World Bank Country Manager Mrs. Larisa Leshchenko says many governmental projects here in Liberia and the world have failed due to poor management.
“Many Government projects in Liberia and throughout the world have failed to deliver on their goals of economic stimulus and job creation because they are not sustainable or are not implemented in a transparent way,” Madam Leshchenko said recently at the Monrovia City Hall during the official launch of the post Ebola- reconstruction projects for Small, Medium and Large businesses across the country.
The World Bank Country Manager says these projects direct credit in a non-transparent manner and in ways that undercut market forces, citing as an example, selecting unqualified businesses or distorting markets by mandating interest rate caps.
In these types of projects, she observes that funds are disbursed but the projects quickly fail due to lack of oversight and non-repayment of loans as beneficiaries deem them to be “government handouts.” According to the World Bank official, the result is that little is achieved in terms of economic stimulus and job creation.
She notes that the aim of the project and the event in general could not be more important and relevant for Liberia, saying small businesses are the lifeblood of the Liberian economy, generating much needed jobs and income.
Madam Leshchenko acknowledges that access to finance is consistently cited as a critical constraint to MSMEs, saying the project promises to make important contributions in the area.
She says the project financed by the World Bank State and Peacebuilding fund for US$4.8 million, aims to increase access to finance for MSMEs in a sustainable manner.
She says it is known that the Liberian economy has faced tremendous challenges in recent years, ranging from the Ebola crisis, declined in commodity prices to the drawdown of the UN Mission in Liberia.
As a result, she notes that the rate of economic growth has fallen from high levels preceding the Ebola crisis to negative growth in 2016. But she says the good news is that there are signs that the worse is behind “us” and the medium-term outlook is positive.
Mrs. Leshchenko adds that economic activity in Liberia is picking up and growth is expected to reach close to 7 percent over the medium term led by mining, with support from agriculture, services and manufacturing.
She stresses that now it is important to ensure that this growth is shared by everyone, and the Government’s efforts to support MSMEs, including through this project, are important contributions to this critical objective.
She announces that beneficiary financial institutions have been selected based on compliance with strict eligibility criteria on financial performance. The financial institutions will bear the credit risk for the funds received and accordingly, they will have to base their lending decisions on a strict credit assessment of the interested small businesses.
Monitoring mechanisms will be put in place to ensure that the funds reach their intended beneficiaries, the small businesses that are starved of capital. In this manner, she says the project can have a lasting impact on alleviating the credit constraint faced by Liberian businesses.
Meanwhile, the World Bank official clarifies that the project alone cannot solve the access to credit problem faced by Liberian small businesses. Like many countries in the world – both developed and developing, she says small businesses struggle to obtain credit because banks perceive them as too risky and unprofitable.
As such, she observes that financial institutions prefer giving loans to larger, more established and less risky businesses. She notes that the World Bank is working with the Central Bank of Liberia and the Ministry of Finance and Development Planning (MFDP) in a broad-based program to increase financial inclusion.
By Lewis S. The–Edited by Winston W. Parley