How can we strengthen collaboration in support of micro-enterprises in value chains?

Micro-enterprises are the lifeblood of many communities and a critical source of employment and livelihoods. Larger companies rely on the effective operation and growth of micro-enterprises in their value chains, often as suppliers, distributors, retailers and customers.  However, many micro-enterprises today are struggling just to survive.  Research points to five areas of need (business and technical skills, access to fair and well-functioning markets, access to affordable, appropriate financial services, infrastructure and services and enabling policy and regulatory environment) that limit the ability of micro-enterprises to thrive, of companies to realise the commercial value of their relationship with micro-enterprises, and of the full potential of micro-enterprises’ social impact in communities. 

 

These needs are also highly interconnected and cannot be tackled in siloes, which is why there is growing appreciation amongst stakeholders that interventions that do not address the full range of micro-enterprise needs can reduce the potential for achieving greater sustained impact – both for micro-enterprises and the companies supporting them.   In recognition of this, a new report by SABMiller, CARE International UK, Business Fights Poverty and the Harvard Kennedy School Corporate Responsibility Initiative highlights the need to move towards a more holistic form of collaboration with the aim of strengthening the broader “market system” in which their value chain and micro-enterprises operate. The report also identifies five critical success factors which are essential for designing and implementing market systems approaches.

 

To mark the launch of the new report, Business Fights Poverty is hosting an online discussion to explore the following questions:

 

  • The report highlights five key interconnected needs of micro-enterprises that would enable them to thrive – how do these needs exist for the micro-enterprises you engage with and support? Are some more important to address than others?

 

  • What are some of the limitations of current approaches to supporting micro-enterprises in value chains? How can taking a more “market systems” approach deliver greater commercial and social value?

 

  • What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?
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USAID works in all of these areas as microenterprises face many challenges. The needs can be somewhat varied—at least in order of importance, i.e. which are the most binding constraints in these market systems. And they can be different based on value chain/type of product or service, geography, societal norms, and even dynamics within individual households.

In understanding needs, you also have to understand risks and risk mitigation strategies, which may seem somewhat counterintuitive to some. For example, purchasing improved seed, although it may have a much higher yield with a slightly increased price, in rain fed areas, should there be a drought during growing season, farmers may actually be worse off at the end. The difference in the amount of the loss may be small, but for the most vulnerable, there any loss is significant.

Land tenure is certainly an important issue for many. Farmers or other entrepreneurs are less likely to make improvements in the land or property if there are little guarantees that they will be able to reap the benefits of those investments.

Access to affordable and relatively quick transportation can be especially important for women, who may face challenges around being away from the home as long to go to a distant, but more lucrative, market.

Richard Gilbert said:

Thanks everyone - Let’s kick off with the first question:

Q1. Our new report highlights five key interconnected needs of micro-enterprises that would enable them to thrive – how do these needs exist for the micro-enterprises you engage with and support?  Are some more important to address than others?

  1. Indentify ‘ Market-system’ roles, capabilities and incentives :

    • From the corporate poitn of view, with the best of intensions, base assumptions are made in terms of available infrastrucuture, existance of relevant high-quality role models and basic education. Investments in program pilot are made, often without conducting an initial base-line assessment before diving into the plot itself. Understanding our landscape, he players and theri relality is key.

    • Another key assumption Accenture often sees made in terms of capabilities stems from the donor space where an omission of previous lessons learnt or challenges uncovered are glossed over in funding and pilot/programme design workshops – in an effort to seem more ‘attractive’ to funders

    • In terms of incentives, very often few organisations, commercial, public sector or donor, ask the questions of what the micro-enterprises really want. This for me has been a great differentiator in the report where it was clearly shown what different micro-enterprises actually want in their form of assistance – training vs. Finance vs. market access etc.

Exploring the real needs of micro-enterprises upfront is hugely insightful and can be a much more impactful and resource efficient way to develop effective interventions in support of micro-enterprises.

In SABMiller Europe, we undertook research in 4 of our key markets (Italy, Poland, Romania and Czech Republic) to understand the challenges faced by small retailers in our distribution chain. While the terminology used to describe the challenges differs slightly from what is used in the report, our findings reflected many of the five needs identified.

For example, retailers said they lacked understanding of store and stock management, lacked funding to invest in their business and, had concerns about bureacracy and red tape.

So I think the five needs identified in the report offer a useful structure that can act as a starting point for an organisation to then drill deeper into understanding how these needs manifest themselves for specific micro-enterprises.

Jolene Dawson said:



Richard Gilbert said:

Thanks everyone - Let’s kick off with the first question:

Q1. Our new report highlights five key interconnected needs of micro-enterprises that would enable them to thrive – how do these needs exist for the micro-enterprises you engage with and support?  Are some more important to address than others?

    1. Understanding Micro-Enterprise Needs :

  • Many of the micro-enterprises we have worked with feel misunderstood. There seem to be largely due to misunderstandings of deep cultural norms (e.g. some farmers feel spoken at, and cultural norms prevent them from interrupting or correcting the person speaking).

  •  In this context, both the corporates or donor organisations as well as the beneficiaries or micro-enterprises make faux-pas – and things get lost in translation.

  • By focussing on human-centred design, Accenture Development Partnership have made huge in-roads into setting up healthy partnerships between corporates, donors and micro-enterprises in health, agriculture and finance. This concept ensures that the very human beneficiary is front and centre to the design of all elements of the programme or products in question.

I would say the most important is probably not in the list. The most important need in my opinion is not economic, financial or technical, although all of them are critical. In my opinion the most important need is psychological. Small businesses owners need first of all more self esteem to be able to cope with the challenges they confront.   

Hello everyone, I am Juan Carlos Thomas, Global Entrepreneurship Director at www.technoserve.org. We partner with public and private institutions to work with enterprising people in the developing world to build competitive farms, businesses and industries.

  1. Establish the value proposition :

    • When working both with commercial organisations as Accenture Strategy or with development sector agents as Accenture Development Partnerships we come across the same challenge, but from opposite sides.

    • Commercial ventures tend to want to see returns on their investment (whether CSI funded or from core business) within a very short space of time, usually in line with their annual financial statements.

    • Development agents approach some programmes with a deep systemic outlook and are not concerned if they see very slim or no positive results for the first few years.

    • I believe a balance of these views needs to be reached, especially when addressing thing from a market-system view. Commercial agents should understand from the outset, that systemic change (and in turn real impact) take time to cultivate, but development agents must be clear that progress, however small it seems must be able to be demonstrated (and in some cases audited)

    • The value proposition needs to clearly provide value to all parties, wherever they hail from, and be measureable in increments and holistically. It’s about articulating it in a way that makes sense for all parties involved.



Richard Gilbert said:

Thanks everyone - Let’s kick off with the first question:

Q1. Our new report highlights five key interconnected needs of micro-enterprises that would enable them to thrive – how do these needs exist for the micro-enterprises you engage with and support?  Are some more important to address than others?


 Hi everyone, I'm Alison Griffith, the senior policy and practice advisor on market systems and private sector at Practical Action. Looking forward to a rich discussion on how we can support a better enabling environment for millions of MSEs!

    1. Co-ordinate effetively :

      • As alluded to my comments on value proposition, many corporates and development agents approach micro-enterprise inclusion in a siloed manner. They typically think of value for their own organisation and not necessarily the beneficiary micro-enterprise. Accenture has seen programmes, ambitious and small, fail due to poor co-ordination, mainly due to ineffective communication and expectation management.

      • Part of this siloed approach breeds an unsustainable intervene and leave approach. He alignment and commitment to long-term investment and incremental wins is so critical to success.



Richard Gilbert said:

Thanks everyone - Let’s kick off with the first question:

Q1. Our new report highlights five key interconnected needs of micro-enterprises that would enable them to thrive – how do these needs exist for the micro-enterprises you engage with and support?  Are some more important to address than others?

Fascinating Andres. How do you build self esteem or does it grow organically through successful enterprise?

I couldn´t agree more with this set of 5 challenges that face microentrepreneurs for further development and any attempt to take Management and Tech Skills, A2Mkts, A2F, infrastructure and policy to an optimal level should be not only welcome but encouraged. However, we need to realize that this is a marathon rather than a sprint and it takes an alignment of a variety of public and private players to move a whole ecosystem to the next level.

 

So where do we start? how can we build momentum by demonstrating a valid approach that will convince public and private players to do what it is required? how can we start helping microentrepreneurs and their communities that can not wait decades to get their ecosystem fixed?

 

We start by addressing the most critical ones, which doesn’t mean neglecting the rest. Our experience suggest that in many underdeveloped markets, although base conditions are far from ideal, they are "good enough" at least for a sizable segment of microentrepreneurs, so we have started to work with them in the most critical ones. These are usually a subset of managerial skills as we have found that no matter how good is regulation, infrastructure, A2F and A2Mkts is , if some core managerial skills are not present, they will not benefit from that. Conversely a few key managerial skills have demonstrated to largely help entrepreneurs overcome or at least maneuver in suboptimal ecosystems and growth at a great pace. Among these core skills are included the ability to identify both market and funding opportunities, which would address other two key gaps identified in the guide.

 

TechnoServe and its partners have tested this approach at scale (thousands of entrepreneurs) with great results in a number of very diverse markets, from Nicaragua to Burkina Faso, which is creating evidence and momentum to help us influence governments, corporates and financial institutions to join forces. 


Richard Gilbert said:

Thanks everyone - Let’s kick off with the first question:

Q1. Our new report highlights five key interconnected needs of micro-enterprises that would enable them to thrive – how do these needs exist for the micro-enterprises you engage with and support?  Are some more important to address than others?

  1. Measure impact :

    • Many ventures fail based solely on the metircs they measured. What some performace management processes often fail to acknowledge or attempt to measure is the direct vs. Indirect imapct that they are having. In terms of pure revenue generation for firm x, things may have only improve by 1%, but the mincrease in available cash in the beneficiairy miciro-enterprise can be life-changing through the same programme, though not explicityl maasures.

    • Accenture has a long and successful history of helpng both coprorates and developmetn agentns to craft thier montioring and evaluation programmes to incoporate the entire eco-system – input – impact and everything inbetween, qualititatively and quatitatively, directly and indirectly. In our exereince, often the micro-eterpise is unsure of how to define success in the same launguage as a coprorate and is often unsure of how or why to measure progress.

    • In terms of importance ofthe needs, I believe all 5-interconnected needs of micro-enterprises is importnat, thought the order is. Start with understanding who you are dealing with, then how you can work togeher and what you both define as success then figure out who plays what role, and how to co-ordinate effectively.



Richard Gilbert said:

Thanks everyone - Let’s kick off with the first question:

Q1. Our new report highlights five key interconnected needs of micro-enterprises that would enable them to thrive – how do these needs exist for the micro-enterprises you engage with and support?  Are some more important to address than others?

In our part of Latin America (Colombia, Peru, Ecuador, Honduras and El Salvador) since the majority of mom and pop shops are owned by women, the most important need for them to also address their family needs.  For them business and family are one thing.  So they need to manage both correctly and  lead their families properly and impact positively their communities.

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