World Bank Turns To Aiding Small Companies

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When the World Bank lends money at favorable interest rates, it usually goes to support massive industrial, hydroelectric, or agricultural projects. Now, according to a World Bank policy paper, the bank plans to direct a portion of its funds to small labor-intensive companies, which in some countries "generate more direct and probably more indirect jobs per unit of invested capital" than larger capital-intensive firms.

Bank officials recently disclosed plans for a $106-million loan to strengthen a seven-year-old program run by the Indonesian Ministry of Industry and the Bank of Indonesia that provides credit to small agricultural, manufacturing, and service enterprises. About 70,000 loans will be made under the program, creating 140,000 new jobs.

Funds to aid what the World Bank calls "small-scale enterprises" currently represent only $300 million of the total $12-billion World Bank and International Development Association lending effort. But an effective development policy, the bank says, "should seek to increase the use of labor relative to capital to the extent that it is economically efficient."