III. ACCESS TO FINANCE
Matching Grant Facility is a sub-component under the Second Competitiveness Enhancement Project.
The MGF subcomponent will provide a financial subsidy for SMEs to invest in value-added activities or export oriented processes.
Based on successful implementation of the World Bank Competitiveness Enhancement Project (CEP I) in 2006-2013, in respect of MGF component of the project, the Government of Moldova decided to continue to support through a new scheme of matching grant co-financing, which was approved within the CEP II project. The aim of the new matching grant facility (MGF) is to help SMEs implement a set of activities that seek to improve their export competitiveness.
Through the provision of MGF under CEP II, the project will help Moldovan SMEs with export potential to use business development services (BDS) and other relevant business services, to help increase their competitiveness. Service providers will support SMEs to:
(i) improve existing products and services;
(ii) create new products and services;
(iii) improve production processes;
(iv) improve business management.
As a result the project is expected to increase the number of SMEs:
(i) exporting to new markets or new customers;
(ii) exporting for the first time;
(iii) exporting new products;
(iv) selling new products into export-oriented value chains.
Through the MGF will be addressed the information asymmetry that is faced by SMEs about the value of BDS for export competitiveness. The MGF subcomponent will provide financial subsidy for SMEs to invest in value-added activities or export-oriented processes. Thus, this program is expected to overcome the market failure by encouraging SMEs to use BDS to help increase their competitiveness, and see first-hand that these services will increase their opportunities to reach new markets, new customers, export new products, and develop other new export-oriented activities. Once the enterprises experience the benefits of these services, they will be more likely to pay for them. In this way, the MGF will address the market failure.
The facility is US$3.0 million and it is expected that approximately 250 SMEs will benefit out of the proposed Facility during the 5 years of Project implementation.