The World Bank Report No: ISR5317 Implementation Status & Results Kenya Micro, Small, and Medium Enterprise Competitiveness Project (P085007) Public Disclosure Copy Operation Name: Micro, Small, and Medium Enterprise Competitiveness Project Stage: Implementation Seq.No: 14 Status: ARCHIVED Archive Date: 10-Apr-2011 Project (P085007) Country: Kenya Approval FY: 2005 Product Line: IBRD/IDA Region: AFRICA Lending Instrument: Specific Investment Loan Implementing Agency(ies): Ministry of Industrialization Key Dates Board Approval Date 13-Jul-2004 Original Closing Date 30-Jun-2010 Planned Mid Term Review Date Last Archived ISR Date 10-Apr-2011 Effectiveness Date 17-Dec-2004 Revised Closing Date 30-Jun-2012 Actual Mid Term Review Date Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project aims to increase productivity and employment in participating micro, small and medium enterprises (MSMEs). This objective will be achieved by strengthening financial and non-financial markets to meet the demand of MSMEs, strengthening support for employable skills and business management, and reducing critical investment climate constraints in MSMEs. The project will focus on key value chains and on both formal small and medium enterprises and informal microenterprises that have high potential for dynamic growth, including "graduation" from informal to formal status. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost ACCESS TO FINANCE 9.50 STRENGTHENING ENTERPRISE SKILLS AND MARKET LINKAGES 8.10 Institutional Capacity Building and Project Management 3.85 Public Disclosure Copy Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating NA Implementation Status Overview Since the last ISR period, further progress has been made towards achieving the Project Development Objectives (PDOs). The summary below highlights the main progress towards each of the elements through which the project is expected to achieve the PDO. Page 1 of 7 The World Bank Report No: ISR5317 **Strengthening financial markets to meet the demand of MSMEs and reducing some of the critical investment climate constraints in MSMEs: This is being addressed through the support to (i) the Financial Sector Deepening Trust (FSDT) and (ii) the SME risk investment TA funds, covering a) Business Partner International (BPI) and b) other TA providers. Public Disclosure Copy (i) The renewal of the grant agreement was signed in January 2011 and pending payments were done; a new disbursement request for accrued amount as of September was submitted in December 2011 after a long delay partly affected by FSDTs focus on developing a new strategy and a multi year plan approved in September 2011. Since FSDT is a pool of funds, it can continue its good performance pending actual flow of funds from the MSME project for a while, but eventually needs to get the funds to be able to adjust its accounts. FSDT continued to perform well as reported in their quarterly reports, including, for instance, 25 new products launched such as weather insurance and revamped value chain financing and 82 financial institutions supported. At the project restructuring, one need highlighted for the project overall was to strengthen the interlinkages across sub- components, as feasible. In line with this recommendation, FSDT and the matching grant component have been discussing options to support the development of products by financial institutions supported under FSDT for the value chains supported by the matching grant component, following the successful development of a product for the coffee value chain by a leading bank. This will be heightened under the revamped value chain financing project of FSDT. (ii) a) BPI has continued to provide TA reaching 68 smes (88 projects) for US$334,095 inTA funding supporting total investments that have reached US$9.4 million as of end September 2011; also, per the restructuring document, an officer was hired in August 2011 to promote the uptake of TA funds among SMEs. The IFCs SME solution center (SSC) has continued to provide outstanding support to the project in its engagement with SMEs. (ii) b) following the original project design, the TA provided to SMEs was expected to be extended to beneficiaries of SME risk capital funds other than BPI. After a delay of several years, two new risk capital funds are assessing provision of TA for SMEs after having signed MOUs; one fund already presented two projects. The other funds are likely to present requests shortly, while 1-2 more funds are expected to engage as well. This is also being supported by SSC. **Strengthening support for employable skills and business management and reducing other critical investment constraints in MSMES (particularly on the 4 value chains covered): All four sub-components of Component 2 have experienced progress: (i) the Value Chain Based Matching Grant, an early and sustained implementation success, has continued to deliver highly satisfactory performance and enabled key market linkages in the coffee, leather and cotton value chains. The pyrethrum sector continues to face challenges as a result of delays in the liberalization of the sector, but at least 2 projects have been supported. Over the period, there have been several noticeable achievements, in particular for the coffee value chain (first one to start under the project) and the cotton value chain, but also for the leather value chain and to a lesser extent, the pyrethrum value chain. Notably, the Pyrethrum Bill 2011 was gazetted on 7th December 2011, which is broadly in agreement with the Pyrethrum Apex. The Apex is now planning lobby efforts to fast track approval of the Bill. In accordance with the project restructuring recommendations, non-matching support has been provided to training institutes, but through a simpler mechanism than originally anticipated (originally thought using industrial training levy, but fast tracked through the non-matching grant). Importantly, the sub-component identified quick wins for interventions using the additional funds of USD$300,000 that were added at project restructuring with 8 new projects being implemented. For details of the progress made please refer to a presentation prepared at a recent inter-apex committee meeting with all the value chains (attached). (ii) Industrial Training Levy Scheme. After a long hiatus of several years for the initiation of the contract, preparation of the work, and review by the task force, the report on the Public Disclosure Copy restructuring of the scheme has been delivered and reviewed. The report contains recommendations to enhance the quality and effectiveness of the current levy scheme for public training. The task force met recently and approved the report with minor comments that are expected to be delivered shortly to the consultants for finalization. (iii) Business Plan Competition. the second phase is well underway building on success of the first round (completed last year, after delays of several years) with applications received and being vetted. Activities under this sub-component have provided high visibility to the project. As a result, more private entities have expressed interest in providing additional support to SME beneficiaries and the Bank team has facilitated some of these engagements, in line with the restructuring document. (iv) Global Business School Network. Following the successful completion of this subcomponent at the time of restructuring, a new phase was included to further support universities beyond the original four. The success of the first phase largely hinged on the extended support of the IFC GBSN unit, no longer part of the IFC (now an NGO). For the second stage, the ministry requested the support of a consultant to enable achievement of similar results, which has been hired and a plan for implementation has been designed, being implemented. Proposals were submitted for NOB and comments provided. These will be resubmitted shortly. Page 2 of 7 The World Bank Report No: ISR5317 Disbursements of the IDA credit proceeds have reached 57%, which are not yet at the level expected for this ISR period according to the restructuring paper. Notwithstanding, further expenditures were incurred per the latest FMR, with pending payments expected to be finalized shortly. Once the pending payments are made, the disbursement rate is expected to rise to about 67%. Public Disclosure Copy Other implementation issues: As noted in previous ISRs, the implementation delays after project restructuring mainly occurred last year due to the lengthy procurement process to renew the contracts for the project implementation consultants. The related procurement issues were resolved and all but one contracts were renewed. The renewal of the consultant contract for communication support (under the revised Component 3 that combined project management, communications, and M&E under one component) is ongoing. The Bank has provided technical comments that are being incorporated to be resubmitted shortly. Project management and the governance arrangement have improved significantly, with stronger efforts addressing lingering aspects (i.e. more expeditious processing of request for NOB, closer supervision of activities). The Project Steering Committee now holds regular meetings and through those meetings has provided strategic oversight to project implementation most recently regarding the proposal for reallocation and/or cancellation of Funds being revised to be resubmitted to the Bank. Since the implementation of the planned activities have improved substantially, progress towards development objectives is now on track, with further gains expected during the last 6 months of the project, in particular with regard to PDO Indicator 1 (54% of the targeted value achieved as of September 2011). The baseline data for PDO Indicator 2 was collected in 2008 and a follow-up survey is scheduled for March 2012. All the ratings remain unchanged for this ISR period. Discussions will be held with the Client regarding the impact evaluation arrangement in early 2012. Locations No Location data has been entered Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target At least 2,500 new jobs created in participating Number Value 1346.00 2500.00 MSMEs Date 30-Jun-2005 30-Sep-2011 30-Jun-2012 Comments At least 1346 new jobs At least 2500 new jobs created in participating MSMEs Value added per worker increases by 20 Percentage Value Public Disclosure Copy percent in participating MSMEs Date 30-Jun-2005 30-Sep-2011 30-Jun-2012 Comments Firm-level baseline data will Baseline data collected in Value added per worker be collected by technical September 2008. increases by 20 percent in implementing partners as participating MSMEs participating MSMEs are identified Intermediate Results Indicators Page 3 of 7 The World Bank Report No: ISR5317 Indicator Name Core Unit of Measure Baseline Current End Target Volume of Bank Support: Institutional Amount(USD) Value 0.00 122813700.00 5750000.00 Development - Microfinance Date 31-Dec-2004 30-Sep-2011 30-Jun-2012 Public Disclosure Copy Comments FSD Volume of Bank Support: Institutional Amount(USD) Value 0.00 3854237.00 2000000.00 Development - SME Date 31-Dec-2004 30-Sep-2011 30-Jun-2010 Comments value chain, BPC, GBSN Volume of Bank Support: Enabling Amount(USD) Value 448676.00 0.00 Environment - SME Date 31-Mar-2010 30-Jun-2012 Comments component dropped after project restructuring Direct project beneficiaries Number Value 16000.00 Date 30-Jun-2005 30-Sep-2011 30-Jun-2012 Comments No target available At least 16000 people trained (23,527) farmers certified, 1,481 under BPC/GBSN, 1666 under FSD Kenya) BPI139, Value Chain 107,507 Female beneficiaries Percentage Value 7931.00 Sub Type Date Supplemental Comments At least US$11.5m in loans and quasi-equity Amount(USD) Value 9383717.00 11500000.00 investment to SMEs disbursed through SME risk capital fund and facilitated through targeted Date 30-Jun-2005 30-Sep-2011 30-Jun-2012 technical assistance, with loan loss rate below Comments 88 projects US$9.4m 10% investment funds, 8.9% loan Public Disclosure Copy loss rate, US$334,095 in TA funds (68 MSMEs supported). At least 70 percent of financial institutions Percentage Value receiving grants from the Financial Sector Deepening Trust meet or exceed their business Date 30-Jun-2005 30-Sep-2011 30-Jun-2012 plan targets Comments target of 70 percent of FIs met; 72 projects 82 FIs supported, 1,036 people trained, >25 new products launched. Page 4 of 7 The World Bank Report No: ISR5317 Indicator Name Core Unit of Measure Baseline Current End Target A comprehensive supply chain strategy, which Number Value responds to market, technical, human resource Date 01-Jan-2005 30-Sep-2011 30-Jun-2012 Public Disclosure Copy and financial needs of key players alongthe entire supply chain, is created for at least three Comments 4 supply chain strategies A comprehensive supply sectors. (Tex completed and being chain strategy, which implemented; 49 grants; responds to market, technical, 4,500 MSME contracts human resource and financial signed; 23527 farmers got needs of key players alongthe certification.more entire supply chain, is created achievements in presentation for at least three sectors. attached. Agreement on training levy scheme, legislation Number Value and implementation plan Date 01-Jan-2005 07-Dec-2011 30-Jun-2012 Comments Final report submitted and Agreement on training levy reviewed by taskforce. Minor scheme legislation and comments to be implementation plan communicated to consultants shortly. 100 new business case studies introduced into Number Value the Borrower#s universities# business school curriculum. Date 01-Jan-2005 07-Dec-2011 30-Jun-2012 Comments 104 cases written and some 100 new business cases already incorporated into produced, and case-based curriculums. Consultant hired instruction is routinely used in for implementation of new at least one required course activities added during in each of the three business restructuring building on schools. earlier successes. Case-based instruction is routinely used in at Number Value least one required course in each of the three business schools. Date 01-Jan-2005 31-Dec-2010 30-Jun-2012 Public Disclosure Copy Comments All the 3 universities have Case-based instruction is case based instructions routinely used in at least one routinely used at various required course in each of the levels three business schools. Page 5 of 7 The World Bank Report No: ISR5317 At least 200 eligible entrepreneurs apply to the Percentage Value 2092.00 200.00 business plan competition in the first year, with at least a 5% increase in the number of eligible Date 30-Jun-2005 31-Dec-2010 30-Jun-2012 applicants annually. Comments 2,092 applicants in 8 At least 200 eligible Public Disclosure Copy provincial competitions; 700 entrepreneurs apply to the entrepreneurs trained; second business plan competition in phase well underway. the first year. Increased subcontracting in local supply chains Percentage Value providing at least 50% increase in the level of local sourcing Date 09-Jan-2008 31-Dec-2010 30-Jun-2012 Comments Baseline data collected in Next operational audit will 50% increase in September 2008 provide updates. subcontracting in local supply chains Data on Financial Performance (as of 25-Jul-2011) Financial Agreement(s) Key Dates Project Loan No. Status Approval Date Signing Date Effectiveness Date Closing Date P085007 IDA-39590 Effective 13-Jul-2004 04-Aug-2004 17-Dec-2004 30-Jun-2012 Disbursements (in Millions) Project Loan No. Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P085007 IDA-39590 Effective XDR 15.00 15.00 0.00 8.54 6.46 57.00 Disbursement Graph Public Disclosure Copy Page 6 of 7 The World Bank Report No: ISR5317 Public Disclosure Copy Key Decisions Regarding Implementation Notable progress ongoing and achievement of development objectives on track. Final version of the cancellation of funds/reallocation request should come in shortly. Restructuring History Level two Approved on 28-Dec-2009 Related Projects There are no related projects. Public Disclosure Copy Page 7 of 7