most widely used financial instruments (Kersten et al., 2017). Recently, developing countries, are increasingly using incubators and accelerators to support firms, but these policies generally lack the features of good design, such as a results framework, clear objectives, well-defined eligibility and selection criteria, and robust monitoring and evaluation (M&E) systems (Grover, Medvedev and Olafsen, 2019). Such design and implementation gaps do not bode well for the success and scalability of public efforts to support firm growth. The lack of strong M&E systems (including program impact evaluations) also means that it is unclear whether these programs generate greater benefits than their costs.

Given that several factors simultaneously limit firm growth, evidence underscores the importance of addressing multiple constraints. An intervention in Tanzania that offered both business training and grants to micro firms was successful in improving firm performance in terms of sales, profits and happiness relative to a program that did either training or grants alone (Berge et al., 2015). Similar results were found in Uganda (Fiala, 2018).

In line with this evidence, this paper proposes a novel three-stage program that will sequentially address multiple constraints among Malawian firms. The process of arriving at the firm support program was informed by extensive discussions with the policy makers and private sector and is described in Box 1. The _first stage_ aims at changing mindset by offering a psychology-based personal initiative training to all firms. Firms that record substantial changes in their mindset will graduate to the _second stage,_ which will build technical capabilities through two alterative programs: one prepares firms to access finance, whereas the other prepares firms to access markets. Firms that show improved capabilities will graduate to the _third stage_ that will support in establishing linkages with potential customers through network programs, as well as offer financial assistance. This program design will be implemented in Malawi through the Financial <u>Inclusion and Entrepreneurship Scaling</u> project of the World Bank.

**Box 1: The context of Malawi: Proliferation of programs with large gaps**

To inform the design of the entrepreneurship support program component of the <u>Financial Inclusion and Entrepreneurship Scaling Project, the World Bank team met with key actors of the entrepreneurial</u> ecosystem in Malawi including (i) policy makers; (ii) several small and medium firms (randomly selected from the World Bank enterprise survey sample frame, 2014; beneficiaries of current support programs); (iii) large firms in various sectors (identified beneficiaries of current support programs) (iv) development partners; and (v) business development service providers. In addition, the World Bank team also conducted a complete mapping of firm support interventions in Malawi. Discussions with the stakeholders and the mapping of existing programs supporting firms clarified that the multiplicity of programs have not been able to make much progress in forming a critical mass of firms that can contribute to a vibrant private sector in Malawi.

The World Bank team identified the following key gaps in current programs: 4