871_1_DayPresentation.ppt

BDS Market Development

A Training Presented by the SEEP Network and the International Labour Organization’s SEED

Program


COURSE GOAL

To help enterprise development specialists understand commercially-oriented business development services (BDS) initiatives and to improve the outreach, cost-effectiveness,

sustainability, and impact of their BDS offerings to micro, small, and medium-sized

enterprises (SEs).


AGENDA

Overview

5 Guiding Principles

Practitioner Presentation

Risks & Rewards

Closing & Evaluation


LEARNING APPROACHTrainers...

• Facilitate learning;• Draw on participant experience;• Use a variety of learning methods—role plays,

case studies, lectures, games;• Supply reading material; and• Provide practical lessons.


OBJECTIVES1. Define / describe general principles of Market

Development Approach to BDS;2. List broad categories of BDS w/ examples;3. Describe key financial sustainability strategies;4. List BDS organizations / appropriate roles;5. Describe BDS market development principles /

strategies; and6. Describe main risks / rewards of BDS market

development strategies.


THE MARKET DEVELOPMENT APPROACH

Basic Principles:

1. Impact-centered programs;2. Specific, focused, tailored services;3. Demand-driven services;4. Sustainable Service delivery; and5. Development of competitive, vibrant BDS

markets.


Principle 1: Impact-Centered Programs

The focus of BDS programming is to create a POSITIVE IMPACT.

The delivery of business services and the development of service markets are means

toward that goal.

Impact-Centered Programs

What kind of impact does your program seek to achieve?

Sustainability

Out

reac

h

Cost-Effectiveness


IMPACT


Who does the program serve?


SEs...Micro, small and medium-

sized firms, and

small-scale farmers

Success Story

Microenterprise: Ms. Jemima Gyamfi, Caterer and wholesale egg distributor

Country: Ghana

Organization: ILO FIT and Kapital Radio

BDS: SE Radio Programme

Success Story

Ms. Jemima Gyamfi, Caterer and Egg Seller, Ghana

Learned improved book-keeping practices.

“Now no matter how small the amount, I record it. I indicate the date, describe the transaction and indicate the cost. This is helping me to

protect my chop money.” (Her food money.)

Success Story

Microenterprise: Mrs. Mary Adubofour, Retailer, Poultry Equipment

Country: Ghana

Organization: ILO FIT and Kapital Radio

BDS: SE Radio Programme

Success Story

Mrs. Mary Adubofour. Retailer Poultry Equipment

Learned about the importance of BDS and increased her participation in BDS.

“At first I wasn’t used to participating or attending workshops or meetings, but this program has encouraged me. I attend any workshop or meeting that has any bearing

on my business.”


Principle 2: Specific, Focused, Tailored Services

Business Development Services must:• Address specific SE wants and needs;• Focus on high-priority issues; and • Be tailored to add high value to SEs.

Specific, Focused, Tailored Services

What are

Business Development Services?

Business Development Services

They Are More Than...

Technical Assistance

FinanceTraining

Business Development Services

Market Access

Technology

Inputs & Infrastructure

Product Development

SE White Paper: Proposals to Improve SE Policy in South Africa

Advocacy

They Are Also...

Specific, Tailored, Focused Services

INSOTEC: Ecuador

Sector: Jeans manufacturing

Strategy: Help MEs improve quality

Services: Buttonholing, embroidery, input and equipment supply.

Outreach: 4,450 in 2000

Sustainability: Break-even in 2000

Principle 3: Demand-Driven Services

Respond to SE wants and needs; Are paid for by SE or commercial

actors with vested interest; Put immediate financial pressure on

supplier to provide relevant services.


Demand-Driven Services

SEs pay fees for services

or

SEs acquire services such as advice from buyers or

suppliers as part of a business deal.

Charging Fees

Veterinary Services in Nepal

• CECI/MARD trains entrepreneurs to supply veterinary services to farmers;

• Veterinarians sell services to farmers;

• 40 village veterinarians selling;

• Vets earn profits of 40 - 50%.

Services Through Business Deals

PROARTE, a Nicaraguan handicraft company initiated by MEDA

• Markets traditional handicrafts;• Buys from about 100 rural artisans;• Supplies inputs, product designs, &

training;• Earns 15% profits in 1997.

Mutually Beneficial Services…FIT Business Connect Magazine

• Publishes free business-to-business magazine – circulation 10,000 – in Zimbabwe;

• Financed by advertising revenue from small and large firms with...

• Large firms buying big ads, paying more;• Small firms buying small ads, paying less; and• Micro firms benefiting for free.

Other Financing Strategies


Principle 4: Sustainable Services

BDS should be made available to SEs over the long run through financially sustainable

delivery mechanisms, institutions, and markets –

In sum, through the PRIVATE SECTOR.

Sustainable Services

Sustainability depends on:

1) Private sector financing (demand-driven services);

2) Cost-structure in-line with SE and market ability to pay; and

3) Independent, financially viable institutions and delivery mechanisms.

Criteria for Viable BDS Suppliers

• Capacity to deliver services;• Close to SEs in culture, operating environment,

geography;• Low cost structure;• Commercial focus, business culture, accounting

and management systems;• Organizational independence, especially from

donor funds;• Organizational stability; and• Focus on services, SEs, or BDS.

Institutional sustainability more likely when subsidized and commercial

activities are separated.

• Supplier or provider delivers (commercial) services directly to SEs; or

• Facilitator supports the (commercial) supply of BDS by other (sustainable) institutions.

Sustainable Services

Principle 5: Develop Vibrant, Competitive, BDS Markets

Success is: A vibrant, competitive BDS market in

which a range of SEs are accessing a wide selection of BDS supplied by

numerous commercial suppliers that SEs choose to patronize.


Donor Service Provider

MSME

Subsidized Program Model


Subsidized Program Model

• Donors support 1 or a few providers• NGOs provide free or highly subsidized

services• Small number of SEs gain access to

services designed by Donor/NGO• Program lasts as long as funding is

available.


BDS Market Development Model

BDSFacilitator

BDSProvider

BDSProvider

BDSProvider

SE

SE

SE

SE

SE

SE

SE

SE

SE

Commercial OrientationDevelopment Agenda

Donor


• Donor or facilitator supports numerous suppliers with TA rather than grants;

• Suppliers are commercially oriented and competing to serve SEs;

• Suppliers provide services SEs want;• Suppliers service numerous SEs;• Suppliers earn profits and provide services

over the long term.


BDS Market Development is new, Many questions remain…

3. Who does?

Research and development …Product development

… Delivery of services …Information coordination …

Skills enhancement … Regulation… Advocacy

State

Private sector

(for-profit)Not-for-profit

sector

Business membership organisations

Business networks

4. Who pays?

2. Key supply-side players

1. Market functions

Start with understanding theEXISTING

PRIVATE SECTOR MARKET

for services.


BDS Market Consists of…

Supply DemandTransactions


BDS Market

Geogr

aphy

Target SEs

BDS Type

BDS Markets are Bounded by …

BDS MARKET ASSESMENT

Why assess markets? What do we do with this information?

Understand current supply and demand; Pinpoint specific constraints / opportunities

SEs face in accessing desired services; and Investigate sustainable service delivery

strategies.


Select Appropriate Interventions

MATCH

Constraints to Interventions

Weak Supply

Weak Demand

Few Transactions

Product Development, Capacity Building

Promotions, financing, discounts

Linkage & information services

Vouchers

NetworksBiz.

Links

Product Dev.

Information

Venture Cap.

TATraining

Seven BDS Market Development Strategies

Voucher Programs Training Services in Paraguay

Between 1995 and 1999:

•Provided 30,000 vouchers to •13,700 microenterprises purchasers•Over 40 private sector suppliers.

50% off!


Information ServicesFIT ILO SE Radio Program

Since 1999: Reaching over 300,000 SEs; Changing policies, helping SEs improve

business practices and reach new markets; Broadcasting commercially viable programs; Costing under $100,000 (total program).


SE Cluster and Network Development UNIDO

• Helps groups of firms access services in Honduras, Nicaragua, Mexico, Jamaica, and India.

• Knitwear producers in India approached ITC training to adapt course to their needs – 500 firms reached.

• Membership fees sustain the groups.


Business Linkages

Manicaland Business Linkage Project

• Facilitates sub-contracting from large to small firms

• 1996-2000: 110 linkages, 1,000 jobs

• Large firms mentor small firms.


Technical Assistance to Suppliers ACDI/VOCA Training and Technical

Assistance to Polish Business Support Organizations (BSOs)

Project strengthened supply and demand for Business management training and consulting services;

Project trained 38 BSOs, 131 consultants, 223 SEs in

Trainers and consultants served more than 30,000 clients on a commercial basis.


Product Development and Commercialization

IDE – Irrigation Technology: Treadle Pumps

• IDE designs pumps & trains manufacturers and distributors;

• Bangladesh in 2000: 65 manufacturers, 700 dealers, 5,000 installers sold more than 1 million pumps.


Social Venture Capital: MEDA & PROARTE in Nicaragua

• MEDA & individuals invested venture capital in PROARTE,

• PROARTE marketed traditional Nicaraguan crafts for 100 producers in 1997.

• MEDA plans to disinvest over time.



From this experience, and applying basic market thinking, a set of

guiding principles has emerged.

Although not all examples represent all principles,

these are the principles to strive for!

GUIDING PRINCIPLES

Focus:

Target interventions to address BDS market constraints.

GUIDING PRINCIPLES

Tread Lightly:

Minimize interventions to avoid BDS market distortions.

GUIDING PRINCIPLES

Supply DemandTransactions

Inte

rven

e he

re!

NO

T h

ere!

Inte

rven

e he

re!

Provide market assessment, training, TA – not direct services.

GUIDING PRINCIPLES

Promote Competition.

Develop a range of suppliers and service products in the same market – offer SEs choice.

GUIDING PRINCIPLES

Develop business relationships with suppliers,

mutually beneficial contracts, not grants for direct services to SEs.

GUIDING PRINCIPLES

Remain Flexible to Rapid Change,

in SE markets and in BDS markets.

GUIDING PRINCIPLES

Coordinate with other BDS Stakeholders.

Suppliers offering subsidized services undermine efforts to develop BDS

markets.

GUIDING PRINCIPLES

Develop a clear exit strategy.

Plan to leave behind a vibrant, competitive, BDS market.

Do the programs presented use the guiding principles?



PRACTITIONER PRESENTATION

Risks & Rewards of BDS Market Development


Risks & Rewards of BDS Market Development



OBJECTIVES

1. Define / describe general principles of Market Development Approach to BDS;

2. List broad categories of BDS w/ examples;3. Describe key financial sustainability strategies;4. List BDS organizations / appropriate roles;5. Describe BDS market development principles /

strategies; and6. Describe main risks / rewards of BDS market

development strategies.

BDS Market DevelopmentTHE MARKET DEVELOPMENT

APPROACH

Basic Principles:

1. Impact-centered programs;2. Specific, focused, tailored services;3. Demand-driven services;4. Sustainable service delivery; and5. Development of competitive, vibrant BDS

markets.

Resources• www.seepnetwork.org/bdsguide.html

• http://www.ilo.org/public/english/employment/ent/sed/bds/seminar/index.htm

• http://www.ilo.org/public/english/employment/ent/sed/bds/donor/index.htm


http://www.seepnetwork.org/bdsguide.html


A Training Presented by:

The SEEP Network

and

The International Labour Organization’s SEED Program

Documents

871_1_DayPresentation.ppt