Regional: Pacific Business Investment Facility

Sovereign Project | 47373-001 Status: Approved


Asian Development Bank (ADB) (i) establish the Pacific Business Investment Trust Fund; (ii) accept and administer grant contributions to the trust fund from bilateral, multilateral, and other sources, in each case substantially in accordance with the terms and conditions set forth in this paper; and (iii) administer a portion of technical assistance (TA) for the Pacific Business Investment Facility, to be financed on a grant basis from the trust fund.

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Project Name Pacific Business Investment Facility
Project Number 47373-001
Country Regional
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8729-REG: Pacific Business Investment Facility
Technical Assistance Special Fund US$ 1.50 million
Pacific Business Investment Trust Fund US$ 11.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Finance - Small and medium enterprise finance and leasing

Industry and trade - Small and medium enterprise development

Gender Equity and Mainstreaming Some gender elements
Description Asian Development Bank (ADB) (i) establish the Pacific Business Investment Trust Fund; (ii) accept and administer grant contributions to the trust fund from bilateral, multilateral, and other sources, in each case substantially in accordance with the terms and conditions set forth in this paper; and (iii) administer a portion of technical assistance (TA) for the Pacific Business Investment Facility, to be financed on a grant basis from the trust fund.
Project Rationale and Linkage to Country/Regional Strategy

Pacific island countries face significant and complex development challenges that constrain private sector growth. Challenges include the high cost of doing business, inadequate infrastructure, outdated legal systems, inadequate business and technical advisory services, and land rights issues. The financial sector is underdeveloped, with a low ratio of private sector credit to gross domestic product. Businesses of all sizes have difficulty securing commercial finance in the Pacific. Small and medium-sized enterprises (SMEs) are particularly affected, because commercial banks in the region extend little credit to this segment. Opportunities for businesses to raise additional capital through stock exchanges are also limited. There are no private equity funds in the region and no near-term prospects for new funds. Since 2010, the economic ministers of the Pacific Islands Forum have annually called on development partners to help increase access to finance for SMEs. The Government of Australia expressed interest in working with ADB to design innovative approaches to address the financing constraint faced by SMEs. ADB's Midterm Review of Strategy 2020 emphasizes ADB's intention to expand support for SME finance.

In 2013, ADB reviewed (i) private equity funds and other finance facilities in the Pacific, (ii) the financial sector and supply of and demand for business advisory services by country, (iii) the experience of hybrid risk finance and business advisory support facilities in other regions, and (iv) potential models for the Pacific region. The review found that to ease the financing constraint faced by SMEs, government and development partner efforts should aim to unlock the excess liquidity that commercial financiers have in almost all Pacific island countries. While commercial banks report an interest in increasing lending to SMEs, they remain hesitant. Their credit policies and products favor larger clients and short-term investments. The banks, which are highly risk averse, have expressed concerns over SMEs having weak internal management capacity (including limited financial management skills), as well as insufficient shareholder capital and acceptable collateral. Proposals put to banks by SMEs generally lack the rigor required from a business and financial plan. As a result, credit is often unavailable or unaffordable for SMEs at offered terms.

The TA's impact will be the sustainable growth of the private sector in selected Pacific island countries. The outcome will be commercially successful and sustainable SMEs in Pacific island countries. It is expected that (i) at least $15 million of additional finance will be leveraged from commercial sources; (ii) at least 100 supported SMEs will expand or diversify operations; and (iii) at least 1,000 jobs will be created or saved in supported SMEs.

Tailored business advisory services are needed to reduce financier concerns about SMEs' internal capacities. While these services are available in the larger Pacific island countries, their focus is on large, predominantly foreign-owned enterprises, governments, and development partners. In contrast, business development centers, where they exist, cater to microenterprises and informal sector operators. This leaves SMEs unserved. Building the managerial and technical capacity of these entrepreneurs is essential to improve the business risk profile with financiers. Further, in the underdeveloped Pacific financial markets, innovative financing arrangements are required to leverage and supplement commercial finance. These measures facilitate access to finance for SMEs to expand and diversify, and would absorb excess bank liquidity. They would complement ongoing private sector development and financial sector reforms, including secured transactions reforms, which will increase access to finance by SMEs over time, but will not alone bridge the financing gap.

Business financing and development programs have been implemented in the Pacific and other regions by bilateral development partners, development finance institutions, and private fund management companies for many years. The following lessons have been drawn from these programs: (i) managerial and technical advice to SMEs, pre- and post-finance, is essential for leveraging commercial finance; (ii) SMEs must contribute to the cost of advisory services to ensure buy-in, and must see the advice provided as independent, objective, and confidential; (iii) extensive collaboration with commercial financiers and other stakeholders is vital to achieve the intended impact and lower implementation cost; (iv) SMEs typically demand less than $300,000 in finance, which finance facilities with a commercial mandate have been unable to respond to effectively; (v) where finance is provided, self-liquidating instruments are preferred to prevent exit issues; (vi) expansion of existing businesses is less risky and more likely to succeed than establishment of new ventures; (vii) maintaining an in-country advisory presence in many countries is not cost-effective; and (viii) building in-country advisory capacity is usually not sustainable in the Pacific without continued donor support because of the small market size.

Impact Sustainable growth of the private sector in selected Pacific island countries
Project Outcome
Description of Outcome Selected SMEs in Pacific island countries are commercially successful and sustainable
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Business advisory services are provided to SMEs in selected Pacific island countries

2. Selected SMEs receive concessional loans from the Pacific Business Investment Trust Fund in parallel with commercial finance

3. Project management services are effectively delivered

Status of Implementation Progress (Outputs, Activities, and Issues)

Establishment activities for the facility are almost completed. Contact programs with businesses in selected countries have begun. Three core team consultants (Facility Manager, 2 Business Advisors, and Administration Officer) are engaged and based full time in PLCO. The M&E Expert is engaged on intermittent inputs. The recruitment of the thrid Business Advisor, Financial Restructuring Expert, and individual technical experts as panel members are ongoing.

There are 100 ongoing initiatives (or subprojects) being implemented for 5 Pacific developing member countries under the TA and 9 active consultant contracts. Approximately $6.1 million has been committed, with approximately $768,000 disbursement to date.

Geographical Location Kiribati,Tonga,Federated States of Micronesia,Nauru,Palau,Tuvalu,Republic of Fiji,Republic of the Marshall Islands,Papua New Guinea,Cook Islands,Samoa,Solomon Islands,Vanuatu
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design

(i) Government officials from relevant government agencies and state-owned enterprises in PDMCs;

(ii) Private sector entities including chambers of commerce, women's groups, banking institutions;

(iii) Civil society organizations including women's and community groups; and

(iv) Development partners active in private sector development activities in Pacific and other bilateral and multilateral development institutions/organizations.

During Project Implementation Same as during the project design with more frequent and in-depth consultations.
Business Opportunities
Consulting Services Consultants will be engaged by ADB in accordance with the Guidelines on the Use of Consultants (2013, as amended from time to time).
Procurement Procurement will be undertaken in accordance with ADB's Procurement Guidelines (2013, as amended from time to time).
Responsible ADB Officer Sabine Spohn
Responsible ADB Department Pacific Department
Responsible ADB Division Pacific Liaison and Coordination Office in Sydney, Australia
Executing Agencies
Asian Development Bank
6 ADB Avenue, Mandaluyong
Metro Manila, Philippines
P.O. Box 789, 1099 Manila,
Concept Clearance 03 Jun 2014
Fact Finding -
Approval 26 Sep 2014
Last Review Mission -
Last PDS Update 22 Sep 2015

TA 8729-REG

Approval Signing Date Effectivity Date Closing
Original Revised Actual
26 Sep 2014 - 26 Sep 2014 31 Aug 2019 - -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
1,500,000.00 11,000,000.00 0.00 0.00 0.00 0.00 12,500,000.00 26 Sep 2014 796,919.38

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