Study on Promoting Rural Enterprise Growth and Development

Description
The dynamic role of micro and small-scale enterprises (MSEs) in developing countries as "necessary engines for achieving national development goals such as economic growth, poverty alleviation, employment and wealth creation, leading to a more equitable distribution of income and increased productivity is widely recognized."

Promoting rural enterprise growth
and development: Lessons from
four projects in sub-Saharan Africa
Enabling poor rural people to overcome poverty
“Field experiences”
2
Promoting rural enterprise growth
and development: Lessons from
four projects in sub-Saharan Africa
Prepared by:
Nana Asantewaa Boateng
Small Enterprise Development Specialist
“FIELD EXPERIENCES”
Enabling poor rural people to overcome poverty
2
© 2011 by the International Fund for Agricultural Development (IFAD)
The opinions expressed in this publication are those of the authors and do not necessarily
represent those of the International Fund for Agricultural Development (IFAD). The designations
employed and the presentation of material in this publication do not imply the expression of any
opinion whatsoever on the part of IFAD concerning the legal status of any country, territory, city
or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The
designations ‘developed’ and ‘developing’ countries are intended for statistical convenience
and do not necessarily express a judgement about the stage reached by a particular country or
area in the development process.
The designations employed and the presentation of the material in the maps contained in this
document do not imply the expression of any opinion whatsoever on the part of IFAD
concerning the delimitation of the frontiers or boundaries, or the authorities thereof.
ISBN 978-92-9072-310-3
April 2012
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Table of contents
Abbreviations and acronyms 5
Foreword 6
1. Introduction 7
2. Brief project profiles 9
Rural Enterprises Project – Phase II (Ghana) 9
Support Programme for Rural Microenterprise
Poles and Regional Economies (Madagascar) 11
Rural Small and Microenterprise Promotion Project – Phase II (Rwanda) 12
Promotion of Rural Entrepreneurship Project – Phase II (Senegal) 14
3. Good practices/lessons learned across projects 16
What is a ‘good practice’? 16
Specific lessons learned/good practices across projects 16
- Enterprise development approach: Targeting and accessibility 17
- Effective business development services 20
- Effective business financial services 22
- Availability of materials and tools 25
- Client/market connection 27
- Enabling environment for sustainable MSE development 29
- Sustainability of enterprise development 31
- Gender sensitivity in enterprise development 33
4. Conclusion 36
5. Recommendations 38
5
Abbreviations and acronyms
GRATIS Ghana Regional Appropriate Technology Industrial Service
MSE micro and small-scale enterprise
NBSSI National Board for Small Scale Industries
PCMU project coordination and monitoring unit
PROMER-II Promotion of Rural Entrepreneurship Project – Phase II
(Senegal)
PPPMER-II Rural Small and Microenterprise Promotion Project – Phase II
(Rwanda)
PROSPERER Support Programme for Rural Microenterprise Poles and
Regional Economies (Madagascar)
REP-II Rural Enterprises Project – Phase II (Ghana)
SME small and medium-sized enterprise
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Foreword
It is my pleasure to share with IFAD colleagues and partners this report on the lessons
learned from IFAD-financed rural enterprise projects in sub-Saharan Africa. This is the
first of a series of documents emerging from ‘capitalization workshops’ on key topics
related to our work in achieving IFAD’s goal of enabling poor rural people to improve
their food security and nutrition, raise their incomes and strengthen their resilience.
These workshops bring together staff from IFAD-financed projects, along with farmers
and other rural entrepreneurs and technical specialists, to draw out, share and discuss
– in other words, to ‘capitalize on’ – the practical lessons learned from their
experiences. The workshops involve an intensive week of writing, presentation,
discussion, debate – and laughter. Their results amount to a veritable treasure chest of
wisdom from practitioners, relating not only to their successes, which we plan to scale
up and replicate, but also to their difficulties, which we hope to avoid.
Rural enterprise growth and development is a particularly important topic for IFAD
to explore through a ‘capitalization’ process as the Fund has limited experience in
supporting this work relative to its more traditional work in agriculture and
community development. The focus on Africa (more precisely, sub-Saharan Africa) is
also timely. Africa’s economies today are becoming more dynamic, and agricultural
growth is catalysing broader rural growth. This has led to the rapid emergence of rural
enterprises. Many, if not most, of these enterprises are owned and managed by women
and young people. Nearly all have the potential to generate further employment in
rural areas. We therefore expect to expand our work with rural enterprises beyond the
farm, building on the lessons from our colleagues in Ghana, Madagascar, Rwanda and
Senegal. I therefore extend my thanks to them for sharing their hard-earned knowledge
with us. I hope that you will agree that the lessons and recommendations that have
emerged are very useful for all of us working in rural development.
Ides de Willebois
Director
Western and Central Africa Division
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Introduction
The dynamic role of micro and small-scale enterprises (MSEs) in developing countries
as “necessary engines for achieving national development goals such as economic
growth, poverty alleviation, employment and wealth creation, leading to a more
equitable distribution of income and increased productivity is widely recognized.”
1
In
an attempt to accelerate growth rates in low-income countries, particularly in Africa,
many development partners and donors have made the promotion and development of
MSEs a major concern.
These enterprises, which are mainly rural and agriculture-based, are faced with
unique problems that affect their growth and, thus, reduce their ability to contribute
effectively to economic development. The problems range from the lack of access to
credit, inadequate managerial and technical skills, and low levels of education to poor
access to market information and an inhibitive regulatory environment. The ability of
MSEs to realize their potential impact on the rural economy in terms of generating
employment and increasing income therefore depends largely on the availability and
provision of appropriate and cost-effective business development support services,
including financial support.
Against this background, many development agencies and donors consider the
promotion and development of rural enterprises to be a key tool for rural poverty
reduction in Africa. IFAD, for example, views rural entrepreneurs in particular and the
private sector in general as the main drivers of sustainable rural development. It also
recognizes that providing an enabling environment for market-oriented economic
activities is crucial for the realization of countries’ economic and social objectives. IFAD
is therefore implementing various projects in Africa that have the potential to help rural
communities diversify their income-generating activities by stimulating engagement
not only in value addition to rural products but also in non-farm production and
services that provide additional employment and income opportunities. Experience has
shown that there is great potential for scaling up rural enterprises in Africa.
The search for solutions to scaling up MSEs in Africa as one way of tackling rural
poverty has been the central focus of policymakers, donors and development
practitioners including IFAD. To this end, a number of donors and development
partners provide enterprise development interventions through programmes, projects
and initiatives. In this effort, diverse approaches are used to promote the growth and
development of MSEs based on the policy directions and interests of these donors and
development partners. A wealth of information and experiences in rural enterprise
development methodologies is therefore held by these development institutions,
which, if harnessed and shared, could help to improve best-practice interventions in
support of MSE development and address the key sectoral issues that constrain private-
sector development in particular and MSE growth and expansion in general.
1 William F. Steel and L. M. Webster, How Small Enterprises in Ghana Have Responded to Adjustment.
World Bank Economic Review 6(3): 423-438 (1992).
Accordingly, knowledge acquisition and transfer resulting from the systematic
implementation of enterprise development projects across multiple countries
and projects will provide major opportunities throughout the life of projects to
mainstream learning and reduce costs of replication and scale-up. This process can
also contribute to improving country and regional implementation and future
programme development.
Capturing and disseminating best practices and lessons learned in rural enterprise
development has therefore been central to the management of IFAD’s Africa regional
portfolio. At the same time, it has been realized that this knowledge is not adequately
documented in the various reports that projects are required to submit, since these
reports tend to focus almost exclusively on implementation progress and constraints.
As such, the wealth of experiences and lessons learned that are essential for scaling up
are not sufficiently shared with other projects and stakeholders.
The Capitalization Workshop on Rural Enterprises Development: Challenges,
Progresses and Lessons Learned, held in Accra, Ghana, from 16 to 24 May 2011, was
therefore intended, among other things, to bring together best practices and lessons
learned in rural enterprises from four selected projects in Western and Central Africa to
serve as a guide for future programming by IFAD. The projects involved were the Rural
Enterprises Project – Phase II (REP-II) in Ghana, the Support Programme for Rural
Microenterprise Poles and Regional Economies (PROSPERER) in Madagascar, the Rural
Small and Microenterprise Promotion Project – Phase II (PPPMER-II) in Rwanda, and
the Promotion of Rural Entrepreneurship Project – Phase II (PROMER-II) in Senegal.
One of the many ways to showcase project results is through success stories that
describe how projects have affected people’s lives. Thus, the Western and Central Africa
Division, apart from using the capitalization workshop as a platform to engage projects
and partners in a participatory process of documenting experiences and creating
knowledge products for various purposes, also used the process to identify and capture
lessons learned and experiences across projects in rural enterprise growth and
development. This has led to a greater understanding of the constraints and challenges
faced, which has formed the basis for generating knowledge products that can
contribute to improved programme design and policy dialogue.
This technical report therefore documents the lessons learned and good practices
identified on enterprise development approaches, methodologies and innovativeness
across projects from these four countries.
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999
Brief project profiles
This section presents brief profiles of the four projects whose experiences and practices
have been used to capture enterprise growth and development good practices and
lessons learned in this report. These projects have accumulated sufficient experiences
during implementation for them to yield a number of practical lessons and good
practices, which can be applied to inform ongoing and future IFAD-funded projects,
and may be of value to other projects as well.
Rural Enterprises Project – Phase II (Ghana)
The overall goal of REP-II is to contribute to the alleviation of poverty and improved
living conditions in rural areas of the country, particularly for women and vulnerable
groups, through increased self- and wage employment. The project has an eight-year
duration (2003-2012) and covers 53 districts with four years of technical assistance per
district. It also provided limited support to 11 of the 13 districts of the Phase I project
for the first two years.
At appraisal the project was based at the Ministry of Environment, Science and
Technology, but was later moved to the Ministry of Trade and Industry. A project
steering committee comprising all main project stakeholders oversees project
implementation. The project coordination and monitoring unit (PCMU) coordinates
all project activities and provides technical backstopping, through the National
Board for Small Scale Industries (NBSSI) and the Ghana Regional Appropriate
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Technology Industrial Service (GRATIS), to the district-based delivery mechanisms:
business advisory centres and rural technology facilities. The PCMU is supported by two
zonal offices.
The main project components are:
• Business development services
• Technology promotion and support to apprenticeship training
• Rural financial services
• Support to rural MSE organizations and partnership-building
• Project management and monitoring
The business development services component is implemented through business
advisory centres in a tripartite arrangement comprising the project, the district
assemblies and NBSSI. Business advisory centres, which are part of the district
assemblies, have the following main activities:
• Business orientation seminars
• Community-based skills training
• Small business management training
• Literacy and numeracy training
• Information and referral services
The technology promotion and support to the apprentice training component is
implemented through the rural technology facilities in a tripartite arrangement
comprising the project, the district assemblies and GRATIS. In addition to the three
rural technology facilities already set up under REP-I, 18 new facilities have been
established with the aim of servicing all 53 districts. Overall management of each
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facility lies with a management board comprising representatives of district assemblies,
business advisory centres, GRATIS and the local private business sector from the districts
being served. The main activities of rural technology facilities are:
• Support to master craftspersons
• Support to the traditional apprenticeship system
• Promotion and dissemination of technologies
• Technology support through the production and repair of equipment for the
rural MSE sector
The rural financial services component is implemented through participating financial
institutions in the rural areas with the aim of providing rural MSEs with access to
finance. The component is supported by:
• An onlending credit line from the project – the Rural Enterprise Development
Fund (managed by the Bank of Ghana) – through the participating financial
institutions to small rural businesses
• Support to the efficiency monitoring unit of the ARB Apex Bank for training and
monitoring of the participating financial institutions
The support to the rural MSE organizations component is implemented by the PCMU
through business advisory centres. The main activities under the component are:
• Support to local trade associations for partnership-building and -strengthening
• Support for the formulation of MSE policies to the working group on
microenterprise development
The PCMU coordinates all project activities and provides the necessary technical
backstopping.
A project steering committee comprising all main project stakeholders oversees
project implementation.
Support Programme for Rural Microenterprise Poles and Regional
Economies (Madagascar)
The main goal of PROSPERER is to increase the incomes of poor rural people by
consolidating microenterprises at local and regional levels. Among its other activities,
the programme contributes to the formulation of a national policy and institutional
framework in support of rural microenterprise development. It also improves rural
microenterprise competitiveness in order to boost the performance of clusters and value
chains with linkages to regional growth poles.
The programme has five components:
• Rural microenterprise identification and mobilization
• Business development services for rural microenterprises and vocational training
• Rural finance and risk management
• Market infrastructure and enabling investments
• Monitoring and evaluation, knowledge management and communication
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The following are the main programme activities:
• Providing existing small-scale entrepreneurs from the five most densely
populated regions with a range of business development services, from training
services to improved technologies, to overcome bottlenecks and to support
economic growth
• Facilitating access to financial products and services, such as microfinance and
insurance schemes
• Offering professional and apprenticeship training to young people and adults
who want to create their own microenterprises along key value chains
• Helping to strengthen public-private partnerships with professional federations,
the government and the Federation of the Chambers of Commerce, Industry,
Artisans and Agriculture
Rural Small and Microenterprise Promotion Project –
Phase II (Rwanda)
PPPMER-II promotes rural microenterprise development with a view to improving the
living standards of disadvantaged rural groups and increasing the contribution of the
secondary sector to the Rwandan economy.
The main purpose of the project is to assist small and medium-sized enterprises
(SMEs) in becoming important sources of supplementary income for rural groups,
particularly in areas with high population density and land pressure, and to help
diversify Rwanda’s economy by promoting the secondary and service sectors.
To improve the living standards of the most disadvantaged rural groups, the project
is focused on promoting rural microenterprises (particularly for vulnerable groups),
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developing professional organizations capable of providing services to SMEs, and
supporting the development of a national policy and dialogue platform for SMEs.
Specifically, the project’s objectives are to:
• Promote the development of viable SMEs and their professional organizations so
that they can respond to the needs of the target group
• Improve the performance and productivity of SMEs through access to sustainable
non-financial services
• Promote the use of appropriate technology, the observance of acceptable quality
standards and better access to markets
• Enhance access to financial services adapted to the requirements of SMEs
• Improve the institutional and legal framework of SMEs
The project’s main target group consists of SMEs, which for programme purposes are
divided into three groups (subsistence SMEs, emerging SMEs and expanding SMEs)
defined as follows:
• Subsistence SMEs are active or potentially active microentrepreneurs with less
than Rwandan franc (RWF) 15,000 (slightly under US$25) in savings or
working capital
• Emerging SMEs are more dynamic, often seasonally active enterprises with
RWF 15,000-RWF 150,000 (about US$25-US$250) in savings or working capital;
they are characterized by a reliance on artisanal and/or traditional skills
• Expanding SMEs are full-time, specialized and more modern enterprises
with growth potential and RWF 150,000-RWF 1.5 million (roughly US$250-
US$2,500) in savings or working capital
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The project pays particular attention to vulnerable groups in rural areas, which include:
• Women and woman-headed households (the latter 22 per cent at the national
level)
• Uneducated and/or under- or unemployed young people
• Households headed by children and orphans
• Landless people
• Households affected by HIV/AIDS
• Former soldiers resettled in the project area
Promotion of Rural Entrepreneurship Project – Phase II (Senegal)
PROMER-II aims to boost employment, and hence incomes, among the most
vulnerable groups by improving the profitability of non-farm MSEs and – indirectly –
by stimulating agricultural activities. In particular, it is helping to create and develop
self-employment and wage-based jobs by providing rural MSEs with appropriate and
accessible good-quality and self-sustaining financial and non-financial business
development services.
The project’s overall goal is to promote, in a gender-equitable way, the sustainable
diversification of poor rural people’s livelihoods and income sources. Its specific
objectives are to:
• Foster and consolidate profitable rural MSEs able to offer stable jobs in the
target areas
• Strengthen and professionalize the rural entrepreneurial subsector in those areas
• Improve the overall political, legal and institutional environment for rural MSEs
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The project has five main components:
• Access to non-financial business development services
• Promotion of rural financial services
• Strengthening of professional organizations and political, legal and institutional
environments
• Development of business information services
• Coordination and management
Project beneficiaries are members of the following vulnerable rural households:
• Rural unemployed people who are interested in self-employment, but who lack
the necessary skills, technologies, market access and initial capital
• People with rudimentary skills, but who need both training in entrepreneurship
development and initial capital to set up their own businesses
• Existing owners of MSEs who require better skills and technologies and easier
access to markets in order to improve and expand their businesses
Project activities are managed by a project coordinating unit with four field offices, and
a strong monitoring and evaluation unit to track achievements and guide project
planning and implementation strategies.
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Good practices/lessons learned
across projects
What is a ‘good practice’?
A ‘good practice’ is defined as a technique or methodology that, through experience, has
consistently shown results superior to those achieved with other means, and that is used
as a benchmark after a success has been demonstrated. In rural enterprise development,
a practice can be said to be a ‘good’ practice when it has the capacity to provide
sustainable rural development that has the potential to help rural communities
improve and diversify their income-generating activities “by stimulating engagement in
value addition to rural products and in non-farm production and services which
provide additional income opportunities and reduce household risk.”
2
A ‘good practice’
could therefore be, among others, a methodology, process, policy, regulation, resource
or structure.
Sometimes, however, a good practice may not necessarily be applicable or
appropriate for a particular organization’s or country’s needs. Thus, a key strategic
approach when applying a good practice is to create a balance between the unique
qualities of the practice and the areas that the project or country has in common with
where the practice has been successful.
In the capturing of good practices, there is a tendency for only the positives to be
reported. However, the failures are equally important lessons for future project design
and can help to chart a path that will avoid the same mistakes being repeated.
Good practices and lessons learned from the various projects have been based on
the following key enterprise development areas:
• Targeting and accessibility
• Effective business development services
• Effective business financial services
• Availability of materials and tools
• Client-market connection
• Enabling environment
• Sustainability
• Gender
Specific lessons learned/good practices across projects
The specific lessons and good practices captured on the above key developmental issues
are discussed in the paragraphs that follow.
2 Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ), ed., Guide to Rural Economic and Enterprise
Development, Working paper edition 1.0, November 2003, Eschborn, Germany.
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Enterprise development approach: Targeting and accessibility
By and large, all four projects focus on demand-led/market-driven approaches to
provide enterprise development support to MSEs, basing their interventions on the
priority needs of their client MSEs, particularly existing businesses. In the case of
REP-II, the assessment of client capacity-building needs for the trade-specific
deficiencies or technical skills development and business management skills is
predominantly demand-driven both for business advisory centres and rural technology
facilities. The business advisory centres/rural technology facilities use engagement
approaches including meetings with local business associations, sampled visits to
clients, vocational premises and capacity-building requests received from clients.
PPPMER-II’s MSE-related interventions are also demand-driven and are determined by
beneficiary priorities in all intervention phases, from identification of activities, to
planning, implementation, and monitoring and evaluation. PROSPERER’s main target
is already established rural microbusinesses and small rural businesses whose needs are
identified to ensure that the programme support provided is relevant and efficient.
This demand-driven approach for enterprise development, according to
PROSPERER and REP-II, is the most appropriate since it enhances beneficiaries’
motivation to contribute to the cost of services. Thus the effectiveness of this approach
is evidenced by the willingness of MSEs to pay fees, albeit small ones, to access the range
of services they require, demonstrating their commitment to use such support services
because they see the need for them. Committing themselves financially to access these
services motivates the MSEs to make productive use of the business development
services provided by the projects.
However, it is also evident that some project interventions directly targeted at
specific groups, especially women, young people and other vulnerable groups, are free
or subsidized because they are meant to address particular problems such as youth and
graduate unemployment, rural-urban migration and dwindling local economies. Again,
since vulnerable people lack the self-confidence and knowledge to access enterprise
development services, it is appropriate to use such a direct targeting approach.
One example of such a direct targeting approach is REP-II’s equipment support
to graduate apprentices to promote rural youth employment. Similarly, the project
has a matching grant scheme, whose main purpose is to enable significantly more
women to access longer-term funds that are needed for capital formation and
technology upgrades.
PPPMER-II also has specific programmes for women, especially woman-headed
households, and for uneducated and/or under- or unemployed rural young people. It
sets aside special days to interface with these targeted beneficiaries, briefing them on the
programmes available to them and seeking to motivate them to access these
programmes. In addition, the project provides concessionary loans from funds
provided to banks for onlending to the productive poor to enable them to engage in
income-generating activities after undergoing training. Financing for equipment
purchase is extended to apprentices to kick-start new MSEs; terms are 50 per cent
loan/50 per cent subsidy.
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Similarly, PROSPERER, through its vocational training and basic skills programmes,
targets rural young people who want to create their own microenterprises along key
value chains. It encourages illiterate people to take advantage of its free literacy activities
(which use a system recognized by the Ministry of Education known as intensive
functional literacy for development). Those who have completed their training under
this literacy programme have access to various types of enterprise development support.
These include basic skills or vocational training that best corresponds to their
entrepreneurial activities and other types of support/guidance once they are considered
apt and ready for it. In the same vein, a major project component of PPPMER-II is the
promotion of literacy and empowerment with an emphasis on raising beneficiaries’
awareness of local development issues. The project provides functional adult literacy
training as a strategy and entry point for working with poorer and illiterate groups.
The key challenge faced by the four projects may be how to find the right balance
between providing subsidized or even free goods and services, which can deliver
short-term outcomes, and supporting more market-driven and sustainable approaches.
This notwithstanding, although there is now a consensus among the four projects on
the need to move towards more market-oriented approaches because they are more
effective, opinions differ on how to put this into practice when it comes to productive
poor people, young people and women.
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Lessons learned
A demand-driven approach to enterprise development has proved effective for
existing businesses as this approach has helped projects increase their visibility and
has made enterprise development support more accessible to MSEs. These
enterprises are much more likely to accept project interventions that are based on
their needs, relevance and have immediate application to their businesses. The
demand-led approach also tends to increase beneficiaries’ willingness to pay higher
commitment fees to access business development support services because these
are based on their requirements. This has implications for the sustainability of
enterprise development support.
At the same time, a demand-driven approach may also carry the implicit risk of
restricting outreach to vulnerable groups. Therefore, direct targeting of specific
groups, especially start-ups and vulnerable groups such as women, young people
and productive poor people, assisting them in establishing new MSEs appears to be
appropriate, effective and offers projects the opportunity to focus their interventions
on the specific problems to be solved.
Considering the effectiveness, appropriateness and relevance of the two
approaches, projects should continue to use a combination of demand-driven and
targeted services in their enterprise development activities, as the situation may
require. There is evidence, however, that demand-driven services are much more
successful with existing businesses while targeted services have been effective in
addressing specific problems associated with vulnerable groups, such as high youth,
women and graduate unemployment rates, as well as problems associated with
rural-urban migration and dwindling local economies.
However, to make such a direct targeting approach more purposeful, projects
must put in place and respect transparent qualifying criteria and guidelines, and have
a clear exit strategy in order to avoid market distortions.
The inclusion of numeracy and literacy programmes in enterprise development
interventions tend to help illiterate people access enterprise development support in
order to be integrated into the MSE sector effectively. PROSPERER provides basic
skills or vocational training that best corresponds to a person’s entrepreneurial
capacity or proposed business choice to those who complete their functional literacy
training as a way of integrating them into the mainstream MSE subsector. PPPMER-
II, however, initiates income-generating activities first for illiterate people and as part
of the programme incorporates three to four hours per week of functional literacy.
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Effective business development services
In enterprise development, business development services are provided, among others,
to build the capacity of MSEs to become competitive enough to compete in mainstream
markets. The four projects provide financial and non-financial services to MSEs mainly
through local service providers and/or business advisory centres/rural technology
facilities. Because these intermediaries (for instance, master craftspersons) live in the
districts, language, proximity and cost management issues relating to the
implementation of business development services are better managed and cost-effective.
The projects can therefore focus more directly on building the capacity of these persons
or centres providing services rather than delivering direct assistance to MSEs themselves.
This helps build sustainable capacities for all types of providers at the local level.
Each project provides business development services to MSEs in different ways.
REP-II uses district-level structures to promote and develop business enterprises. These
structures include district assemblies, business advisory centres, rural technology
facilities and district assembly subcommittees on MSE promotion. PROSPERER also
delivers various forms of support through district community-based structures (such
as multiservice one-stop shops), but also uses individual local service providers.
PPPMER-II mobilizes and works with both private- and public-sector service providers.
The identification and selection of local service providers is vital in ensuring the
quality and suitability of business support services. To this end, PROSPERER has
established accreditation and evaluation committees that meet regularly to approve the
initial accreditation of service providers, without which they are not authorized to deliver
support services. Furthermore, to further the competitive and sustainable delivery of
business development services, the programme is promoting the establishment of a
network of service providers. This network is expected to facilitate the exchange of ideas
and methodologies among service providers, help ensure competitive pricing for services,
and enable productive poor people to access business development services.
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Lessons learned
Using local service providers to deliver business development services to MSEs is
cost-effective for projects, more economical for clients, and efficient in that the
trainees tend to be receptive to mentoring by a successful local service provider in
their selected trade. The use of local service providers also ensures sustainability
after the life of the project.
To increase the effectiveness of local service providers, capacity-building and the
provision of some form of accreditation are essential. Service providers need to have
greater knowledge and proficiency in areas such as facilitation, training evaluation,
report-writing, adult training techniques, training needs assessment, training design
and session planning, post-training monitoring of clients’ performance, and
information and communication technology. National training programmes should
make these subjects part of their normal syllabus and should also provide
appropriate testing and certification.
Furthermore, the presence and use of district-level structures to deliver business
development services, such as the business advisory centres/rural technology facilities
in Ghana and the one-stop shops in Madagascar, make access easier, which ensures
sustainability and boosts local-level enterprise development after projects have ended.
The promotion of a network of service providers can potentially ensure the quality
of service delivery and promote competition among local service providers. Such a
network can also serve as a self-monitoring tool. Funding for promoting a service
provider network and related capacity-building can pose challenges that a project
must meet if it is to succeed in developing a strong network institution that will
provide the desired impact.
One fundamental principle, agreed on by all projects, is that the training should
be easily transferred back to the clients’ workplace. Therefore, the relevance of the
training content, and the quality, appropriateness and pragmatism of the delivery
methods used by trainers, including responsiveness to trainees’ characteristics, are
all critical for putting into practice the skills and knowledge acquired during training.
The projects also identified another crucial element in client capacity-building,
namely the need for continuous maintenance of the new skills or knowledge acquired
once training has been completed. Follow-ups/refresher top-ups are essential,
because if skills and knowledge are not used regularly, they quickly fade away.
This is even more critical for start-ups and new MSEs established by young people,
women and graduate apprentices.
Building positive attitudes and entrepreneurial mindsets among clients essentially
ensures that the support provided to them by business development services is
effective. With the right attitudes and mindsets, clients take the risks necessary for
the development and success of their businesses. In addition, businesses need to
have the potential for growth and access to markets in order to become profitable.
The provision of a full range of services and the correlation between the quality
of service and its price also prompt strong MSE buy-in and underpin service
sustainability. The stage of growth of a client’s business determines the composition
of the services to be provided, but the mix must include business and technical skills
development, financial management and market connection support.
22
Effective business financial services
The main objective of rural financial services is to enhance rural small-scale
entrepreneurs’ access to sustainable financial services provided by efficient local
financial service providers that offer deposit facilities and small-scale loans to
community members for rural business activities.
However, banks are generally averse to providing funds to MSEs without
instruments that reduce their credit risks. The few that venture provide mostly short-
term working capital loans because they have inadequate funds to support the
provision of long-term loans to MSEs for the acquisition of capital assets. Furthermore,
commercially priced lines of credit targeting MSEs, which are often channelled through
banks by donor-funded initiatives, are generally unattractive to banks given the
high capacity-building costs associated with significant expansion into this sector.
Thus traditional MSE credit lines have often been underutilized or are not onlent to
intended borrowers.
To address this situation, projects have established onlending credit lines (e.g. REP-
II’s Rural Enterprise Development Fund) to provide financial support to MSEs, mainly
through the banking system. REP-II uses matching grants to finance equipment
purchased in order not to distort the competitive environment in the financial sector.
PPPMER-II grants concessionary loans (subsidies) as a pro-poor intervention to MSEs;
the loans are granted through the banks based on negotiated interest rates, and the
credit risk is shared between the project and the clients. The PPPMER-II experience is
therefore a credit incentive instrument that seeks to facilitate greater MSE lending by
reducing the risk that banks face in providing funds to the productive poor. All these
financial support mechanisms are complemented with financial literacy education.
In addition to credit, savings products that encourage clients to set aside part of
their income as savings have been developed by PPPMER-II with the banks. Their
purpose is to inculcate clients with the habit of savings. This enables clients to pay off
the 50 per cent subsidy loans granted them and accumulate funds that will allow them
to be weaned off credit in the future.
Most banks do not have adequate institutional structures (such as strong MSE
units), and traditional loan officers generally lack effective MSE credit risk assessment
and supervision skills (particularly cash-flow-based analysis and intensive loan-
monitoring methods). These factors prevent them from expanding MSE lending
sustainably. REP-II, recognizing that the characteristics of matching grant credit
operations are quite distinct from collateral-based lending operations and new in
Ghana, provides technical assistance to the participating financial institutions through
capacity-building, helping them to establish the internal systems and procedures that
are critical to the development of the skills needed to manage matching grants.
To increase MSEs’ accessibility to loanable funds, REP-II, PROMER-II and PPPMER-
II assist them in improving their capacity to present credible loan application packages,
including proper financial records and business plans; make productive use of the
loans; and improve their ability to service the debt by addressing credit management,
business management and technical capacity constraints. Such targeted assistance to
the beneficiary MSEs is intended to bring about a significant increase in effective
demand – bankable enterprises – for the expected expansion in available credit.
23
REP-II involves the business advisory centres, which are closer to the clients, in the
screening of clients as a pre-appraisal technique to evaluate the character, repayment
capacity and loan history of clients before referring them to the banks for
loans/matching grants. Such screening helps to select ‘good’ clients for bank financing
and reduces appraisal time by banks. Similar initial screening is done by local service
providers/associations under PROSPERER and PPPMER-II.
Lessons learned
Although credit is a critical factor for MSE development and may guarantee the take-
off of new MSEs – contributing to growth and job creation – the inclusion of savings
instruments in the financial packages can better address the risk mitigation needs of
MSEs by improving their access to capital and increasing resources available for
further financial intermediation. Matching grants and guarantees are gradually gaining
ground in MSE development as good cost-sharing financing and risk-mitigating
mechanisms as against collateralized credit.
Thus incorporating savings products into financial service delivery enables clients
to accumulate internally generated funds for use in the future so as to wean them off
bank credit eventually and allow them to become self-sufficient. Savings deposits
therefore provide a relatively stable source of funds that can enable an MSE to
become sustainable and self-reliant in the longer term since indications are that
medium- to long-term financing is not easily available.
The recommended best practice approach so far as MSE saving is concerned is to
encourage voluntary savings, tailored to the demands and purposes for which clients
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3 Shawn Cole and N. Fernando, Assessing the Importance of Financial Literacy. Asian Development Bank,
Finance for the Poor 9 (3) (2008).
4 World Bank, Rural Finance Innovations: Topics and Case Studies (Report No. 32726-GLB), April 2005.
World Bank, Agriculture and Rural Development Department.
save, and to link such savings to credit as banks tend not to want to bear 100 per cent
credit risk for MSE loans. New savings products for MSEs should not be developed
and implemented in isolation, but need to be assessed within the holistic context of all
the savings insurance and credit products that can be provided to MSEs: this will
address their total financial services needs, including savings with education.
Leasing is also a viable mechanism for rural finance for unleashing liquidity into
existing MSEs, including value chains.
The provision of financial services to MSEs must, however, be complemented with
financial literacy education. Financial education provides a foundation for managing
money, which is an indispensable skill in a world where microfinance products and
services are proliferating at the same time that overly aggressive financial service
providers are ever ready to pressure the consumer. Further, research shows that
financially literate clients make better financial decisions and maintain a better overall
financial well-being.
3
With regard to how to deliver the financial education, experience
has shown that there is no ‘best way’; it depends on the target group, the objectives
of a financial literacy initiative and the available resources. Mass media – including
television, street theatre, call-in radio, or printed materials, such as posters and
comics – are being used increasingly to expose poor and often illiterate people to key
financial messages. The choice of delivery systems is very much a question of
resources. While tangible, direct training is expensive on a large scale, bundling
delivery channels – for example, combining radio with some direct training offers – can
help strike a balance between achieving both broad and focused impacts.
Technical assistance in the form of capacity-building is equally critical for
participating banks and will contribute to a greater use of MSE credit lines/matching
bank grants and higher patronage by borrowers. Regular MSE finance capacity-
building assistance helps banks strengthen their ability to target MSEs, establish the
requisite internal systems and procedures, and develop a cadre of specialized staff
essential for the development of commercially viable MSE lending operations. The
matching grant concept is a new financing option for MSEs and financial institutions
lack the expertise for its management. Capacity-building to participating banks
should include institutional strengthening in financial intermediation that is
appropriate for MSEs (e.g. introducing mobile banking, teaching liquidity
management or teaching banks to price MSE credit products). It may involve helping
banks to understand the needs of the MSE sector and how to develop new products
(or adapt existing ones) accordingly. It may also require building banks’ capacity in
risk mitigation and product innovation techniques, including areas such as partial
guarantee programmes and index-based insurance.
4
All stakeholders involved in credit administration need to work together for the
efficient functioning and management of rural business financial services. The initial
screening of prospective borrowers by local service providers (PROMER-II) and
business advisory centres (REP-II) has helped financial institutions to target only
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committed clients and bankable MSEs. This has been possible because the service
providers are closer to the clients than the banks. Experience shared by some of the
participating financial institutions under REP-II’s Rural Enterprise Development Fund
revealed that the involvement of business advisory centres in the initial screening of
MSEs for loans has made their loan-making processes easier and loan repayment
better precisely because the business advisory centres assist them in distinguishing
good borrowers from bad ones. Forging strong partnerships between financial
institutions and projects in the management of credit for MSEs gives credence
to the delivery of credit to MSEs and increases the financial institutions’ commitment
to the process.
Availability of materials and tools
Numerous strategies to generate youth and women employment have been adopted by
development practitioners and government to, among others, help minimize rural-
urban migration. One of the strategies is the promotion of youth employment through
apprenticeship. However, many graduate apprentices in rural areas, where poverty levels
are relatively higher, cannot establish themselves after graduation because they lack the
means to acquire the necessary tools and equipment to start their own businesses.
This forces them to prolong attachment to their masters, take menial jobs in unrelated
trades or migrate to urban centres.
The provision of start-up kits has been incorporated into the four projects’
apprenticeship programmes as one strategy to generate new MSEs and jobs in rural
areas. As part of REP-II interventions to encourage and stimulate business start-up by
graduate apprentices, the project has a graduate apprentice start-up fund under its
‘technology promotion and support to apprenticeship training’ component. The fund
is used to provide start-up kits (equipment or tools). The district assemblies pay
20 per cent of the total cost of the start-up equipment while the project pays 80 per cent.
About 70 per cent of those who have received the grant have already established their
own businesses. Lack of start-up capital appears to be the main contributory factor to
the low adoption rate of business establishment by graduate apprentices.
PROMER-II also provides seed capital to support apprentices with tools and
equipment for start-ups. Like REP-II, it provides grants for the purchase of light
equipment to young workers facing constraints in terms of access to credit (i.e. lack of
resources and guarantees). The main difference between REP’s and PROMER’s strategies
is that while REP-II provides the tools as a grant, PROMER-II, in addition to grants for
start-ups, has a revolving matching grant through which clients can access loans to
purchase tools and equipment to be repaid over a specified period. Similarly,
PROSPERER subsidizes only part of the cost of equipment to beneficiaries; the
beneficiaries contribute the other part through loans granted by microfinance
institutions to cover initial working capital and investment credit.
The tools and equipment support appears to be a strong vehicle for the generation
of new MSEs and jobs. The starter tool kit arrangement by REP-II and PROMER-II, for
instance, has proved to be a highly efficient incentive for graduate apprentices to start
and own businesses. Because of the cost involved, however, the ongoing direct
provision of tools and equipment by projects raises sustainability issues.
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Lessons learned
The provision of tools and equipment to young apprentices is an effective way of
encouraging them to establish MSEs, which in turn leads to rural job creation.
However, project financing of this intervention cannot be sustainable over time.
Sensitizing the local governance system to the need to internalize the provision
of tools and equipment in the budgets of local authorities is of vital importance.
Only by creating a high sense of ownership among the assemblies will sustainability
be assured.
A revolving matching grant fund from which loans are granted for the purchase of
tools and equipment is a more effective and sustainable way of financing MSE tools
and equipment than providing these as a grant. PROMER-II provides matching
grants to finance tools and equipment for apprentices whereas REP-II does so for
other MSEs. Both approaches are highly effective. PROSPERER’s experience of a
cost-sharing approach could be looked at as an alternative option to scale down the
donation image.
To sustain new MSEs established by young people after the provision of tools and
equipment, further capacity-building in savings and banking culture, in addition to
technical and business skills, a maintenance culture and business planning, must be
provided to help them grow their businesses.
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Client/market connection
MSEs face a combined lack of market exposure and a market-led product development
culture. These result in their limited capacity to identify and take advantage of market
opportunities offered by the growing local economies and globalization. Furthermore,
because of their size limitations, most MSEs cannot afford to develop the critical mass
of functions that are essential to access markets and secure market shares. Under such
circumstances, supporting MSEs to access and settle on markets on a sustainable basis
through compliance with quality standards, product adaptation, product development,
proactive marketing, active sales and marketing, integration into value chains and
management is critical for their growth and expansion.
In addition to capacity-building in marketing, projects can improve the market
access of MSEs by organizing their exhibitions and trade shows. REP-II and PROMER-II
have indicated that their clients have greatly benefited from such trade shows, especially
because they have provided increased visibility for their products, and have expanded
sales and markets beyond their localities. REP-II reports an increase in client interest in
participating in trade shows.
On the other hand, PROSPERER strengthens market access by deploying its efforts
to improve the productive and commercial/marketing environment of rural
microbusinesses/small rural businesses. For example, it builds stores, retail outlets and
exhibition halls to provide MSEs with greater market access. It is expected that MSEs will
eventually take ownership of this infrastructure.
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Lessons learned
Providing marketing training to clients in areas such as product development,
pricing, advertising, packaging and labelling remains the main, but least expensive,
building block for strengthening the market access of MSEs. Training should be
complemented with trade information support through the establishment of an
interactive database, which is regularly updated and which clients can access, on
major buyers, supplies, market prices and other market support information.
The promotion of clients’ market access through local (district) trade shows has
been another important and potent marketing tool that helps to facilitate trade,
thereby increasing the incomes of MSEs through market expansion, increased sales,
business linkages and product development at the local level. Client exhibitions and
fairs also help to facilitate the building and harnessing of local knowledge and skills
in marketing.
Increasing patronage to boost sales at trade shows is also essential and largely
depends on such critical issues as publicity of the trade show from within and
outside the host districts; good client display skills; and the establishment of
common quality measures to ensure uniformity of product standards at fairs and
exhibitions. Again, a high sense of commitment by exhibitors in terms of paying
commitment fees towards associated organizational costs ensures the sustainability
of fairs. Experience has shown that providing a special package to women is a key
to motivating them to participate in such shows.
The sustainability of these fairs, however, depends on the availability of funds for
their recurring organization. The best option for achieving this is to secure
governments’ acceptance of the trade shows as a strategic and catalytic intervention
of their trade development support structure within the framework of their
entrepreneurship development strategy. This would necessarily involve the creation of
a budget line for trade show organization in the annual budgets of district assemblies.
PROSPERER’s market development strategy of improving the commercial
environment of MSEs by building specific infrastructure such as stores, retail outlets,
exhibition halls, packaging/processing workshops and multi-purpose business
centres could be looked at as an alternate market connection option for MSEs.
Projects should, however, not become involved directly, but should play only a
facilitating role at the local level for ensuring the general improvement of market
infrastructure for MSEs.
The ingredients necessary for small enterprises to enter into more organized and
remunerative urban, national or regional markets are product quality, good
packaging, regularity of supplies, capacity to supply at the right time, price and
quantities, and the use of acceptable record-keeping standards in addition to market
access support. PROMER-II’s market access support to rural bakers in Senegal,
which allowed bakers to modernize their traditional bakery businesses and
substantially increase their turnovers, is a potent example of the impact of such
market access support.
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Enabling environment for sustainable MSE development
To promote MSE development, a conducive business environment must be created.
This includes the formulation of appropriate MSE policies, the institution of
appropriate structures to promote MSE development, the availability of the
institutional capacity of government agencies to effectively deliver services to the private
sector, an increased capacity of MSEs to leverage investment funds, an improved market
information system, and a national system of standardization, certification and
accreditation.
Mainstreaming REP-II’s institutional and delivery processes into the decentralized
government system, through the design of the project, has helped considerably to create
an enabling environment for enterprise development at the local level. The district
assemblies (local authority) play crucial roles in project implementation, coordination,
financing and monitoring. Several examples that demonstrated district assemblies’ keen
appreciation of the importance of the project activities to their own developmental
efforts were presented at the capitalization workshop.
To enable district assemblies to play their coordination and facilitation roles to
support MSEs more effectively, REP-II has been building their institutional capacity. The
project sees such support as crucial since district assemblies will continue working with
business advisory centres and rural technology facilities after the project has ended.
Many district assemblies have shown their commitment to the project by providing
financial, human resource and logistical support. Examples are the provision of office
space and furniture, the recruitment of support staff for the business advisory
centres/rural technology facilities and the payment of contributions towards recurrent
costs. In some participating districts, the district assembly has provided office
equipment such as computers.
Some district assemblies have already learned from the concept of the graduate
apprentice support facility and are providing start-up support for newly trained
community-based clients in the form of materials and equipment such as beehives,
cement and tables for beekeepers, grasscutter farmers and soap-makers, respectively.
A directive has been given by the Government of Ghana for the establishment of an
MSE subcommittee within the district assemblies, to be responsible for all MSE
activities at the district level, with the business advisory centres as their executing wings.
Finally, collaboration among projects and with major stakeholders/participating
institutions, local service providers and local business associations/groups and banks at
the local level also helps to create an enabling environment for the achievement of
project objectives. PROSPERER, for instance, helps strengthen public-private
partnerships with professional federations, government and the Federation of the
Chambers of Commerce, Industry, Artisans and Agriculture to create an enabling
environment for sustainable MSE development.
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Lessons learned
Mainstreaming project activities into the local governance system commits
governments through the local authority to provide the right environment, resources
and support to MSE development on a sustainable basis. This mechanism provides
an exit strategy that allows ownership by the public-sector entities themselves.
Two crucial elements are strengthening local authorities by building their capacity
to play their roles for MSE promotion and development, and creating a conducive
environment for sustainable rural MSE development.
MSE development and growth can also be achieved through collaboration and
partnerships among all the major stakeholders, with each stakeholder playing its role
effectively and efficiently.
Further, the need for governments to formulate appropriate MSE policies to
promote and develop MSEs cannot be overemphasized. One such policy in Ghana
that is contributing notably to the development of MSEs at the local level is the one
mandating all metropolitan, municipal and district assemblies to set up MSE
subcommittees within the local governance structure. The new local government
law in Ghana for the decentralization of MSE administration and promotion is
another example.
The promotion of an enabling environment that fosters MSE/public-sector
dialogue at the local and national level on issues pertaining to private-sector
development policies, infrastructure, access to services and supporting laws is an
essential foundation for sustainable MSE development. Dialoguing on policy
formulation will not only help capture private-sector concerns but also create a better
understanding and commitment on the part of the business community, of which
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MSEs are part, and make policies more acceptable and effective. Thus project
support of the emergence and empowerment of MSE associations has allowed them
to become well-organized bodies, building their capacity in business advocacy, and
dialoguing and linking them to apex bodies of MSEs so as to give them the voice to
advocate for appropriate policies and by-laws, and also support gender-responsive
policies at both the local and national levels.
The first hurdle every country must overcome in developing its private sector is
to create a sound macroeconomic environment by formulating strategies to promote
growth and reduce poverty that will create business opportunities and options to
access the resources required for investment. Also essential are good governance
factors that minimize the risks involved in doing business.
Physical infrastructure also plays a central role. Complementing the development
of roads, telecommunications and rural information networks open up rural economies,
motivating service providers to access rural areas to provide services. Inadequate
physical infrastructure has been acknowledged as a factor hampering business
growth, especially market access, and sometimes leads to business failures.
Sustainability of enterprise development
A good policy on MSE is a prerequisite for the sustainability of MSE promotion and
development. The Government of Ghana’s directive to all metropolitan, municipal and
district assemblies to establish MSE subcommittees to be responsible for all district-
level MSE activities, with the business advisory centres as their executing wing, has been
found to be a good policy for the sustainability of MSE development. The directive has
helped to consolidate the centres’ place in the local government system. This
internalization, making the business advisory centres part of the district
administrations, has started the process that will eventually lead to their ownership by
the various district assemblies, thereby ensuring continuity.
In addition, REP-II’s efforts to partner with existing public organizations, and its
inclusion of such relationships in the delivery of support to MSEs in its project design,
appears to have helped to make the sustainability of enterprise development in Ghana
more certain. The key implementing agencies are the district assemblies, the NBSSI,
GRATIS and the participating financial institutions, mostly rural and community banks.
Again, the use of private local service providers in project districts by all four projects
has been highlighted as an important way to help build local capacities for sustained
enterprise development support services. The projects’ continuous building of the
capacity of local service providers to enable them to be used as conduits for the delivery
of business development services to MSEs is therefore building human capital at the
local level that will remain in the localities even after a project ends.
The sustainability of specific project interventions such as the provision of tools,
equipment and financial services, however, depends largely on how well these
programmes can be integrated and mainstreamed into existing government structures.
On sustainability at the enterprise level, helping MSEs to grow from micro to small
and from small to medium is an effective tool for business success over time. REP-II, for
instance, has training modules for three levels of businesses: start-ups, survival stage
and growth-oriented.
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Lessons learned
The use of district-level structures to promote and develop business enterprises in
the districts in project design consolidates the sustainability of enterprise
development. Depending on the area of competence, it is preferable to work with
public service agencies that have specific competences granted to them by law and
regulations for MSE development activities to ensure the sustainability of services.
Building local capacity and using it to develop MSEs is also an effective strategy
to sustain the delivery of business development services to the sector.
A systematic approach of growing businesses, with appropriate and relevant
interventions that meet the needs of businesses at every level of the growth ladder,
ensures the success of MSEs. Providing continuous, holistic, relevant and easily
applied business development support services to MSEs generates client interest
and ensures sustainability. MSE development practitioners have outlined the
following topics for training modules tailored to the three stages of business growth:
• Business start-up stage. Literacy and numeracy skills; strategic mindset;
entrepreneurship; basic financial management; general business management;
marketing and customer orientation
• Business survival stage. Business planning; production planning and
management; financial management (budgeting, working capital management,
credit management, investment decisions) and marketing (market research,
product development)
• Growth-oriented stage. Strategic planning and management; marketing for
exports; investment finance; production management relating to production
methods and financial management (interpretation of financial statements,
investment options)
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Experiences narrated by REP clients, and shared with projects at the workshop,
revealed that the interventions considered to be most helpful in ensuring the growth
and profitability of their businesses included: trade shows; marketing training
(especially in customer service); costing and pricing; new product development
techniques; packaging; financial services; access to appropriate technologies and
information on available techniques; and, most important of all, technical skills
development. Growth-oriented businesses indicated as their major requirement
medium- and long-term financial intermediation for investments in business assets,
pointing out that such facilities were limited in the financial sector of their economies.
Business success or failure is a result of a culmination of issues that the business
person must grapple with. Having an entrepreneurial mindset alone, even one
sharpened through management training, though crucial, does not ensure business
success. In the same vein, although a good business environment, including the
removal of barriers to business formalization, the promotion of private- and public-
sector dialogue, and improved market access, goes a long way towards ensuring
business success, it is not sufficient – access to relevant services, including finance,
is also needed to spur the growth of sustainable MSEs.
What brings about business success or failure may differ from sector to sector
and from country to country. However, entrepreneurs must be helped to avoid certain
critical mistakes in order to attain business success. These mistakes include: poor
financial control; inability to make the ‘entrepreneurial transition’ at the right time;
insufficient capitalization; uncontrolled growth; failure to develop a strategic plan,
including a marketing plan; and inability to access various forms of business
support/guidance (technical, information).
Gender sensitivity in enterprise development
Gender disparities in Africa are evident in, among others, the restricted access of women
to resources and support services, and their limited involvement in decision-making.
Women and young people are often marginalized from business relations and have
minimal control over access to factors of production, impinging on their capacities to
benefit fully from enterprise development support. Enterprise development support
therefore needs to take into account the special circumstances and needs of women
through the design of gender-sensitive programmes. Such programmes should help
improve women’s and girl’s living standards and also promote their participation in
decision-making.
The four projects have specific objectives and programmes to reach the most
vulnerable and needy segments of the rural community, including women and young
people. PROMER-II in Senegal has a project objective of directing 50 per cent of its
interventions to women, and 30 per cent to young people. Specifically, the project has
a gender and youth action plan that emphasizes improving MSEs run by women and
young people. A gender focal person who ensures gender sensitivity in project activities
is also in place. PROPERER in Madagascar is institutionalizing gender inclusion in its
support activities. Some 60 per cent of its interventions are targeted at women.
Furthermore, a manual for gender promotion has been developed to support woman-
led enterprises. PPPMER-II in Rwanda ensures that 50 per cent of women are in
management positions in associations and at least 30 per cent of support services are
34
targeted at women. For REP-II in Ghana, 62 per cent of project beneficiaries are women;
of the 22,000 new MSEs whose establishment the project has assisted, 14,000 are
headed by women. These achievements have been possible because gender activities
have been mainstreamed in project work.
Gender interventions have, however, come with some challenges, including the
problems posed by women’s lack of self-confidence and illiteracy, and by traditional
and cultural norms. Building project staff’s and local service providers’ capacities to
mainstream gender issues in project work and to place the gender function within a
project are some of the challenges faced by projects in implementing gender-specific
interventions. REP-II reported that the Gender Action Learning System (GALS) training
of trainers methodology has been helpful in training the project’s major stakeholders in
gender issues.
Lessons learned
Gender sensitivity in project management does not mean a concentration on
women’s issues to the exclusion of men’s: the emphasis must be placed on a
person’s age, sex and economic status.
Women’s leadership can be successfully promoted if women are given equal
opportunities in the educational system and if mentorship by successful business
women is facilitated (i.e. peer learning).
Gender sensitivity should be reflected in every project component; it should be
budgeted for; and action plans should be developed to ensure that it filters through
all project activities.
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Capacity-building of project staff and major stakeholders in gender sensitivity
in enterprise development, using the GALS methodology, has helped projects to
provide staff with the requisite knowledge and skills to understand the gender
dimension in project work.
Greater sensitization of men in gender issues increases their gender awareness
and also helps to change the fundamental issues (traditions and cultural norms)
inhibiting the promotion of women in decision-making.
Functional literacy and numeracy training has an important role in boosting
women’s self-confidence and enables them to access productive resources for
business development.
Although the appointment of focal persons within the project management
structure is necessary in mainstreaming gender issues in project work, gender
sensitivity must pervade all project components.
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Conclusion
This technical report emphasizes that, although enterprise development (i.e. the
establishment and development of MSEs) remains a critical element in reducing rural
poverty, there are various other factors that need to be considered. The first of these is
the need to mainstream project enterprise development interventions into local
government structures at the project design stage (as was done in Ghana). This secures
the commitment of the local government to MSE development, and it also helps to
ensure the continuation of MSE support after a project’s end. The creation of an
enabling environment through the formulation of policies that help determine a
business-friendly environment and culture in government is also crucial for
development of the sector. Additionally, the provision of support to MSEs in the form
of tools, equipment, credit and other business development services facilitates the
establishment of new MSEs, especially those headed by vulnerable members of society
such as young people and women. The sustainability of such support services, however,
depends largely on how well they are integrated into the local governance system and
the corresponding degree of government commitment to MSE development.
A predominantly demand-driven and bottom-up approach to enterprise
development is most effective, as interventions are based on the real needs of MSEs.
When MSEs recognize that a business development service has immediate application,
they are motivated to make productive use of it, which then affects the sustainability of
the service itself. However, direct targeting of specific groups such as women, young
people and productive poor people is much more appropriate as it helps to direct
resources to the right people.
The importance of the private sector in enterprise development cannot be
overemphasized. Using local service providers, including trainee graduates, to provide
business development services to MSEs at the local level is an innovation that helps to
build local capacity for continuity of the provision of business development services to
MSEs. Local service providers live in the districts, and this ensures their proximity to
clients, avoids possible language barriers during service delivery and interaction with
project beneficiaries, and is also cost-effective. Institutionalized structures should be put
in place to strengthen service providers’ capacities so that they can contribute more
effectively to knowledge and skills transfer, and deliver business development services
to MSEs in a cost-effective and sustainable manner.
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The provision of business financial services to MSEs is crucial for MSE development
because it enhances rural small-scale entrepreneurs’ access to sustainable financial
services provided by efficient local finance providers that offer deposit facilities and
small-scale loans to community members for rural business activities. Credit guarantee
funds and matching grants have been the main ways of providing finance to MSEs. Low
loan recovery and a lack of capacity on the part of bank staff to manage micro and small
loans and administer matching grants are the key negative factors that can endanger the
sustainable provision of loans to MSEs. Strengthening the capacity of bank staff to
administer credit to small local businesses holds the key to the sustainable
improvement of MSE access to financial services.
Promotion of client market access through local (district) trade shows is an
important tool that facilitates trade and thereby increases incomes of MSEs through
market expansion, increased sales, business linkages and product development at the
local level. Publicity of the trade show from within and outside the host districts is
critical to the show’s success as this stimulates patronage.
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Recommendations
Based on the above lessons captured from the four projects, the following
recommendations emerge for ongoing and future rural enterprise programmes:
1. Enterprise development approach: Targeting and accessibility
• Projects should continue to use a demand-driven/market-based approach in
targeting MSEs for enterprise development support because this approach
stimulates the commitment of MSEs to access such support. They should use
a direct targeting approach in targeting vulnerable groups such as young
people, women and productive poor people when specific interventions are to
be provided. This difference in approaches reflects recognition that market-
based approaches have limitations in dealing with specific problems associated
with poor and vulnerable groups. When adopting a direct targeting and
subsidized approach, however, projects need to put in place explicit and
transparent guidelines together with qualifying criteria and exit strategies to
avoid market distortions.
2. Effective business development services
• Projects should continue to provide business development services through local
service providers, but considering the immense benefits that this approach has in
helping to sustain the availability of business development services to local
entrepreneurs, it is important that it become a permanent part of the local
governance system. Where there are already existing business development
service structures within this system, these structures should be mainstreamed
into a new project design.
• Institutionalized structures should be put in place to strengthen the capacities
of local service providers in client needs assessment, training, design and
additional pedagogical tools/skills to contribute more effectively to knowledge
and skills transfer.
• Local service providers should not be limited to providing technical skills
development but should provide management skills transfer as well.
• Projects must ensure service quality, competition and affordability of business
development services to the vast majority of MSEs by promoting networks
of service providers. This should be included in project design and budget
lines provided.
3. Effective business financial services
• Direct financial interventions by projects to provide credit lines to MSEs through
the financial sector help to avoid market distortions and, since financing to
MSEs remains greatly inadequate, must be continued. Projects, however, need
to focus more on risk-mitigating instruments for financing medium- and long-
term investments for MSEs such as matching grants and guarantee funds.
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These instruments tend not to compete with short-term funds provided by
the banks, and therefore do not create a disincentive to banks to administer
project funds.
• Financing the MSE sector is a specialized area and banks tend not to have the
requisite knowledge and skills. Consequently, their capacities must be built to
make them more efficient in delivering credit to the sector.
• Projects should incorporate savings instruments into their financing packages to
provide MSEs with a buffer against credit risks and a way of accumulating capital
for business expansion.
4. Client/market connection
• Marketing training, which builds capacity to understand the importance of the
various elements of marketing in business development, is the least expensive
MSE market connection tool. It should continue to be featured in project
capacity-building programmes.
• Client trade shows should be ‘mainstreamed’ into the local governance system as
a trade development support structure within the framework of the government’s
entrepreneurship development strategy. This will help fund and sustain the trade
shows, which are a potent marketing tool to promote increased market access at
the local level and beyond.
• Project marketing support to MSEs needs to incorporate clients’ exhibitions in
order to spread a culture of competition among project clients and help expand
market access for MSEs at the local level and beyond, leading to increased sales
and incomes.
5. Enabling environment for sustainable MSE development
• Project strategies for MSE development need to be mainstreamed into local
government development frameworks such as local development plans and
poverty reduction strategies.
• Projects should facilitate a structured, inclusive and effective public-private
dialogue as a main element in institutional and policy reforms at the national
and local levels. They should also encourage dialogue between these levels to
ensure that decisions made are implemented and can be modified if required.
This will help create an environment that will encourage and provide incentives
for entrepreneurship and investment by lowering the risks and costs of doing
business, including by removing barriers to business formalization.
• A competitive banking system, with expanded access to private credit on terms
and conditions more adapted to the needs of the poor, can help poor people
move into higher value-added activities.
6. Gender sensitivity in project management
• Gender disparities in Africa are evident in women’s limited involvement in
decision-making and leadership, in the inappropriate design of equipment, and
in women’s access to and ability to participate only in selected markets activities.
Thus inclusion of gender-sensitive policies and strategies in MSE development is
essential. To this end, gender sensitivity should be reflected in every project
component and budgeted for. Action plans also need to be developed to ensure
that gender sensitivity filters through all project activities.
Contact
Zoumana Bamba
Knowledge Management Officer
West and Central Africa Division, IFAD
[email protected]
International Fund for
Agricultural Development
Via Paolo di Dono, 44
00142 Rome, Italy
Tel: +39 06 54591
Fax: +39 06 5043463
E-mail: [email protected]
www.ifad.org
www.ruralpovertyportal.org
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