exclusively to finance the provision or acquisition of advisory and consultancy services.<sup>30</sup> Although there are a large number of SMEs in OECD countries, few benefited from SME support programs.

45. Commercial providers of such services tend to do better. A study of SME support programs in Korea found that when comparable support services were available from private commercial, government or other non-profit agencies, the services of the commercial agencies were rated higher than public providers.<sup>31</sup> There were several reasons why the non-profit sources of support were less effective: a) excessive generality of training, information and other support provided; b) difficulties faced by SMEs in accessing such support or taking advantage of it effectively; and c) poor governance by support providers.

46. An example of a successful program is the CIMO program in Mexico. The program provides subsidized training and technical assistance to micro, small and medium enterprises. Its objectives are to raise worker productivity, promote good systems and practices in enterprises, foster industrial clusters and inter-firm linkages, align training supply with training needs. Two evaluations of the program were done in 1995 and 1997 respectively, comparing CIMO-supported firms with a control group of non-supported firms (Tan,2002). The evaluations suggest that the CIMO program made a significant difference. The CIMO-supported firms were more likely to provide training, including formal training courses and training by external trainers, than the control group. These firms had a greater tendency, compared to the control group, to introduce productionenhancing organizational changes (such as team work, quality circles and client orientation) and bring changes in production processes. The CIMO-supported firms had faster rates of increase in capacity utilization and, when economic conditions were adverse, a lower rate of decline in capacity utilization, than the control firms.

47. In recent years, a consensus has emerged in the SME practitioner community that traditional approaches to SME support need to be replaced by more effective interventions. The new approach discourages the use of interest rate subsidies and argues for subjecting business development services to market disciplines. It calls for redirecting efforts away from helping SMEs directly to developing financial and consulting markets that serve SMEs. A reflection of the new approach is the growing emphasis by IFC on increasing the cost-recovery rate in its project development facilities and the Bank's experimentation with a variety of matching grant schemes. Under such schemes, the Bank loans finance part of advisory services, as long as the private firm matches the amount in some proportion. One matching grant scheme, in Mauritius, has so far been evaluated in depth and been found to be ineffective.<sup>32</sup> Other new approaches aim at reducing the costs of market access or transaction costs for SMEs, by strengthening information systems, and helping develop management tools for SMEs. So far no evaluations exist for such approaches.

> 30 OECD (1997).

> 31 Nugent and Yhee (2001).  The paper evaluates the use of support from governmental and other non-profit institutions, sectoral associations and government policies by SMEs in Korea.

> 32 Biggs (1999) .

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