Report No: ICR00218 IMPLEMENTATION COMPLETION AND RESULTS REPORT (Credit Number 6287-ZR) ON A CREDIT IN THE AMOUNT OF US$ 100 MILLION TO THE Ministry of Finance FOR DRC- SME Development and Growth Project January 9, 2025 Finance, Competitiveness and Investment Eastern And Southern Africa The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT CURRENCY EQUIVALENTS (Exchange Rate Effective {Sep 23, 2024}) Currency Unit = = US$1 US$ = SDR 1 FISCAL YEAR January 1 - December 31 Regional Vice President: Victoria Kwakwa Country Director: Albert G. Zeufack Regional Director: Hassan Zaman Practice Manager: Consolate K. Rusagara Task Team Leader (s): Magueye Dia, Natalia Agapitova ICR Main Contributor: Zouhour Karray The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ABBREVIATIONS AND ACRONYMS BDS Business Development Services BPC Business Plan Competition CPF Country Partnership Framework DRC Democratic Republic of Congo ERR Economic Rate of Return FCS Fragile and Conflict-Affected States GBV Gender-Based Violence GDP Gross Domestic Product GEMS Geo-Enabling Initiative for Monitoring and Supervision GoDRC Government of Democratic Republic of Congo GRM Grievance Redress Mechanism ICR Implementation Completion and Results Report IDA International Development Association IDNAT Numéro d'identification Nationale (National ID Number) IRI Intermediate Results Indicator ISR Implementation Status and Results Report M&E Monitoring and Evaluation MDA Ministries, Departments, and Agencies MSME Micro, Small, and Medium-sized Enterprises NGO Non-Governmental Organization NIF Numéro d'Identification Fiscal (Fiscal Tax Number) NPV Net Present Value OCC Office Congolais de Controle (Congolese Office of Control) PAD Project Appraisal Document PADMPME Projet d'Appui au Développement des Micro, Petites et Moyennes Entreprises (Small and Medium- Sized Enterprises Development and Growth Project) PCU Project Coordinating Unit PDO Project Development Objective PPD Public-Private Dialogue PPP Public-Private Partnerships PRONADEC Programme National de Développement de l'entrepreneuriat Congolais (National Program for the Development of Congolese Entrepreneurship) PSU Provincial Supervision Unit RCCM Registre du Commerce et du Crédit Mobilier (Trade and Personal Property Credit Registry) RRA Risk and Resilience Assessment SBP Simplified Business Plan SME Small and Medium-sized Enterprises SNDP Strategic National Development Plan SSA Sub-Saharan Africa STEP Student Training for Entrepreneurial Promotion Methodology TA Technical Assistance ToC Theory of Change ToT Training of Trainers The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT TRANSFORME Empowering Women Entrepreneurs and Upgrading MSMEs for Economic Transformation and Jobs in DRC Project US$ US Dollar USAID United States Agency for International Development WB World Bank WBG World Bank Group The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT TABLE OF CONTENTS DATA SHEET ................................................................................................................................................. i I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................................................2 II. OUTCOME ...................................................................................................................................................8 III. KEY FACTORS AFFECTED IMPLEMENTATION AND OUTCOME................................................................... 20 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME ............................ 20 V. LESSONS AND RECOMMENDATION ............................................................................................................ 28 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................................................ 31 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ....................................................... 36 ANNEX 3. PROJECT COST BY COMPONENT ......................................................................................................... 38 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................................................ 39 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ................................. 41 ANNEX 6. SUMMARY OF ONGOING IMPACT STUDY ........................................................................................... 42 ANNEX 7. SUPPORTING DOCUMENTS (IF ANY) ................................................................................................... 43 ANNEX 8. PROJECT’S THEORIES OF CHANGE ...................................................................................................... 44 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT DATA SHEET @#&OPS~Doctype~OPS^dynamics@icrbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P160806 DRC- SME Development and Growth Project Product Operation Short Name Investment Project Financing (IPF) DRC SME Development and Growth Project Operation Status Approval Fiscal Year Closed 2019 Original EA Category Current EA Category Partial Assessment (B) (Restructuring Data Sheet - 11 Dec Partial Assessment (B) (Approval package - 06 Jul 2018) 2023) CLIENTS Borrower/Recipient Implementing Agency Ministry of Finance Justin Kalumba Mwana Ngongo DEVELOPMENT OBJECTIVE Original Development Objective (Approved as part of Approval Package on 06-Jul-2018) The project development objective is to support the growth of Micro, Small and Medium-sized Enterprises (MSMEs) and increase employment and entrepreneurship opportunities for youth and women in select areas. s s s s s @#&OPS~Doctype~OPS^dynamics@icrfinancing#doctemplate FINANCING Financing Source Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) i The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT World Bank Financing 100,000,000.00 100,000,000.00 99,586,063.67 IDA-62870 100,000,000.00 100,000,000.00 99,586,063.67 Total 100,000,000.00 100,000,000.00 99,586,063.67 RESTRUCTURING AND/OR ADDITIONAL FINANCING Amount Disbursed Date(s) Type Key Revisions (US$M) 10-Mar-2023 Portal 90.76 • Reallocations 11-Dec-2023 Portal 94.50 • Loan Closing Date Extension @#&OPS~Doctype~OPS^dynamics@icrkeydates#doctemplate KEY DATES Key Events Planned Date Actual Date Concept Review 06-Apr-2017 06-Apr-2017 Decision Review 20-Mar-2018 20-Mar-2018 Authorize Negotiations 21-May-2018 21-May-2018 Approval 06-Jul-2018 06-Jul-2018 Signing 29-Jun-2018 21-Sep-2018 Effectiveness 20-Nov-2019 ICR/NCO 27-Dec-2024 09-Jan-2025 Restructuring Sequence.01 Not Applicable 10-Mar-2023 Restructuring Sequence.02 Not Applicable 11-Dec-2023 ICR Sequence.01 (Final) -- 08-Jan-2025 Operation Closing/Cancellation 28-Jun-2024 28-Jun-2024 @#&OPS~Doctype~OPS^dynamics@icrratings#doctemplate RATINGS SUMMARY Outcome Bank Performance M&E Quality Highly Satisfactory Highly Satisfactory High ii The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ISR RATINGS Actual Disbursements No. Date ISR Archived DO Rating IP Rating (US$M) 01 23-Nov-2018 Satisfactory Satisfactory 0.47 02 18-Jun-2019 Satisfactory Moderately Satisfactory 0.75 03 26-Dec-2019 Satisfactory Moderately Satisfactory 1.74 04 07-Jul-2020 Satisfactory Moderately Satisfactory 8.86 05 05-Mar-2021 Satisfactory Moderately Satisfactory 13.37 06 09-Jan-2022 Satisfactory Satisfactory 50.84 07 05-Mar-2022 Satisfactory Satisfactory 69.51 08 27-Oct-2022 Satisfactory Satisfactory 76.27 09 17-May-2023 Satisfactory Satisfactory 92.06 10 29-Jun-2024 Highly Satisfactory Highly Satisfactory 99.59 @#&OPS~Doctype~OPS^dynamics@icrsectortheme#doctemplate SECTORS AND THEMES Sectors Adaptation Mitigation Major Sector Sector % Co-benefits (%) Co-benefits (%) FY17 - Agricultural markets, 5 0 0 commercialization and agri-business FY17 - Manufacturing 37 0 0 FY17 - Industry, Trade and Services FY17 - Other Industry, Trade and 44 0 0 Services FY17 - Public Administration - 14 0 0 Industry, Trade and Services Themes Major Theme Theme (Level 2) Theme (Level 3) % FY17 - Financial Infrastructure and FY17 - Finance FY17 - MSME Finance 67 Access iii The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT FY17 - Human Development and FY17 - Gender 41 Gender FY17 - Entrepreneurship 45 FY17 - Enterprise Development FY17 - MSME FY17 - Private Sector 72 Development Development FY17 - Youth FY17 - Jobs 35 Employment iv The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ADM STAFF Role At Approval At ICR Practice Manager Rashmi Shankar Consolate K. Rusagara Regional Director Hassan Zaman Global Director Ceyla Pazarbasioglu-Dutz Mona E. Haddad Practice Group Vice President Pablo Saavedra Country Director Jean-Christophe Carret Albert G. Zeufack Regional Vice President Makhtar Diop Victoria Kwakwa ADM Responsible Team Leader Alain Traoré Magueye Dia Co-Team Leader(s) Milaine Rossanaly Natalia Agapitova ICR Main Contributor Zouhour Karray Consultants Ilias Hamdouch ; Jan Hendrik van Zoelen Cortés ; Puja Guha Page 1 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. The Small and Medium Sized Enterprises Development and Growth Project (PADMPME) in the Democratic Republic of Congo (DRC) was appraised in June 2018 and started its implementation during a period of economic growth that was threatened by persistent business environment, socioeconomic, political, and security challenges. Growth Domestic Product (GDP) growth averaged 6.1 percent from 2008 to 2018,1 higher than an average growth of 3.8 percent for Sub-Saharan Africa (SSA) during that period.2 At the time of appraisal, the DRC was the second-largest African country by land territory and fourth largest by population with an estimated 87 million inhabitants.3 Despite the economic growth and significant natural resources endowments, including one of the highest concentrations of mineral wealth in the world, the overreliance on the mining industry and the lack of economic diversification had not translated into improved socio-economic conditions for most of the population. The economy in DRC was hindered by a particularly difficult business environment as noted in the 2017 World Bank’s Ease of Doing Business, where the DRC ranked 184th out of 190 countries,4 and in the 2018 Country Policy and Institutional Assessment, where the DRC received a score of 2.9, below the SSA International Development Association (IDA) average. 5 Overall, GDP per capita in real dollars had drastically decreased, reaching US$388 in 2016, about one-third of its value of US$989 in 1960.6 In terms of human capital, the DRC ranked among the poorest countries in the world (176 out of 189 countries ranked) according to the 2016 Human Development Index.7 In addition, the security situation, particularly in the Kivu and Kasai provinces, remained highly volatile. The country had been going through political turmoil since 2016, when President Kabila completed his second term and new presidential elections, which were scheduled to take place in November 2016, were delayed following negotiations over the electoral process and changes in term limits. A contested election took place in December 2018, followed by a tense presidential transition. 8 This political uncertainty engendered distrust between the Government of the DRC (GoDRC) and the public, leading to street protests and social unrest. Security concerns became more commonplace and had a dampening effect on economic activities. The Project’s preparation and initial implementation took place under these challenging circumstances. Furthermore, the Ministry of Small, and Medium-sized Enterprises (SMEs), a key counterpart for the Project, had just been formed. 2. Subsistence agriculture constituted the main economic activity of the rapidly growing Congolese population. In 2018, 58 percent of the total employed worked in low-productivity agriculture. Agriculture represented about 18.9 percent of GDP, compared to 65.9 percent for industry (dominated by mining) and 15.2 percent for services.9 As the overall population had already reached 93 million by the end of 202010, the agro-industrial sector remained limited in terms of production due to numerous constraints, ranging from weak basic infrastructure services, 1 https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=CD 2 https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=ZG 3 https://data.worldbank.org/indicator/SP.POP.TOTL?locations=CD 4 https://openknowledge.worldbank.org/server/api/core/bitstreams/30e44c7f-eee3-558e-8a5a-8fcac8d87d2f/content 5 https://documents1.worldbank.org/curated/en/721671565809408540/pdf/Country-Policy-and-Institutional-Assessment-CPIA-Africa-2018-Strengthening-Debt- Management-Capacity-Congo-Democratic-Republic-Quick-Facts.pdf 6 Source: WDI, WB (accessed in January 2018) 7 https://hdr.undp.org/system/files/documents/2016humandevelopmentreportpdf1pdf.pdf 8 https://www.bbc.com/news/world-africa-46819303 9 https://databank.worldbank.org/source/world-development-indicators 10 https://data.worldbank.org/indicator/SP.POP.TOTL?locations=CD Page 2 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT limited access to land and to finance, stifling fiscal and para-fiscal policies, and more frequent extreme weather conditions. Moreover, most subsectors lacked the organizational structure, market mechanisms, and enabling business and institutional environments to create synergies and develop value-adding ecosystems. The economic fragility of the country was also reflected in its weak manufacturing production with factories that were either outdated or operated part-time due to high electricity costs, administrative harassment, limited access to finance, cost-prohibitive inputs, scarcity of equipment and spare parts, and lack of a skilled workforce. The revitalization of these factories and the development of strategic value chains were critical to diversifying DRC’s economy, improving its competitiveness, and increasing domestic production. 3. Informality remained widespread as the DRC had a dual economic structure characterized by many small informal firms and a limited number of large formal firms. Over 90 percent of firms were small (1-9 employees) and nearly half of them were recent firms with less than five years in existence. Recent firms accounted for over 35 percent of employment, while firms 6 years and older contributed most of DRC’s employment (approximately 60 percent).11 The proportion of recent firms in DRC is large even in a context of fragility. When compared to other Fragile and Conflict-Affected States (FCS) for which an Enterprise Survey is available, DRC came second, only behind South Sudan. Unlike developed countries where Micro, Small, and Medium-sized Enterprises (MSMEs) serve as the main engine of growth and job creation, most of the labor force in DRC was trapped in low productivity activities, largely in the informal sector, which employed 89 percent of the active population. At the time of appraisal, small firms had an annual employment growth rate of 5.2 percent, compared to 6 percent for medium-sized firms, and 1.3 percent for large firms.12 MSMEs needed to improve productivity to become an important engine for economic growth and employment for a growing active and young population.13 The weak entrepreneurship ecosystem and challenging business environment prevented MSMEs from expanding into key productive sectors with high-growth potential for domestic and export markets. Market and institutional failures resulted in numerous constraints for MSMEs: (i) lack of an integrated vision to develop key productive sectors of the economy and basic infrastructure services; (ii) prohibitive fiscal and parafiscal policies that stifled the sustainable development and the transition of MSMEs into the formal sector; (iii) absence of national, provincial, and local development strategies and support mechanisms to promote specialized clusters of key industrial value chains; (iv) lack of specialized support organizations with business development services capacities; (v) insufficient financial instruments tailored to MSMEs; and (vi) limited skills in the overall MSME sector. 4. Gender-based inequality was prevalent in the DRC, preventing women from becoming aware of several recent legislative changes and accessing related services. In 2016, with the support of the World Bank and other partners, important progress against gender inequality was made when the Family Code was reformed, allowing married women in the DRC to formalize their entrepreneurial ventures through business registrations, a bank account, and the independence to carry out most economic activities related to the development of their business without their husband’s interference. This law also raised the legal marriage age for girls from 15 to 18 and allowed married women to have a greater voice in the management of their marital property.14 The GoDRC has signed various international and regional legal regulations and conventions for the protection of women and young girls. However, the partial progress achieved through these laws and regulations were often not implemented or unknown to the population. Consequently, women and girls were still subjected to misogynistic attitudes and discriminatory practices, which at times prevented them from accessing education, basic services, and the right to inheritance, particularly for widows. 11 The World Bank MSME survey - https://documents1.worldbank.org/curated/en/817691584000898009/pdf/Scaling-Up-Ecosystems-for-Small-Businesses-in-the- Democratic-Republic-of-Congo-Analysis-Based-on-Data-from-Kinshasa-Lubumbashi-Matadi-and-Goma.pdf 12 Idem. 13 Informal Enterprise Survey for the DRC, 2014, WB. 14 https://blogs.worldbank.org/en/developmenttalk/reforms-enhance-gender-equality-democratic-republic-congo-advocacy-implementation Page 3 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Theory of Change (Results Chain) 5. The original theory of change (Annex 7) from the Project Appraisal Document (PAD) addressed multiple key challenges. These included: (i) regulatory constraints and capacity limitations of relevant ministries and agencies at the national and provincial levels to promote private investments and job creation in target urban areas; (ii) binding constraints to promote private investments and sustain job creation in target cities and provinces due to inadequate infrastructure, weak governance, fragile business climate, and low-skilled human capital; and (iii) limited skills and financing instruments among vulnerable groups, including women and youth, to create their own job opportunities as entrepreneurs. The main assumptions of the Project were that a decentralized strategy (e.g., working closely with cities) and a direct merit-based approach with beneficiaries that considered constraints related to governance, business climate, financing, supply chain, and human capital, would lead to improved job creation and enhanced MSME performance. These assumptions proved to be true as reflected in the efficacy section below. Despite the severe impacts of the COVID-19 crisis, the Project enhanced the resilience of businesses and accelerated the economic recovery across target cities. Moreover, the Theory of Change (ToC) indicated the Project’s contribution to the long-term impacts of poverty reduction and shared prosperity. Project Development Objective (PDO) 6. As stated in page 16 of the PAD, the PDO was to support the growth of MSMEs and increase employment and entrepreneurship opportunities for youth and women in select areas. The PDO was to be achieved through interventions that (i) provided direct support to entrepreneurs and MSMEs, supporting their launch, formalization, and growth to generate value-adding activities and create jobs among vulnerable population groups, particularly women and youth; and (ii) improved the business environment at the national and local levels to enable continued sustainable growth for the supported entrepreneurs and MSMEs. Key Expected Output and Outcome Indicators 7. The Project’s main objective focused on supporting the growth of MSMEs, both formal and informal, in four target cities, creating employment for women and youth in these cities. The eligible sectors included light manufacturing, agri-processing, and services (excluding general trade and import-export activities) in four urban areas in the DRC: Matadi in the province of Kongo Central, Lubumbashi in Katanga, Goma in North Kivu, and the capital of Kinshasa. These cities were targeted because of their supportive provincial governments, availability of infrastructure, pools of existing MSMEs, and large industrial enterprises providing opportunities for growth and value chain integration. Enhancing the business environment in these four cities would also support the sustainability and continued growth of the MSMEs supported by the Project. 8. The corresponding PDO indicators are as follows: (i) - Number of new firms established by targeted beneficiaries (of which female-owned and young entrepreneurs); (ii) - Percentage increase in average revenue of beneficiary MSMEs; (iii) - Net full-time equivalent jobs created among beneficiary MSMEs. Page 4 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Components 9. The Project was structured around three interconnected components with a mix of interventions that were mutually reinforcing. The third component, which aimed at developing institutional capacity, also included Project management support activities. 10. Component 1 supported entrepreneurship opportunities for women and youth, while fostering an enabling business environment for sustainable MSME growth (initial cost US$44.0 million, actual cost: US$45.92 million). It consisted of three sub-components: 1.1 Support for women entrepreneurs (initial cost: US$15.00 million, actual cost: US$16.63 million) through technical and financial assistance (in-kind grants) over the course of a five-step process: (i) communication and public awareness campaigns; (ii) comprehensive training program for 4,500 women applicants; (iii) simplified call for proposals and business plan competition; (iv) delivery of in-kind grants, coaching, and mentoring to the most engaged women that meet all eligibility criteria; and (v) networking and peer learning activities. After completion of the five steps, female grantees were to be invited to the Business Plan Competitions (BPCs) to be supported through sub-components 1.2 and 2.1, while they could also benefit from the SME Hubs to be established under sub-component 2.2. This activity also took into consideration 15 percent of the administrative cost for implementation and supervision by a competitively hired local or international firm or non-governmental organization (NGO). 1.2 Start-up grant and technical assistance (TA) for young entrepreneurs (between 18 and 35 years old) to develop entrepreneurial capacity and launch or expand business ventures, expanding the pool of local MSMEs through training and cash grants (initial cost: US$17.00 million, actual cost: US$20.36 million). A selection process invited young talents at the startup stage or with a formal or informal business less than two years old to apply. To incentivize formalization, businesses would be required to register before becoming eligible for funding. The selection process would consist of two to three rounds of business competitions, each including four steps: (i) outreach campaign and preparation clinics on pitching business ideas; (ii) prequalification of business pitches by a panel of experts and training on defining short business plans for the top 30-40 percent of applicants; (iii) financial assistance through cash grants of US$ 20,000 for up to 750 entrepreneurs who formalized, completed training, and submitted adequate business plans; and (iv) 18 months of supervision of the business plan implementation through mandatory training and mentoring. This activity also took into consideration 15 percent of the administrative cost for implementation and supervision by a competitively hired local or international firm or NGO. 1.3 Improvement of business environment, with a special focus on women-led MSMEs (initial cost: US$12.00 million, actual cost: US$8.93 million). This sub-component would finance analytical studies, data collection, training, and other TA activities such as the (i) review of the national strategy for SMEs promotion and development of an implementation action plan; (ii) review of the legal framework currently applicable to SMEs and TA to support the modernization of existing regulations or the adoption of new regulations; (iii) review of the policy, institutional and/or other constraints and the proposal of an incentive-based legal framework for SMEs in growth sectors; (iv) review of the tax regime applicable to SMEs and advising on appropriate measures to increase the equity of the tax system15; (v) review of the subcontracting law plus recommendations and support to ensure its effective implementation; (vi) strengthen the institutional capacities for dispute resolution, including existing arbitration and commercial mediation centers; (vii) identification and piloting of specific tools for public-private dialogue (PPD) that could be useful at the provincial and local levels based on international best practices; and (viii) rollout 15 Etudes sur les Ecarts Fiscaux dans la République Démocratique du Congo, pages 26 to 28, World Bank, December 2017. Page 5 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT of the implementation of PPDs in the four locations targeted by the Project. In addition, this sub-component would also finance dissemination campaigns to improve awareness around the new Family Code and other women- friendly legal provisions within the Labor Law, Land Law, and the recent Equality Law. 11. Component 2 targeted SME development through direct support and the establishment of innovative SME Hubs to improve and increase services available to SMEs (initial cost: US$42 million, actual cost: US$36.06 million). It consisted of two sub-components: 2.1 Enhancing the growth and performance of SMEs (initial cost: US$37.00 million, actual cost: US$31.97 million). The first sub-component would provide matching grants16 to 500 established SMEs to tackle growth challenges that could not be addressed due to institutional and market constraints. Depending on uptake, the maximum allowance would be US$200,000 per SME and the average allocation would be US$75,000 based on an allocation pool of US$32.5 million over two years of supervised implementation and business development support. To encourage the participation of women-led SMEs, this sub-component established a target ratio of 40 percent matching grant allocation to women-led/owned SMEs, encouraging and prioritizing women-owned/led SMEs that met all eligibility criteria. The target of 40 percent of the overall accompanied SMEs is more than double the proportion of SMEs that are women-owned/led in DRC (less than 20 percent). This activity took into consideration 12.5 percent of the administrative cost for implementation and supervision by a competitively hired local or international firm or NGO. 2.2 Development of ancillary SME Hubs (initial cost: US$5.00 million, actual cost: US$4.09 million). The second sub- component would support the growth of supply chains through collaborative arrangements with large companies using the ancillary SME Hub model. The SME Hub is defined as a plot of land located near existing large companies around which a cluster of SMEs can be integrated into the value chain, reaching critical capacity to meet the supply levels of larger players. This sub-component would finance TA, studies, marketing, communication activities, and business development services (BDS), including supplier development programs for four to five SME Hubs with an average capacity of 40 SMEs. These SME Hubs would be privately managed by large companies in agribusiness, mining, light manufacturing, and/or services. These large firms would be selected through a call for proposals. New SME Hubs would be operational in Years 3 and 4 of the Project to be ready to host MSMEs supported by sub- components 1.1, 1.2, and 2.1. 12. Component 3 contributed to the development of the institutional capacity at national and provincial levels for both public and private stakeholders to improve the enabling business environment, supporting the sustainability of activities under Components 1 and 2. Component 3 also facilitated the support functions for the Project’s management (initial cost: US$14 million, actual cost: US$17.32 million). A Steering Committee was established to provide strategic guidance for the Project, ensure coordination across departments, and monitor progress toward achieving the PDOs. This third Component consisted of two sub-components: 3.1 Capacity strengthening of public and private institutions supporting entrepreneurs and MSMEs (initial cost: US$5.00 million, actual cost: US$4.04 million). The first sub-component would focus on strengthening public and private institutions in the entrepreneurship support ecosystem. This effort included Ministries (e.g., Ministry of SMEs and Ministry of Gender) and public agencies in charge of delivering services to the private sector at the provincial level that are key in the development of the entrepreneurship ecosystem. In addition, this activity aimed at building the capacity of BDS actors to catalyze BDS services through training and technical support to private firms and organizations, including the Federation of Enterprises of Congo and the Confederation of Small and 16These partial grants (40 to 60 percent of the cost) were allocated through BPCs for services (including both consulting and non-consulting services), staff salaries, and goods (e.g., equipment and spare parts) within the scope of the business development plans and outreach, communications, consulting services, and associated costs related to the delivery of these business development grants. Page 6 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Medium Enterprises of Congo, among others. Improvements to the overall business environment would strengthen the sustainability of the direct support provided to entrepreneurs, SMEs, and SME Hubs under the first two components. 3.2 Project Implementation (initial cost: US$9.00 million, actual cost: US$13.28 million). The second sub-component financed activities related to the Project’s management, including the setup of a Project Coordination Unit (PCU) in Kinshasa and Provincial Supervision Units (PSUs), together responsible for the Project’s coordination, communication, and monitoring and evaluation (M&E). International consulting expertise would also be selected to support the technical capacity building of local partners that would eventually take over the administration of the BPC, provide associated BDS, and implement supplier development program activities. B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 13. The PDOs remained unchanged throughout the Project. Revised PDO Indicators 14. No PDO Indicators were modified during Project implementation. Revised Components 15. No Components were modified during Project implementation. Other Changes 16. The first restructuring of the Project was approved in March 2023. As the number of youth entrepreneurs supported under sub-component 1.2 was higher than expected, the initial budget allocation to the disbursement category dedicated to grants for young entrepreneurs was insufficient to cover the second tranche of grants to be provided. Therefore, the GoDRC requested a reallocation of funds, ensuring the delivery of the second tranche of grants to all selected youth beneficiaries. 17. The second restructuring was approved in December 2023. A six-month extension of the closing date from December 28, 2023 to June 28, 2024 was approved, allowing additional time to complete the activities under sub- component 1.1 aimed at supporting women entrepreneurs in Lubumbashi as well as the activities under sub- component 2.2 aimed at the establishment of the SME Hubs. For sub-component 2.2, the extension would ensure the supervision of the implementation of the three SME Hubs. For sub-component 1.1, due to the COVID-19 crisis, the recruitment of the implementing firm took longer than expected. Consequently, there was limited time to provide in-kind cash grants to 2,900 women entrepreneurs belonging to the impact study’s control group.17 The PCU and the task team agreed to transfer most of this activity to the TRANSFORME18 Project, which is continuing and scaling up many of the activities initiated under the PADMPME Project, except for 920 women entrepreneurs in Lubumbashi as this city is not included among the areas of intervention of the TRANSFORME Project. This six- 17 As part of the Project, the World Bank’s Africa Gender Lab carried out an impact study on the technical and financial assistance provided to women micro- entrepreneurs in the cities of Goma and Lubumbashi under sub-component 1.1. The results are expected to be published in 2025. 18 The Empowering Women Entrepreneurs and Upgrading MSMEs for Economic Transformation and Jobs in DRC (TRANSFORME) Project (P178176) is an ongoing US$300 million World Bank operation. Page 7 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT month extension fulfilled the commitments to these 920 beneficiaries in Lubumbashi, mitigating reputational risks for both the GoDRC and the World Bank. 18. The Project also extended the disbursement deadline after the closure of its activities. The grace period was extended by two months as one of the implementing partners (UN Women) had not shared the final certified statement of account nor transferred potential remaining balances from certain contracts. The deadline extension also permitted departments and programs to recover outstanding amounts for activities funded under the Project. This extension also permitted the processing of at withdrawal applications that were awaiting signature in the World Bank’s Client Connection system. Rationale for Changes and Their Implication on the Original Theory of Change 19. Other than the abovementioned six-month closing date extension, no other changes took place that would imply changes to the initial ToC. II. OUTCOME A. RELEVANCE OF PDO Assessment of Relevance of PDOs and Rating 20. The relevance of the PDO is High. The PDO is fully aligned with the most recent19 World Bank (WB) Country Partnership Framework (CPF) for the DRC. This is corroborated by numerous references in the CPF to the importance of (i) enhancing the enabling business environment and revitalizing SMEs across key sectors of the economy and (ii) supporting the expansion of the private sector by creating jobs and boosting entrepreneurship among women and youth. The Project supports all CPF Focus Areas and their objectives: Focus Area 1: Strengthen stabilization efforts for reduced risks of conflict and violence o Objective 1.1: Strengthen crisis resilience for vulnerable, displaced, and conflict-affected populations. o Objective 1.2: Improve interconnectedness between and within communities. Focus Area 2: Strengthen systems for improved service quality and human capital o Objective 2.3: Improve gender disparities and inclusion across sectors. Focus Area 3: Strengthen economic management for increased private sector investment o Objective 3.1: Strengthen systems for improved debt management and increased domestic revenue stabilization. o Objective 3.3: Strengthen economic diversification through increased agricultural productivity and a stronger operating environment for MSMEs. 21. The Project was also fully aligned with the GoDRC’s own strategic priorities both at the time of appraisal and at the time of the Project’s closure. The Strategic National Development Plan20 (SNDP) 2019-2023 at the time of the Project’s appraisal, which formed an input into the scoping of the PDO and Project components, aimed to 19 https://documents.worldbank.org/en/publication/documents-reports/documentdetail/214221646062568502/congo-democratic-republic-of-country-partnership- framework-for-the-period-fy22-26 20 https://plan.gouv.cd/projects/pnsd Page 8 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT modernize the private sector, improve human capital, and promote job creation and economic resilience. The subsequent SNDP 2022-2027 objectives21 are also highly relevant for the PDO as they support the establishment of a strong private sector, acceleration of economic transformation, and increased job creation. The subsequent TRANSFORME Project, which covers four new provinces in addition to three out of the four under PADMPME, is an illustration of alignment with the DRC's strategic orientations. 22. The Project contributed to addressing the drivers of fragility in DRC – an FCS country. In 2020, DRC’s 2020 Human Capital Index score was 0.37; below the SSA average of 0.40. According to the 2021 World Bank Risk and Resilience Assessment (RRA), the drivers of fragility in DRC include the following: (i) a non-diversified and unequal economy that strongly favors elite interests and is kept in place by a continuously renegotiated political settlement based on competition for natural resources capture; (ii) high levels of exclusion and a chronic lack of economic opportunities that keep an extremely poor and young population at very low education levels trapped without prospects for social mobility, creating fertile ground for youth to seek out illicit alternatives or resort to violence; and (iii) a legacy of trauma from armed conflict resulting in the normalization and commodification of the use of violence, including sexual and gender-based violence (GBV), which has eroded social cohesion. With a focus on supporting women and youth entrepreneurship, MSME growth, and diversification of activities away from the mining sector, the Project activities were relevant in addressing the abovementioned drivers of fragility, including in the conflict-affected East, where Goma is one of the target geographic areas of the Project. Supporting MSMEs in Goma also benefitted the surrounding rural space as many of the raw materials and inputs are sourced from rural producers. The Project has also directly supported one of the sources of resilience identified in the RRA: the immense potential of the large young population that can be a source of dynamism. B. ACHIEVEMENT OF PDOs (EFFICACY) 23. The overall efficacy of the Project is rated High. Remarkable achievements have been made against the PDO indicators as presented in the PAD, largely exceeding its end targets. Despite the FCS context and the shock of the COVID-19 pandemic, the Project overachieved all three PDO indicators (job creation, revenue increase, and new firms) by 66, 77, and 100 percent respectively. The gender and youth targets for the two sub-indicators under the first PDO indicator (new firms) were also exceeded. Other than the highly positive outcomes resulting from the direct support to women micro-entrepreneurs, youth entrepreneurs and to SMEs, the Project also had important structural achievements for the overall business ecosystem through (i) capacity building of 38 public and private institutions; (ii) the adoption of eight reforms; (iii) the dissemination of existing laws through 193 events that raised awareness among 31,493 people; (iv) the strengthening of a network of 245 BDS providers plus the creation of an online BDS platform; and (v) the establishment of three SME Hubs. The evidence collected to support this Implementation Completion and Results Report (ICR) is deemed adequate to assess Project efficacy, even considering the paucity of available data in the FCS context and discrepancies in the reporting of the M&E system, which undercounted results in eight out of the twenty Results Frameworks indicators. The analysis supporting this rating is summarized below with more details on the results of individual PDO and intermediate indicators provided in Annex I. The assessment of achievement of each objective/outcome is based on the ToC elements including at the disaggregated level – considering long-term impacts of support to women entrepreneurs, to youths, to SMEs, and to the establishment of the SME Hubs (ToC diagrams in Annex 7). 21 https://www.effectivecooperation.org/congo-national-development-vision-and-plans Page 9 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Assessment of Achievement of Each Objective/Outcome Efficacy of PDO Outcome on New firms established by targeted beneficiaries 24. The first target of the three PDO outcome indicators was to establish 3,000 new firms by providing direct support to beneficiaries. There were additional objectives for women and youth, with each group expected to establish 2,000 new firms.22 In other words, the goal was for the vast majority of the 3,000 new firms to be established by these two specific groups. As per the PAD, it was also expected that some of the new firms would enter the formal sector. In a country like DRC facing strong challenges of fragility following many years of conflict, the overarching vision was to start building a new generation of MSMEs and entrepreneurs that could contribute to economic growth and job creation, especially among disadvantaged populations such as women and youth, tackling directly some of the drivers of fragility in DRC as identified by the RRA. 25. The women micro-entrepreneurs and youth entrepreneurs established a total of 6,012 firms, doubling the PDO target of 3,000. Among the firms established, 5,128 firms (85.3 percent) were established by women entrepreneurs, exceeding the gender target of 2,000 by 156%. Similarly, 2,514 firms (41.8 percent) were established by young entrepreneurs, exceeding the youth target of 2,000 by 26%. 26. The Project significantly expanded the number of women micro-entrepreneurs supported as the COVID-19 pandemic disproportionately affected this target group. The COVID-19 pandemic’s socioeconomic effects led to an increase in the demand for assistance compared to initial assumptions. The value of the in-kind grants was adjusted, and more importance was given to the adoption of digital technologies through the distribution of mobile phones and digital skills training, helping women entrepreneurs to continue their business activities. After consultations, the size of the grant was set at US$2000, compared to the initial average target of US$3000, to extend the support to more beneficiaries. The financial assistance was provided in the form of an e-voucher linked to specific suppliers. The Project signed agreements with 90 private enterprises in the DRC to facilitate the procurement of the production equipment, materials, and consumables. This financing approach was preferred by women as it prevented forms of extortion and harassment that women tend to experience. During interviews, the beneficiaries expressed their appreciation for the regular communication at every step of the process. 27. The Project provided technical and financial assistance to 4,732 women micro-entrepreneurs, supporting them to establish firms. Under sub-component 1.1, a total of 7,142 women were selected out of 32,175 applicants (22.2 percent) and were trained by Congolese trainers on a personal initiative course (with a focus on self-esteem and confidence), surpassing the first intermediate results indicator (IRI1) target of 4,500 by 59%. The majority (6,736) of these women continued their training through additional sessions on establishing simplified business plans (SBP) for their future firms. Out of the SBP trainees, 4,732 women micro-entrepreneurs were then provided in- kind grants to establish firms and put their SBP into action, exceeding the IRI2 target of 2,500 grants for women micro-entrepreneurs by 89 percent. Among these women micro-entrepreneurs, 1,234 were younger than 35 years old. The remainder of the SBP trainees not assisted under PADMPME in the cities of Goma, Kinshasa, and Matadi was transferred to the subsequent TRANSFORME Project due to budget constraints. 28. A total of 3,010 youth entrepreneurs were trained by the Project, leading to the creation of 1,280 firms. The IRI3 target of 750 youth trained was effectively quadrupled. Two distinct groups of youth entrepreneurs were trained under sub-component 1.2. The first group of 1,615 youths underwent action-oriented entrepreneurship training 22 New firms established by young female beneficiaries are counted in both the gender and youth targets. Page 10 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT for youths known as STEP (Student Training for Entrepreneurial Promotion).23 Among the STEP trainees, 320 youth went ahead and established their own firms without the Project’s financial support. The second group of 1,395 youth underwent an entrepreneurship bootcamp to develop their business plans to apply for the grants under the BPC for youth. Among the bootcamp trainees, 960 were selected to receive matching grants to launch or expand their businesses. Out of the 960 selected youth, 396 were women (41 percent). The beneficiaries’ feedback emphasized the importance of the practical training that was offered throughout the selection process. 29. The Project supported the formalization of the newly established firms, enlarging the formal sector and increasing the country’s tax base. The female entrepreneurs under sub-component 1.1 were encouraged to obtain their registration as formal micro-enterprises. All youth entrepreneurs under sub-component 1.2 became formal SMEs by (i) registering with the Trade and Personal Property Credit Registry (RCCM), (ii) obtaining a National ID Number (IDNAT), and/or (iii) receiving a fiscal tax number (NIF). The Project provided technical support (e.g., raising awareness of the procedures and administrations, individual coaching and support in creating files, direct action with administrations) and financial support in the form of an additional US$2,000 grant per young entrepreneur for formalization costs. This is an important achievement as most companies operate in the informal sector in the DRC. The Project tackled a strong challenge in DRC as the formal sector accounts for only 0.7% of the number of firms.24 According to the enterprises census of 2019, the majority of firms do not have formalization documents. Non-possession of the social security identification number concerns almost all economic units in the DRC (99.4 percent). The same trend is observed for possession of the other documents: RCCM (96.9 percent), IDNAT (97.3 percent), and NIF (98.2 percent). 30. Structural reforms were facilitated to encourage entrepreneurship and the establishment of new firms more widely. Eight reforms were supported, exceeding the IRI5 target of five reforms implemented by 60 percent. Two particularly relevant reforms to support the establishment of new firms were (i) the adoption of Law N° 22/030 of September 8, 2022, on the promotion of entrepreneurship and startups and the related regulatory framework and (ii) the establishment of a one-stop shop for business registration in the province of Central Kongo. The law on entrepreneurship and startups includes the simplification of procedures as well as providing fiscal incentives to encourage and support new firms. The one-stop shop in Matadi in the province of Central Kongo facilitates the administrative procedures to establish new firms. Previously firms had to travel to Kinshasa or pay middlemen to open and register their firms, increasing the time and monetary costs. 31. The Project took a holistic and pragmatic approach to structural reforms. The Project supported the adoption of new laws but also facilitated the elaboration of decrees, amendments, and the practical implementation of reforms. The eight reforms advanced according to their respective circumstances. Some reforms specifically tackled national law modifications, which had been the most challenging step because of political uncertainty related to the general election of December 2023 and the rotation of government teams. The Project also supported the drafting of the implementation decrees related to two of the approved laws on entrepreneurship and crafts, though their final adoption is still pending. Other reforms were at a more advanced stage, so the focus was on their implementation by building institutional capacities at the provincial level as part of the decentralization process in the DRC (e.g., one-stop shops for construction permits and business registrations) and cross-cutting areas such as promoting PPPs and reforming commercial courts. The overall aim was to start establishing a conducive regulatory framework for business development, both in law and in practice. Furthermore, certain reforms such as the digitalization of commercial courts proceedings and the establishment 23 https://step-training.com/ 24 Global Report of the enterprise’s census in DRC, 2019, https://caid.cd/mkengela/RAPPORT-RGE.pdf Page 11 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT of the one-stop shops for construction permits and business registration are likely to reduce opportunities for corruption, a key driver of fragility as per the 2021 RRA. 32. This holistic approach for an enabling business environment for new firms included the dissemination of existing entrepreneurship legal rights, particularly for women. A total of 193 communication and dissemination events were organized, just exceeding the IRI4 target of 192 events. A diverse set of activities was undertaken, from advertising on social networks and the set-up of mobile clinics for disseminating legal texts to activities covered by the media and the establishment of listening points in marketplaces to disseminate information. These events and activities were able to raise awareness about entrepreneurship rights among 31,493 people, while also contributing to the formalization of 846 micro-enterprises run by women who were not directly supported by the Project. Efficacy of PDO Outcome on Percentage increase in average revenue of beneficiary MSMEs 33. The second target of the three PDO outcome indicators was to increase the revenue of supported MSMEs by an average of 30 percent. Multiple constraints had been identified as limiting the revenue growth potential of MSMEs in the PAD and in a survey undertaken in the four target cities before the launch of the Project’s activities.25 These constraints included the lack of managerial and entrepreneurial skills, difficulties in utilizing technology, restricted access to markets, the high cost of inputs, and limited access to finance. These constraints were generally more salient for women-owned or led MSMEs than for their male peers. 34. The youth entrepreneurs and the SMEs supported by the Project increased their revenue by an average of 53 percent, exceeding the PDO target by 77 percent. The results are based on the average revenue increase of the 960 youth entrepreneurs, who raised their revenues by 64 percent, and the 430 established SMEs supported by the BPCs, who raised their revenues by 27 percent.26 In monetary terms, the 53 percent average revenue increase equates to US$ 26.5 million in additional annual revenue created: US$19.3 million by the established SMEs and US$7.2 million by the youth entrepreneurs. The results are even more notable when taking into consideration the disruptive socioeconomic effects of the COVID-19 pandemic during the Project’s implementation. 35. The revenue growth of the youth entrepreneurs was partly enabled by a comprehensive TA package. The direct support to youth entrepreneurs included training sessions prior to the delivery of grants on improving entrepreneurial skills and developing business plans, with a special focus on business formalization, operational organization, contracting of suppliers, and the launch of production and marketing of new products. The TA continued after the delivery of grants through a comprehensive support program of group training, individual coaching, networking, mentoring, and logistical support. A total of 24,178 sessions of TA were provided to the youth entrepreneurs. 36. The complementary package of technical plus financial assistance supported the youth entrepreneurs to create new products, expand their networks, and grow their revenues. The youth entrepreneurs received US$15.7 million in grants, averaging US$16,390 per youth entrepreneur. The 960 youth entrepreneurs supported by the BPC innovated through the launch of 1,210 new products, an average of 1.3 new products per youth entrepreneur. These entrepreneurs also improved their access to new clients and suppliers through the establishment of 2,597 25 The World Bank MSME survey - https://documents1.worldbank.org/curated/en/817691584000898009/pdf/Scaling-Up-Ecosystems-for-Small-Businesses-in-the- Democratic-Republic-of-Congo-Analysis-Based-on-Data-from-Kinshasa-Lubumbashi-Matadi-and-Goma.pdf 26 To calculate the revenue growth of youth entrepreneurs and SMEs, the coaches collected the accounting balance sheets (monthly, quarterly, and annual) of their beneficiaries. These balance sheets showed the evolution of revenue and served as means of verification. Further verification and validation of the data and documents collected was carried out centrally by the implementing partner’s M&E team. Page 12 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT new business partnerships, averaging 2.7 new partnerships per supported entrepreneur. Their average revenue increased from US$16,389 to US$26,924, a 64.3 percent increase. Furthermore, 92 percent of the youth entrepreneurs supported were still in business 24 months after receiving assistance, far higher than the IRI13 target of 50 percent. Consultations with stakeholders confirmed the importance of combined and integrated support for youths – technical and financial – because of the lack of institutional capacity to provide coordinated support to these marginalized target groups. The Project also informed the design of national programs such as the National Program for the Development of Congolese Entrepreneurship (PRONADEC), underlining the complementarities between priority areas of support.27 37. The Project provided matching grants to 430 SMEs under sub-component 2.1. The 430 SME grant recipients were 14 percent lower than the IRI6 target of 500 grant recipients. IRI6a tracked the proportion of women-led SME grant recipients, with a numerical target of 200 out of 500 matching grants – an implicit 40 percent target. In total, 179 women-led SMEs received grants, ten percent lower than the numerical target. In percentage terms, 41 percent of all grants were for women-led SMEs, just exceeding the implicit 40 percent target. IRI6b tracked the proportion of the youth-led SME recipients of the matching grants, with a numerical target of 80 out of 500 matching grants – an implicit target of 16 percent. In total, 119 youth-led SMEs received grants, 49 percent higher than the numerical target of 80. In percentage terms, 28 percent of all SMEs receiving grants were youth-led, largely exceeding the 16 percent target. 38. The SME BPC allocated US$ 26,729,052 in matching grants. This output was 23.6 percent lower than the IRI7 target of US$35 million, which is unsurprising as the number of SMEs financially supported was also lower than anticipated. The grants provided were substantial in size, averaging US$62,379 per SME, but lower than the foreseen average of US$75,000 in the PAD. The lower-than-expected results for IRI6 and IRI7 were contingent on a variety of external factors, particularly a thorough selection process with strict eligibility criteria that emphasized firm quality over quantity. A total of 1,040 SMEs applied, of which only 610 SMEs passed the eligibility criteria. Among the eligible SMEs, 430 SMEs passed the subsequent selection process to receive the matching grants. The size of the grants was also based on the needs of the SMEs as developed in their business plans. This due diligence lowered the outputs in terms of beneficiaries and the value of grants delivered; however, these lower-than- expected outputs did not hinder the outcome achievements for all three PDO indicators, which were largely exceeded. 39. The financial assistance received by the SMEs helped to tackle multiple constraints, enabling revenue growth. Among these constraints are the high price of inputs, low technology utilization, and limited access to finance. The grants substituted the limited access to finance, facilitating the purchase of inputs and new equipment, including new technologies, to increase production and/or improve productivity. A majority (75 percent) of the grants were utilized to make investments in equipment, which resulted in productivity gains and market access expansion. Furthermore, the improvements and potential in the supported SMEs were noticed by other actors, ultimately leading to improvements in access to finance. A total of 170 SMEs supported were later able to mobilize an additional US$1.4 million in private capital, of which 56 percent from bank loans, to complement the investments made through the Project’s grants. 40. The TA provided to the SMEs enhanced their material investments. Like the youth entrepreneurs, the SMEs received TA before and after the delivery of the matching grants. Prior to the grants, the TA focused on improving business plans, drawing up equipment specifications based on identified needs, and logistical support for 27 PRONADEC is a national Program launched in 2020 to boost economic transformation of the DRC through key role assigned to entrepreneurship growth. The Program has been structured around 4Cs: 1st C for business Climate, 2nd C for Capacity, 3rd C for access to Credit/finance, and the 4th C for Contract to reflect access to market. Page 13 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT equipment purchases. After the delivery of the grants, the coaching and mentoring focused on improving internal processes (e.g., administrative management, accounting) and developing best practices to increase access to markets, optimize procurement, and improve product quality (e.g., better consideration of standards, strengthening of control functions, improved packaging). In total, the SMEs received 9,155 coaching sessions and 704 mentoring sessions. The financial and technical assistance were linked, reinforcing each other. During consultations with beneficiaries, they valued the TA provided by the Project, which helped them to professionalize their businesses and to implement standard management practices. 41. The established SMEs were consequently able to innovate and diversify, enlarge their networks, and grow their revenue. In terms of innovation and diversification, the supported SMEs launched 323 new products, while in terms of new suppliers and clients, the SMEs established 400 new business partnerships. The average SME annual revenue increased by 27.2 percent, from US$60,820 to US$77,380. Among the 430 SMEs supported, 271 were small-sized. Out of these small-sized enterprises, 112 of them (41 percent) graduated to the level of a medium- sized enterprise.28 These achievements have been verified in the short term as 98 percent of all SMEs supported under sub-component 2.1 were still in business 24 months after receiving assistance, far higher than the IRI13 target of 50 percent. 42. The Project contributed to lift other major constraints to growth and expansion, mainly the lack of infrastructure and services. Most entrepreneurs and family-owned businesses in DRC lack working facilities; therefore, their homes are also used for work activities. The lack of stable electricity service is another major constraint for all types of business. To tackle these and other challenges, the Project helped establish three SME Hubs in Goma and Kinshasa, one less than the IRI8 target of four SME Hubs. A total of 21 potential investors were considered; however, it must be noted that the SME Hub concept is a new and innovative instrument in Africa in general, and in DRC in particular, which required significant pedagogy with stakeholders before buy-in was reached. Furthermore, the COVID-19 disruptions made many investors risk-averse to the idea of a shared space. After the pandemic restrictions eased, several investors again expressed interest. Only three were able to complete the activities required under a tight schedule, including land acquisition, facilities construction, and common infrastructure development. On the public-sector side, stakeholders took time to consider expediting administrative procedures, which remained slow despite the importance of such Hubs for value chain development. Once the application decrees for Law N°22/030 of September 2022 related to the promotion of entrepreneurship and startups are adopted, SME Hubs and their users will benefit from tax incentives, providing additional financial support to these initiatives. 43. The SME Hubs offer many of the infrastructure and services needed by MSMEs to expand. These infrastructure and services include shared public utilities, ICT, working spaces, production equipment, and access to soft infrastructure – all generating economies of scale. They also create spaces for MSMEs to network, learn, and establish new partnerships. The high demand for the three SME Hubs, which reported 144 SMEs renting space, 20 percent higher than the IRI9 target of 120 SMEs, shows the high demand for these innovative Hubs. The demand also justifies this innovative pilot approach taken by the Project and indicates the potential for the scaled-up approach that is being implemented under the subsequent TRANSFORME Project. At the Project closure, a pipeline of 12 investors was interested in supporting SME Hub initiatives – demonstrating the growing demand for such infrastructure-sharing solutions. Some of these investors have continued working under the TRANSFORME Project. 28Small-sized businesses are considered those with annual sales between 10,000,000 and 80,000,000 Congolese francs. Medium-sized companies are those with annual sales between 80,000,000 and 500,000,000 Congolese francs. Page 14 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT 44. The Project contributed to the strengthening of the private-sector ecosystem in the four targeted cities through capacity building and the formalization of firms. The WB governance and procurement teams supported the implementation of the community benefits principles, strengthening local implementation partners through the systematic use of consortiums between international and local firms. These consortiums were designed to facilitate knowledge transfer and capacity building between private actors. The establishment of an e-voucher system for the delivery of in-kind grants to female micro-entrepreneurs also built the capacity of dozens of participating local suppliers, supporting their digitalization and professionalization. Moreover, multiple sub- components included training of trainers (ToT) activities, expanding and strengthening the network of Congolese trainers and coaches available to local SMEs. In total, 712 trainers and coaches benefitted from ToT sessions. As mentioned previously, the Project also provided TA to raise awareness among the MSME beneficiaries of the advantages of formalizing their activities. Since participation in the Project’s BPCs required businesses to be registered, this resulted in the formalization of hundreds of MSMEs, enlarging the country’s tax base. 45. The Project also contributed to strengthening business development services, currently limited in the ecosystem, which should support MSMEs to continue growing in the future. Another major constraint for MSMEs in DRC is the limited availability and poor quality of BDS that can assist MSMEs to improve technically, increase productivity, and expand operations. To remedy this market failure, the Project implemented a multi-step BDS program that included: (i) a mapping study of the existing BDS ecosystem; (ii) an action plan to stimulate the BDS market; (iii) capacity building of 245 BDS providers in the four target cities; (iv) the development of a national BDS online platform; and (v) subsidizing BDS to 333 youth entrepreneurs and SMEs supported by the BPCs under sub- components 1.2 and 2.1. This holistic support should help catalyze the development of the BDS market in the DRC in general, and in the four target cities in particular, ultimately improving the business skills that entrepreneurs and SMEs need to grow their businesses. Efficacy of PDO Outcome on Net full-time equivalent jobs created among beneficiary MSMEs 46. The establishment of new firms plus the revenue growth of supported MSMEs led to the creation of 14,926 new jobs. This positive result is 66 percent higher than the target of the third PDO outcome indicator of 9,000 new jobs. Under sub-component 1.1, 29 the women micro-entrepreneurs created 1,677 direct full-time jobs. 30 No estimates were available for the number of indirect jobs created by the women micro-entrepreneurs. Under sub- component 1.2, the youth entrepreneurs created 2,258 direct full-time jobs. The SMEs supported under sub- component 2.1 created a further 5,880 direct jobs.31 In total, 9,815 direct jobs were created. Furthermore, it is estimated that the youth entrepreneurs and SMEs created an additional 5,111 indirect jobs,32 leading to a total of 14,926 direct and indirect jobs that the Project contributed to creating. 29 Data from the women microentrepreneurs was collected digitally by their coaches, who were in regular contact with the beneficiaries. Collected data was validated by a supervision team composed of one assistant per city who was responsible for reviewing daily all entered data and performing quality control on its consistency. For reliability, one supervisor per city worked with the implementing partner’s M&E expert to make random field visits (during and after data collection) to cross-check the data entered by the coaches. The data validated by the supervisors would then be processed and transmitted to the PCU for evaluation and, if necessary, validation. 30 The 4,732 women microentrepreneurs who were financially supported could have also been accounted as new full-time jobs as they generally moved from more precarious work and activities to working for their newly established firms. However, given that these beneficiaries were accounted in the first PDO indicator (New firms established by targeted beneficiaries) and to avoid double counting, they were not accounted in this PDO indicator. 31 Data from the youth entrepreneurs and SMEs was collected by their coaches, who were in regular contact with the beneficiaries. The data was then verified, consolidated, and validated centrally by the implementing partner. Supervision and data quality assessment missions were organized regularly for a regular check of the data in terms of verification, but also in terms of archiving of verification documents. For job creation, verification documents included the signed contracts of new employees, their monthly pay slips, and their registration to the social security system. 32 Only the direct jobs created by the youth entrepreneurs and established SMEs under sub-components 1.2 and 2.1 were used to estimate the number of indirect jobs created. Therefore, the number of indirect jobs created is potentially higher. Conservative multipliers of 1 indirect job per 1 direct job in the agricultural sector, 1.25 indirect jobs per 1 direct job in the service industry, and 1.5 indirect jobs per 1 direct job in the light industry sectors were employed to estimate the number of indirect jobs. Page 15 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT 47. These jobs were quality employment opportunities that were mostly formal and included vulnerable groups such as youth and women in urban environments in an FCS country. The 8,138 jobs created by the youth entrepreneurs and SMEs supported under sub-components 1.2 and 2.1 were formal jobs. This is an important achievement as according to the latest employment survey in DRC,33 the proportion of informal jobs remains high at 90 percent (2023e) with 60 percent of the active population working in the agriculture sector of which 70 percent is self-employed. Women represented only 20 percent of formal jobs in the private sector and 22 percent in the public sector compared to 52.3 percent in the informal sector. Overall, youth unemployment is estimated at 31.3 percent for those between 15 and 24 years old and 16.1 percent for those between 25 and 35 years. Through support provided by the Project to youth and female entrepreneurs as well as to SMEs to enter and thrive in the formal sector, the Project succeeded in increasing the creation of formal jobs in DRC. Justification of Overall Efficacy Rating 48. The overall efficacy rating for the Project is High. The intended Project scope was delivered effectively despite the FCS environment, the uncertainties that surrounded a contested Presidential election, and the COVID-19 pandemic. The Project achieved 99.59 percent disbursement of funds34. All three PDO indicators were largely exceeded, as were all intermediate indicators for Components 1 and 3. A few of the intermediate output indicators under Component 2 had slightly lower results than expected; nonetheless, this did not impact the expected outcomes from those activities. Component 2 intermediate outcome indicators such as the number of SMEs utilizing the SME Hubs exceeded expectations. As highlighted in the WB Country Economic Memorandum35, gaps in labor productivity across sectors are wide. Across PDOs, sectors, and cities, the Project sought to boost productivity through digitalization, the acquisition of production equipment and/or technical training, and mentoring. Overall, the achievement of all PDOs can be attributed to the sequence of activities and outputs that ensured merit-based eligibility at various stages of the selection process in addition to ensuring post-grant technical support to supported firms and facilitating reforms and capacity building to the institutional and business environments to support the sustainability of the Project’s achievements. The establishment of the SME Hubs, which will provide keys services to MSMEs, and the continuation and scale-up of this Project’s activities through the subsequent TRANSFORME Project will also contribute to sustainability. C. EFFICIENCY Assessment of Efficiency and Rating 49. Based on an economic and financial analysis to assess the Project’s economic efficiency, the Net Present Value (NPV) is estimated to be US$52.2 million at a 15 percent discount rate with an Economic Rate of Return (ERR) of 35 percent over a fifteen-year period including Project implementation. This ERR based on the economic ex- post assessment is higher than the ERR of 29 percent calculated at appraisal. Further details on this calculation, including a sensitivity analysis, are provided in Annex 4. 33 Employment trends and survey from the Ministry of Employment, Labor and Social Protection, December 31, 2023 34 The slight difference between the disbursement rate in the operation workspace (99.59%) and the total costs per component (paragraphs 10 to 12) is linked to exchange rate variations. The operation workspace does not include cost per component and sub-component. 35 https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099101723140732664/p17516107d644902908ed007c19258606dd Page 16 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT 50. The ICR analysis is based on disbursements under sub-components 1.1, 1.2, and Component 2 of US$73 million, equivalent to approximately 73 percent of the full Project value. The aforementioned high rate of return was achieved despite delays related to the COVID-19 pandemic, the 2018-2019 Presidential elections, and other factors noted in paragraph 51 below. While the ERR would have been even higher in the absence of these delays, the analysis clearly highlights the cost-effectiveness (and value for money) of the Project’s investments. This analysis is based on a central assumption that beneficiaries (women, youth entrepreneurs, and SMEs) will have a lower failure rate and higher revenue growth rate than they would otherwise as a result of the Project’s support. 51. The efficiency analysis of this ICR focuses only on the direct support provided to entrepreneurs and SMEs; nonetheless, extensive social benefits under the TA and institutional strengthening activities (e.g., higher quality of business development services, time and money saved due to an improved business environment, additional businesses formalizing, improved public management, and digitization related to SMEs and artisans, etc.) should be strongly noted. It is worth noting that including the impact of these investments would vastly amplify the estimated impact. In particular, the increase in formal businesses is likely to spur follow-on growth for the entrepreneurial ecosystem — an important positive externality. Such externalities also include increased economic and trading activity, wider growth of key value chains in agriculture and other sectors, increased use of local content for downstream goods and services, female empowerment, and reduction in entrepreneurial barriers for women, etc. 52. The Project demonstrated strong operational efficiency, demonstrating strength, and flexibility in adapting to conditions on the ground. Following internal and external audits, the Project was able to quickly act on recommendations to improve project management, thereby reducing administrative costs. Operational efficiency and administrative costs were also impacted by the Presidential elections in 2018-2019, the COVID-19 pandemic, the unrest in Noth Kivu in 2019, and the volcano eruption near Goma in 2021. These challenges were addressed through the support and supervision of the World Bank team, including remote support during the COVID-19 pandemic, providing continuous guidance to the PCU. The Project was strengthened through the recruitment of an additional procurement expert and the support of experienced consultants. These efforts helped the PCU to catch up with initial delays, accelerating implementation starting in the second half of 2021 and into 2022 and 2023 and allowing the project to exceed the three PDO targets. In 2022 and 2023, the Minister of Finance recognized the Project Coordinator with an award for Best Coordinator among all coordinators for WB operations in DRC. Project management costs ranged from US$33.9K to US$74.7K per person per year. 53. Considering the factors described above, Efficiency is rated as Substantial . As discussed above, the Project demonstrated strong returns from support to entrepreneurs and MSMEs. Although the Project did experience some delays due to the Presidential elections and the COVID-19 pandemic, results exceeded all the Project’s outcome targets and the vast majority of its output targets. D. JUSTIFICATION OF OVERALL OUTCOME RATING 54. The Project’s overall outcome rating is Highly Satisfactory. The operation largely surpassed its three PDO objectives, remained highly relevant throughout its project cycle, and efficiently used and reallocated its resources. Furthermore, the Project effectively responded to the COVID-19 crisis and remained operational in the context of political and social unrest. The evidence for the achievement of outcomes is also supported by beneficiary and government feedback. Page 17 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 55. Gender was a cross-cutting theme and key design element of the Project to tackle the challenges that women face in DRC. It was estimated in 2018 that women managed and/or owned only 28% of the MSMEs in the four targeted cities.36 Multiple Project activities increased the number of women-led/owned MSMEs, particularly (i) through the support of women micro-entrepreneurs (sub-component 1.1) and (ii) through dissemination campaigns of women-friendly laws (sub-component 1.3). Furthermore, approximately 40 percent of the grants for young entrepreneurs (sub-component 1.2) and established SMEs (sub-component 2.1) were provided to young women entrepreneurs and women-led/owned SMEs. Women in the four target cities were also more likely to report (i) not knowing how to employ technology; (ii) lacking managerial skills; and (iii) having less confidence. The Project tackled these constraints in complementary ways. Mobile phones were delivered to 7,034 women micro-entrepreneurs, while the grants delivered to women-led/owned MSMEs under sub-components 1.1, 1.2, and 2.1 facilitated the purchase of new equipment and technologies. The training, mentoring, and coaching not only supported women in learning how to optimally use these new resources, but also to professionalize, enhance their managerial skills, and improve their overall confidence. 56. The Project supported over seven thousand women entrepreneurs directly, while also creating jobs for women. A total of 7,142 women micro-entrepreneurs received training and 4,732 among them received in-kind grants. These female beneficiaries also received post-grant mentoring services, including support to establish cooperatives. Among the youth entrepreneurs and SMEs supported with grants, 396 out of 960 youth entrepreneurs (41 percent) were women and 179 out of the 430 SMEs were women-led/owned (40 percent). The female youth entrepreneurs received post-grant mentoring and were encouraged to formalize their businesses. At the three SME Hubs established in Goma and Kinshasa, the percentage of SMEs that are women-led/owned benefitting from them ranged between 14 and 40 percent. Furthermore, many of the direct jobs created by the Project beneficiaries were for women. For example, among the full-time formal jobs created by the youth entrepreneurs and SMEs, 42.9 percent were for women. 57. Even more women benefitted from the other Project’s activities including in geographical areas outside the Project’s four target cities. The approval of the law for the promotion of entrepreneurship and startups was supported by the Project through the establishment of an inventory of existing laws favorable and unfavorable to women's entrepreneurship. The Project also supported advocacy activities carried out by multiple civil society organizations on behalf of women. For example, nine legal texts were identified on gender promotion (e.g., National Strategy for MSMEs Development and National Program for Entrepreneurship in DRC). A range of dissemination activities were carried out to inform women regarding their economic autonomy and anti- discrimination rights, particularly those related to entrepreneurship under the recently reformed Family Code. The Project raised awareness among 31,493 people. This awareness-raising contributed to the formalization of 846 micro-enterprises run by women who were not directly supported by the Project. The dissemination activities were carried out through advertising on social networks, press releases, activities covered by the media, the establishment of listening points in marketplaces as places for centralizing and disseminating information, and mobile clinics for disseminating legal texts. These activities helped to tackle the discrimination that women continue to face in DRC. 36 World Bank (2019), Scaling Up Ecosystems for Small Businesses in the Democratic Republic of Congo Report Page 18 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Institutional Strengthening 58. The Project provided holistic support to strengthen national and local institutions. Extensive capacity building was provided to the PCU, facilitating the successful implementation of the Project. The subsequent TRANSFORME Project (P178176) has been entrusted to the same PCU given its strong capacity. The Project also supported multiple business climate reforms, particularly the i) digitization of the one-stop building permit office, ii) the SME law, iii) the Crafts law, iv) the reform of the commercial justice system, v) the PPP law, among others. In total, eight different business climate reforms were enacted. Furthermore, the Project also supported the dissemination of existing laws to inform citizens and businesses of their existing rights, particularly gender-related rights. The Project also strengthened the institutional and operational capacities of 38 public and private institutions, including the Federation of Congolese Enterprises, the National Agency for the Development of Congolese Entrepreneurship, and the National Institute of Statistics through the procurement of equipment and capacity- building activities. In total, 864 persons participated in capacity-building sessions, exceeding the IRI11 target of 475 participants by 82 percent. Among the participants, 88 percent reported that their skills and/or knowledge were enhanced, just exceeding the IRI12 target of 85 percent. Mobilizing Private Sector Financing 59. The Project mobilized US$17 million in private sector financing through the creation of the SME Hubs and the direct support to established SMEs and youth entrepreneurs. The operators of the SME Hubs privately raised and invested US$15 million to establish the three SME Hubs in Goma and Kinshasa. Among the 430 SMEs supported, 72 of them (17 percent), raised US$1.4 million in private financing for their investments. A majority (56 percent) of their private sector financing came from banks. Lastly, among the 960 youth entrepreneurs supported, 206 of them were able to raise a further US$635,000 of private sector financing. Poverty Reduction and Shared Prosperity 60. The Project had a positive impact on poverty reduction and shared prosperity in the four target areas through job creation and local private sector development. The Project directly or indirectly tackled multiple aspects of the three drivers of fragility in DRC by (i) supporting the growth of MSMEs to develop a more diversified and equal economy; (ii) creating economic opportunities for the most disadvantaged and marginalized populations, including women micro-entrepreneurs and unemployed youth; and (iii) supporting the population of Goma in the East, which continues to suffer from the effects of armed conflict and instability. The Project also facilitated the enactment of business climate reforms and strengthened the entrepreneurial ecosystem, which should lead to further improvements in the business environment and job creation in the long run. Other Unintended Outcomes and Impacts 61. The beneficiaries’ resilience was strengthened and climate-friendly investments were facilitated. The assistance provided to youth entrepreneurs and SMEs also strengthened their resilience through the increase in their number of products and business partnerships. As mentioned above, the 960 youth entrepreneurs supported launched 1,120 new products and established 2,597 new business partnerships, an average of 1.2 new products and 2.7 new partnerships per youth entrepreneur supported. The Project did not have indicators for climate- friendly investments, so no quantitative data was collected on such investments, making it difficult to estimate the extent of such investments. Nonetheless, there are qualitative examples of new firms being launched or making investments of this nature. For example, two supported firms in Matadi are recycling plastic waste to Page 19 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT create biodegradable bags and construction bricks. Given the high cost of electricity, and its unreliability, multiple firms also invested in solar panels. III. KEY FACTORS AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING IMPLEMENTATION 62. The Implementation of the Project was influenced by several factors: a. Factors subject to the control of the Government and/or implementing agencies. The cross-cutting nature and the distributed geographic scope of the Project (national and four provincial authorities) resulted in power struggles and change resistance in the case of some Ministries, Departments, and Agencies (MDAs). For instance, the administrative process to set up SME Hubs was slow and some of the regulatory reforms supported by the enabling environment technical assistance under Component 1 still have pending application decrees. The political and social uncertainty surrounding the general election of December 20, 2023,37 was another important factor that delayed the application of these regulatory reforms. b. Factors outside of the control of the Government and/or implementing agencies. These included persistent economic volatility associated with international crises such as the COVID-19 pandemic and the inflationary trends worsened by geopolitical events. Regionally, the challenging security situation was disruptive to the implementation of activities in the North Kivu region. Locally, the Mount Nyiragongo volcano eruption on May 22, 2021, delayed implementation of activities in Goma in the late Spring and early Summer of 2021. Lastly, the COVID-19 pandemic was a significant external shock that delayed Project activities, requiring Project coordination to adapt to a virtual Project coordination approach, which was not the most effective approach given the FCS context. Moreover, some of the training programs were also delayed due to these international crises. c. Factors subject to the control of the World Bank. The Project supervision was adequate and took place on a regular basis. Formal implementation support missions were conducted twice a year and technical World Bank staff across the Project’s functions were consistently present during the missions and held accountable for project developments. The WB rollout of the new procurement framework38 became a major hurdle in the FCS context of this Project. This slowed down the initial phase of the Project and required additional supervisory efforts and significant support from the Procurement team. Lastly, Task Team Leaders adapted well to external challenges, especially the COVID-19 restrictions, which conditioned the work to take place remotely for the first phase of the Project. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION 37 https://en.wikipedia.org/wiki/2023_Democratic_Republic_of_the_Congo_general_election 38 https://projects.worldbank.org/en/projects-operations/products-and-services/brief/procurement-new-framework Page 20 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT 63. The overall rating of quality of M&E is High. Despite minor shortcomings in the M&E system’s design and implementation, the M&E system as designed and implemented was sufficient to track the progress of the Project and to assess the achievement of its objectives. M&E Design 64. The Project’s Results Framework captured the planned activities and expected impacts as outlined in the ToC. The Project’s Results Framework included three PDO indicators, mirroring the three long-term impacts in the ToC. One of these PDO indicators (Number of new firms established) was also disaggregated by gender and youth, including specific targets for each sub-category. The Results Framework also included 13 intermediate indicators, which covered the main outputs from the Project’s activities. One of the intermediate indicators (Number of SME recipients of the matching grants) was also disaggregated by gender and youth with respective targets. Among the 13 intermediate indicators, eleven were output indicators and two were outcome indicators: (i) Number of SMEs renting space and operating in SME Hubs and (ii) Share of new firms supported under the BPC that are still operating 24 months after receiving assistance. The definitions and data sources of the indicators in the PAD provided useful additional information and guidance for the PCU. One minor shortcoming was the lack of information regarding the indicators’ expected data source, which was mitigated by the MSME ecosystem survey in the four target cities that followed. The survey established a baseline and guided data collection efforts. The Results Framework did not have any errors among its indicators or targets that had to be corrected during the implementation of the Project. 65. The Project’s M&E design took into consideration the limitations of an FCS context. Given the paucity of data in the DRC, all indicators in the Results Framework measured the outputs and outcomes resulting directly from the Project’s activities, while the data collection relied on the Project’s implementing partners, the PCU, and the provincial units. To optimize data collection, the indicators were defined in a way to set the baseline to zero at the start of the Project. However, a detailed baseline survey,39 the MSME ecosystem survey, was conducted by the WB in partnership with the European Union Program for Innovation and Competitive Industries before the launch of the main project activities. The Project design originally envisioned that the mid-term and final data collection would be conducted by external service providers as there were concerns that the PCU would not have the necessary M&E capacity. However, a different approach was taken as the COVID-19 restrictions would have made it challenging for an additional external service provider to collect data directly from beneficiaries. Therefore, the data collection was incorporated into the ToRs of the implementing partners. The quality of the data collected by the Project was verified and confirmed by the Bank during the preparations for the subsequent TRANSFORME Project, validating the agile approach taken. M&E Implementation 66. The Project ensured the necessary human resources to implement its M&E system, while the implementing partners took ownership of the necessary data collection and reporting. The PCU hired an M&E specialist, who oversaw the development of the necessary tools and systems. The M&E specialist and technical experts also carried out regular field visits to the Project activities. The Mid-Term Report noted that the M&E system was well established, with multiple tools having been developed by the PCU and the implementing partners, including the M&E manual. The only recommendation was to establish a centralized database using tailored software. The lack of such software led to underreporting errors when consolidating results from different Project activities. Nonetheless, the Project benefitted from the Geo-Enabling Initiative for Monitoring and Supervision (GEMS) initiative, which allowed the use 39 The World Bank MSME survey - https://documents1.worldbank.org/curated/en/817691584000898009/pdf/Scaling-Up-Ecosystems-for-Small-Businesses-in-the- Democratic-Republic-of-Congo-Analysis-Based-on-Data-from-Kinshasa-Lubumbashi-Matadi-and-Goma.pdf Page 21 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT of the KoBoToolbox for collecting data digitally. The Project’s implementing partners took ownership of the data collection needed to report on the progress and impact of their activities. The implementing partners had M&E staff, developed their respective M&E manuals, and systematically collected data from the activities that they were implementing. Reports were continuously shared by the implementing partners to the PCU regarding the advancement and results of their activities. 67. The Project went a step further and facilitated an impact study on the support of female entrepreneurs. Through the World Bank’s Africa Gender Lab, an impact study on the training and in-kind grants provided to female micro- entrepreneurs under sub-component 1.1 was carried out in two of the Project’s targeted cities: Goma and Lubumbashi. Nonetheless, data was also collected by the impact study in Kinshasa and Matadi. The objective of the impact study was to evaluate the socioeconomic impact of different versions of the training provided as well as the impact of the in-kind grants delivered. The impact study was implemented smoothly, leading to a baseline and four subsequent data collection phases. The data collected is being analyzed, with the impact study’s results expected to be published by September 2025. Brief Summary of Ongoing Africa Gender Lab Impact Study An impact evaluation was conducted on the activities delivered to women entrepreneurs under sub-component 1.1. A total of 3,600 eligible women entrepreneurs from Goma and Lubumbashi were enrolled in the study. These participants were randomly allocated to either the PI training or a control group through a public lottery. The study was conducted between 2020 and 2023, with four rounds of follow-up quantitative data collected. Participation in the PI training was high, with women attending an average of 9.5 out of 12 sessions, and 10.4 sessions when they were invited to bring their husbands. Most women were satisfied or highly satisfied with the training content and organization. However, the quantitative survey and a rapid qualitative data collection revealed issues with the quality of the delivered equipment. Despite these issues, most women still possess the equipment, and nearly two thirds reported using it regularly. Findings from the four survey rounds indicate that the PI training positively impacted business practices, innovation, and investments in women’s businesses. Both the training and the in-kind grant significantly enhanced beneficiaries’ subjective well-being. While inviting husbands to participate in the training increased women’s attendance, it did not alter the training’s overall impact. Further analysis is underway to determine if certain groups of women entrepreneurs experienced profit increases and to understand the mechanisms of impact. More information can be found in Annex 6, while the full evaluation and analysis is expected to be published in 2025. M&E Utilization 68. The M&E data was collected as designed and informed the PCU, the GoDRC, and the Bank on the progress the Project was making. The regular data collection and reporting enabled semesterly Implementation Status and Results Reports (ISRs) and M&E reports submitted to the World Bank and the GoDRC. The monitoring of the Project’s activities helped to adapt activities. For example, the utilization of up-to-date M&E data led to the Project’s restructuring, providing six additional months to finalize the remainder of the activities under sub-component 1.1. Page 22 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Justification of Overall Rating of Quality of M&E 69. The overall rating of quality of M&E is High. Despite minor shortcomings in the M&E system’s design and implementation, the M&E system allowed the Project to effectively track the progress of its activities and assess the achievements of its objectives in a challenging FCS context. The M&E system went a step further by integrating and facilitating an impact study. The data and findings collected by the M&E system were used to inform the direction of the Project as well as to inform the subsequent TRANSFORME Project, which is scaling up activities started under PADMPME. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 70. No social and environmental issues were flagged. The Project was classified as Category B, meaning it generated, negligible environmental or social impacts. The following safeguards policies were triggered: Environment Assessment OB/BP 4.01, Pest Management OP 4.09, Physical Cultural Resources OP/BP 4.11, and Involuntary Settlement OP/BP 4.12, resulting in 21 enterprise screenings, which allowed for the completion of an Environmental and Social Management Plan. All visited enterprises were applying environmental and social safeguards to their waste management process. In the case of young entrepreneurs, environmental compliance was partial. Based on available information for this ICR, the Project has not negatively impacted livelihoods, land use, or physical relocation of people. No GBV cases were reported. All safeguard policies were deemed Substantial at the time of the closing. 71. The project’s Grievance Redress Mechanism (GRM) received 235 complaints across all four cities. The GRM was functional since 2019. In total, 35 Grievance Management Committees were put in place and 186 members were trained in the GRM. Project activities that generated the most complaints were the BPCs leading to 84 complaints from young entrepreneurs and 151 complaints from SMEs, mostly related to the application process and the non- objection step prior to grant delivery. No sanctions or cancellations of procurement processes were necessary because of complaints received through the GRM. The Project achieved the IRI10 target of responding to 100 percent of grievances. 72. At the time of the final submission of the ICR, the Project disbursement rate for WB financing was 99.59 percent (US$ 99.59 million disbursed as of December 17th, 2024). The Project Financial Management rating was Substantial. The disbursement plan was in line with the Project’s strategy to allow time for MSMEs to capture the value added through competency and capacity-building processes. Most financial resources (86 percent) were deployed in the last two years of the Project after the competitive selection of the implementation partners and once MSMEs received their financial assistance. 73. On the procurement side, the Project experienced delays due to the capacity development of the PCU coupled with international crises. The Project Procurement rating shifted from High to Substantial as per the last ISRs 9 and ISR 10, respectively dated May 2023 and May 2024. Early in the implementation, the Project experienced challenges with large procurement contracts due to the weak capacity of the PCU’s procurement team at the time. These challenges were addressed through the close support and supervision of the World Bank team, which provided continuous guidance to the PCU procurement team. The PCU was further strengthened through the recruitment of an additional procurement expert and the support of experienced consultants. These efforts helped to resolve most procurement issues and allowed the Project to catch up with the delays in selecting implementation partners to conduct the core project activities related to beneficiary MSMEs. By the mid-review, the Project was on track with the 2021 work program fully implemented, which substantially increased the Page 23 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT disbursement rate from 13 percent as of February 10, 2021 to 51.2 percent by the end of December 2021. In 2023, the focus shifted to ensure adequate local partnerships for the fulfillment of procurement activities related to equipment and tools that selected beneficiaries, ranging from micro-businesses to medium-sized firms, would be able to acquire. There were some issues related to the transportation costs for the delivery of equipment, especially for women entrepreneurs. The PCU worked diligently on these situations on a case-by-case basis. C. BANK PERFORMANCE Quality at Entry 74. The PAD demonstrates strategic relevance and approach to addressing the outlined development challenges and a clear alignment between the PDO and the Project components, outcomes, and objectives. The Project was aligned with the CPF and the GoDRC’s NDPs; moreover, the Project directly addressed some of the drivers of fragility as per the RRA. The PDO was comprehensive, relying on technical, financial, and economic analyses across target cities and beneficiaries. The Project design and components considered poverty, gender, and social development challenges by addressing not only the needs of private firms of different sizes but also vulnerable beneficiary groups such as women and young entrepreneurs. The design also sought to ensure proximity with the beneficiaries by decentralizing the implementation in targeted cities while considering security and fiduciary risks as well as social and environmental safeguards. At the strategic level, there was a national Steering Committee supported by provincial committees in charge of technical aspects. At the operational level, the PCU was supported with PSU for the Project’s implementation. This decentralization approach allowed the Project to be closer to the ground and to the persons, enterprises, and institutions supported. In addition, the design took into consideration informal firms and defined a path and incentives toward formalization over the course of the selection and support processes. The components and sub-components were interconnected and mutually reinforcing to not only support the policy reforms and institutional development but also to improve the competencies of beneficiaries and private and public stakeholders at the national and provincial levels. The Project design considered improvements to the enabling business environment, (reforms, dissemination of entrepreneurial rights and establishment of SME Hubs) as essential for the continued growth and sustainability of results from the direct support provided to entrepreneurs and SMEs. 75. The Project was built on the priority themes of the World Bank SME Development Agenda and on key lessons and recommendations from similar projects across regions, specifically in Africa. The Project considered the key areas identified under the World Bank SME Action Plan (World Bank, 2016) and incorporated the key lessons and recommendations from the IEG Report “The Big Business of Small Enterprises” (IEG, 2014), conducted on 179 World Bank Group projects targeting SMEs in 2006-2012 as well as the analysis of ten relevant SME projects in Africa. The WBG experience from the above-mentioned projects brought an important added value to the Project. Additionally, the Project was designed in close collaboration and coordination with other active World Bank and IFC operations in DRC working in various sectors (Education, Agriculture, Finance & Markets), which allowed to build on the experiences of other teams and leverage synergies across projects in the country. The Project was designed considering other private sector development activities supported by other donors including the European Union, French Development Agency, African Development Bank, German Association for International Cooperation, United States Agency for International Development, Japan International Cooperation Agency, among others actively engaged in the DRC to avoid duplicating efforts and enhance synergies. 76. The Project benefitted from Trust Fund and Global Teams support at entry, informing the design of the Project, particularly its Results Framework. Given the FCS nature of the context, there is a limited amount of updated Page 24 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT secondary data. The Project benefitted from a grant from the Competitive Industries and Innovation Program Trust Fund, which facilitated a SME Hub market study and a mapping of MSMEs in each of the four target locations. The Global Tax Program also provided support to the Project, particularly for a survey of SMEs and a review of the SME taxation regime. The Project also received support from Global Teams on various topics, particularly on the process evaluation, the SME Hubs, and the training courses provided to beneficiaries. The data collected at this stage through this Trust Fund facilitated activities design and informed the Project’s Results Framework, particularly the end targets for its indicators. Nonetheless, other factors such as the nature of an FCS context, the difficult political situation in DRC at appraisal, and previous experiences with similar projects were also taken into consideration when setting the Project’s expected results. 77. The implementation model of the Project was adapted to address increased security challenges and to manage the frequent changes among the Government’s counterparts. Despite the overall country context, the Project followed its course according to the initial Project objectives without requiring revisions as the objectives remained deeply rooted in the GoDRC’s strategic objectives and the CPF, as outlined in previous paragraphs. The Bank team adjusted to the FCS context for the project’s activities and related geographies by keeping field work in safe areas as per local authorities’ and World Bank Group (WBG) guidance. Despite COVID-19 restrictions, a volcanic eruption near Goma, and security challenges in the East, these factors did not negatively impact the expected geographic coverage. The four selected urban areas across the country were relatively safe areas as per local WBG guidance. 78. The structuring of the implementation arrangements and M&E arrangements was effective in ensuring that both Project implementation and supervision would be successful. Some challenges were encountered in the supervision by the central PCU of local activities related to the beneficiaries in Kinshasa as the local PSU team was smaller compared to other cities. These challenges were overcome by the mid-term review with additional recruitment. On the M&E side, despite a few minor shortcomings, the M&E system as designed and implemented allowed the Project to effectively track its activities and achievements. 79. The Project broke ground in many aspects of MSME development, which influenced Project preparation. Besides being one of the few Competitiveness for Jobs and Economic Transformation (C-JET) Projects implemented in an FCS context, it was one of the first in the Central Africa region, and possibly the largest budget- wise, for the purpose of private sector development. The political context at the time, and the insecurity prevailing in some regions, made the team focus on key urban areas for Project implementation. The team also considered the proper balance necessary to support the capacity development of both national and provincial private and public stakeholders. During preparation, the Ministry of SMEs did not have a transversal role in private sector development nor a convening power across ministries. It was therefore challenging to engage all relevant stakeholders that would play a key role in Project implementation at the early stage of the Project’s preparation. Quality of Supervision 80. Overall, the quality of supervision from the WB team managing the Project has been outstanding. This assessment reflects the team’s continuous support and adaptation, deep technical expertise, and strong partner management skills, which largely contributed to Project achievements in the face of several implementation challenges in an FCS context. This observation was aligned with the Overall Implementation Progress, which was rated as Satisfactory throughout the Project and upgraded to Highly Satisfactory in the last ISR. This is notable for a Project rated as “Substantial Risk”. The WB team facilitated synergies and collaboration with IFC mainly to identify investors for the SME centers and mobilize private capital. Also, close coordination to support business Page 25 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT enabling environment reforms has been materialized through complementary TA delivered and joint policy dialogue. This initial collaboration with IFC in the PADMPME Project led to closer and more systematic collaboration under the TRANSFORME Project, particularly on improving the national credit infrastructure and supporting business enabling environment reforms. 81. The WB task team established a close working relationship with the client, particularly the Ministry of SMEs and the Ministry of Gender. The regular official missions, technical missions, and regular Project management meetings with the client over the full Project lifecycle were key to ensuring the continuity of Project supervision remotely, even during the COVID-19 pandemic that stopped in-person missions. Despite being unable to conduct field visits in the provinces for 18 months during the pandemic, the WB task team maintained close relationships with senior officials and across the GoDRC, which helped ensure that issues were managed promptly and effectively. 82. The task team was committed and competent with limited changes in team composition and adequate team coverage locally and in the subregions. The PCU staff and other key stakeholders unanimously reported the dedication and professionalism of the WB team, which was crucial in the successful Project implementation. The political and security complications inherent to the FCS context, paired with a gradual PCU capacity development process and delayed selection of the implementation partners, created a particularly challenging supervision task for the Project team, especially with the series of international crises (e.g., COVID-19 pandemic, global inflation, etc.) that were taking place at the same time as the Project was being implemented. The presence of other key team members locally and in the region (Senegal, Mali) allowed a flexible approach to often uncertain mission planning. 83. The task team demonstrated persistence in pursuing continuous remedial actions to resolve issues or delays in implementation. In general, the PCU and implementation partners appreciated the support and proximity of the Bank team, while not always satisfied with the WB standard operating procedures related to procurement and safeguards. Nonetheless, the procurement and safeguards aspects of the Project were implemented satisfactorily through close support and guidance from the WB teams. The task team coped with these situations through extensive dialogue with the client, the implementation partners, the PCU, the PSUs, and WB colleagues, exemplified by the candid internal reports (e.g., ISRs and Aide Memoires) and external reports (e.g., presentations by consulting firms and NGOs) on progress and challenges. 84. The PCU was the anchor point, together with the provincial supervision units, for all communications to ensure proximity and response timeliness. A delicate balance was necessary between the national and provincial supervision and between the public and private implementing partners. The PCU duly managed expectations and concerns across stakeholders. 85. The implementation partners provided additional institutional capacity throughout the selection process of the beneficiaries. This prevented additional risks, from corruption to coordination, across the four target cities. This boosted the project implementation after the mid-term review to overcome the delayed start caused by COVID- 19 and the capacity building of public and private stakeholders in the DRC. The implementation partners also provided crucial M&E implementation support, which together to the capacity building and support provided to the PCU, led to a well-functioning M&E system. Page 26 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Justification of Overall Rating of Bank Performance 86. The WB’s performance is rated as Highly Satisfactory. This considers the excellent Quality at Entry preparation and the high level of proactivity in ensuring the Quality of Supervision. Following the COVID-19 external shock, the Project recovered quickly as evidenced by the disbursement rate that progressed from 13 percent on February 10, 2021 to 51.2 percent by the end of December of 2021. Minor shortcomings of the M&E system and the procurement process were promptly addressed and did not affect the Bank Performance rating. However, these improvements will be considered in the lessons learned section. D. RISK TO DEVELOPMENT OUTCOME 87. The sustainability risk to the development outcome following the completion of this Project is assessed as medium-low in part due to the improvements to the enabling business environment. One of the main risks that this type of project faces is its sustainability after its closure, particularly for the firms directly supported. However, the holistic support to the overall business ecosystem – capacity building to public and private institutions, adoption of reforms, dissemination of existing laws, strengthening BDS providers, and establishment of SME Hubs – should facilitate the continued growth of the entrepreneurs and SMEs directly supported by the Project. Moreover, this enabling business environment should also support other firms not directly supported to emerge and grow over time. Barring an unexpected political or economic crisis at the national or international levels, the sustainability risk is therefore not considered high. 88. The sustainability risk is further mitigated by the continuation and scale-up of PADMPME activities through the TRANSFORME Project. The development of MSMEs plus the job creation and revenue growth objectives that were central to PADMPME have been maintained under TRANSFORME, which became effective in December 2022 and continues to be implemented after PADMPME’s closure. The target sectors will remain the same, and the geographic selection will build on the experiences of PADMPME as TRANSFORME is supporting three of the four previously targeted locations (Goma, Kinshasa, and Matadi) plus four additional locations (Bunia, Bukavu, Mbuji-Mayi, and Kananga) that were pre-identified based on the existence of province-level private sector development strategies aligned with the CPF, synergies with other WB Projects, the feasibility of interventions considering infrastructure and security risks, and the demand growth for entrepreneurship to reduce fragility as demonstrated by the PADMPME experience and conveyed by provincial authorities. Specifically for the province of Central Kongo, TRANSFORME will be implemented in the six cities along the Kasangulu-Moanda corridor, beyond the province’s capital city of Matadi. Given the strategic investment in the province of Central Kongo and the economic opportunities, this geographic extension has been accepted to capitalize on the achievements of the PADMPME Project and to strengthen synergies with a pipeline of strategic investments. 89. In general, the successful pilot approach adopted under PADMPME will continue and be scaled-up with adaptations under TRANSFORME and the upcoming INGA3 Project. This subsequent TRANSFORME Project will continue and expand activities pertaining direct support to women entrepreneurs, youth entrepreneurs, SMEs, and SME Hubs. TRANSFORME will continue to improve the enabling business environment through capacity building to the Ministry of SMEs, the Ministry of Gender, and the Central Bank, implementation of additional reforms, and the dissemination of existing laws. The new project will seek to improve sustainability further by improving overall access to finance for entrepreneurs. Additional improvements to the overall economic ecosystem, including improved access to finance, should enable firms supported under PADMPME and TRANSFORME to grow independently of the assistance provided by the projects. Furthermore, the SME Hub Page 27 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT concept will also be incorporated into the upcoming INGA3 development program (P506438) under preparation as phase 1 of the multi-phase programmatic approach - phase 1 being focused on local area development40. V. LESSONS AND RECOMMENDATION 90. Lesson 1: The achievements of the Project are a result of the multi-faceted instruments deployed under the Project, which reinforced each other and were tailored to the specific needs of different beneficiary groups. The agile and clear design of the Project contributed to its success as a wide range of instruments the Project deployed provided different beneficiary groups with a tailored and coherent set of activities based on their profiles and their needs. Other projects have had more limited results as their support was not sufficiently tailored to the targeted beneficiaries. This Project showed what can be achieved when support is tailored according to the type of beneficiary. Across beneficiary groups, the common feedback was how valuable the hands-on TA was in helping these business owners and entrepreneurs become more productive and professional in their business development. It was also valuable to design interdependent activities to allow for a concurrent selective process to take place across MSME beneficiary groups regardless of the size or the age of the enterprise. This was key in the weak institutional environment of an FCS country. 91. Lesson 2: The analytical work carried out on MSMEs and entrepreneurial ecosystem needs as well as the detailed preparation of SME instruments at the design stage were crucial for the Project’s success. The analytical work and preparations benefited from an internal World Bank preparation grant financed by the SME Launchpad Program. The MSME instruments employed were not necessarily novel; however, the design used many best practice lessons from previous MSME support (e.g., inputs at the outset from the local private sector, implementation with local participation and private implementing partners, targeting of different segments of MSMEs/entrepreneurs to establish a pipeline of growing businesses, proper use of expert panel selections, close technical support for grantees, financial and technical assistance delivered together, among others). Many similar MSME support programs with similar basic designs have not been as successful due to issues in the details of the design and implementation. 92. Lesson 3: The FCS nature of context such as the DRC requires flexibility and modularity in the Project’s design and management. The Project faced further challenges through unexpected national and international crises (e.g., COVID-19 pandemic, high inflation, volcanic eruption and rising insecurity around Goma). Through the annual work plans and budgets, the PCU and the WB teams adjusted the yearly focus to adapt to changes in the environment. In addition, the structuring of implementation partners that were competitively selected ensured additional capacity to adapt to the evolving circumstances while providing effective project management as well as transparent and effective processes to train, coach, and mentor beneficiaries before and after the provision of grants. 93. Lesson 4: The Project employed a multi-faceted effective outreach model to inform and engage with women entrepreneurs that could serve as a model for similar projects in FCS contexts. The Project deployed a multi- channel communication system for its sensitization and outreach campaigns, with each campaign specifically tailored to the audience and Project activity. For example, for the dissemination of information on existing gender rights, the implementing partner established ‘antennas’ at marketplaces where women frequently worked or 40 The Inga 3 development program aims to harness Inga 3’s hydropower potential for long-term economic transformation, job creation, and inclusive growth in DRC. The phase 1 of the program under preparation will be focused on local area development in Kongo Central where the Inga site is located. Supporting establishment of SMEs centers to support value chain development is one of the activities considered to support development of Inga growth corridor. Page 28 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT made their purchases to convey messages in the respective local languages depending on the city. Another example includes dissemination at churches on Sundays, where women also frequently gather. These multiple customized communication channels with tailored messages could be replicated in other FCS countries to ensure that the desired messages are well communicated widely. 94. Lesson 5: The decentralization strategy to target select urban areas of interventions was critical to ensure proximity with the main beneficiaries (e.g., the MSMEs, including women and youth entrepreneurs); however, it requires engage with national and provincial stakeholders to establish ownership, build their capacity, and improve the enabling business environment. The Project demonstrated that multi-faceted and spatially concentrated interventions could improve the overall competitiveness of the MSME ecosystem in the target cities and the integration of value chains in partnership with large corporations. These outcomes can meet the objectives of inclusive growth in key productive sectors of the economy in line with established national and sub- national private sector development strategies. For projects with decentralized implementation, both national and sub-national engagement is important to build ownership by the client and ensure all relevant stakeholders take part in the knowledge transfer from implementation partners. When the Project was designed, the team mainly interacted with a selection of national and sub-national stakeholders, both public and private. As the Project progressed, it became essential to engage local organizations and authorities to ensure adequate communication, manage expectations, and adapt to changes. It is paramount to have a strong coalition of MDAs to ensure that Project activities will be anchored with primary and secondary stakeholders at the national and provincial levels that will continue to support key activities beyond the knowledge transfer phase. 95. Lesson 6: The reforms to strengthen the enabling business environment remain key to sustaining the development of MSMEs and value chains in strategic sectors of the economy. While the Project delivered a broad set of reforms as detailed in previous sections, some still require the approval of application decrees despite the Project’s TA support to draft them. Two pathways remain essential: i) the need for reforms to strengthen the enabling environment to continue, which takes time and should include a change management strategy; and ii) a bottom-up approach in an FCS country like DRC where MSMEs are directly supported at the firm/entrepreneur level with holistic and tailored support packages to accompany the transformation of the economy. 96. Lesson 7: Procurement can become a major hurdle to overcome for multiple stakeholders. At the Bank, the deployment of a new procurement framework required significant levels of assistance and supervision to overcome numerous hurdles in an FCS context. Perhaps such an important deployment should take place in a phased manner rather than a “big bang” approach. At the Project Task Team level, the consortium approach was adequate and accelerated local capacity development, especially given the distributed geography of the target cities. At the PCU level, the intricate prerequisites41 across a variety of procurement activities required specific World Bank project teams’ support and outside expertise to keep the Project progressing to ensure that planned activities, outputs, and outcomes are reached. Moreover, avoiding urgent procurement would allow for proactive planning as it is necessary to exercise supplier bargaining power, ensure optimal negotiation, and consider full cost-of-ownership (taking into consideration product warranties, product availability, delivery, and quality). Several women entrepreneurs mentioned that lower-quality branded equipment was delivered, most likely due to limited local supply availability resulting from inflationary trends and the post-COVID-19 global supply crunch. In addition, home delivery issues were also observed, which were eventually resolved by the Project’s teams. 41These prerequisites included the specific needs for different beneficiaries depending on category type (e.g. youth, women, new vs. established businesses, etc.), enterprise size (e.g. micro, small, medium-sized), and sector type. Page 29 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT 97. Lesson 8: The SME Hub pilot was successful, leading to the mobilization of US$ 15 million in private capital, and can be scaled up as a key lever for the development of services, infrastructure, and partnerships crucial to the sustainable growth of MSMEs, supporting the overall ecosystem. On top of providing services, infrastructure, and networking opportunities to MSMEs, SME Hubs have proven to be an effective mechanism to mobilize private capital. As mentioned above, the three operators of the SME Hubs in Goma and Kinshasa raised and invested US$15 million to establish the three SME Hubs. The successful implementation of large private company-backed SME Hubs hinges on formal partnerships and well-defined governance. Many partnerships were formalized with (i) private actors such as banks, chambers of commerce, (ii) public actors such as the National Agency for Investment Promotion, Congolese Office of Control, Authority for the Regulation of Subcontracting in the Private Sector, One-Stop Business Registry Center, and (iii) international development organizations. 98. Lesson 9: The employment of private providers to implement activities was important for the Project’s success, particularly given the challenging context, while the systematic use of international-national consortiums facilitated knowledge transfer and local capacity building. The Project activities were both ambitious and complex and would have unlikely reached the same outputs and outcomes if carried out by public agencies instead of the various private partners employed. Nonetheless, to ensure local capacity building, the Project followed the community benefits principles, strengthening local implementation partners through the systematic use of consortiums between international and local firms. These consortiums were designed to facilitate knowledge transfer and capacity building between private actors. Furthermore, the implementation of activities was able to continue during the restrictions of the COVID-19 pandemic as a result of the participation of local consortium partners. The Project also implemented a specific capacity building program for public agencies such as the Ministry of SMEs and the Ministry of Gender to improve capacity in the country’s public sector as well. 99. Lesson 10: In FCS contexts, private consortiums can provide crucial support with data collection, while capacity building to the PCU on M&E is also essential to ensure a well-functioning M&E system. The Project originally expected that data collection would have to be conducted by external service providers due to concerns of low M&E capacity in an FCS context. However, COVID-19 restrictions made this planned approach unfeasible. Instead, data collection was delegated to implementing partners, who included dedicated M&E staff, developed M&E tools and systems, and were able to systematically collect data given their regular contact with beneficiaries. The Project also built the capacity of the PCU in terms of M&E throughout the project lifecycle, while also benefiting from the GEMS initiative, which allowed the use of the digital KoBoToolbox to collect data. The support from the implementing partners plus capacity building to the PCU were sufficient to overcome initial low M&E capacity and establish a strong M&E system. 100. Lesson 11: The access to finance dimension is essential for supported firms to continue growing and giving them the freedom to use their banks for the reception of their cash grants, as opposed to employing only a selection of banks, can facilitate access to credit. The Project signed agreements with a selection of banks to effectuate the provision of grants for the direct support of youth entrepreneurs and established SMEs. A side effect of this agreement was that some of the beneficiaries had to open accounts with new financial institutions as opposed to using their existing bank accounts. Therefore, the grants did not improve the relationship with the banks with whom the beneficiaries already had a relationship, foregoing the opportunity to improve access to credit. The beneficiaries who were already clients of the selected banks saw better prospects in obtaining loans. It is thus recommended to be flexible on the delivery of grants, allowing beneficiaries to receive their grants through the banks that they already use. This flexibility enables higher levels of private capital mobilization, while also allowing supported entrepreneurs and firms to obtain credit to continue financing any necessary operational costs and cash flow needs over a longer period – a preoccupation shared by the supported beneficiaries. Page 30 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS @#&OPS~Doctype~OPS^dynamics@icrresultframework#doctemplate A. RESULTS FRAMEWORK PDO Indicators by Outcomes Not Categorized Indicator Name Baseline Closing Period (Original) Closing Period (Current) Actual Achieved at Completion Result Month/Year Result Month/Year Result Month/Year Result Month/Year Number of new firms established by 0.00 Jul/2018 3,000.00 Dec/2023 6,012.00 Jun/2024 targeted beneficiaries (Number) (of which female-owned). 0.00 Jul/2018 2,000.00 Dec/2023 5,128.00 Jun/2024 (Number) (of which young 0.00 2,000.00 2,514.00 entrepreneurs) (Number) Net full-time equivalent jobs created 0.00 Jul/2018 9,000.00 Dec/2023 14,926.00 Jun/2024 among beneficiary MSMEs (Number) % Increase in average revenue of 0.00 Jul/2018 30.00 Dec/2023 53.00 Jun/2024 beneficiary MSMEs (Percentage) Intermediate Indicators by Components Not Categorized Indicator Name Baseline Closing Period (Original) Closing Period (Current) Actual Achieved at Completion Result Month/Year Result Month/Year Result Month/Year Result Month/Year Page 31 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Number of female micro- 0.00 Jul/2018 4,500.00 Dec/2023 7,142.00 Jun/2024 entrepreneurs who received training (Number) Number of female micro- 0.00 Jul/2018 2,500.00 Dec/2023 4,732.00 Jun/2024 entrepreneurs who received cash subsidies (Number) Number of young entrepreneurs who 0.00 Jul/2018 750.00 Dec/2023 3,010.00 Jun/2024 receive training (Number) Number of public 0.00 Jul/2018 192.00 Dec/2023 193.00 Jun/2024 awareness/dissemination events delivered (Number) 0.00 Jul/2018 5.00 Dec/2023 8.00 Jun/2024 Comments on achieving targets Thanks to project's the support, the one-stop shop for the issuance of construction permits has been digitised; ii) the DRC's legal texts have been brought into line with OHADA's Uniform Acts, more than 10 years after the country joined this regional organisation; iii) the institutional and regulatory framework of the PPP law has been put in place; iv) a one-stop Implemented reforms supporting shop for business start-ups has been established in the Central Congo Province; (iv) the private sector development (Number) commercial justice system has been modernised with the reform of the civil procedure code, which provides for the digitalisation of commercial court proceedings and a reduction in the time taken to resolve commercial disputes; (v) a law on SMEs and the related regulatory framework have been adopted; (vi) a legal and regulatory framework for the development of the craft sector has also been developed; (vii) two provincial decrees have been revised to take gender into account. 0.00 Jul/2018 430.00 Dec/2023 430.00 Jun/2024 Comments on achieving targets The goal of 500 Matching Grant recipients under the business plan competition (COPA) was nearly reached (430) with one cohort of COPA instead of the two originally planned, Number of SME recipients of the eliminating the need for a second cohort. matching grants (Number) Following the reallocation of resourcs between category 4 (Matching Grants) to the category 3: Cash grants (to cover the higher number of young entrepreneurs to be supported), the targeted number of Matching Grant recipients is slightly changed from 500 to 430. Page 32 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT (out of which female-owned) 0.00 200.00 179.00 (Number) (out of which young 0.00 80.00 119.00 entrepreneurs) (Number) Total value of funds allocated to SME 0.00 Jul/2018 35,000,000.00 Dec/2023 26,729,052.87 Jun/2024 recipients of the matching grant (Amount(USD)) Share of new firms supported under 0.00 Jul/2018 50.00 Dec/2023 94.00 Jun/2024 the Business Plan Competition (BPC) that are still operating 24 months after receiving assistance (financial and non-financial) (Percentage) Number of SME Hubs established 0.00 Jul/2018 4.00 Dec/2023 3.00 Jun/2024 (Number) Number of SMEs renting space and 0.00 Jul/2018 120.00 Dec/2023 144.00 Jun/2024 operating in SME hubs (Number) Percentage of grievances that were 0.00 Jul/2018 100.00 Dec/2023 100.00 Jun/2024 responded to (Citizen Engagement) (Percentage) Total number of participants in the 0.00 Jul/2018 475.00 Dec/2023 864.00 Jun/2024 capacity building/training events held (Number) Percentage of participants in the 0.00 Jul/2018 85.00 Dec/2023 88.00 Jun/2024 capacity building/training events held who reported that their knowledge/skills was enhanced after the training (Percentage) Page 33 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT B. KEY OUTPUTS Objective/Outcome: Support the growth of Micro, Small and Medium-sized Enterprises (MSMEs) and increase employment and entrepreneurship opportunities for youth and women in select areas. 1. New firms established by targeted beneficiaries (disaggregated by gender and youth) Project Development Objective (PDO) 2. Net full-time equivalent jobs created among beneficiary MSMEs Indicators 3. Increase in average revenue of beneficiary MSMEs 1. Female micro-entrepreneurs who received training Intermediate Results Indicators 2. Female micro-entrepreneurs who received cash subsidies 3. Young entrepreneurs who receive training 4. Reforms supporting private sector development 5. SME recipients of the matching grants (disaggregated by gender and youth) 6. Value of funds allocated to SME recipients of the matching grant 7. SME Hubs established 8. SMEs renting space and operating in SME Hubs 9. Percentage of grievances that were responded to 10. Participants in the capacity building/training events held 11. New firms supported under the Business Plan Competition (BPC) that are still operating 24 months after receiving assistance Sub-Component 1.1 Key Outputs by Component - Training sessions for 7,142 women entrepreneurs (linked to the achievement of the - In-kind grants for 4,732 women entrepreneurs Objective/Outcome) - Mentoring & post-grant support - 16 Beneficiary cooperatives Sub-Component 1.2 - Training sessions for 3,010 youth entrepreneurs - Cash grants for 960 youth entrepreneurs - US$635,000 in private finance mobilized - Mentoring & post-grant support Page 34 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT Sub-Component 1.3 - 193 Dissemination sessions - Eight Business climate environment reforms enacted - Capacity building to 38 public and private institutions Sub-Component 2.1 - Capacity building sessions for 436 SMEs - Matching grants to 430 SMEs - US$1.4 million in private finance mobilized - Mentoring & post-grant support Sub-Component 2.2 - Three SME Hubs established in Goma and Kinshasa - 144 SMEs benefitting from the services at SME Hubs - US$15 million in private finance mobilized Component 3 - Capacity building to 245 BDS providers - Establishment of an online BDS platform Page 35 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Magueye Dia Team Leader Natalia Agapitova Team Leader Kadiatou Balde Financial Management Specialist Bertille Gerardine Ngameni Wepanjue Financial Management Specialist Jean-Claude Azonfack Procurement Specialist Alexis Manirambona Environmental Specialist Christophe Ngongo Muzyumba Environmental Specialist Cyrille Valence Ngouana Kengne Environmental Specialist Shamard Ya Jua Mungu Shamalirwa Social Specialist Jean-Pierre Lungenyi Ntombolo Social Specialist Luc Sukadi Mbayo Procurement Team Mohammad Ilyas Butt Procurement Team Christelle Tandundu Epuza Procurement Team Julie Luvisa Bazolana Procurement Team Alain Tienmfoltien Traore Team Member Ingrid Cesarine Meka Team Member Andrea Vasquez-Sanchez Team Member Lisette Meno Khonde Team Member Tazeen Hasan Team Member Mariama Daifour Ba Team Member Julia Vaillant Team Member Zouhour Karray Team Member Tresor Angela Ikobo Team Member Page 36 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT @#&OPS~Doctype~OPS^dynamics@icrannexstafftime#doctemplate B. STAFF TIME & COST Staff Time & Cost Stage of Project Cycle No. of Staff Weeks US$ (including travel and consultant costs) Preparation FY17 15.507 112,665.30 FY18 63.699 512,425.00 FY19 25.677 180,981.01 FY20 9.101 112,540.60 FY21 1.610 11,620.83 FY22 1.075 9,466.52 Total 116.67 939,699.26 Supervision/ICR FY17 0.725 4,818.51 FY19 19.525 230,612.73 FY20 37.863 215,141.71 FY21 31.924 254,086.34 FY22 43.940 309,693.26 FY23 37.570 272,749.80 FY24 49.588 353,049.45 FY25 12.538 114,327.35 Total 233.67 1,754,479.15 Page 37 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ANNEX 3. PROJECT COST BY COMPONENT Component Amount at Approval (US$M) Actual at Project Closing (US$M) Component 1: Support entrepreneurship opportunities for 44,000,000.0 45,986,889. 0 youth and women Component 2. SME Development 42,000,000.0 35,925,341.0 Component 3: Capacity building and 14,000,000.0 17,321,281.0 Project Management Page 38 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ANNEX 4. EFFICIENCY ANALYSIS 1. As part of the efficiency analysis for this ICR, the task team conducted an economic and financial analysis for this Project. This annex describes the methodology for that analysis. To the extent possible, the ICR analysis is based on actual data gathered as part of the M&E efforts of the Project. Because the quantitative benefits of capacity building and training activities are difficult to estimate, our calculation focuses on the results for direct entrepreneurs and MSME beneficiaries. Based on these investments, the project NPV is estimated to be US$52.2 million at a 15 percent discount rate with an ERR of 35 percent over a fifteen-year period including project implementation. 2. Sensitivity analysis: At a discount rate of 12 percent, the NPV is estimated at US$74.3 million over a fifteen-year period. At a 6 percent discount rate, the NPV is estimated at US$149.5 million. Restricted to only an eight-year period, the analysis calculates an NPV of US$10.6 million at a 15 percent discount rate and an ERR of 23 percent. 3. For the purpose of this analysis, we consider these economic benefits as the income of the Project’s investments — thereby applying the discounted cash flow model for financial analysis of private investments within the context of a World Bank project. Key variables used as assumptions in this analysis have been tested for sensitivity to ensure the robustness of the overall analysis and the potential project interventions. 4. Additional spillover effects and growth to nearby project investments are likely to amplify the impact of the Project’s investments. This amplified impact will essentially create a multiplier effect related to the investments under this Project. However, this multiplier effect has not been included in the Project’s economic analysis for several reasons: i) for the sake of conservatism; ii) difficulties in attribution and measurement associated with using a sweeping multiplier; and iii) difficulties in determining the correct size and timing of the multiplier effect. Given this exclusion, the impacts of this Project, especially social benefit spillovers, will likely be underestimated in the analysis here. 5. These social benefits include higher quality of business development services, time and money saved due to an improved business environment, additional businesses formalizing, improved public management and digitization related to SMEs and artisans, etc. The Project’s investments are also likely to spur positive externalities for the wider population beyond these direct beneficiaries. Such externalities also include increased business formalization, increased economic and trading activity, wider growth of key value chains in agriculture and other sectors, increased use of local content for downstream goods and services, female empowerment, and reduction in entrepreneurial barriers for women, etc. 6. The economic analysis assumes that beneficiaries (youth and women entrepreneurs, MSMEs) will have a lower failure rate and higher revenue growth rate than they would otherwise as a result of the Project’s support. a. Reduction in failure rate: Women and youth entrepreneurs are assumed to have a high failure rate of 60 percent, which is reduced to 40 percent as a result of the Project’s interventions. For MSME beneficiaries, the baseline failure rate is set lower at 40 percent, with the impact of the Project expected to reduce this to 20 percent. b. Revenue growth: The analysis assumes an additional revenue growth of 17.67 percent for beneficiaries over a baseline of 3 percent over three years. This aligns with the revenue growth figures recorded in the Results Framework, which show that beneficiary revenue grew by an average of 53 percent. Page 39 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT c. Baseline revenues: For women and youth entrepreneurs, baseline revenues are assumed to be low, beginning at US$5,000 per year. For SME beneficiaries, the analysis assumes a baseline annual revenue of US$50,000. 7. The results of additional sensitivity analyses are summarized below: Sensitivity condition ERR (percent) Reduce failure rate impact by 50 percent 26 Increase failure rate impact by 50 percent 44 Page 40 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS See the borrower’s full report, “PADMPME Closure Report”, appended separately (PDF) into the operation workspace. Available in French. PADMPME - Rapport d'achèvement V-Finale - 28 Juin 2024 Clean).pdf Page 41 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ANNEX 6. SUMMARY OF ONGOING IMPACT STUDY An impact evaluation was conducted on the activities delivered to women entrepreneurs under sub-component 1.1. The evaluation aimed to address the following questions: (i) What is the impact of Personal Initiative (PI) training on women’s outcomes and the performance of their businesses? (ii) Does the participation of husbands in the PI training increase its impact on women’s outcomes and the performance of their businesses? (iii) What is the impact of receiving an in -kind grant valued approximately $2,000 on women’s outcomes and their businesses? and (iv) Is there a complementarity between the in-kind grant and PI training? A total of 3,600 eligible women entrepreneurs from Goma and Lubumbashi were enrolled in the study. These participants were randomly allocated to either the PI training or a control group through a public lottery conducted at the various registration venues. Half of the eligible married women were invited to bring their husbands to the training sessions. All enrolled women were then offered to participate in a second public lottery that assigned them to either the in-kind grant treatment group or a control group. The study was conducted between 2020 and 2023, with four rounds of follow-up quantitative data collected. Participation in the PI training was high, with women attending an average of 9.5 out of 12 sessions, and 10.4 sessions when they were invited to bring their husbands. The majority of women were satisfied or highly satisfied with the training content and organization. Over 90% of women assigned to receive the grant did so. However, the quantitative survey and a rapid qualitative data collection revealed issues with the quality of the delivered equipment. About half of the women reported receiving items that did not match their requests, citing quality issues or discrepancies with the requested equipment. The perceived quality of the equipment was lower than expected, with an average rating of 5.6 out of 10, and it was considered more expensive than market prices. Despite these issues, the majority of women still possess the equipment, and nearly two thirds reported using it regularly. Findings from the four survey rounds indicate that the PI training positively impacted innovation and investments in women’s businesses. Beneficiaries were more likely to introduce new products, work more hours, and have higher average investment values compared to the control group. The training also significantly improved their business practices. Both the training and the in-kind grant significantly enhanced beneficiaries’ subjective well-being. While inviting husbands to participate in the training increased women’s attendance, it did not alter the training’s overall impact. The study did not find a significant effect of the PI training or the grant on the performance outcomes of the businesses (i.e., business sales and profits). Although the training improved business practices, these changes may have been too small to significantly impact profits and sales. Other factors, such as lack of demand or the conflict in Goma, which were not directly addressed by the project, could also explain the lack of improved business outcomes. Further analysis is underway to determine if certain groups of women entrepreneurs experienced profit increases and to understand the mechanisms of impact. Page 42 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ANNEX 7. SUPPORTING DOCUMENTS (IF ANY) DRC geographic map and targeted Project provinces and cities Page 43 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT ANNEX 8. PROJECT’S THEORIES OF CHANGE I. Overall Project ToC II. TOC – Support for Women Entrepreneurs Page 44 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT III. TOC – Support for Young Entrepreneurs IV. TOC – Support for SMEs Page 45 The World Bank DRC- SME Development and Growth Project (P160806) ICR DOCUMENT I. Support for SME Centers Page 46