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Pakistan: Small and Medium Enterprise Sector Development Program [Loan 2066-2067- PAK]

sector: Industry and Trade | country: Pakistan

The project completion repoert (PCR) appropriately captures the lessons of the Small and Medium Enterprise Sector Development Program (SMESDP), mostly from its unsuccessful aspects, including the coordination and communication challenges associated with programs that are too broad in scope and involve numerous government entities; the ineffectiveness of high-level coordination bodies; the need for project administration memorandums to help manage project implementation; the need to assess procurement risks and define appropriate modes of procurement and disbursement at the start; the need to adequately assess actual implementation progress, particularly for components that are delayed; and the need to assess the feasibility of earmarking program loan proceeds for program components in light of government financial management and control systems.

The lack of success in restructuring the Small and Medium-sized Enterprise (SME) Bank also reconfirms lessons identified by the Independent Evaluation Department (IED) and other development partners with regard to state bank restructuring, including labor retrenchment and incentive issues, as well as the difficulties associated with privatization such as determining an acceptable sale price and finding reputable strategic investors for a bank with an SME focus. On the positive side, the SMESDP experience also underscores (i) the importance of adequate stakeholder consultations, and timely technical input and stakeholder feedback in policy formulation and legislation; (ii)the effectiveness of a dedicated, autonomous policy advisory, development, and coordination institution (if a competent managerial resource such as the Small and Medium Enterprise Development Authority [SMEDA] is put in place); and (iii) the role that independent performance audits can play in operationalizing matching grant schemes, such as the Business Support Fund (BSF).

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