MSME Competitiveness Project

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This will be achieved through a set of activities that aim to: a) digitize government to business services and inspections, streamline permissive documents, and enhance national quality infrastructure to reduce the regulatory burden enterprises face (Component 1); b) increase access to finance for micro, small and medium-sized enterprises (MSMEs) through credit guarantees and enhance the capacity of the Credit Guarantee Fund (CGF) (Component 2), c) support the development of MSMEs and enhance their export competitiveness (Component 3); d) support project management and implementation (Component 4); e) support the government's response in case of an emergency (Component 5).The operation will have six components: Component 1 (US$21.85 million): Digitization and Regulatory ReformActivities will focus on scaling up digitization of Government to Business (G2B) services (permissive documents, authorizations, etc.) promoting integrated service delivery, enhancing national quality infrastructure and reducing regulatory burden for private sector and increase competitiveness in the post-COVID recovery. This will be complemented with digitizing and enhancing capacity of inspections (equipping them, improving e-Inspection management system, and enabling risk-based inspections). Relevant regulatory reform as needed to implement digitization, as well as reforms linked with regulatory simplification, will complement digitization. This involves: a) scale-up of digitization of G2B services (permits, licenses, approvals, notifications, etc.) at national and local level; b) enhance and upgrade e-Inspection system to enable proper inspection planning and implementation of field inspection visits; c) enable interoperability of different platforms and services provided to businesses through the development of integrated service delivery, d) simplify business regulations, including export-import processes, laws and regulations to enable more conducing digital trade and services, e) improve national quality infrastructure to prioritize investments and associated technical assistance focusing on those areas linked with enabling exports in key economic sectors, f) ensure that the Project addresses climate vulnerabilities and supports reduction of GHG emissions and generates mitigation and adaptation climate co-benefits, and f) supporting reforms through performance-based conditions. Component 2 (US$15 million): Access to Finance The objective of Component 2 is to unlock financial intermediation to MSMEs by addressing high collateral requirements and the heightened risk aversion of financial institutions to MSMEs in Moldova through public portfolio partial credit guarantees. Component 2 will benefit private MSMEs, with no more than 249 employees, annual turnover up to 50 million lei, and total assets up to 50 million lei. The Project will support public credit guarantees for both investment loans and working capital loans by commercial banks via the CGF. The Project will finance the provision of portfolio public credit guarantees to MSMEs through capitalization of the CGF (~US$14.5 million) and will also provide technical assistance (up to US$0.5 million) to strengthen ODA/CGF’s institutional capacity to facilitate access to finance for MSMEs. Component 3 (US$ 12.25 million): MSME Development and Export CompetitivenessActivities under this component will support firms through matching grants, export readiness, supplier linkages, and export promotion programs. The planned activities are linked with the Government’s goals of simplifying the rules for MSME operation, supporting business establishment, growth and internationalization, enabling more efficient support programs for MSMEs, as well as facilitating the inflow of investments. The tools provided under this Component will help companies to address some of the current shortcomings, thus improving competitiveness and enabling export. The Project will enhance the capacity of ODA and MSMEs to address climate action priorities by providing trainings on climate change topics (adaptation and mitigation).Component 4 (US$0.9 million): Project Management and ImplementationFunds will be allocated to ensure adequate staffing of the Project Implementation Unit (PIU) with key staff, including monitoring and evaluation, environmental and social specialists, to ensure implementation in accordance with World Bank rules. PIU will be under MoEDD and it will manage implementation of the Project.Component 5 (US$0 million): Contingency Emergency Response Component.This is an unfunded contingency component that can be activated in case of a relevant emergency event. Following an eligible crisis or emergency, the Borrower may request the World Bank to reallocate Project funds to support an emergency response. Once triggered, this component will draw from the then uncommitted loan resources under the Project to address the emergency. Eligible crisis or emergency is any event that has caused, or is likely to imminently cause, a major adverse economic and/or social impact to the Borrower, associated with a natural or man-made crisis or disaster. This design of the activities to be carried out under this component will consider the context of the COVID-19 pandemic and the recent geopolitical risks in the region whereby additional social protection measures may be required, as well as response to any other large shocks that may manifest. Therefore, the CERC is not limited to certain sectors, regions, or specific activities. The definition of eligible emergency and a positive list of activities will be included in the Loan Agreement and in the CERC Manual annex included as part of the Project Operations Manual (POM).Component 6 (US$ 0.35 million): Modernization of the Collateral RegistryThis component is funded by a Recipient Executed (RE) grant provided by the Moldova Growth Resilience and Opportunities for Well Being (MGROW) Trust Fund, which is an extendable multi-donor trust fund administered by the WB. The activities under this component will focus on procuring the software for the collateral registry and will be implemented by the Recipient: Republic of Moldova through the Ministry of Justice (MoJ). The World Bank has been providing complementary technical assistance to MoJ on the modernization of the collateral registry through the design of a new platform and system to register and publish security rights over movable assets, which will significantly simplify the process to obtain finance secured by movables as well as provide certainty to creditors as to their priority status, enhancing access to finance for MSMEs. The digital collateral registry is expected to have a transformative impact, enabling complete digitalization of public services leading to the streamlining of processes for businesses and citizens, interconnection with national data sets; automation of work processes between the stakeholders of the registry data providers (more than 2,000), improving transparency, efficiency and accuracy.