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Bhutan: Micro, Small, and Medium-Sized Enterprise Sector Development Program

sector: Industry and Trade | country: Bhutan

This validation agrees with the project completion report (PCR) on the general lessons drawn from the Micro, Small, and Medium-Sized Enterprise Sector Development Program (MSME SDP). The clearly defined tranche release criteria provided impetus to achieve the envisaged outcomes and outputs. More involvement by the implementing agency, such as the Department of Cottage and Small Industry (DCSI), in the design process could have improved impact, particularly for the cost-sharing facility (CSF). There was lack of qualified local consultants and foreign consultants did not fully understand the context in Bhutan for a program such as the MSME SDP. Future programs should adequately account for this risk.

This validation agrees with the lessons pointed out by the project completion report (PCR) on the program and project components. The lessons from the program component were (i) the importance of an MSME policy paper, although delayed, in setting the strategy and action plan and a clear work program for DCSI; and (ii) administrative costs could have been reduced and incentives increased for implementing the program preconditions if the three tranches of $2 million were set to just two tranches of $3 million. From the project component, the lessons pointed out were (i) the broader reach realized due to the combination of credit to MSMEs, investment in their capacities, and an enabling environment; and (ii) the strong continuity between an earlier support by ADB for a credit information bureau and the project’s support for a central registry as both initiatives reinforced each other. In addition to the lessons drawn out by the PCR, this validation adds that there should have been adequate assessment at appraisal of the suitability of a new facility such as the CSF, especially in the context of Bhutan where the number of BDS providers is small and where government heavily subsidizes training for business development services (BDS).

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