Providing Essential Infrastructure in Fragility, Conflict and Violence-Affected States - A toolkit for enabling SME participation

SMEs in general, but especially in FCV contexts, face major costs, risks and capacity and financial constraints. Such challenges may be particularly acute in public procurement and related markets when PSP initiatives are being developed and implemented. Creating an enabling environment for SME participation in PSPs in FCV contexts involves an entire ecosystem.

G20/OECD Guidance Note on Diversification of Financial Instruments for Infrastructure and SMEs

The selected voluntary policy recommendations provided below seek to assist  governments in  tackling key challenges linked to mobilising private financing for infrastructure and SMEs, in particular from institutional investors and capital markets and diversifying financial instruments with special attention to equity financing. As challenges are country-specific, the recommendations are intended to serve as guidance to country authorities in their effort to cope with their specific circumstances, including targeting particular type of investors.

Further Reading in SMEs and PPPs

The role of SMEs on PPP projects has been analyzed from different sectors. Below are some documents on how pro-SME PPP regulations and policies have worked in practice.




How to foster a more inclusive environment for SMEs in PPPs?

The benefits of supporting such small and medium-sized enterprises, or SMEs, carry over into Public-Private Partnerships (PPPs). But often, these enterprises find themselves “crowded out” by the bigger players in infrastructure. SMEs in developing countries may find it particularly costly and time-consuming to comply with complex pre-qualification criteria or bidding documents, leaving them unable to compete with market leaders. This is unfortunate because SMEs participating in PPPs can build local capacity and expertise, decrease costs, facilitate logistics, encourage increased competition, and create broader opportunities for economic development.

Examples of Policies that Incorporate Existing Operators into New PPPs

This situation is quite common in the transportation sector, especially in where a new transportation system such as bus rapid transit is created. Examples of countries that have had to face this situation are Colombia and Peru (see below). The governments of these countries recognized the policy need to allow existing operators to be included in the new system, and structured the PPP to allow for such considerations.

SMEs and PPPs

Among the many benefits that PPPs can bring, PPPs can build local capacity and expertise (resulting in more cost efficiencies), encourage increased competition, and create opportunities for broader economic growth. To enjoy such benefits, involving small and medium enterprises (SMEs)* in PPPs is key.

Public Private Partnership: National Treasury PPP Practice Notes issued in terms of the Public Finance Management Act

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National Treasury’s PPP Manual is a systematically guide to public and private parties through the phases of the regulated PPP project cycle for national and provincial government, unpacking policy and providing procedural clarity as it does so. It draws on South African project experience to date and on best international practice, without infringing on the authority of accounting officers and authorities. It sets rigorous risk-assessment standards by which government will make affordable project choices that best leverage private investment for quality public services.

Scaling Up Blended Financing of Water and Sanitation Investments in Kenya

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This PPP case demonstrates how OBA enabled the government to channel private funding for a development priority.  Community-based organizations grew into PPPs with fully commercial business models for delivering water in poor rural areas. A Kenyan micro finance bank provided loans, where part of the principal was paid by GPOBA once the service proved functional and part of credit default risk was guaranteed by USAID.