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complementary policy measures such as advisory services can step in to maximize the effects of financing provided by the loan scheme. A strong legal framework for upholding creditor rights. The feasibility of establishing and maintaining a credit guarantee scheme depends on sound processes for collection and recovery of assets in case of default and effective contract enforcement. These are preconditions for the effective design, implementation, and evaluation of a credit guarantee scheme.
5. Grants and Vouchers Two common instruments to support technology upgrading are grants and vouchers (see box 7.5). Grants are a direct allocation of funding from public agencies to finance all or part of a technology project. In the case of matching grants, public agencies match a percentage of the contribution made by the applicant to ensure the applicant’s commitment to the activity. Vouchers are small, entitlement-based grants that do not need to be repaid. They are used to incentivize firms to digitalize with simple projects that require ready-made digital solutions, and to push firms to collaborate with technology providers. With effective auditing, vouchers require only light management. The simplicity of administration is a key attraction of voucher schemes; however, they require
BOX 7.5 The Difference between Vouchers and Grants A voucher is a type of grant with specifically defined characteristics regarding the selection process, implementation mechanisms, and value of the grant. When choosing one instrument over the other, policy makers need to consider the following important features of vouchers compared to regular (matching) grants: ■■
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Vouchers are entitlement based rather than competition or merit based; that is, applicants can get vouchers if they fulfill the selection criteria set in advance. Vouchers are small in value. Typically, the face value of vouchers is no more than a few thousand dollars, while regular grants can be much larger. Vouchers focus on behavior change: inducing small and medium enterprises and technology providers to collaborate and begin a process of technology upgrading, often of digital technologies. By contrast, regular grants typically focus on input additionality—implementing the adoption of a technology or digital solution—and are intended to crowd in private investment in technology projects. Vouchers rely heavily on brokers, which perform the functions of advertising, selecting technological solutions, vetting technology providers, monitoring, and ex post verification. Vouchers are simple to administer. Disbursement occurs when technology providers redeem vouchers, and firms often do not receive any value except the technical assistance.
Source: Cirera et al. 2020.
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