Download Emerging Opportunities - APT Action on Poverty

MICRO, SMALL & MEDIUM
ENTERPRISES
Emerging opportunities in the
wider economy
An international perspective
ANDY JEANS
What is a small enterprise?
• A process by which products or services
are traded
• An enterprise generates income for its
owner and workers by selling to customers
Individual
Customer
Goods or
services
Product
or
Service
Small
Business
Money
Inputs
Traditional Small Businesses
• Farmers, petty traders, artisans, tailors, etc
• Products – small quantities, little value
addition, low / inconsistent quality
• Customers – generally poor people from
neighbourhood, some middlemen
• Low income, saturated markets, insecure
• Available Support? - very little from either
private or public sources
Typical Large Business
• Mining, construction, manufacturing,
retailing (private or state owned)
• Products: High volumes, quality, valueadded, diverse
• Customers – wide range
• Available Support? – good access to
inputs and services
Constraints facing Small
Businesses
• Supply side – skills, raw materials, tools,
capital, information
• Infrastructure – roads, premises, power,
water, communications
• Demand side – markets, customers
• Policy environment – legal, regulatory
Supply side changes
• Improved access to
– basic education
– a wider range of material inputs
– transport and communication facilities
– financial and business services
• Enhanced capacity for collective action
Development Programmes
• Most interventions have addressed supply
side constraints:
– Credit, skills training (technical and business)
and infrastructure development
• Leading to improved:
– Access to technology, tools, working premises
– Capacity to produce better quality, alternative
products
– Capacity to produce more efficiently
Market problems
• Having the capacity to produce does not
mean a small business can sell at a
reasonable profit, for the effort
• Nor does it mean that sufficient quantities
can be sold to sustain the business
Customers and Trends
•
•
•
•
•
Poor individuals
Better-off individuals
Government
(Buyers for) Large firms
Other Small Businesses
Individuals
Poorer
Better off
• Limited
purchasing power
• Increased access
to factory goods,
imports
• Looking for higher
quality, new
products
• Prefer
convenience of
supermarkets
Large Firms
Government
• Tendering
systems
• Trends to
privatise and
decentralise
• Can import
Private
• Need large range of
supplies
• Demand high quality,
consistency, timeliness,
invoicing
• Trend to outsource
• Can import and export
Opportunities for Small
businesses
Other Small Businesses
Good opportunities for growth, diversity
• To bridge the gap between the growing
markets of large firms
The “missing middle”
Legal, regulatory
Formal / official
• Licenses
• Import regulations
• Taxation
• Time consuming
procedures
• Policing
Informal
• Harassment
• Corruption
• Access to supplies
Changes / Trends …………….. ?
Most Promising Opportunities
• Production and processing for onward sale
to other businesses
• Service businesses – wide range:
– Conventional – trading, repair, packaging,
transport, printing, accountancy etc.
– Other - Skills training, information, Q/A,
business planning, consultancy (?)
How to promote a thriving
network?
Tackle demand-side constraints – forge
links through which goods can be sold:
– Facilitate sub-contracts, forward contracts
– Assist intermediaries
– Build capacity of groups / associations /
clusters – to access markets
– Forge commercial links through trade fairs,
catalogues
How to tackle policy
constraints?
• Educate / inform policy makers – ‘best
practice’?
• Stimulate greater dialogue with SMEs or
their representatives
• Increased capacity to identify and
articulate needs can also enable
negotiations with private firms
CONCLUSIONS
• Emerging opportunities for MSEs - better
linked and integrated into wider economy
• SED interventions need to adapt:
– Informed by better understanding of market
demand and channels
– More emphasis on market (rather than input)
constraints
– Strengthen capacity of MSEs to forge and sustain
links
Who? - Business, NGOs, Government ?