Macedonia Business Ecosystem Project - Year 2 Work Plan

The project is guided by a theory of change that facilitating systemic change in the MSME sector will have a broad and sustainable impact on current and future firms in Macedonia in terms of competitiveness, reflected in increased job creation, revenue growth, and supply chain linkages. The overall goal of the project is to achieve a self-sustaining cadre of business support organizations (BSOs) that offer targeted, in-demand services to their MSME members/clients, who are incentivized to pay for these services. Additionally, the project aims to create a robust network of alternative financing mechanisms and institutions investing in MSMEs with links to a strong pipeline of investment-ready start-ups and MSMEs. Lead firms are also expected to actively invest in local economic development activities, including developing their future workforce, helping suppliers reach standards, improve quality, introduce new technologies and know-how, support entrepreneurship, and finance activities from municipal development plans. BEP is addressing MSME challenges through a systems approach, focusing on the incentives, behaviors, and relationships that underpin the system. The project is structured to focus on improving the supporting ecosystem for MSMEs, ensuring that the project supports new relationships among MSMEs and BSOs, commercial and non-bank financial institutions, and lead firms. Sustainability is the cornerstone of the project's approach, and critical to developing a truly supportive, enabling system for MSME growth and job creation in Macedonia. The project is building on the successes and lessons learned from previous projects on both supply and demand sides to facilitate a functioning system of MSME finance that will enable firms to expand, add jobs, and improve productivity. BEP's approach addresses the systemic supply and demand aspects of MSME finance, building on USAID's past work to bring Macedonia's finance sector to new levels of scale, efficiency, and profitability. BEP's three components address key facets of the business ecosystem, which are naturally interconnected and mutually reinforcing. The components include improving business support services to MSMEs, improving MSME access to sources of financing, and leading firms to invest in the development of supply chains and labor forces. The project is taking an integrated and innovative approach to ensure activities take into account and leverage the benefits to MSMEs from the interrelated nature of services, finance, and private sector engagement. The project has set several targets, including a 15% average annual growth rate for MSMEs, 5,750 new jobs, 250 MSMEs accessing alternative and traditional financing, $138M in financing (investment and credit) for MSMEs and start-ups, and $40M leveraged by lead firm and private sector partners. The targets are expected to be achieved through the project's activities, which include grants, training, and technical assistance to support the development of a dynamic ecosystem of business service organizations, financial facilitators, business services providers, and financial institutions and investors supporting the MSME sector.