received help with business advisory services reported that MPDF assistance has led to improvements in their performance in terms of planning, quality management, human resource management, and/or environmental management and about 60 percent reported an increase in net profits or annual sales following MPDF-assisted changes.<sup>23</sup> 37. However, the evaluation raises questions about additionality and cost effectiveness. About one-third of the MPDF clients who received financial advice believed that the facility made no difference to the financing they obtained and two-thirds indicated that they would have implemented their project even without bank financing by relying on equity contributions from owners or family members, retained earnings and other sources of equity and debt.<sup>24</sup> On cost effectiveness, MPDF's performance was better than earlier PDFs (cost per project during the period covered by the evaluation was about 50% lower than in the earlier PDFs) but still left a lot to be desired. MPDF is collecting roughly 4.8% of the total cost of services—this is significantly below the 10% cost recovery originally projected.<sup>25</sup> 38. In brief, the project development facilities require considerable subsidization. It is not clear if the activities supported by the facilities deserve subsidies and, if they do, whether the results achieved justify the amount of subsidies given. Lack of a detailed cost-benefit analysis precludes firmer conclusions.<sup>26</sup>

# _World Bank SME projects_

39. In addition to providing credit, many World Bank SME projects also provide technical assistance to enterprises. An OED evaluation of five such World Bank SME projects that closed between FY97 and FY01, and an OED impact evaluation study of four SME projects in the Philippines that provided support to private firms during 198892, show mixed results on the technical assistance component.<sup>27</sup> Three out of the five SME projects did well on the input side, i.e., there was substantial use of the technical assistance (TA) services. However, only one of them reports significantly positive outcomes, with the other two achieving partially successful outcomes. The other two projects, as well as the four SME projects in the Philippines, show little use of the TA services. In the case of Philippines, the credit line component was substantially used and had a good impact, but the performance of the TA component was disappointing.

> 23 Nexus Associates, Inc. "Evaluation of the Mekong Project Development Facility, Final Report," June 4, 2002, report prepared for IFC, Operations Evaluation Group. The evaluation covered almost all enterprises supported by the MPDF.

> 24 However, the companies interviewed for the evaluation suggested that the need to raise money from other sources might have delayed the project, reduced its scope and/or increased the costs of capital.

> 25 The front-end fees that the MPDF could charge was limited to US$100 per project, a condition set by the Government of Vietnam as part of the establishment of MPDF.

> 26 It should be noted that, in recent years, there has been a shift in the nature of support provided by the project development facilities with direct support to enterprises no longer being the main instrument of support. Such support is now provided on a more selective basis with the emphasis shifting towards working with intermediaries, such as financial intermediaries and providers of business advisory services. 27 The five projects were in Burundi, Ghana, Nigeria, Pakistan and Sri Lanka.

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