank team. Finally, monitoring and progress reports were detailed and
prepared on regular basis.
108. Rating: As a result, primarily due to temporary non-compliance in relation to required
FM practices and delays in procurement, the implementing agency performance is rated
moderately satisfactory.
c) Justification of Rating for Overall Borrower Performance
109. Rating: Based on the moderately unsatisfactory government performance and
moderately satisfactory implementing agency performance, overall Borrower performance is
rated moderately satisfactory. Greater weight was placed on implementing agency performance
as it had a greater impact on achieving the PDO. This is confirmed with the fact that significant
measurable achievements were recorded in the context of challenging and complex
implementation environment.
6. Lessons learned
110. Results framework should be designed to measure direct impact of the project. This
includes ensuring that monitoring and impact indicators directly correspond to the project
objective and are easily measurable. This is essential not only to assessing whether project
objectives have been achieved, but also to ensuring that the targets are practically achievable and
within the control of the project management.
111. In case of significant project delays (i.e., delay in effectiveness, implementation, etc.),
which may affect implementation of original project design, a review of planned project activities
should be conducted to confirm that they can be practically implemented. As a result of long
delays, operational and political circumstances may change. This could inhibit implementation in
line with the initial design. If these changes are substantial, project restructuring should be
considered to ensure that the operation fits the new implementation environment.
112. Implementing entities should include key staff with required qualification and experience
with World Bank procedures from the very start of the project. As there was no suitable entity
within the government, and based on previous experience with government run projects in
Nigeria, a private entity was tasked with project management. The PMU also employed national
staff in some key positions thus building local capacity, while the PIU was staffed with civil
servants. As a result, it is likely that the local staff capacity to implement complex projects was
increased, and should provide a significant human resource for future projects. While the
engagement of a private sector operator may have increased overall implementation capacity in a
complex implementation environment, the private PMU has also experienced initial challenges
with applying World Bank procurement guidelines. In this regard, to alleviate the initial capacity
issues in the future, the Bank should ensure that implementing entities include key staff with
required qualification and experience from the very beginning. In addition, all key staff should
undergo additional task specific technical trainings – designed and delivered by the World Bank -
during the first six months of project implementation. Finally, the World Bank project teams may
25
need to provide more intense implementation support during the first year of implementation,
especially related to compliance with Bank‟s fiduciary standards.
113. All core project management functions should be within a single implementing entity.
Implementation arrangements envisaged both the private PMU and government led PIU. While
most of the project management functions were with the PMU, including procurement, the
responsibility for financial management and disbursements and compliance with World Bank
rules in these areas rested with the PIU. The split of the core functions proved to be ineffective, as
overall project implementation depended on synchronized performance of both entities which
could not always be ensured due to different capacity levels and/or procedural requirements.
114. Building commercially viable microfinance institutions under the project required
funding and experienced technical knowhow. The latter had to be imported to Nigeria from
reputable international companies. While the commercial banking sector was expanding and
diverse in 2003, the microfinance market was embryonic and did not contain adequate local
expertise. In the absence of local capacity a “first mover�? approach involving reputable
international partners/investors (i.e., IFC, Accion, Microcred, etc.) was necessary and the use of
performance grants was an effective approach to using such expertise to jumpstart the industry.
115. Piloted approach of targeting BDS providers, as opposed to MSMEs, can facilitate
creation of market for BDS. While a demand driven approach has a sound rationale, targeting
existing BDS providers has advantages in terms of avoiding intervention in market transactions
and ensuring the accumulation of skills from outside rather than the recycling of existing skills.
Following the latter approach the project built the capacity of BDS suppliers and expanded the
services, thereby potentially attracting a broader customer base, and increasing cost-effectiveness
and outreach to MSMEs. It would have been beneficial if the project also facilitated more
interaction and networking between the BDS providers to allow for more knowledge exchange.
116. The Specific investment loan may not be the most suitable tool for facilitating
comprehensive policy reforms. All envisaged project activities that depended on the PMU/PIU
and private sector engagement were relatively successfully implemented (i.e., ATF, BDS, etc.).
By contrast activities which required wider government actions or parliamentary approval, such
as certain investment climate reforms, were delayed, or only partial progress was achieved.
When wider policy reforms are necessary, investment loans may have to be coupled with budget
support operations. Alternatively, dated legal covenants underpinning planned reforms could be
considered as well. Finally, the government oversight (i.e., PIU) should ideally be housed with
an institution with a clear mandate for the project supported activities (i.e., MSME development)
and a high level of authority. While such institution did not exist in Nigeria at the time of design,
identifying an influential champion institution remains a key to operations timely success.
117. Though it was a pilot project, which allowed for a more flexible design and testing of
new approaches, the breadth of the operation may have been too ambitious. This is especially
true with regard to numerous activities aimed at reforming the investment climate which required
wide institutional support which could not be fully secured. With regard to support provided to
value chains, it may have been beneficial if the project concentrated on one value chain
intervention initially, and scaled up only following successful implementation. In addition,
delays related to capacity issues and slow administrative procedures further complicated
achievement of some of the planned activities which depended on many stakeholders, and which
could not be achieved despite three extensions. Thus simplification of both the component and
the management structure of the project could have been worthwhile.
26
118. While IFC investments in the microfinance sector were larger than estimated at design, it
seems that this was achieved with very limited IDA-IFC coordination. No regular reporting and
interaction mechanisms were established at the design stage, and no periodic operational
meetings were organized during implementation. It is likely that in-depth collaboration with IFC
may be difficult given the different approaches of the two organizations, but nevertheless a more
structured form of coordination would be beneficial in joint projects.
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners
119. Overall, the borrower, implementing agencies, and beneficiaries all highly rated project
activities and outputs. They felt that tackling MSME issues in Nigeria was highly relevant for
addressing economic growth and employment issues. In regards to their experience with project
implementation they all cited lengthy and often complex administrative procedures regarding
implementation of World Bank funded projects. Further, it was suggested that any future
operation should have a well developed publicity strategy to properly educate the stakeholders
about the project and build consensus about the importance of reforms. To ensure proper
involvement of all relevant government stakeholders, including those who may not be directly
involved with the project but whose action may be critical at certain occasion, it was suggested
that liaison officers are appointed by all relevant/participating agencies who could follow up on
all pending issues.
120. Access to finance was identified as a key constraint for Nigerian MSMEs by all
stakeholders. This is consistent with the findings of the most recent World Bank Investment
Climate Assessment study from 2011 which identified low access to finance as the second most
important constraint for Nigerian SMEs, following the shortage of electricity
121. Not surprisingly, all consulted stakeholders expressed strong interest in a follow up
project focusing on access to finance and expanding to other areas of the country. Stakeholders
also highlighted that access to finance is more restricted in rural areas. The following topics were
identified as potentially relevant to future operations: (i) technical assistance for MFIs to improve
their operations and better serve their clients; (ii) access to a MSME credit lines for qualifying
MFIs and banks interested in downscaling; (iii) country wide consumer financial
education/literacy program; and iv) support with improved regulation and supervision of growing
MFI sector to ensure stability, transparency, and to prevent public‟s loss of confidence in
financial system due to failure of some MFIs in recent years.
.
27
Annex 1. Project Costs and Financing
The following information is based on Financial Management report as of June 2012.
Project Cost by Component (in US$ million equivalent)
Components Appraisal Estimate Actual Latest Percentage of
(US$ million) Estimate Appraisal
(US$ million)
Access to Finance 10 7.9 79%
Business 12 7.4
Development
Services 61.6%
Investment Climate 5.1 6.6 129.4%
Public/Private 1 2.3
Partnership
Development 230%
Project 2.3 8.6
Management,
Monitoring
Evaluation 373%
Unallocated 1.6
TOTAL 32.0 32.8
28
Annex 2. Outputs by Component
Below is a summary of the most significant project outputs:
Component 1: Access to Finance
The project supported the establishment of four MFIs (Accion, Susu, Microcredit, and
AB) and thus facilitated subsequent mobilization of US$30.8 million of private equity
investment
Total number of borrowers and savers in 4 MFIs as of end September 2011 was 35,232
and 144,683 respectively
Downscaling of one commercial bank (Oceanic Bank)
Total disbursed loan portfolio for four MFIs and a commercial bank of around US$57.4
million
Component 2: Business Development Services
Support provided to 69 BDS providers (45 under general BDS Fund and 24 through 4
value chain interventions – catfish, rice, palm oil, and tourism) which in turn introduced
25 new products and services
Approximately 3,360 MSMEs received BDS, and a total of 20,161 MSME attendants of
which 17,358 were covered under the general BDS program and 2,803 in 4 supply chains
New jobs in supported supply chains estimated at around 1,168
Component 3: Investment Climate
Law on Secured Transactions drafted
Legal and regulatory framework for credit bureaus was established
Central Bank of Nigeria Staff trained in supervising credit bureaus
Three new Credit Bureaus (CB) are operational
Two new multi-door alternative dispute resolution (ADR) court houses established in
Kaduna and Abia State, while the existing ADR centers in Lagos was strengthened
Report on integrating registration process was prepared and disseminated, workshop held,
and hardware delivered
Component 4: Public/Private Partnership Development
159 23 public sector personnel from NIPC, SMEDAN, and federal and state level
governments received advanced project related training through 285 training activities
(247 courses and 38 study tours)
Three roundtables for MSME financial services providers
Two stakeholder forums on private credit bureaus
One consultative forum on commercial bank downscaling
Two PPD roundtables on IC
Two knowledge sharing ADR events;
23
Some trainees benefited from more than one training/study tour.
29
Co-sponsored three annual NESG NES;
Three BDS fairs;
Two stakeholder forums on rice and tourism values chains
One MSME Competitiveness report prepared
One Competitiveness Conference organized
Component 5: Project Management, Monitoring and Evaluations
N/A - This component ensured implementation of the four program components above.
30
Annex 3. Economic and Financial Analysis
1. The primary focus of the Economic and Financial Analysis was on the two main project
components: (i) access to finance; and (ii) business development services. The reason for this
approach is that these were the only two components offering quantitative data necessary for
calculating net present value and internal rate of return.
2. For the Investment Climate and Public Private Sector Partnership Development
components a qualitative analysis of costs and benefits has been presented in the main text.
Access to Finance
3. In determining the direct attributable cash flows for this component, two variables were
applied: (i) equity investment; and (ii) increase in sales of beneficiary MSMEs.
i) Equity Investment: These figures used as they represented direct investments facilitated by the
MSME Project, and were derived from the four supported MFIs. For purposes of this analysis, it
was assumed and reflected in the table below, that the equity investments were made at the time
of establishment of each of the MFIs (i.e., Accion and AB were established in 2007, Susu in 2008,
Microcred in 2010).
Equity Investments for MFIs Equity (N) Equity ($)
AB 1,500,000,000.00 10,344,827.59
Accion 1,206,000,000.00 8,317,241.38
Microcred 1,000,000,000.00 6,896,551.72
Susu 773,000,000.00 5,331,034.48
Total 4,479,000,000.00 30,889,655.17
ii) Increase in sales of beneficiary MSMEs: In 2009, an independent impact survey 24 was
conducted to measure the impact of the access to finance component. The survey focused on
three MFIs: Accion, Susu, and Mic. It is important to note that while MIC microfinance bank
ultimately failed during the crisis and lost its license, the positive impact on beneficiary
borrowers/MSMEs was confirmed by the cited survey.
4. One of the areas measured by the study was the effect that obtaining a loan had on sales
of beneficiary MSMEs. The study found that on average, the monthly sales of beneficiary
MSMEs increased by NGN 197,385 (from NGN 455,388 in 2007 to NGN 652,773 in July 2008),
or 44% per respondent compared to pre-intervention time. Given that these results were obtained
based on response of 56 percent of the surveyed MSMEs, it was assumed that the same impact
was recorded for 56 percent of the borrowers of three observed MFIs (approx. 11,000 at the
time). Further, as no control groups were used in this part of the study the evaluation team
gauged the attribution effect by directly asking respondents about the extent to which the changes
in sales were caused; as a result 25.2 percent attributed the change completely or to a large extent
to the loan, 39 percent said that it had some effect, while 36 percent said that loan had no or little
effect. Consequently, the change in sales was applied to 64.25 percent of respondents who
confirmed this causation. This number was then multiplied by the average monthly sale increase
24
Impact Evaluation of Borrowers from Accion , Susu, and MIC Microfinance Banks, by Luba Shara, IFC with data collection
conducted by: BDO OFO CONSULTING LTD, 2009
31
of NGN 197,385 converted to a US Dollar amount ($1,361.28). According to the study, the
increase was observed from 2007 to mid-2008. As no data was available for subsequent years,
the cash flows were assumed to equal to zero from 2009 to 2011. For purposes of this analysis,
the same assumptions, related to impact of loan on MSME sales, were applied to borrowers MFIs
which were not covered by the study and/or may not have been operational at the time of the
study. Namely, this includes AB which was operational in 2008 but not covered by the study,
Oceanic Bank‟s borrowers resulting from downscaling in 2009, and Microcred which was
established in 2010.
Attribution
effect
Respondents (64.25% of Avg. Total Avg.
(56% of borrowers Monthly Monthly
Number of borrowers surveyed) Sales Sales
Microfinance Banks Borrowers surveyed) OK Increase ($) Increase ($)
Susu, ACCION, and 11,000 6,160 3,958 1,361.28 5,387,657.61
MIC (in 2008)
326 183 117 1,361.28 159,670.58
AB (in 2008)
2,886 1,616 1,038 1,361.28 1,678,192.75
Microcred (in 2010)
1826 1022.42 657 1,361.28 671,632.66
Oceanic (2009)
Business Development Services
5. In determining the direct attributable cash flows for this component, two variables were
applied: i) increase in sales of beneficiary MSMEs; and ii) matching grants.
(i) Increase in sales of beneficiary MSMEs: According to an independent impact survey25
focusing on BDS component, the average monthly sales of beneficiary MSMEs increased from
about N243,840.58 in 2006 to N449,270.4 in early 2008, or by 84.2 percent. The conclusions
were based on a sample of 183 MSMEs from a total population of approximately 3,000 project
beneficiaries at the time. For purposes of this analysis, it was assumed that the measured benefits
could be applied to total population of project beneficiaries (MSMEs) at the time. Accordingly,
the measured increase in sales of N205,429.82 was converted to US Dollars and applied to entire
population of 3,000 beneficiary MSMEs. In addition, it was conservatively assumed that
beneficiary MSMEs continued to record a real annual sales growth of five percent following the
initial increase of 84.2 percent (i.e., from 2009-2011).
25
Impact Survey of MSME Beneficiares, by BDO OFO CONSULTING LTD, 2008.
32
Avg. Monthly Sales Total Avg. Monthly
Business Development Services No. of Beneficiaries Increase ($) Sales Increase ($)
2006-2008 3,000.00 1,416.76 4,250,272.14
2009 3,000.00 331.53 994,591.71
2010 3,000.00 588.7 1,766,097.43
2011 3,000.00 728.13 2,184,383.67
6. Matching Grants: By design, the BDS component required beneficiary BDS providers to
match the received grants. For purposes of this analysis, it was assumed that the total of $3.1
million under the matching grant scheme resulted in mobilization of the equal amount by the
beneficiary BDS providers. According to the information received from the PMU, the
disbursement of BDS grants on annual basis was as follows: 2006 - US$491,150; 2007 -
US$676,606; 2008 - US$758,665; 2009 - US$419,183; 2010 - US$551,255 and 2011 -
US$257,781. Consequently, it was assumed and reflected in the table below, that the same
amounts were matched in each of the project years.
Overall Project Financial Analysis
7. The economic analysis of this MSME project made the following assumptions in order to
produce net present value (NPV) and the internal rate of return (IRR) on project investment:
The considered project life was seven years, beginning in 2005 and ending in 2011. This
was a result of delayed effectiveness which materialized in December 2004, thus
allowing disbursements to begin only in 2005.
The observed increases in sales of beneficiary MSMEs for access to finance and BDS
components were based on the respective impact assessment studies which focused on
specific periods. For the periods not covered by the studies, the cash flows for access to
finance were denoted as zero, while for BDS a real growth of 5% was assumed. The
rationale for assuming continued increase in sales for BDS beneficiaries was that
technical skills they obtained would continue to enhance their business. For access to
finance components, the impact on sales of AB, Microcred, and Oceanic Bank‟s
borrowers resulting from downscaling was assumed to be the same as determined by the
cited studies.
Oceanic Bank was exempted from the analysis of the private equity contribution variable
as it was not possible to obtain data regarding the exact equity investment for the Oceanic
Bank‟s portfolio which was a result of downscaling.
The cash flows were also assumed to equal to zero in all instances/years where
quantitative data was missing.
Finally, all original figures in Nigerian Naira were converted US Dollars using an
average exchange rate of N145/US$1 for the whole implementation period (N130/US$1
in 2007; N160/US$1 in 2011).
Total planned IDA disbursements based on the most recent FM report as of June 2012
(US$23,963,103) for Access to Finance, BDS, and Project Management, and M&E
components were considered to have been expensed in year 1.
The Discount rate used was 12 percent, in line with the original Economic and Financial
Analysis from the Project Appraisal Document.
33
Calculation of NPV and IRR:
2005 2006 2007 2008 2009 2010 2011
In US$ 0 1 2 3 4 5 6
Capital Outlay Investment -23,963,103
Access to Finance Component
Equity Investment 0 0 18,662,068.97 5,331,034.48 0 6,896,551.72 0.00
Increase in sales revenue of Borrower MSMEs 0 0 0 5,547,328 671,632.66 0 1,678,192.75
BDS Component
Increase in sales of BDS Beneficiaries 0 0 0 4,250,272.14 994,592 1,766,097 2,184,384
Matching grants 0 491,150.00 676,606.00 758,665.00 419,183.00 551,255.00 257,781.00
Net cashflow -23,963,103 491,150 19,338,675 15,887,300 2,085,407 9,213,904 4,120,357
Discount Factor 1.00 0.89 0.80 0.71 0.64 0.57 0.51
Discounted Cashflow -23,963,103.00 438,526.79 15,416,673.28 11,308,266.19 1,325,314.08 5,228,216.67 2,087,501.30
NPV 11,841,395.31
IRR 28%
34
Annex 4. Bank Lending and Implementation Support Supervision Processes
(a) Task Team Members
Names Title Unit
Lending
Ismail Radwan Country Program Coordinator ECCUS
Peter J. Mousley Lead Private Sector Development Specialist AFTFW
Chioma Kelechi Nwagboso Consultant AFTFW
Irene F. Chacon Operations Analyst AFTFW
Uma Subramanian Lead Private Sector Development Specialist CICTI
Geeta Batra Chief Evaluation Officer CEXEG
Bayo Awosemusi Lead Procurement Specialist AFTPC
Jennifer Isern Manager CSAAP
Peer Benno Walter Stein Senior Manager CAIDR
Shireen El-Wahab Consultant EASFP
Irene Arias Regional Manager CLACO
Mehnaz S. Safavian Senior Economist SASFP
Hisham A. Abdo Kahin Senior Counsel LEGES
Mary Asanato-Adiwu Senior Procurement Specialist AFTPC
Chaoying Liu Evaluation Officer CDIAS
Luba Shara Senior Monitoring & Evaluation Specialist CAFAF
Thomas Losse-Mueller Senior Financial Sector Specialist AFTFE
Adenike Sherifat Oyeyiola Senior Financial Management Specialist AFTFM
Akinrinmola Oyenuga Akinyele Senior Financial Management Specialist AFTFM
Adewunmi Cosmas Ameer Adekoya Financial Management Specialist AFTFM
Rona P. Cook Program Assistant AFTFE
Yeshareg Dagne Program Assistant AFTFE
Collins S. Umunnah Team Assistant AFCW2
Giula Pellegrini Junior Professional Associate AFTFE
Marilyn Swann Manalo Consultant AFTFW
Karen Alexandra Hudes Senior Counsel LEGST
35
(b) Staff Time and Cost
Staff Time and Cost (Bank Budget Only)
Stage of Project Cycle USD Thousands (including
No. of staff weeks
travel and consultant costs)
Lending
FY04 617,717.30
FY05 0.00
FY06 0.00
FY07 0.00
FY08 0.00
Total: 617,717.30
Supervision/ICR
FY04 77,209.92
FY05 243,351.90
FY06 173,232.00
FY07 137,155.53
FY08 209,534.11
FY09 237,160.79
FY10 200,118.16
FY11 153,429.19
FY12 174,685.79
Total: 1,605,877.39
36
Annex 5. Beneficiary Survey Results
1. In order to measure progress with achieving the Project Development Objective, two
impact surveys were commissioned focusing on the impact of Access to Finance and Business
Development Services components respectively. Both surveys focused on determining the
project‟s impact on sales and employment levels of beneficiary MSMEs. Access to Finance
Survey was finalized in 2009 and it focused on impact evaluation of borrowers from Accion,
Susu, and MIC microfinance banks, which were all established with project support. Business
Development Survey was finalized in 2008 and focused on MSMEs which benefitted from
business development services facilitated by the project.
2. The surveys confirmed a link between projects supported activities and increase in sales
and employment levels of beneficiary MSMEs. The results are detailed below:
Access to Finance Survey– Impact Evaluation of Borrowers from Accion, Susu, and MIC,
Microfinance Banks26
3. The survey was conducted on a stratified random sample of 450 out of 11,000 borrowers
of ACCION, SUSU, and MIC microfinance banks. The key objectives of the survey were to
determine the project impact on: (i) increasing access to finance for previously undeserved
MSMEs; (ii) positively affecting borrowers‟ business sales; and (iii) increasing the number of
people borrowers employ. The results are summarized below:
(i) Access to finance increased for previously underserved MSMEs, as the project
succeeded in increasing access to finance for 25 percent (88 out of 354 people) of
respondents who had been unable to access the loans before. The change in access to
finance was calculated by aggregating respondents who did not apply for a loan before
because of perceived difficulties with those respondents who applied but were denied,
and then dividing this value by a total sample size.
(ii) Obtaining a loan on average resulted in 44 percent increase of respondents‟ monthly
sales as compared to pre-intervention time. Respondents reported monthly sales losses as
low as NGN 2,400,000 and sales increases as large as NGN 6,543,333 with almost 20
percent of respondents reported no changes in sales at all. Yet, on average, the monthly
sales increased by NGN 197,385 or 44 percent per respondent compared to pre-
intervention time from NGN 455,388 in 2007 to NGN 652,773 in July 2008. The change
in sales was calculated only for those 198 respondents (56 percent of a total sample) who
provided numbers for both 2007 and 2008 years.
4. The attribution effect was addressed by directly asking respondents about the extent to
which the changes in sales were caused by obtaining the loan, confirming that obtaining a loan
had an effect on sales. Slightly more than a quarter of respondents (25.2 percent) attributed the
change in sales completely or to a large extent to the loan. Another 39 percent claimed that
accessing the loan had some effect on sales, whereas 36 percent stated that the loan had no or
little effect on sales.
26
Prepared by: Luba Shara, International Finance Corporation (World Bank Group); Field Work (Primarily Data Collection)
Conducted by: BDO OFO CONSULTING LTD. July 9, 2009.
37
5. In addition, in responding to a direct question, more than 80% of respondents agreed that
obtaining a loan affected both their business sales and profitability in the past year. Results are
provided in the tables below. (Sales can be attributed to obtaining a loan = “completely agree�?
(10.8 percent) + “to a large extent�? (14.4 percent) + “to some extent (38.7 percent) + “to a little
extent�? (20.1 percent) = 84 percent).
Perceived Effect on sales
Sales were affected by
N of cases % Valid % Cumulative %
obtaining a loan?
Agree 153 77.3 82.7 82.7
Disagree 32 16.2 17.3 100.0
Total 185 93.4 100.0
Missing 13 6.6
Total 198 100.0
Perceived effect on profitability
Profitability was affected N of cases % Valid % Cumulative %
by obtaining a loan?
Agree 162 81.8 85.7 85.7
Disagree 27 13.6 14.3 100.0
Total 189 95.5 100.0
Missing 9 4.5
Total 198 100.0
6. Obtaining a loan seems to have had only a minuscule effect on employment: only about
one percent of respondents reported an increase in hiring completely or largely due to a loan
obtained as a result of the project. The average number of employees hired by respondents has
not changed over the period of 1.5 years (on average, two employees). Only 34 respondents (11.6
percent) stated that they hired new people after obtaining the loan. Of 11.6 percent who did hire
more people, the number of new hires ranged from one to six, with two new employees on
average. More than half of respondents (56.2 percent) hired only one new employee, and majority
(90.6 percent) from one to two employees. However, when asked about attribution of hiring as a
result of a loan, only three respondents attributed the increase in hiring completely or to a large
extent to a loan (10 percent), while 50 percent stated that a loan had little or no effect on their
decision to hire more people. And, 40 percent of those who answered this question attributed
some effect in hiring of new people to a loan obtained from the bank.
7. In addition to confirming improved access to finance and increase in sales, the survey
also confirmed positive change in business practices of beneficiary MSMEs. According to the
survey, 94 percent of respondents agreed with a statement that obtaining a loan led to
improvements in their businesses. Specific examples include changes in keeping business records
and preparing end of the year accounts: the number of respondents who keep business records
increased by 23.4 percent as compared to the pre-loan time period (a rise from 66.0 percent to
89.4 percent), while the number of those who prepare end of the year accounts increased by 3.9
percent compared to pre-term time period (from 31.9 percent to 35.8 percent).
38
BUSINESS DEVELOPMENT SERVICES – MSME BDS Impact Assessment Survey27
8. The objective of the assessment was to conduct a comprehensive survey of MSMEs
which received assistance from the project‟s BDS component, as well as three control groups.
The survey locations for the BDS Impact Survey comprised the pilot states of BDS interventions
of Lagos, Kaduna and Abia and control (matching) states of Ogun, Oyo, Kano, Plateau and
Anambra. Ogun and Oyo are the matching states for Lagos; Kano and Plateau for Kaduna and
Anambra for Abia.
The survey was administered on the four groups of enterprises as follows:
Treatment Group (A) 183 MSMEs benefiting from BDS grant
services in pilot states of Lagos, Kaduna and
Abia
Control Group (B) 225 MSMEs without any BDS assistance in
pilot states.
Control Group (C) 74 MSMEs benefiting from other BDS
providers‟ (non-clients) services in non-pilot
states of Ogun,Oyo, Kano, Plateau, Anambra,
FCT and Bauchi
Control Group (D) 295 MSMEs without any BDS assistance in
non pilot states.
9. Based on the results on sales for all the groups and employment results for Groups A and
C it can be inferred that BDS of the supported BDS providers made more positive impact on
performance than the control groups. The measurable impact of BDS on sales and employment
levels was gauged by the trend and changes in sales/employment figures of the MSMEs before
and after they received BDS and whether the changes are statistically significant.
10. The survey confirmed that the average monthly sales of Group A increased by 84.2
percent (from about N243,840.58 in 2006 to N449,270.4) while that of Group C increased by
mere 6.2 percent (from N401,713.5 in 2006 to N426,466.2367,771). The corresponding quarterly
sales figures for group A increased from N1, 023,884 to N2, 172,799 representing 112 percent
increase and for group C it was a decrease of 3.7 percent.
11. Based on statistical test of significance, BDS received by group A impacted positively on
their sales more than that of control group C. When the sales figure before and after BDS were
subjected to statistical tests of significance, the changes in group A‟s monthly and quarterly sales
were found to be statistically significant at 95 percent confidence level. The computed t-statistics
for A‟s monthly and quarterly sales figures are 2.021 and 2.249 respectively. For group C, the
increase in monthly sales was not statistically significant while the quarterly sales decrease was
significant. The computed t-statistics for C‟s monthly and quarterly sales figures are 1.681 and
2.340 respectively. Moreover, only 15(20 percent) of group C attributed changes in their sales
figure to BDS while 86(47 percent) of Group A enterprises attributed their changes in sales to
27
BDO OFO CONSULTING LTD. February 21, 2008.
39
BDS. Group B that operated in the same environment as group A (pilot states) but did not enjoy
any BDS experienced a slight increase of 3.5 percent in their average monthly sales (from
N263,667 in 2006 to N273,008 in 2007) and 11.2 percent increase in quarterly sales(from
N723,000 to N812,462). These increases in monthly and quarterly sales were not statistically
significant at 95 percent confidence level with computed t – statistics been 1.396 and 1.454
respectively.
12. Based on the trend in employment before and after BDS, the survey confirmed that the
target Group A experiencing a 41.7 percent increase in employment (from a mean of 5.8 to 8.3
employees) while Group C experienced an increase of about 16 percent (from 10.9 to 12.7). The
statistical test of employment change in Group A gave a significant difference before and after
BDS while Group C shows an insignificant difference. The computed t-statistics for A and C are
2.405 and 1.335 respectively. This shows that BDS had impacted positively on the employment
performance for the clients of the supported BDS providers more than on the performance of the
clients supported by other BDS providers. The control groups B and D only provided overall
average employment figure for 2006 and 2007 and no separate figures for the periods to enable
calculation of growth rates in their employment. The mean employment figures for B and D are
6.07 and 13.98 respectively. These employment figures are incomparable with that of group A for
the purpose of impact assessment because the changes in employment of groups B and D cannot
be gauged.
13. In addition to impact on sales and employment, the survey recorded additional benefits
from project facilitated BDS. Specifically, based on the analysis of the respondents‟ satisfaction
ratings it was concluded that the quality of BDS received by the treated Group A was higher than
that of the Control Group C. Further, it was found that the BDS providers in the pilot states made
more impacts on knowledge and skills acquisition than the services providers in the Control
states. In terms of acquisition and improvement in skills and knowledge, about 63 percent
respondents from Group A and about 38% from Group C strongly agreed that they obtained new
knowledge by purchasing BDS. In regards to new skill acquisition 50 percent as of Group A
respondents strongly agreed that they acquired new skills, while only 16 percent from Group C
confirmed the same relationship. In regards to application of skills and knowledge in
business/operations, 96% of BDS users in Group A have applied the knowledge and skill gained
to their business practices, as well as 91% of Control group C. The follow up support for both
training and advisory services were rated poor (38% for consultancy and 34 percent for training).
404040 BDS users in Group A have applied the knowledge and skill gained to their business
practices, as well as 91 percent of Control group C.
40
Annex 6. Stakeholder Workshop Report and Results
A final closeout event of the MSME Project was organized by the project‟s communication team
in consultation with the PMU and NIPC. This was held on the 7th of December, 2011 with
attendance from beneficiaries from the states targeted from the Project, government institutions
like the Central Bank of Nigeria, SMEDAN, and the media. The event featured beneficiaries‟
testimonies as well as a preview of the documentary on the Project -- all highlighting the
achievement and lessons learned from the implementation of the project.
41
Annex 7. Summary of Borrower’s ICR and / or comments on Draft ICR
The World Bank has received the project completion report as prepared by the PMU. Below is
the summary of main reported achievements and supported events.
Targets from PIM – Access to Finance Achievements as of 31/09/2011
1.1 At least two new microfinance 1.1 Four new MFIs have been established (AB
institutions are established. Microfinance Bank; ACCION Microfinance Bank,
MicroCred Microfinance Bank, and Susu
For each MFI: Microfinance Bank).
1.1.1 At least 30,000 active clients by end 1.1.1 Active borrowers and savers for each MFI are: AB
of year 4. (15,061/38,199); ACCION (12,089/59,084);
MicroCred (5,294/ 10,096) and Susu (2,778/37,304)
as of 31/09/2011. Total borrowers were 35,232 and
total savers were 144,683.
1.1.2 At least US$20 million outstanding 1.1.2 Total outstanding portfolio is US$33.9 million.
portfolio by end of year 4. Outstanding portfolio for each MFI is: AB (US$18.6
m); ACCION (US$10 m), MicroCred (US$3.3 m);
and Susu (US$2 m) as of 31/09/2011.
1.1.3 Financial self-sufficiency ratio at 1.1.3 Financial self-sufficiency is 89% (AB), 117%
least 100% by end of year 4. (ACCION), 55.3% (Microcred) and 105% (Susu) as
of 31/09/2011.
1.1.4 Loan loss rate below 5% by end of 1.1.4 Loan loss rate is 0% (Microred), 2% (AB) and 6%
year 4. (ACCION) as of 31/09/2011 (the other grantee did
not report). However, it was agreed that portfolio at
risk (PAR) at 30 days was a better indicator: 0.65%
(AB), 3.93% (ACCION), 0.78% (Microcred) and
4.99%* (Susu) as of 31/09/2011.
1.2 New private sector investment in MFIs 1.2 New private sector investment in MFIs was US$30
at least US$15 million million (N4.5 billion paid up capital) as of 30/06/2011.
Note: This figure does not include paid up capital
from the two microfinance banks that the MSME
Project financed and are now closed.
1.3 At least one commercial bank 1.3 One commercial bank (Oceanic) established an
establishes an MSME downscaling internal microfinance section as of 31/09/2011.
programme.
For each commercial bank:
1.3.1 At least 5,000 active clients by end 1.3.1 3,818 active borrowers and 1,073,429 active savers
of year 4. as of 31/09/2011.
1.3.2 At least US$10 million outstanding 1.3.2 US$7 million (N 1.017 billion) outstanding portfolio
portfolio at end of year 4. as of 31/09/2011.
1.3.3 Financial self-sufficiency ratio at 1.3.3 This figure is not available as the microfinance
least 100% by end of year 4. department is a unit within the bank, but the ratio is
at least 100%.
1.3.4 Loan loss rate below 5% at end of 1.3.4 There is no figure available for this indicator, but it
year 4. was agreed that portfolio at risk (PAR) at 30 days
42
was a better indicator: this was 5.9% as of
31/09/2011.
1.4 Bankers are aware of downscaling 1.4 There have been successful meetings with Banker‟s
programme and develop more positive Committee on downscaling and a number of
perceptions of commercial viability of commercial banks (Afribank, First Bank, UBA, and
downscaling. IBTC) have invested in subsidiary banks. Including the
three banks that have invested in ACCION (NIB
[Citibank], Ecobank, and Zenith Bank), seven out of
Nigeria's 22 commercial banks have invested in one
form or another in commercial microfinance.
Targets from PIM – General BDS Fund Achievements as of 31/12/2011
2.1 Assistance provided to at least 20 BDS 2.1 Assistance provided to 46 Providers from General
providers BDS Fund (excluding VC BDS Grants).
2.1.1 At least 20 products or services 2.1.1 63 products or services improved or developed.
improved or developed through Project
support
2.2 At least 1,000 MSMEs receive BDS from 2.2 17,358 MSMEs have received BDS from
participating BDS providers participating BDS providers.
2.3 Each assisted BDS provider demonstrates
sustained uptake of supported products and
services:
2.3.1 by end of third year, at least 75% of 2.3.1 / 2.3.2 There are conceptual problems with the
clients adopt new behaviors measuring criteria 2.3.1 and 2.3.2 but they have been
probably met where appropriate. A certificate course (the
2.3.2 at least 25% of clients return for Kaduna Program) could obviously not have repeat
additional services customers. A widely circulated casebook on family
business succession has problems in defining each reader
as a client.
2.3.3 Cost recovery for the specific activities considered
2.3.3 by end of third year, BDS provider has is around 58%.
at least 75% cost recovery on supported
projects
43
Targets from PIM – Value Chains Achievements as 31/12/2011
2.2 Assistance provided to at least 30 BDS providers 2.2 A total of 29 BDS providers have been
assisted through the four value chain
interventions – catfish (11), rice (5), palm oil
(3) and tourism (10)
2.2.1 At least 20 products or services improved or
developed through Project support 2.2.1 29 products/services have improved or
developed by the BDS grantees.
2.3 At least 1,000 MSMEs receive BDS from 2.3 2,803 firms have received BDS from
participating BDS providers participating BDS providers – catfish (1,300),
rice (997), palm oil (206) and tourism (300).
2.4 Each assisted BDS provider demonstrates
sustained uptake of supported products and
services:
2.4.1 by end of third year, at least 75% of clients 2.4.1 Of those BDS providers who successfully
adopt new behaviors completed their grants there is considerable
sustained uptake.
2.4.2 at least 25% of clients return for additional 2.4.2 Not all the services provided require the
services provision of repeat or additional services to
be effective (e.g. training). Where repeat
use is relevant, repeat or additional use is in
2.4.3 by end of third year, BDS provider has at least line with the target of 25%.
75% cost recovery on supported projects
2.4.3 The initiatives under tourism (destination
promotion) and palm oil (training) did not
call for cost recovery. In catfish and rice,
where grants were used to provide BDS,
cost recovery was close to 100%.
2.5 Trusted and reliable accreditation process for BDS 2.5 This referred to the Catfish Value Chain
providers is created (1st year: stakeholders agree Programme in particular. FISONS, a grantee,
on accreditation qualifications and criteria) was supported by the programme to develop
an accreditation system and has now drafted
law, which it is pushing through Parliament,
to give its accreditation system the force of
law. There were also certification elements in
the tourism VC intervention.
2.6 Catfish association is established in response to 2.6 The catfish associations already existed and
industry-led demand for joint action were helped to become key BDS providers.
Targets in the PIM – Investment Climate Achievements as of 31/12/2011
3.1 Legal and regulatory framework for credit 3.1 The legal and regulatory framework for credit bureaus
bureau established has been established.
3.2 Private sector credit bureau is created 3.2 Three private sector credit bureaus have been
established and are functioning.
44
3.3 Bank officers‟ awareness and knowledge of 3.3 CBN staff have been trained in supervision of credit
credit bureau increased bureau. The awareness of the services offered is spreading
across the banking industry but there is a need for greater
awareness and capacity building to increase usage of
services. The industry association is undertaking this.
3.4 Alternative dispute resolution mechanisms 3.4 Two new ADR Multidoor Courthouses have been
developed and implemented in up to three created in Abia and Kaduna, and the existing Multidoor
States Courthouse and the Citizen‟s Mediation Center in Lagos
have been strengthened.
3.5 The diagnostic, design and implementation have been
3.5 Diagnostic conducted, programme design completed, though not within a year.
completed, and formal agreements reached by
end of year 1
3.6 The Abia and Kaduna Multidoor Courthouses have
3.6 Time required to resolve commercial just been established so it is too early to measure impacts.
dispute under alternative system at least XX% There is evidence of increased usage of mediation services
less than prior/existing system (target level at the Citizen‟s Mediation Center in Lagos
contingent on diagnostic)
Targets in PIM – Public Private Partnership Achievements as of 31/12/2011
Development
4.1 26 public sector personnel from NIPC, 4.1 159 unique public sector personnel from NIPC,
SMEDAN and state-level ministries (e.g., SMEDAN, CBN and federal and state-level
commerce and industry) receive advanced ministries have received advanced project-related
project-related training. training through 285 training activities (247 courses
and 38 study tours).
Note: Some personnel have benefited from more than
one training course/study tour.
4.2 Training participants provide at least one in- 4.2 26 of the trainees have conducted post training
house seminar upon return. seminars.
4.3 Training participants prepare training 4.3 66 training summary reports have been prepared
summary report. (verbally or written).
4.4 Annual roundtable discussion, beginning 2nd 4.4 The project held three roundtables for MSME
Qtr 2005, between government and private financial services providers; two stakeholder
sector to establish dialogue on policies and forums on private credit bureaus; one consultative
programs targeted at MSMEs and to forum on commercial bank downscaling; two PPD
disseminate lessons learned, best practices, roundtables on IC; two knowledge sharing ADR
and project success stories. events; co-sponsored three annual NESG NES;
three BDS fairs; two stakeholder forums in rice and
tourism. There were also several materials
(brochures, documentaries) which were widely
distributed.
Note: This section was redesigned in the period
following the completion of the PIM.
4.5 Project is represented on the programme of 4.5 The Project signed a memorandum of understanding
Nigerian Economic Summit (NES) every with the NESG and supported the implementation of
45
year beginning 2005. the NES programme. In addition, the project co-
sponsored the annual NES Summits and the work of
the Non-oil & Agriculture Policy Commission, and
supported representatives from the State
Governments in the project states to participate in the
NES and dialogue.
4.6 Three MSME Competitiveness Reports. 4.6 One MSME competitiveness report was prepared in
conjunction with the NESG and other stakeholders.
Note: This activity was done late in the project because
the project had been previously directed to drop the
element.
4.7 Three Competitiveness fora.
4.7 One Competitiveness forum was organized in
conjunction with NESG and other stakeholders.
Note: This activity was done late in the project
because the project had been previously directed to
drop the element.
46
Annex 8. Comments of Co-financiers and Other Partners/Stakeholders
N/A
47
Annex 9. List of Supporting Documents
1. Project Concept Note (July 2003)
2. Project Appraisal Document (November 2003)
3. Project Implementation Manual (November 2004)
4. Aide Memoires and Implementation Status Reports
5. PMU‟s Project Progress Reports and Completion Report
6. Impact Evaluation of Borrowers from Accion , Susu, and MIC Microfinance Banks, by Luba
Shara, IFC with data collection conducted by: BDO OFO CONSULTING LTD, 2009
7. Impact Survey of MSME Beneficiares, by BDO OFO CONSULTING LTD, 2008.
48
Annex 10. List of sponsored events under each component of the Project:
Component 1: Access to Finance
Date Location
First roundtable on Technical Service Provision for
1 June 2006 Lagos, Nigeria
MSME
2 Roundtable on ATF Component for MSME June 2006 Kaduna, Nigeria
3 Roundtable on ATF Component for MSME June 2006 Abia, Nigeria
4 NationaL Stakeholder Workshop on Credit Bureaus June 2006 Lagos, Nigeria
Award Ceremony for Access to Finance Grants to Susu
5 February 2007 Lagos, Nigeria
and MIC Microfinance Banks
6 ACCION Microfinance Bank Launching July 2007 Lagos, Nigeria
7 Workshop on External Audit for Microfinance March 2009 Lagos, Nigeria
8 Workshop on Portfolio Quality and Governance March 2009 Lagos, Nigeria
9 External Audit of Microfinance Banks in Nigeria April 2009 Lagos, Nigeria
10 Savings Mobilization for Commercial Microfinance August 2009 Lagos, Nigeria
11 Savings Mobilization for Commercial Microfinance September 2009 Kaduna, Nigeria
12 Workshop on MicroLeasing December 2010 Lagos, Nigeria
13 Workshop on Microinsurance December 2010 Abuja, Nigeria
49
Component 2: Business Development Services
Date Location
Training on Market Oriented Small Business
1 February 2007 Abuja, Nigeria
Development Services for BDS Providers
2 Workshop for Catfish VC BDS Grantees June 2008 Lagos, Nigeria
Training on Market Oriented Small Business
3 August 2008 Abuja, Nigeria
Development Training for BDS Providers
4 Lagos BDS Fair May 2009 Lagos, Nigeria
5 Kaduna BDS Fair June 2009 Kaduna, Nigeria
6 Abia BDS Fair June 2009 Abia, Nigeria
Value Chain Workshop, jointly organised by
7 October 2009 Abuja, Nigeria
MSME Project & DFID
Training on Market Driven BDS and Value Chain
8 November 2009 Abuja, Nigeria
Development for BDS Providers
9 Workshop for Tourism VC BDS Grantees November 2009 Calabar, Nigeria
10 Workshop for Tourism VC BDS Grantees January 2010 Lagos, Nigeria
Kaduna BDS Fair hosted within the 31st Annual
11 February 2010 Kaduna, Nigeria
Kaduna International Trade Fair
Tourism Value Chain Stakeholders‟ Final
12 June 2010 Calabar, Nigeria
Seminar
13 Workshop for Rice VC BDS Grantees July 2010 Kaduna, Nigeria
ILO/ITC Training of BDS Providers on Women's
14 November 2010 Abuja, Nigeria
Entrepreneurship Development
Rice Value Chain Development Stakeholders
15 December 2010 Kaduna, Nigeria
Final Seminar
ILO/ITC Training of BDS Providers on Women's
16 May 2011 Abuja, Nigeria
Entrepreneurship Development
17 Stakeholder Workshop for Palm Oil November 2011 Umuahia, Nigeria
50
Component 3: Investment Climate
Date Location
CREDIT BUREAUS
National Workshop on Credit Bureau
1 June 2006 Abuja, Nigeria
Development in Nigeria
Implant Training for Credit Bureau Operations
2 March 2009 Abeokuta
in Nigeria (for CBN staff)
Washington and Chicago,
3 Study Tour - Regulating Credit Bureaus September – October 2009
USA / Cairo, Egypt
4 Stakeholders Workshop on Credit Bureau December 2011 Lagos, Nigeria
BUSINESS REGISTRATION
Signing of MOU on Business Registration
1 September 2007 Abuja, Nigeria
among NIPC, CAC and FIRS
2 Workshop on Credit Bureau for CBN Staff February- March 2009 Abuja, Nigeria
Implant Training for Credit Bureau Operations
3 February 2009 Kaduna, Nigeria
in Nigeria (organised solely for CBN staff)
SECURED LENDING
Secured Lending Inaugural Stakeholder‟s
1 May 2009 Abuja, Nigeria
meeting
National Workshop on Secured
2 November 2011 Abuja, Nigeria
Lending/Securitization
ADR
Study Tour to Uganda on Commercial Court
1 February 2007 Uganda
Practices (ADR)
ADR Seminar “Commercial Alternative
2 November 2007 Abuja, Nigeria
Dispute Resolution for Core Stakeholders�?
3 ADR Assessment Report Presentation Forum February 2009 Abuja, Nigeria
ADR Stakeholder‟s Phase 2/Design Phase
4 June 2009 Abuja, Nigeria
Conference
Training - Alternative Dispute Resolution
5 October 2009 Washington, USA
(ADR)
6 Signing of Protocol on ADR by Abia State June 2010 Aba, Nigeria
Settlement Week of Lagos Multi-Door
7 July 2010 Lagos, Nigeria
Courthouse
Opening ceremony of Abia State Multidoor
8 December 2011 Umuahia, Nigeria
Commission
51
Component 4: Private – Public Partnership
Date Location
1 Intervention Design and Management in BDS – July 2004 Glasgow, UK
NIPC and SMEDAN staff
2 Microfinance Training – NIPC Project August- Plokwane City, South Africa
Coordinator September 2004
3 Seminar on Model Law on Leasing – Chartered October 2004 Rome, Italy
Inst. Of Arbitrators
4 Goods and Equipment Procurement Course – November 2004 Durban, South Africa
NIPC Staff
5 Services Procurement – NIPC Staff NA Lagos, Nigeria
6 Financial Management and Disbursement – November 2004 Malawi
NIPC Staff
7 Accounting Software System Training - NIPC November – Lagos, Nigeria
Staff December 2004
8 Financial Management & disbursement training September 2005 Malawi
– NIPC Staff
9 Financial management & disbursement training November 2005 Malawi
II
10 Workshop on Procurement & Consultancy November 2005 Lagos, Nigeria
Service – NIPC staff
11 Capacity Building and Needs Assessment December 2005 Abuja, Nigeria
Workshop – NIPC and SMEDAN Staff
12 Course on The General Manager January 2006 Harvard, US
Program(TGMP) – NIPC Staff
13 Principles & Practice of MSME Promotion & June 2006 Abuja, Nigeria
Development – NIPC and SMEDAN staff
14 Summit on Sustaining Reforms and Unlocking June 2006 Abuja, Nigeria
Nigeria's Potential – NIPC and Minister of
Commerce Kaduna/Lagos
15 Collateral Reform and Access to Finance – July 2006 London, UK
NIPC, CBM and FMoJ staff
16 Creating an Enabling Environment for Small October 2006 Turin, Italy
Enterprise Development – NIPC and SMEDAN
staff
17 Prevention, Analysis & Detection of Corporate October 2006 Mombasa Kenya
Fraud – NIPC staff
18 Local Government .Investment Climate Reform March 2007 Tanzania
19 Strengthening OSIC for Accelerated Public March 2007 Kaduna, Italy
Sector Reform
20 NESG National Forum for Synergy in MSME June 2007 Abuja, Nigeria
Development
21 Phase 1 Study Tour on IPA Strategy for IC July 2007 Botswana
Reforms
22 Financial Management Training October 2007 Turin, Italy
52
23 NIPC Directors Study Tour to Egypt November 2007 Egypt
24 Training on Project Management – NIPC Staff July 2009 London, UK
25 Results-Based Management Implementation and September- Setym International Training,
Performance Indicators October 2009 Canada,
26 Study Tour for NIPC October 2009 Bangladesh
27 Training -Crown Agents Certificate in November 2009 London, UK
Procurement for Senior Executives – NIPC Staff
28 Sustainable Microfinance – NIPC Project November 2009 London, UK
Coordinator
29 Training - Results-Based Management November - Setym International Training,
Implementation and Performance Indicators, December 2009 Malaysia,
30 Creating an Enabling Environment for SMEs November- Turin, Italy
Development December 2009
31 Project Budgeting and Cost Control – NIPC May 2010 Malaysia
Project Accountant
32 Monitoring and Evaluation August 2010 London, UK
33 Project and Program Impact Assessment August- Montreal, Canada
September 2010
34 Project Budgeting and Cost Control – NIPC Staff October 2010 Malaysia
35 Study Tour – NIPC Staff October 2010 Indonesia
36 Advance Audit Skills – NIPC Internal Audit October 2010 London, UK
37 Project & Programme Management Training – November 2010 London, UK
NIPC Staff
38 Public Financial Management: Planning and November- London, UK
Control – NIPC Staff December 2010
39 Creating and Enabling Environment for November – Turin, Italy
Sustainable Small Enterprise Development – December 2010
NIPC Staff
40 Course on Regulating Financial Markets – NIPC March 2011 Washington DC
Project Accountant
41 Training course on Monitoring and Evaluation – 2011 London, UK
NIPC Department Project Coordinator
42 Course on Leading a Project Team – NIPC March 2011 Dubai, UAE
Project Secretariat
43 Study Tour – NIPC Staff July 2011 Ahmedabad, India
44 Study Tour – NIPC Staff July 2011 Chennai, India
45 Leadership for Senior Managers – NIPC Mrs. November 2011 Dubai, UAE
Okala
53
To Tahoua To Agadez To Nguigmi
10°E 15°E
Illela NIGER
NIGER SOKOTO e Lake Chad
ob
To Y
Kandi Sokoto Katsina
Yobe Oamasak
Nguru
ma
Kaura
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i
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Dutse Pokiskum Damaturu
Maiduguri
To Nig
er KANO
CHAD
Kandi
Zaria n g ol a
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Bunga
Kaduna BAUCHI GOMBE Biu
BENIN Kainji
Kontagora
CAMEROON
Reservoir
dun
a KADUNA Bauchi Gombe
Ka
10°N
NIGER 10°N
A
Wawa Jos
To
A W
Bori
Minna
e
nu
P L AT E AU
A M
ABUJA
Be
Nige
r
Yola
K WA R A FEDERAL Shendam
A D
Jalingo
Baro CAPITAL
Ilorin TERRITORY Lafia
SA
NAS A R AWA
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Benue
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a
Bali NIGERIA
Oshogbo EKITI Lokoja Wukari
Ibadan
Ado-Ekiti
K O G I
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O SU N
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Abeokuta
ONDO
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To
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Benin Abakaliki
Lagos
City Asaba Awka EBONYI CROSS NIGERIA
BRA
Sapete RIVER MICRO, SMALL AND MEDIUM
r
Nige
D E LTA IMO CAMEROON
Warri
Umuahia ENTERPRISE PROJECT
Owerri ABIA
Uyo MAIN CITIES AND TOWNS
5°N RIVERS Aba Calabar 5°N
Yenogoa
Port AKWA- STATE CAPITALS
Gulf of Guinea BAYELSA Harcourt IBOM To
Doula NATIONAL CAPITAL
0 50 100 150 200 Kilometers MAIN ROADS
This map was produced by the Map Design Unit of The World Bank. RAILROADS
The boundaries, colors, denominations and any other information 0 50 100 150 Miles
IBRD 39221
MARCH 2012
STATE BOUNDARIES
shown on this map do not imply, on the part of The World Bank
Group, any judgment on the legal status of any territory, or any
Bioko I.
endorsement or acceptance of such boundaries. 5°E (EQ. GUINEA) 10°E INTERNATIONAL BOUNDARIES