Overview

Financial sector and business support programs cover a variety of interventions that serve to increase access to financial services and enhance the economic opportunities of individuals, enterprises, and government institutions to play effective roles in reducing poverty.

Lack of access to financial services is frequently cited as a main contributor to persistent poverty, and MCC interventions address access issues through a number of channels.  In particular, finance projects designed to benefit the poor often focus on expanding participation in the financial sector.  Results are measured by increases in the availability and use of savings products, payment services, loans and other financial services. 

Financial sector programs are largely designed to affect the supply of financial services by improving the operational efficiency of microfinance institutions, stimulating lending to specific groups or regions, facilitating physical access to banks, or training lenders in new credit analysis techniques.  Efficiency upgrades often target increases in the number of poor clients served as well as reductions in operating costs.  However, some activities also address the demand-side by, for example, educating farmers how to access credit to purchase seed and fertilizer.

Business support services often target improving the skills of small-scale entrepreneurs, measured by increases in profits and employment.  Such business support services include efforts to benefit all economic actors by providing improved information, easing access to judicial procedures, supporting better regulation, and strengthening public and private institutions.

Such programs tend to address sources of friction that inhibit interaction among economic actors.  Increasing financial literacy among the poor and developing specialized skills needed to run profitable businesses are examples of demand-side programs.  Strengthening the legal system and the governmental institutions that influence the ease and pace of transactions are examples of improving business environment and procedures.

While the channels through which these interventions address economic growth and poverty reduction are clear conceptually, evaluations of financial sector and business support programs are challenging for several reasons.  Perhaps most importantly, entrepreneurship and business acumen are often not observable characteristics that can be identified through a survey.  As a result, comparing participants to nonparticipants is not likely to produce an accurate measure of the program’s impact.  In addition to the selection bias issue, there are many factors affecting the profits and wages of small businesses and their workers that need to be controlled for during the course of the evaluation.  As a result, estimating the rate of return of financial sector projects can be challenging.

Logic Model

MCC Impact Evaluations in Progress

Sort the table by clicking on the column headers. Arrows indicate ascending and descending order.

Country	Project/Activity	Focus of Evaluation	Methodology
Benin	Financial Institution and Borrower Capacity Building Activity	What is the impact of the challenge facility on the availability of financial services and on the profits of micro-, small- and medium-sized enterprises?	TBD
El Salvador	Productive Development Project	What is the impact of technical assistance and investment support on investment, employment, and income?	TBD
Morocco	Enterprise Support Project	Does business training increase the effectiveness of existing small- and medium-sized enterprise credit and grant programs?	Randomized control trial