Sustainable Microfinance - Balanced Scorecard's added value for ...

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Sustainable Microfinance
Balanced Scorecard's added value for Starting
Entrepreneurs in the Netherlands
by
Elmar Hoogendoorn
2010
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STATEMENT OF AUTHENTICITY
I have read the TiasNimbas Business School
Regulations relating to plagiarism and certify that
this project is all my own work and does not
contain any unacknowledged work from any other
sources.
Signed:
I confirm that the Word Count as per the
Regulations is 20347 words.
Date: 23 September 2010
Elmar Hoogendoorn ##!
Sustainable Microfinance

Keywords and Abstract
Sustainable Microfinance
‘Balanced Scorecard’s added value for Starting Entrepreneurs in the Netherlands’
Keywords and phrases in this Thesis
Elmar Hoogendoorn
TiasNimbas Business School
September 2010
Microfinance, Balanced Scorecard, Sustainability, Micro and Small Entrepreneurs
Abstract
Micro-credit and microfinance are rather new phenomena in the Netherlands. In a
short period both have been embraced fully by government officials as a valuable
instrument for social and economic development. The overall aim of this research is
to make a contribution to the existing body of literature and to develop a practical
model that will enable (one of) the Dutch microfinance players to make a move
towards sustainability. Therefore an explorative research has been established.
This exploratory inductive research consists of: (1) an intensive literature review and
(2) interviews with experts from the microfinance sector, to determine how the
available models need to be adjusted to the specific needs of starting entrepreneurs.
Based on the qualitative content analysis in relation to the literature it is concluded
that due to managerial inadequacy and a significant degree of copying behaviour,
typical start up businesses have high failure rates within the first three to five years.
Therefore government officials should eliminate incentives to create low probability
companies and focus on start up companies with a lot of (growth) potential. In order
to indentify this potential and provide micro entrepreneurs with a tool to develop a
sustainable business, the ‘Equally’ Balanced Scorecard Model for Micro and Small
Entrepreneurs (MSE) has been developed. This model focuses on four interrelated
stakeholders (society, investor, customer and entrepreneur) and clearly indicates the
relation between them and enables the MSE to identify the stakeholder it needs to
focus on.
Elmar Hoogendoorn ###!
Sustainable Microfinance

Preface
Being born and raised on a cheese !
farm, undertaking has always had a special
interest. My two oldest brothers both have their own enterprise and starting my own
business has been a goal ever since I was little. This was one of the reasons to apply
for the MSc in Financial Management at TiasNimbas. During various courses of the
previous year we learned that the objective of many cooperation’s is to maximize
shareholders wealth, and that although this might have contributed to the current
financial crises, still a lot of companies and business models primarily focus on this.
This in mind I felt like researching something more tangible, that could make a
contribution from a more holistic perspective. When I learned about microfinance in
the Netherlands used to stimulate entrepreneurship, I directly felt that this subject
was a perfect fit between my personal interests and the topic for my final assignment.
While attending the "2010: A Changing Europe combating poverty, supporting
enterprise" conference in London, I learned about the many different views people
have about how to make the microfinance sector sustainable and realized that a
clear focus was needed.
Some people reach the highest top of the ladder and only then
discover that it stands against the wrong wall (Covey, 2009)
I have experienced my thesis project as an opportunity to apply and extend all my
previously acquired knowledge and to gain better insight into my stronger and
weaker personal assets. Any potential mistakes made are the results of my individual
efforts; for the good parts, I thank those at my side during the course of the thesis
project. I sincerely thank Maria Franco and the other members of the European
Microfinance Network for allowing me to attend the conference. I owe special thanks
to all respondents for their time and the valuable information they provided during the
interviews. I would like to thank Michael Bier for his effort in guiding me through this
process. I feel that with his help I was able to guide my thesis into making it a useful
piece of paper that can be used for further research and aid starting entrepreneurs in
their search for a sustainable enterprise. I am grateful for the final proof reading done
by Mary Schoon. Furthermore, I would like to thank my fellow student Dominik Katz
for helping me in keeping my focus on the important aspects and clear up any
confusion that may have arisen. Lastly, I would like to thank my girlfriend Marleen
Overgaag and all other friends and family for their support during the previous year.
Elmar Hoogendoorn, Amsterdam, 23 September 2010
Elmar Hoogendoorn #=!
Sustainable Microfinance

Condensed Table of Contents
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!
Keywords and Abstract! ###!
Preface! #=!
Condensed Table of Contents! =!
Table of Contents! =#!
List of Figures! #>!
List of Tables! >!
List of Abbreviations! >#!
SECTION I.! INTRODUCTION! "!
1. ! Overview! "!
2.! Theory and Literature Review – Microfinance! #"!
3.! Theory and Literature Review – Balanced Scorecard! "$!
SECTION II. ! RESEARCH DESIGN! ##!
4. ! Methodology! %&!
SECTION III. ! FINDINGS AND DISCUSSION! $%!
5. ! Results! &'!
6. ! Discussion! '(!
7.! Conclusion, Recommendations and Limitations! ''!
List of Appendices! )*!
Bibliography! #*)!
Elmar Hoogendoorn =!
Sustainable Microfinance

Table of Contents
!
Keywords and Abstract! ###!
Preface! #=!
Condensed Table of Contents! =!
Table of Contents! =#!
List of Figures! #>!
List of Tables! >!
List of Abbreviations! >#!
SECTION I.! INTRODUCTION! "!
1. ! Overview! "!
1.1 Introduction! ?!
1.2 Different microfinance players! @!
1.2.1 Promotion and distribution of services! @!
1.2.2 Coaching! A!
1.2.3 Simplified access to financing! B!
1.3 Professionalizing! C!
1.4 Research aim! D!
1.5 Research Objective and Central Question! D!
1.6 The Research Strategy, Philosophical Stance and Approach! EF!
1.7 Research and Report Structure! EE!
2.! Theory and Literature Review – Microfinance! #"!
2.1 Introduction! EG!
2.2 Background on Microfinance! EG!
2.3 Microfinance in developing countries! EG!
2.3.1 Double Bottom Line! E?!
2.3.2 Mission drift?! E?!
2.3.3 Social Performance Measurement! EH!
2.4 Microfinance in (Western) Europe! EA!
2.4.1 Microfinance Institutions Goals! EB!
2.4.2 Microfinance Institutions Modes! EB!
2.4.3 Benchmarks! ED!
2.5 Business Development Services! GF!
2.5.1 Introduction! GF!
2.5.2 What are BDS?! GE!
2.5.3 Lessons from the Past! GG!
2.5.4 Types of BDS! G?!
2.5.5 BDS Dimensions! GH!
2.5.6 Success of BDS! GA!
2.5.7 BDS Criticism! GA!
2.6 Conclusion! GB!
3.! Theory and Literature Review – Balanced Scorecard! "$!
3.1 Introduction! GD!
3.2 The Characteristics of the Balanced Scorecard! GD!
3.2.1 Background! GD!
3.2.2 Structure! ?F!
3.2.3 Linking, Cause and Effect! ?E!
3.2.4 Indicators! ?G!
3.2.5 Purposes! ??!
3.2.6 Process! ??!
3.2.7 Success of the BSC! ??!
3.2.8 Criticism on the BSC! ?H!
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3.3 Lessons from previously developed BSC models! ?@!
3.3.1 The Performance Measurement Pyramid for Small Business! ?@!
3.3.2 Performance Management Beyond the Private Sector! ?B!
3.4 Characteristics of Micro and Small Entrepreneurs! ?D!
3.4.1 Planning in the Small Business Sector! ?D!
3.4.2 Defining ‘Fit’: The Unique Features of Small Business! HE!
3.4.3 Performance Measurement in the Small Business Sector! HE!
SECTION II. ! RESEARCH DESIGN! ##!
4. ! Methodology! %&!
4.1 Introduction! H@!
4.2 Setting! H@!
4.3 Philosophical Stance! HA!
4.4 The Process of Qualitative Content Analysis! HA!
4.4.1 Step 1: Preparing the Data! HA!
4.4.2 Step 2: Defining the Unit of Analysis! HB!
4.4.3 Step 3: Developing Categories! HB!
4.4.4 Step 4: Testing the Coding Scheme on a Sample of the Text! HC!
4.4.5 Step 5: Coding All the Text! HC!
4.4.6 Step 6: Assessing the Coding Consistency! HD!
4.4.7 Step 7: Drawing Conclusions from the Coded Data! HD!
4.4.8 Step 8: Reporting the Methods and Findings! HD!
4.5 Methods of Data Collection! @F!
4.6 Literature Review! @F!
4.7 Interviews! @E!
4.7.1 Sample Selection Interviews! @E!
4.8 The Research Design! @G!
4.9 Reliability and Validity! @?!
SECTION III. ! FINDINGS AND DISCUSSION! $%!
5. ! Results! &'!
5.1 Introduction! @B!
5.2 The categories! @B!
5.2.1. Reason, Drive and Contribution! @C!
5.2.2. Social! AF!
5.2.3. Financial! AE!
5.2.4. Sustainability Entrepreneur! AG!
5.2.5. Customer and Market research! A?!
5.2.6. Internal Business Processes! AH!
5.2.7. Organizational, Personal Development! AH!
5.2.8. Learning, Growth and Employee! A@!
5.2.9. Network and Business Development Services! A@!
5.2.10. General BSC model! AA!
5.2.11. Relation and Link! AA!
5.2.12. Most Important! AB!
5.2.13. Measurement and Indicators! AB!
5.3 Summary! AC!
6. ! Discussion! '(!
6.1 Introduction! BF!
6.2 A Balanced Scorecard for Micro and Small Entrepreneurs! BF!
6.2.1. General ‘Equally’ Balanced Scorecard Model! BF!
6.2.2. Social! BE!
6.2.3. Financial! BE!
6.2.4. Sustainability Entrepreneur! BG!
6.2.5. Customer and Market research! BG!
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6.2.6. Internal Business Processes! B?!
6.2.7. Organizational, Personal Development! B?!
6.2.8. Learning, Growth and Employee! B?!
6.2.9. Network & Business Development Support! BH!
6.2.10. Reason, Drive and Contribution! BH!
6.2.11. Relation and Link! B@!
6.2.12. Most Important! B@!
6.2.13. Measurement and Indicators! B@!
7.! Conclusion, Recommendations and Limitations! ''!
7.1 Introduction! BB!
7.2 Concluding Remarks! BB!
7.2.1 From the Literature Review! BB!
7.2.2 From the Empirical Findings! BC!
7.2.3 The Model: ‘Equally’ Balanced Scorecard! CF!
7.3 Theoretical Contribution! CF!
7.4 Practical Implications! CF!
7.5 Research Reflection! CE!
7.6 Future Research! CG!
List of Appendices! )*!
Appendix A – Thesis Proposal! CH!
Appendix B – Performance Management Beyond the Private sector! EFE!
Appendix C – Interview Outline! EF@!
Appendix D – Reason, Drive and Contribution! EFB!
Appendix E – Social! EEF!
Appendix F – Financial! EEG!
Appendix G – Sustainability Entrepreneur! EE@!
Appendix H – Customer and Market research! EEB!
Appendix I – Internal Business Processes! EGF!
Appendix J – Organizational, Personal Development! EGE!
Appendix K – Learning, Growth and Employee! EG?!
Appendix L – Network! EGH!
Appendix M – Business Development Services! EGA!
Appendix N – General BSC model! EGC!
Appendix O – Relation and Link! E?F!
Appendix P – Most Important! E?G!
Appendix Q – Measurement and Indicators! E??!
Appendix R – Sustainability of Microfinance! E?H!
Appendix S – Qredits! E?A!
Bibliography! #*)!
Elmar Hoogendoorn =###!
Sustainable Microfinance

List of Figures
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Figure I-1: Thesis Overview 1
Figure 1.1: Capital for Small Businesses 2
Figure 1.2: People Considering – Having Plans – Becoming Entrepreneurs 3
Figure 1.3: The Research Model 11
Figure 2.1: SPM system Framework 15
Figure 2.2: Strategy Map 15
Figure 2.3 Number of Loans Disbursed by Country 2008-2009 16
Figure 2.4: Future Goals of European MFIs 17
Figure 2.5: Social Inclusion of Enterprise Development 20
Figure 2.6: Types of Enterprises 20
Figure 2.7: Overview of BDS 35
Figure 3.1: The BSC framework 31
Figure 3.2: The Assumed Causal Relationship in the BSC 32
Figure II-1: Thesis Overview 44
Figure 4.1: Step model of inductive category development 48
Figure III-1: Thesis Overview 56
Figure 5.1: Starting point entrepreneurs 59
Figure 6.1: ‘Equally’ Balanced Scorecard for Micro and Small Entrepreneurs 70
Figure 6.2: ‘Equally’ Balanced Scorecard for Micro and Small Entrepreneurs 75
Figure B-1: Example of a BSC matrix 101
Figure B-2: Simplified Strategy Map 102
Figure B-3: The Social Enterprise Scorecard 103
Figure B-4: Strategy Map 103
Figure B-5: Comprehensive Performance Management System 104
Figure B-6: Performance Measurement for Small Business 104
Elmar Hoogendoorn #>!
Sustainable Microfinance

List of Tables
Table 2.1: Enterprise Category 21
Table 2.2: Business Development Service Categories 23
Table 3.1: Development of the Performance Measurement Pyramid for SB 36
Table 3.2: Performance Management Beyond the Private Sector 37
Table 3.3: Planning in the Small Business Sector 40
Table 3.4: Performance Measurement Systems and MSE 42
Table 4.1: How the sub questions will be answered 50
Table 4.2: The Interviewees 52
Table 4.3: Reliability Check 54
Table 5.1: Categories and number of mentioning’s 58
Table 5.2: How can the BSC improve the sustainability of starting entrepreneurs? 68
Table 5.3: How does the BSC need to be adjusted? 68
Table 5.4: What dimensions are relevant for starting entrepreneurs? 69
Table 5.5: How do the dimensions relate to each other in an optimal BSC? 69
Elmar Hoogendoorn >!
Sustainable Microfinance

List of Abbreviations
BDS Business Development Services
BSC Balanced Scorecard
CDFA Community Development Finance Assossiation
CDFI Community Development Financial Institution
CEE Central and Eastern Europe
CGAP Consultative Group to Assist the Poor
CPMS Comprehensive Performance Management System
EIF European Investment Fund
EMN European Microfinance Network
GT Grounded Theory
MFC Microfinance Centre
MFI Microfinance Institution
MF-points Microfinance-entrepreneurial-points
MSE Micro and Small Entrepreneurs
NGO Non-Governmental Organizations
PMS Performance Measurement System
SB Small Business
SMART Specific Measurable Attainable Relevant and Time-bound
SME Small and Medium sized Enterprises
SPM Social Performance Management
UN United Nations
ZZP-er ‘Zelfstandinge Zonder Personeel’
Self-employed Person without Employees
Elmar Hoogendoorn >#!
Sustainable Microfinance

Section I. Introduction
The conclusion of this thesis will provide an answer to the following research
question:
How can the performance measurement systems used by microfinance
institutions in both developing and industrialized countries be used to provide
the best added value for the microfinance sector in the Netherlands?
Section 1 serves as the springboard for this research. Chapter 1 reveals the
background of Microfinance, which has led to the central question and objective of
this research. In addition, this chapter discusses the research and report structure.
As the mode of research employed in this work is inductive, the literature review is
carried out before the research is designed in detail. Therefore, the report will follow
the same structure. For that reason, chapters 2 and 3 will cover the relevant
literature. Whereas chapter 2 will have a broad scope on microfinance and related
researches, chapter 3 will discuss the suitability of PMSs in relation to the Dutch
microfinance sector.
Figure I-1: Thesis Overview (Author)
!
Elmar Hoogendoorn 1
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1. Overview
This chapter serves as the general introduction to this dissertation. It reveals the
empirical rationale for this thesis, on which the objectives and central question of this
research are based. Towards the end of this chapter, the research and report
structure are presented.
‘Borrowing money for a house or car is something people manage to do,
definatly if they have a steady job. But borrowing money to start up a
business? That is something different. Even though enterpreneurship is
expected to have a possitive social impact’. (Groenevelt in Hen, 2010)
Figure 1.1: Capital for Small Businesses (The Economist, 2010)
!
Elmar Hoogendoorn 2
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1.1 Introduction
According to a research, conducted in 2006, by 21minuten.nl and the Dutch
Chamber of Commerce, 3.000.000 people think about starting their own business
within five years and 600.000 have concrete plans to do so (see Figure 1.2). Annually
only 70.000 people actually start their own business. The main reasons for this
relatively low number are:
• Lack of assistance;
• Financial barriers and;
• Insufficient knowledge and capacities.
The provision of micro credit, in combination with the assistance of a coach, can take
away these barriers (Stichting Microfinanciering & Ondernemerschap, 2006). Tillaart,
et al. (2009) support this view. Based on figures from the Chamber of Commerce,
they state that the number of starting entrepreneurs has increased from 35.000 in
1990 to more than 100.000 in 2007 and 2008.
Figure 1.2: People Considering – Having Plans – Becoming Entrepreneurs
(Adapted from Oberman and Roelofsen, 2009)
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Elmar Hoogendoorn 3
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In 2007, the Dutch Ministry of Economic Affairs, under the management of State
Secretary Frank Heemskerk, appointed The Council for Microfinance. One of the
members of this Council is Her Royal Highness Princess Maxima of the Netherlands,
who was a member of the UN advisory committee during the year of microcredit
2005.
In October 2007, the Council presented an advisory report to State Secretary
Heemskerk. This report states that microfinance has big potential as stimulator of
entrepreneurship. According to the Council this will have a positive influence on:
1. Economic growth;
2. Integration of disadvantaged groups;
3. Reducing unemployment.
Further the report states that local microfinance initiatives, of which already many
were presents at the time the report was presented, are the source of power when it
comes to using the potential. In order to strengthen these initiatives and to increase
the sustainability, the Council proposed an approach where the local initiatives, which
have direct access to the target groups, are supported by a franchise system. This
enables them to use coaching networks and to have access to simple financings
models (Council for microfinance, 2007).
Another statement from the report is that the Netherlands, compared to other
countries in Europe, was behind with stimulating micro entrepreneurs. A couple of
countries (in particular France, Spain, England and Finland) were already using
microfinance for several years. The Council stated that the Netherlands could learn
the following lessons from those experiences:
1. Local microfinance initiatives, carried out by people that stand in the middle of
local communities are of indispensable importance;
2. Coaching, both before and at the beginning of the lifetime of the business, is
next to financing very important;
3. Scale is important for sustainability. National coordination under one central
brand can be the key to success;
Elmar Hoogendoorn 4
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4. Efficiency and automated processes to judge applications, such as a client-
score-model, that are adjusted to the target group can reduce costs and
contribute to sustainability;
5. Self-sufficient microfinance does not seem to be possible without relative high
interest rates.
1.2 Different microfinance players
In line with the advisory report three related components have been created.
According to Heemskerk (2009a) microfinance in the Netherlands, is intended for
starting and existing entrepreneurs with a feasible business plan and consists of
three different components:
• Promotion and distribution of services;
• Coaching and;
• Microcredit up to !35.000, -.
1.2.1 Promotion and distribution of services
Longer existing and newly erected local initiatives are carrying out the promotion and
distribution of services. By the time of the first annual meeting of the so-called
microfinance-entrepreneurs-points (MF-points), there were 34 registered MF-points,
and a couple of MF-points were in the process of being erected, to realize the
ambition of national coverage by the end of 2010 (Stichting Microfinanciering &
Ondernemerschap, 2009b).
According to the toolkit ‘how to set up a MF-point’ there can be made a distinction
between three different types of MF-points (Stichting Microfinanciering &
Ondernemerschap, 2009a):
1. Model 1 – the Entrepreneurs’ house
2. Model 2 – the Entrepreneurs’ office window
3. Model 3 – the Entrepreneurs’ network
The models have different approaches and characteristics, but all examples can be
found in practice. Potential and existing entrepreneurs can visit these MF-points to
Elmar Hoogendoorn 5
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collect information or seek specific assistance.
These organizations provide the intake, initial
feedback on entrepreneurs’ capacities and
ideas, advice about the specific coaching when
needed, possible financings options, assist
entrepreneurs with writing their business plan,
during the process of the credit application and
finding a suitable coach. Another role these organizations !
play is increasing the
awareness of the possibilities of microfinance on a local level.
Zwind (2009) conducted a research to picture the economic impact of the MF-points
most important findings as follows:
• 44% of the clients start a business;
• On average these business contain 1.5 fte;
• 94% of business (2004-2009) still exist in 2009;
• For 49% of the clients their business is their most important source of income,
for 24% this is paid employment and for 16% this is social welfare.
• 74% expects to grow within two years;
• The majority (77%) did not need a loan to start up or continue the business;
• 36,2% has a bachelor background and 19,9% has an academic background.
1.2.2 Coaching
Starting entrepreneurs that are coached have a bigger chance of succeeding than
those that will have to do without coaching. After five years 70 to 80% of the starters
are still active when they have been coached. Without coaching this is only 50%
(Stichting Microfinanciering & Ondernemerschap, 2009a).
Therefore coaching is a very important component of microfinance. The advice of the
Council for microfinance was to develop a network of trained volunteers and
professionals (Council for microfinance, 2007).
Dutch definition of microfinance:
‘the combination of coaching and
microcredit (up to a maximum of
!35.000) focused on the starting
entrepreneur with the objective to
stimulate entrepreneurship’
(Oberman and Roelofsen, 2009).
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In recent years, numerous initiatives to support (pre) starting entrepreneurs with
focused training and coaching have emerged. The specific numbers and impact of
these practices were unknown. This was the reason for the project management of
Microfinance (part of the ministry of Economic affairs) to conduct a research to create
an overview of the quality of the coaching for staring entrepreneurs.
The findings of that research, conducted by Tillaart, et al. (2009) are as follows:
• 51% of the coached pre-starters, started a business;
• 2% decided not to start a business;
• The remaining 47% was still in the process of deciding;
• One out of five starters mentions that turnover and profit figures have
improved due to coaching;
• Starters mention that the coaching helped to develop a (better) marketing
strategy or business strategy;
• More than half mentions to have developed a better understanding of
entrepreneurship and two thirds indicate to have improved their own
entrepreneurial skill.
Entrepreneurs can find an entrepreneur by themselves, but the advisor of the MF-
point can assist as well. The advisor has insight in the local availability of coaches
and can assure the correct match between coach and entrepreneur.
1.2.3 Simplified access to financing
The advisor of the MF-point assists the entrepreneurs with the application for a
microcredit up to !35.000. In 2007, the Ministries of Economic Affairs and Social
Welfare had a business case; the ‘game’ was to come up with the best way to
provide microloans for or to start up businesses. Two different options were erected
and later pilot-tested (Heemskerk, 2009a):
1. ‘Borgstelling’
2. Qredits
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In some regions entrepreneurs are able to get microloans through the ‘Borgstelling’.
This is a surety service where the government secures 80% of the loan in order to
stimulate banks to provide the loans. This lowers the risk for the individual capital
provider to the level of an average SME borrower (Gemeente Den Haag, 2009).
Qredits is a combination of traditional banking and sophisticated IT system. Qredits
has nine local loan officers and local contacts that are essential for the assessment
and monitoring. A centralized national back office backs these loan officers, enabling
Qredits to maximize economies of scale and growth towards realizing sustainability
(Qredits, 2010b). The way Qredits operates can be compared with a bank. The main
difference is the specific and individual attention for the micro-entrepreneur. The
lending procedure exists of five steps (Qredits, 2010a); application, intake, screening,
assessment / review and granting. All the information generated during the five steps
is gathered in the IT system MicroNet. This system enables an automated loan
assessment procedure, communication between the back office and the local loan
officer, a highly automated central back office procedure and is linked to several
external actors (Qredits, 2010b). The system can be used constantly for monitoring
and has a lot of potential. Therefore Qredits won the ‘Europe Award’ for Microfinance
Good Practices, endowed with !50,000, - during the 7th European Microfinance
Network’s Annual Conference in London (Qredits, 2010c).
By the time the Council presented its report it was expected that only twenty percent
of the annual 10.000 extra entrepreneurs (see figure 1.2) would need additional
financing.
1.3 Professionalizing
Micro-credit and microfinance in (Western) Europe, and particularly in the
Netherlands, are rather new phenomena (see paragraph 1.1). In developing
countries however, it is much older. Initially, most developing countries accepted
microfinance as an instrument to combat poverty. Then it was acclaimed as an
instrument to boost entrepreneurial initiatives. Subsequently, microfinance institutions
(MFIs) developed comprehensive programs offering a wider range of products and
services to micro-entrepreneurs (Molenaar, 2009). During the maturing process
several performance measurement systems (PMSs) have been developed in order to
cope with the professionalization of the sector.
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1.4 Research aim
The overall aim of this research is that the results contribute to the existing body of
literature and to provide a practical model that can be used by (one of) the
microfinance players. In order to prevent the same wheels from being invented again,
the first step will be to identify what PMSs are being used by MFIs in both developing
and industrialized countries. The research aim of this thesis can be formulated as
follows:
Identify what PMSs are being used (by MFIs) around the world in order to
develop a model that contributes towards the sustainability of the microfinance
sector in the Netherlands.
1.5 Research Objective and Central Question
The objectives that arise from the research aim are:
• To give a sound and in-depth review on the current literature on MFIs and the
PMSs they use;
• To identify the gap between theoretical and empirical performance
measurement regarding PMS used by MFIs;
• To identify what specific elements microfinance experts consider to be
important for performance measurement in the Netherlands;
• To identify the need for further research.
The objectives are the input for the research question. The central question in this
research is thus:
How can the PMSs used (by MFIs) in both developing and industrialized
countries be used to provide the best added value the microfinance sector in
the Netherlands?
In order to answer the central question, the following sub-questions need to be
answered:
• What does the current body of literature reveal about the different MFIs, and
their use of PMSs, throughout the world?
• How does the current microfinance model in the Netherlands look like?
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• What different players in the Dutch microfinance model can be identified?
• By focussing on what player, will the largest move towards contribution be
realized?
• How can the identified PMSs improve the sustainability of this player?
• How do the PMSs need to be adjusted to be suited for the needs of this
player?
• What elements of the PMS are relevant for this player?
1.6 The Research Strategy, Philosophical Stance and Approach
Now that the central and sub-question(s) of this research are set, the question in turn
is how these can be answered. The potential move towards sustainability will be
based on; already available literature, best practices and the current state of the
Dutch microfinance sector. This method of carrying out research is theory-building.
Theory-building is an inductive approach to research, as theory follows data rather
than the other way around (Saunders, Lewis and Thornhill, 2009). To improve the
model, however, it is possible to combine both inductive and deductive (theory-
testing) research. This is can be done using a Grounded Theory (GT) strategy. GT is
‘theory that emerges from data’ (Glaser and Strauss 1967). GT starts by taking an
inductive approach followed by a deductive approach to test the theory that is being
built. By using this approach, the philosophical stance of the realist can be applied,
which combines the best of both the positivistic method and interpretivistic method’s
world view (Saunders et al., 2009).
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1.7 Research and Report Structure
Using GT structures, the research and the report accordingly.
• To determine what PMSs are being used by MFIs throughout the world, further
discussion on the sustainability of MFIs and the role of PMSs is held through a
literature review in chapter 2.
• As a result of the initial research, it is expected that Dutch MFIs can move
towards sustainability by the use of appropriate PMSs. This needs to be
confirmed by an extended literature review. In addition, the literature review
needs to shed light on what particular PMS can be used, in order to have to
optimal impact. This step will be described in chapter 3.
• Chapter 4 covers the research design, which discusses and explains all the
steps that will be taken in order to come to a valid, reliable and replicable
conclusion at the end of this thesis.
• After the design, the research is performed. Chapter 5 describes the findings
from the research. This is done accordingly to the categories as they were
developed during the research.
• In chapter 6, a discussion is held on the different categories developed during
the research. The empirical findings are compared to the findings from the
literature.
• Chapter 7 concludes this research by summarizing the major findings and
identifying the research opportunities for the future.
Figure 1.3: The Research Model (Author)
!
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2. Theory and Literature Review – Microfinance
2.1 Introduction
To determine what PMSs are being used by MFIs throughout the world, further
discussion on the sustainability of MFIs and the role of PMSs is held through a
literature review in this chapter. First background information will be provided.
Second the different practises from development countries are discussed. Thirdly
microfinance in the industrialized countries will be discussed. Fourthly an important
aspect of microfinance, the business development service (BDS) will be discussed
and finally a conclusion will be drawn relating the further focus of this research.
2.2 Background on Microfinance
According to the Journal of Microfinance the term defines what; ‘is arguably the most
innovative strategy to address the problems of global poverty’ (Woodworth and
Woller, 1999, p. 6.). This view is shared by the United Nations (UN), which
designated the year 2005 as the International Year of Microcredit (UN, 1999). The
key objective of the year was to unite Member States, UN Agencies and Microfinance
Partners in their shared interest to build sustainable and inclusive financial sectors
(UN, 2004) and achieve the Millennium Development Goals (see The World Bank
Group, 2009). Before the 1990s or 1980s both the terms ‘microcredit’ and
‘microfinance’ were not used, neither in the academic literature nor by development
aid practitioners (Schwiecker, 2004). The concept of providing financial services to
low-income people, however, is much older.
2.3 Microfinance in developing countries
What is being regarded as microfinance nowadays initiated in the 1970s and focused
on the provision of credit to the poor in order to reduce poverty and instigate social
change. The process was driven by twenty-three Non-Governmental Organizations
(NGOs), and came to be known as the ‘microcredit revolution’ (Phiri, 2009). This is
associated to Nobel Peace Laureate, Muhammad Yunus, the founder and prophet of
the microcredit movement and Bangladesh’s Grameen Bank (Businessweek, 2005).
Powered by donor support and international publicity, Grameen Banking became the
new model of microcredit (Seibel, 2005).
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2.3.1 Double Bottom Line
Most MFIs deal with a double bottom line. On the one hand they try to reach financial
sustainability and on the other hand they try to increase their socioeconomic impact
(Simanowitz, 2003). Finding the right balance between these two goals can be
difficult. One of the tools that can help a MFI to promote financial performance as
well as measure social performance is the client assessment tool (Woller, 2005). This
tool helps to gather information about the clients, analyze the information and act on
the information. According to measurement expert Gary Woller, there are three
generic approaches to client assessment (Crompton, 2007):
1. Impact assessment;
2. Market research;
3. Client monitoring.
Impact assessment is the process of both proving impact and improving
interventions by measuring as accurately as possible the impact of an intervention
and understanding the processes of intervention and their impacts so as to improve
those processes (Hulme, 2000). This has become an increasingly important aspect
of development activity as agencies and particularly aid donors have sought to
ensure that funds are well spent. According to Pawlak and Matul (2004) impact
assessment has a bad reputation by MFIs.
Market research is the process of gathering information on clients’ needs and wants,
behaviours and perceptions. If carried out properly and if the data is used effectively
it has the potential to strengthen financial performance (Crompton, 2007).
Client monitoring is the process of tracking changes in clients’ profiles, well-being
and behaviour. This will allow a MFI to monitor the socioeconomic status of their
clients and consequently determine its social performance (Crompton, 2007).
2.3.2 Mission drift?
The phenomenon of mission drift captures the process whereby MFIs depart from
their social mission, and increasingly focus on their financial performance. This focus
on financial performance may harm the potential impact and outreach of
microfinance programs, diminishing the poverty alleviation potential of microfinance.
At the same time, this focus may harm the dual return that foreign institutional
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investors expect to gain from the financial and social performance that MFI invested
in. Both effects may occur if the balance between the financial and social
performance of a MFI turns into a trade-off. The ongoing process of the
commercialization of MFIs is leading to such a trade-off (Engels, 2009).
In July 2008, the Financial Times warned for the commercialization of MFIs. The
increasing interest of institutional investors, and the large amount of money injected
into the microfinance industry, seems to enhance the for-profit motive in the industry.
Muhammad Yunus, claimed; ‘when you are making profits you are moving into the
mentality of the loan shark. We are trying to get that loan shark out’ (Burgis, 2008).
Gokhale (2009) notes that for ambitious MFIs, maximizing profits seems to become a
means to attract funding and a key objective by itself.
2.3.3 Social Performance Measurement
The Microfinance Centre (MFC) for Central and Eastern Europe (CEE) and the New
Independent States argues that the key to developing sustainable social performance
management (SPM) systems and practices is by integrating these systems within the
operational organization. This approach enables MFIs to achieve their social mission,
because if there is no system to support improvement in social performance, the
MFIs social mission may be lost in the drive of reaching the financial targets.
Combining social and financial measures can even increase financial returns in the
long run, due to a better understanding of target clients and allocating resources in a
more efficient way and thereby avoiding unnecessary costs of inefficient actions.
Moreover, combining these indicators will enable managers to successfully balance
institutional and development impact trade-offs while striving to achieve the ‘double
bottom line’ and improve overall performance (Pawlak and Matul, 2004). The role of
microfinance differs from one context to another. Based on a needs assessment,
each MFI aims to develop services for selected target groups. Each MFI perceives its
role in a different way and wants to achieve different objectives. Given this
uniqueness of MFIs, there is a need for different systems and approaches for
measuring social performance. Each system needs to answer the following central
questions:
• Verification – How successful is the mission being fulfilled?
• Improvement – What can be done to better fulfil the mission?
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The SPM should have the following functions (Pawlak and Matul, 2004):
1. Identifying target clientele;
2. Monitoring client status change among target clientele (both current and
existing clients);
3. Stimulating the search for new solutions to improve the fulfilment of the
organizational mission through targeting tools, new products, partnerships,
delivery channels, etc.
Figure 2.1: SPM system Framework (Pawlak and Matul, 2004)
!
The MFC has developed a Toolkit
based on the Balanced Scorecard
(BSC) methodology, to help MFIs
professionalize their strategic
management processes and improve
their double bottom line. The Toolkit
minimizes the risk of mission drift for
those MFIs, which grow fast, transform
themselves into regulated institutions
and/or compete aggressively with
other market players (Microfinance
Centre, 2007, p. 2). One of the tools in
the Toolkit, inspired by the BSC is the
!
Strategy Map (see figure 2.2). Since social impact is important for microfinance a fifth
perspective (traditionally the BSC has four perspectives, see paragraph 3.2.2) is
added. This perspective is called the social perspective.
Figure 2.2: Strategy Map (MFC, 2007)
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2.4 Microfinance in (Western) Europe
Micro-credit and microfinance in (Western) Europe are rather new phenomena and
were first put seriously on the agenda in the early nineties. In a relatively short period
both have been embraced fully by politicians at the European Union, and at some
national levels (see figure 2.3), as a valuable instrument for social and economic
development (Molenaar, 2009). There is a spread belief in Europe that microcredit
can play an important role within the 10 year Lisbon strategy for growth and
employment and achieve social inclusion, which goals should have been achieved by
2010 (Canale, 2010).
In the 2007 Survey of the Microfinance sector in Europe (Jayo, Rico and Lacalle,
2008) an assessment was made of the Mission Statements of the majority of the
organizations. These could be classified into the following four main categories:
• Job creation and entrepreneurship promotion;
• Small and Medium Enterprise (SME) and economic development;
• Financial inclusion;
• Social inclusion and the fight against poverty.
Figure 2.3: Number of Loans Disbursed by Country 2008-2009 (Molenaar, 2010)
Due
!
to the different missions of different organizations, different perspectives and
models have been developed. One perspective about microfinance is that it is
sustainable: ‘Dozen of institutions have proved that financial services for poor people
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can cover their full cost, through adequate interest spreads, relentless focus on
efficiency, and aggressive enforcement of repayment’ (Littlefield and Rosenberg,
2004). An opposite perspective is: ‘MFIs that focus on financial self-sufficiency bear
the burden of proving that they are truly reaching the very poor. If not, then they are
pushing the microfinance industry to abandon its value-based roots, and concern for
the poor, however earnest, can be become simply an excuse to make a buck.’
(Woller, Dunford and Warner, 1999).
2.4.1 Microfinance Institutions Goals
One of the main goals of European MFIs is to become sustainable over the long run
(Jayo et al., 2008). The outcomes of the working paper are average for the European
Union (see figure 2.4) there is however a difference between Western Europe and
CEE. In CEE, where microfinance was introduced after the fall of the wall, MFIs
traditionally focus on profitability, scale and sustainability (Hartarska et al., 2006). In
Western European, on the other hand, MFIs have a strong focus on social inclusion
and pay less or almost no attention to profitability (Evers and Jung, 2007).
!
!
2.4.2 Microfinance Institutions Modes
According to Pollinger, et al. (2007) there are three different modes in which MFIs
operate:
• Survival;
• Sustainability;
Figure 2.4: Future Goals of European MFIs (Jayo et al., 2008)
• Self-sufficiency.
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A MFI in the survival mode can barely cover its monthly expenses and faces a slow
death when money runs out. A sustainable MFI covers its annual expenses, but
relies heavily on donations, grants or other forms of public of private subsidies
besides its own income. Finally a self-sufficient MFI is able to cover all its expenses
from lending and related operations. Most organizations are in between survival and
sustainable mode (Pollinger et al., 2007). Two specific definitions of sustainability are
widely used, operational and financial. Operational sustainability refers to the ability
of a MFI to cover its expenses by its incomes generated from its core activities. The
two most important incomes are fees and interest generated from its loan portfolio.
Financial sustainability refers to the ability to cover its costs if it had to raise 100% of
its loan portfolio through recapitalization and through borrowing funds at the market
rate (CGAP, 2003; CDFA, 2006).
Reaching financial sustainability is not for every MFI the ultimate strategic goal.
Vinelli (2002) gives five supporting arguments why MFIs should. The first reason is
that it helps to ensure organizational survival and thus continuing (financial) support
that is desired by many micro-entrepreneurs. Once borrowers feel that the MFI itself
has financial problems or that it will not punish them when they do not repay (in time)
the default rate will increase 1 (Schreiner and Morduch, 2002; Gonzalez-Vega, 1998;
Bates, 1995). Second, pricing their products at market levels will enable MFIs to
attract the target of non-bankable (but potentially viable) borrowers who do not have
access to cheaper products. Third, traditional lenders have to compete with
organizations that benefit from large subsidies. Fourth, once sustainable MFIs will be
able to raise funds from variable sources. Finally, focusing on sustainability will
require the management to control its costs. This last argument can cause mission
drift to occur. The reason for this is that it is easier to increase self-sufficiency by
lending to individuals with better credit records. Consequently the real financial
excluded will not be reached. Hence, instead of searching for borrowers that are
cheaper and easier to serve, lenders need to work harder and more efficiently and
even create less expensive products (Schreiner and Morduch, 2002; Vinelli, 2002).
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1 This is one of the reasons why ‘Stichting Microkrediet Nederland’ operates under the name Qredits
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According to Von Pischke (2002) the best practice for the microfinance industry is
sustainability and eventually self-sufficiency. Therefore sustainable institutions need
to be created. In this sense European MFIs have been increasingly pressured to
adapt more business like practices and become self-sufficient. Dayson, et al. (2009)
conducted a benchmarking study of five UK MFIs. As part of this study they analyzed
and modelled the past and future performance of their loan portfolios, their
partnerships, and the way in which their staff members spent their time and the
processes and structures driving this time-use. They include previous research into
the UK MFI sector, which has identified three pathways of improving financial and
operational sustainability 2 :
• Staff productivity and efficiency;
• Effective partnerships (to reduce costs and increase client base);
• An appropriately mixed loan portfolio.
2.4.3 Benchmarks
In the UK, MFIs are referred to as Community Development Finance Institutions
(CDFIs). CDFIs are often seen as the developed world counterparts of MFIs that
operate in developing countries. A key point of discussion has been whether it is
appropriate to use the same kinds of measures and techniques in both contexts. In
addition to the fact that CDFIs’ activities extend beyond microfinance, there is a belief
that the differences between microfinance in developing and developed countries are
very significant (Servon, 1999), and that there is a need for PMSs that suite the
specific needs of developed economies.
Due to different types of organizations and circumstances in European countries (see
figure 2.5) the benchmarks in terms of the degree of self-sustainability for different
MFIs need to be individually adjustable, depending on target groups and services
provided (Jung et al., 2009). Kramer-Eis and Conforti (2009) state that developing
and maintaining a flexible and sustainable funding model for microfinance operations
that will allow the MFIs to realize their individual approach will be a major challenge.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
" !During the previous one and a half to two years, Qredits has provided around 850 microloans.
Several respondents felt that this number is quite low, considering that Qredits employs twenty-six
people; therefore similar research could be conduct in the Netherlands. Part of this research could be
to identify more specifically the demand for microcredit in the Netherlands. !
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The main factors that negatively affect the move toward a sustainable model, so far
identified are (Evers and Jung, 2007; Guichandut and Underwood, 2007):
1. Difficult and little developed market place;
2. Sector immaturity;
3. Presence of subsidies.
According to Jung, et al. (2009) financial and non-financial services should be
considered as separate cost centres when developing such a model. The financial
operations may become sustainable in the long run, but the Business Development
Services (BDS) for disadvantaged target groups will remain liable on subsidies.
Figure 2.5: Social Inclusion of Enterprise Development (Molenaar, 2010)
!
2.5 Business Development Services
2.5.1 Introduction
Data indicates that approximately 98 percent of
European companies are small businesses
(SBs). Of these small firms, 91 percent are
micro-firms, employing less than 10 individuals,
while 50 percent are sole proprietorships (see
figure 2.6 and table 2.1) (European
Commission, 2007). Moreover, as the industrial Figure 2.6: Types of Enterprises
(European Commission, 2007)
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sector in Europe is in decline while the service industry and modern technology is
steadily growing, micro and small enterprises have gained and are still gaining
importance (Lämmermann, Zamorano and Guichandut, 2007).
Enterprise category Headcount Turnover or Balance sheet total
Medium-sized < 250 ! " 50 million ! " 43 million
Small < 50 ! " 10 million ! " 10 million
Micro < 10 ! " 2 million ! " 2 million
Table 2.1: Enterprise Category (European Commission, 2007)
The !
three major European Microfinance Networks share this view. One of their key
recommendations for policy makers from their shared advisory report (CDFA, MFC,
EMN, 2007) is to recognise that microfinance is broader than the provision of credit.
It includes a range of other financial services, such as savings, insurance and
leasing. However, other non-financial services such as BDS and financial literacy are
needed to fight all aspects of social and financial exclusion. The European Networks
argue that this will significantly enhance the operations of microfinance institutions
(MFIs), which will, in turn, increase their impact, accelerating the inclusion process.
Jayo, et al. (2008) made similar recommendations.
2.5.2 What are BDS?
In 2002 the Micro-Finance Skills Project described BDS as all external non-financial
support to enterprises that:
• Increases operational capacity;
• Provides access to markets;
• Improves management skills;
• Improves financial efficiency;
• Provides access to networks and information.
According to Lämmermann, et al., (2007) support services are especially important
for microenterprises (enterprises with less than ten employees). Micro entrepreneurs
often lack technical and managerial skills, information and market access, factors
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that are needed in order to transform a microloan into a competitive microenterprise.
BDS address these constraints and comprise a wide variety of different non-financial
pre- and post-loan services. Formerly BDS suppliers mainly focused on providing
training and assessment services. However, in the last years, the range has
broadened and now it also includes efforts to improve access to marketing services
and information resources. In addition, infrastructure development and policy reform
are now referred to when talking about BDS. According to Granger and Lämmerman
(2009) BDS enable new entrepreneurs to face administrative procedures, implement
accountancy and management systems, establish a bank relationship and identify
commercial opportunities. In addition, they reduce the risk of non-repayment of the
loan. For business support, many MFIs rely on volunteers.
Since the development of microfinance in Europe, BDS have been regarded as an
essential factor for the successful realization of a microloan. This stands in contrast
to microfinance in developing countries, where credits are more often delivered
without additional business support.
2.5.3 Lessons from the Past
Molenaar (2009) argues that we need to learn from the past. According to him small
and medium-sized enterprises (SME) have received significant attention in the
seventies and eighties and many programmes have been experimented with. Special
SME financing programmes were developed, as well as training and consultancy
services. Evaluations of SME development programmes in the eighties showed the
limitations of the methods and programmes; they did not reach large numbers of
people, were considered costly and were offering all kinds of services to the SME
sector in a supply driven, ineffective and inefficient way.
The comprehensive evaluations of the small-scale industries sector in the late
eighties (Keddie, Nanjundan and Teszler, 1988) provide an in-depth insight into the
numerous pitfalls encountered in small and micro-enterprise development and
promotion programmes. Their studies clearly spell out the weaknesses of the SME
support systems adopted, programmes developed and policies pursued. These
weaknesses led to supply-focused, often isolated support, reaching few people at a
relatively high cost.
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According to Molenaar (2009) the lessons drawn from such analyses are manifold
and have an important influence on the design of micro-enterprise programmes and
on the role of related BDS. Some of these are:
• The need for an enabling environment that will be conducive to the
development of the micro- and small enterprise sector;
• The importance of involving financial institutions in credit and financing
programmes and the need to think in financial systems rather than in credit
lines proper;
• The importance to professionalise intermediary institutions and organisations
and to assist these in their organisational and related human resources
development processes;
• The importance to boost and promote local entrepreneurship resulting in clear
demand for services;
• The need for flexible programmes that can be adjusted to changing needs in
the small and micro-enterprise sector.
2.5.4 Types of BDS
Harper (2000) following Carney (1998) proposes an interesting approach to BDS. He
categorizes BDS by the capital assets, which people need to live on: physical, social,
natural and human (see table 2.2).
Capital Asset Relevant Business Development Services
Physical The provision of home-based business space, power, water, factory
sheds, business incubators, land tenure, roadside rights, transport,
common service equipment
Social The development of co-operatives, self-help groups, business
associations, clusters, networks, franchising, chambers of commerce.
Assistance with information and with linkages to customers and to
suppliers
Natural Promotion of sustainable use of raw materials, recycling, pollution
reduction, waste disposal
Human Training, advice, counselling, consultancy, in technical skills,
‘entrepreneurship’ and in business management
Table 2.2: Business Development Service Categories (Harper, 2000)!
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According to Lämmermann, et al. (2007) this categorization is useful because it
highlights the fact that BDS include a wide range of different development services.
Additionally, it points out the importance of locating BDS in a wider context while at
the same time adapting them to individual business’ needs. Meanwhile, another,
equally useful approach is proposed by the Committee of Donor Agencies for Small
Enterprise Development in its ‘Guiding Principles for Donor Intervention on BDS for
Small Enterprises’ (World Bank, 2001). It differentiates two types of BDS services,
namely strategic and operational. While operational services designate those
services needed for day-to-day operations (information and communication,
management of accounts and compliance with regulations), strategic services
address medium and long-term issues related to a business’ market access or
competitiveness.
2.5.5 BDS Dimensions
According to the Small Enterprise Education and Promotion (SEEP) Network Guide
to BDS, (in Ribbink, 2003) BDS comprise of the following seven dimensions:
1. Training and technical assistance: management training, feasibility studies,
technical training, counselling and advisory services (management and
planning advice, assistance in making loan applications and advice on dealing
with financing institutions);
2. Access to larger markets: strengthened linkages between SMEs and larger
enterprises (joint ventures, sub-contracting arrangements, technology transfer
or marketing contracts), trade fairs and exhibitions and improved advertising;
3. Improved Infrastructure: strengthening the capacity of micro entrepreneurs in
such fields as transport and delivery, money transfer and Internet services;
4. Input supply: improving suppliers’ capacity to provide regular supply of quality
inputs;
5. Product development: technology transfer, quality insurance programs and
design services;
6. Alternative financing mechanisms: notably the facilitation of supplier credit;
7. Policy/advocacy: training in policy advocacy; policy studies.
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Figure 2.7: Overview of BDS (Micro-Finance Skills Project, 2002)
These !
different approaches emphasize the importance of pre- and post-loan services
for making effective use of microcredit and establishing a healthy and growing
microenterprise. Meanwhile it has to be noted that most SB people do not conceive
that they need BDS. In many situations, they use services that are informally
provided for them, for example information and advice provided by relatives, friends
or by media programs as well as BDS that are ‘embedded’ or ‘bundled’, that is,
supplied as a by-product within other commercial relationships. Formal BDS in
contrast are those provided through special arrangements, conditions or contracts
between a business development agency and the owner of the business
(Lämmermann et al. 2007). Figure 2.7 indicates the different BDS needs, services
and providers for micro-entrepreneurs.
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2.5.6 Success of BDS
Lämmermann, et al. (2007) argue that in Europe, a wide range of formal business
service providers for micro- and small enterprises exists. This includes the Chambers
of Commerce as well as public and semi-public business support agencies. Private,
self-sustaining agencies for support services to micro- and small enterprises are
much less common though. There are certainly many individual enterprises that can
testify that assistance from support organisations has made a crucial difference to
their business performance at significant points in their development. Assessment of
the impact of such services on general economic performance at a more aggregate
level is rather more difficult. There is evidence, presented in the Global
Competitiveness Report (Porter et al., 2002), that factors influencing the quality of the
business environment can have a greater impact on performance than is generally
appreciated. Differences in the availability of business information between countries,
for instance, are strongly associated with variations in per capita income (European
Commission, 2001).
2.5.7 BDS Criticism
There is also criticism on the current policies. Shane (2009) states that policy makers
often think that creating more start-up companies will transform depressed economic
regions, generate innovation, and create jobs. Shane argues that this view is flawed
because he believes that the typical start-up is not innovative, creates few jobs, and
generates little wealth. The vast majority of people founding new businesses aren’t
entrepreneurs in the sense of people building companies that grow, generating both
jobs and wealth. Rather, they are founding wage-substitution businesses that have
more in common with self-employment than with the creation of high growth
companies. According to Shane getting economic growth and jobs creation from
entrepreneurs is not a numbers game. It is about encouraging the formation of high
quality, high growth companies. Shane believes that policy makers should stop
subsidizing the formation of the typical start-up and focus on the subset of
businesses with growth potential. He states; ‘while government officials will not be
able to, [similar to venture capitalists] ‘pick winners,’ they can identify start-ups with a
low probability of generating jobs and enhancing economic growth. By eliminating
incentives to create these low probability companies, policy makers can improve the
average performance of new businesses’.
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2.6 Conclusion
Based on the literature presented above, four conclusions can be drawn. The first
conclusion is that this research will have the most added value when focussing on
the pre-loan BDS in the Netherlands. This conclusion is threefold.
• First of all, the BDS is of major importance of the survival rate of starting
entrepreneurs, improving this survival rate will have a significant contribution
towards the sustainability of the complete sector.
• Secondly the partial research conducted so far on the microfinance sector in
the western world is primarily focused on the improvement of the credit-related
MFIs, less research has been carried out with the focus on the BDS provided
in the western world. At the moment of research no specific PMS has been
found used or provided to start up micro entrepreneurs.
• Thirdly, the relative late introduction of microfinance in the Netherlands
allowed the Dutch MFIs to benefit from foreign experiences. This phenomenon
is called the dialectics of progress and enabled the single (major) microcredit
supplier in the Netherlands, Qredits, to develop a PMS that incorporates many
of the advantages a BSC related PMS can deliver to an organization 3 . !
The second conclusion is that since the development of microfinance in Europe, BDS
have been regarded as an essential factor for the successful realization of a
microloan. This stands in contrast to microfinance in developing countries, where
credits are more often delivered without additional business support.
The third conclusion is that BDS are expensive and rely heavily on government
subsidies, therefore government officials need to limit BDS to starting entrepreneurs
with sufficient growth potential.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
3 One of the strengths of the BSC is to make qualitative performance indicators quantitatively
measurable. Qredits realizes this through the use of standard screenings reports each business
consultant has to fill in according to a standard set of questions, while interviewing the potential
entrepreneur.
!
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The final conclusion relates to the PMS used by MFIs. Because most MFI cope with
a double bottom line, they are in pursuit of a PMS that allows them to measure both
financial and non-financial results. A PMS that is invented to deal with financial and
non-financial measures is the Balanced Scorecard (BSC) (see chapter 3). The
literature above showed that examples of PMS related or based on the BSC are
already present in practise.
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3. Theory and Literature Review – Balanced Scorecard
‘The scorecard is not a way of formulating strategy. It is a way of
understanding and checking what you have to do throughout the organization
to make your strategy work.’ (Quote from David Norton in Leadbeater, 1997).
3.1 Introduction
The previous chapter ended with the conclusion that in order to enable MFIs to cope
with the double bottom line, a PMS is required that enables them to manage their
organization based on both financial and non-financial performance indicators.
Another conclusion was that in order to provide a prevalent contribution towards the
sustainability of the Dutch microfinance sector the focus of this research should be
on the MFIs that provide BDS to starting entrepreneurs. First background information
about the BSC will be provided. Secondly, lessons will be drawn from examples of
PMSs beyond the private sector different practises from development countries are
discussed. Finally the specific characteristics of MSEs will be discussed.
3.2 The Characteristics of the Balanced Scorecard
According to Gomes and Liddle (2009) public sector organizations have increased
their use of performance indicators as a tool for monitoring, managing and measuring
performance. Performance indicators have been devised from several different tools,
frameworks and models, such as the Business Excellence Model, Investors in
People, charter mark, ISO 9000, the balanced scorecard and benchmarking
(McAdam, Hazlett and Casey, 2005). An alternative list of performance management
models was suggested by Lee (2006): the Performance Pyramid, the Results and
Determinants Matrix, the Balanced Scorecard, the Consistent Performance
Measurement System, and the Integrated Performance Measurement System. The
common point between the two lists is Kaplan and Norton’s (1996) Balanced
Scorecard. To understand the use of the BSC its background will be discussed in the
next paragraph.
3.2.1 Background
During the early stages of the development of the model, the emphasis was on
integrating financial and non-financial measurements, (McNair, Lynch and Cross,
1990) to make it possible for these different metrics to provide the same signal or
outcome (McNair and Mosconi, 1987). In the early 1990s, Harvard professor Robert
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Kaplan and international strategy consultant David Norton proposed the first
generation of the BSC as a framework to provide structure for related sets of
organizational performance measures. The framework uses strategic and financial
measures to assess the outcome of a chosen strategy by combining quantitative and
qualitative measures (Lynch, 2009), enabling a company to align its smaller-scale
operational activities with the larger-scale objectives in terms of vision and strategy
(Kaplan and Norton, 1992; 1993; 1996c; 2004).
Its designers have claimed that it addresses many of the shortcomings of the more
traditional accounting approaches to organizational performance measurement
(Kaplan and Norton, 1996a). They argue that performance measures should move
beyond the normal financial ratio data such as return on capital employed and
earnings per share. They claim that these functional measures leave out the process
of strategy implementation, while the process is what really matters: ‘Processes have
replaced (or are replacing) departments and functions’ (Kaplan and Norton, 1996a).
The following three main types of process are identified (Lynch, 2009):
Management - how the leader runs the organization, how decisions are made and
implemented; Business - how products are designed, orders fulfilled, customers’
satisfaction achieved and so on; Work - how work is operationalized, purchased,
stored manufactured and so on.
3.2.2 Structure
The framework consists of four predefined and interrelated perspectives, which need
to appear on every scorecard (see figure 3.1). Within the general framework specific
measures can be selected, recognizing that every strategy is unique. Hence, while
the BSC specifies the categories of measures to be used, it also has the flexibility to
customize its design to user requirements through the selection of individual
measures within each category. Due to these characteristics the BSC has become a
very popular model and is one of the most widely used recent innovations in
management accounting (Cobbald and Lawrie, 2002, p. 4). The traditional four key
strategic perspectives are (Kaplan and Norton, 1996a, pp. 30-1):
• Financial - how a company wishes to be viewed by its shareholders;
• Customer - how a company wishes to be viewed by its customers;
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• Business Processes - indicates the areas where the company needs to
stand out in order to satisfy its customers and shareholders;
• Learning & Growth - involves the improving developments that the company
needs to realize if its strategy and vision are to be achieved
Recognizing that some corporate visions and strategies may require additional
perspectives, Kaplan and Norton state that some variation of the BSC framework is
possible (Kaplan and Norton, 1996a, p. 34).
Figure 3.1: The BSC framework (Adapted from Kaplan and Norton, 1996a, p. 9.)
!
3.2.3 Linking, Cause and Effect
Without the linking of the four perspectives in a causal chain a ‘true’ BSC does not
exist. Kaplan and Norton observe that: ‘Many managers believe they are using a
BSC when they supplement traditional financial measures with generic, non-financial
measures about customers, processes and employees … [But] A scorecard should
contain outcome measures and the performance drivers of those outcomes, linked
together in cause of effect relationship (Kaplan and Norton, 1996a, p. 53).
In this vein, ‘The measurement system should make the relationships (hypotheses)
among objectives (and measures) in the various perspectives explicit so that they
can be managed and validated’ (Kaplan & Norton, 1996a, p. 30). For example,
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investments in learning will lead to a better internal business process, which, in turn,
is likely to improve a customer’s satisfaction and loyalty, and therefore result in a
higher return on investments, which would satisfy shareholders (see figure 3.2)
(Kaplan & Norton, 2001).
Figure 3.2: The Assumed Causal Relationship in the BSC
!
3.2.4 Indicators
‘improving organizational performance by monitoring financial performance
[i.e. a primary performance measure] is as useless as trying to improve a
sports team’s performance by only reporting the scores of its games’
(Atkinson and Waterhouse, 1997).
According to the MFC (2007) a well-designed BSC uses indicators to provide a
company with a way to measure progress toward achieving its mission and the
execution of its strategy. Selecting the appropriate indicators is one of the most
critical steps in developing a BSC for a company. There are many possible kinds of
indicators, but ‘lag’ indicators (outcome measures) and ‘lead’ indicators (performance
drivers) are most useful in strategic management.
Lag indicators are the measurable outcomes of actions previously taken and
provide an overall score (e.g. sales volume, market share). They allow a company to
track historical performance and to understand how results change over time. Most
financial indicators are of the lag variety and are often expressed by ratios
(percentages).
(Adapted from Hopper, Northcott and Scapens, 2007, p. 178).
Lead indicators are measurements of situations (or facts) that, at least in part,
determine the desired and / or expected measurable outcomes expressed as lag
indicators. For example, time spent with clients (a lead indicator) can determine an
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increase in client satisfaction (lag indicator). Lead indicators allow a company to
manage their strategy operationally. They can also help to indicate intermediate
changes in processes or indentify intangible assets that are necessary to achieve the
desired final result. Each perspective should have lead and lag indicators, creating a
two-directional cause and effect chain.
3.2.5 Purposes
When a BSC is designed in this way, it is more than just a strategic measurement
system; it will also be a strategic control system that acknowledges the different
expectations of the various stakeholders. The key principles behind the scorecard
are (Lynch, 2009, p. 508; Hopper et al., 2007, p. 178):
• Translating the vision – through clarifying and gaining consensus;
• Communicating and linking – by setting goals and establishing rewards for
success;
• Business planning – to align objectives, allocate resources and establish
milestones;
• Feedback and learning – to review the subsequent performance against the
plan.
The ultimate purpose of the BSC is to translate the vision and strategy of an
organization into measureable objectives with a practical meaning for management.
3.2.6 Process
The first step in achieving these purposes is, to clarify and translate the vision and
strategy into specific strategic objectives and related measures. The next step is to
translate the overall strategy and objectives into specific objectives and measures for
each team or employee (holding a key position in the organization). These objectives
and performance measures will later be the basis for the rewards. The following step
is to communicate these specific objectives in relation to the overall vision and
strategy to all teams and employees (Kaplan and Norton, 1996a, p213). The final
step is gaining feedback and learning form it.
3.2.7 Success of the BSC
Lee (2006, p. 52) argues that the following characteristics legitimise the BSC as a
useful framework for improving performance:
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• Derived from strategy;
• Stimulates continuous improvement;
• Clearly defined purpose;
• Simple to understand and use.
Researchers and commentators have identified widespread satisfaction with the BSC
as a tool for implementing and communicating strategy. For example, the following
benefits have been recognized: the clarity of focus which it brings to the critical
factors determining performance (Kanji and Sa, 2002; Ritter, 2003); its value as an
information system for diagnosis and control (Pandey, 2005); its contribution to the
effectiveness of strategy implementation through the translation and communication
of strategy in the form of tangible measures (Kanji and Sa, 2002); its use as a
substitute for traditional budgeting (Ax and Bjornenak, 2005); and its flexibility and fit
to different organizations (Kanji and Sa, 2002).
3.2.8 Criticism on the BSC
However, research has also shown that BSC users are not very knowledgeable
about the cause and effect relationships that should govern the selection of
performance measures. In practice, users simply have a belief in the relationship
between measures rather that testing and identifying the nature of actual
relationships. Implementations have met a series of practical problems (Ahn, 2001).
The BSC has also been criticized because the temporal link between the variables is
not clear (Nørreklit, 2000; Kunc, 2008). If a cause and effect relationship requires a
time lag between cause and effect, then it is problematic that time is not part of the
scorecard. The effect of the measures will occur at different times as different areas
of performance involve different time scales (Hopper et al., 2007).
Herrscher (2006) argues for what he calls ‘the’ ’really’ ’integrated BSC’ that links
functions, responsibilities, inputs and outputs. Nørreklit argues that some
stakeholders, such as suppliers and public authorities, are excluded from the
traditional BSC model and proposes that ‘a coherent strategy is one in which the
properties of the different areas of strategic focus (finance, market requirements,
technology, internal business processes, etc) are integrated and harmonized,
allowing the ends planned to be achieved through the working together of the
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properties of the different areas of focus’. In a similar vein, de Haas and Kleingeld
(1999) define coherence in a performance measurement system as ‘an attribute of a
performance measurement system which causes performance by the group acting
upon that system to contribute to the performance of other interdependent groups
and, thereby, to contribute to the performance of the organizational entity as a
whole’.
Organizations have focused on building an operational tool that apparently works at a
technical level, rather that following the conceptual blueprint of Kaplan and Norton.
As with many novel developments linked to control and remuneration, resistance to
change had been apparent. Kasurinen (2002), for example, found that three different
types of barriers to BSC implementation exist, which he terms ‘confusers’
(uncertainty about the role for the BSC), ‘frustrators’ (the existence of an hostile
engineering culture), and ‘delayers’ (difficulty in specifying strategies). Consequently
the process of implementation requires careful attention if the BSC is to be adopted
successfully. This view is confirmed by Ax and Bjornenak (2005), whose study of
BSC diffusion in Sweden showed that its original framework had to be amended
during implementation to suit ‘local’ culture and conditions. This was achieved by
including an employee perspective, a link to an intellectual capital model, and the use
of non-budgetary control systems.
Finally, the model often proved to be a poor fit for small and service organizations.
The fatal flaw in the BSC approach was the explicit reliance on a well-developed
corporate strategy for successful implementation. There is significant empirical proof
that a defined strategy is not a given for a SB (Watts, Baard and McNair, 2009a).
3.3 Lessons from previously developed BSC models
Many variations on the traditional BSC have been developed. This section will draw
lessons from these previously developed models.
3.3.1 The Performance Measurement Pyramid for Small Business
Based on the Comprehensive Performance Management System (CPMS) (see figure
B-5 in appendix B) developed by McNair and Watts (2009), Watts, Baard and McNair
(2009b) developed a Performance Measurement Pyramid for Small Business (see
figure B-6 in appendix B). They acknowledged that middle management does not
exist in SB and therefore eliminated the middle layer of the CPMS. The three
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emaining drivers of the model are; sustainability, productivity / flexibility and liquidity.
Finally they state that SBs excel at meeting customers needs (see table 3.1).
Authors Main findings
Mc Nair and
Watts (2009)*
Watts, et al.
(2009b)*
• Developed the Comprehensive Performance Management System
(CPMS) that integrated characteristics of several control systems
• Builds on the work of Lynch and Cross (1991) as well as the model
developed by CAM-I (McNair et al., 2000)
• The integrated model combines traditional and modern perspectives on
control, both top-down and bottom-up metrics, the internal versus
external stakeholder perspective, and finally, the relationship of locus of
control (organizational role) with the types of incentives that companies
have found to be most useful in creating sustainable performance
improvements.
• Developed a performance measurement pyramid for SBs, based on the
CPMS (McNair and Watts, 2009). The following changes have occurred
to ensure the ‘fit’ to SBs:
o The middle of the pyramid has collapsed; reflecting the fact that
middle management is all but non-existent in SBs
o Removing the middle layer from the model leaves the three
primary dimensions noted by many researchers in this area to
be key to the survival and growth of a SB (Watts and Preda,
2004; Orser et al., 2000; Meredith, 1989)
o These three dimensions are then expanded to a set of
operational measures that allow the SB owner to plan for, and
control, the operational pipeline that connects the SB to the
customer
o The remaining concerns; remaining liquid, being flexible, and
constantly providing a superior experience to the firm’s
customers, remains a constant concern not only found in
successful SBs
• While these are critical metrics for all organizations, then, the KPIs for
SBs also capture the fact that they excel at meeting customer needs
because the customer is never more than one step removed from the
operational pipeline. In SB, value is always created for the customer
from the bottom up
Table 3.1: Development of the Performance Measurement Pyramid for Small Business
* Model presented in appendix B
(Adapted from Watts et al., 2009b)!
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3.3.2 Performance Management Beyond the Private Sector
According to Kaplan and Norton (2001), the BSC needs some adjustments in order
to fit to the modus operandi of not-for-profit organizations, because their main
objectives are not finance-related. They suggest putting the customer at the top of
the strategic map. However, even this small modification could be a complicated one.
Kaplan and Norton (2001, p. 98), argue that ‘in a non-profit organization, donors
provide the financial resources; they pay for the service, while another group, the
constituents, receives the service. Who is the customer, the one paying or the one
receiving?’ In order to address this strategic problem, they suggest that:
‘Rather than have to make such a Solomonic decision, organizations place
both the donor perspective and the recipient perspective, in parallel, at the top
of their Balanced Scorecards. They develop objectives for both donors and
recipients, and then identify the internal processes that deliver desired value
propositions for both groups of ‘customers’’ (Kaplan & Norton, 2001, p. 98).
According to Meadows and Pike (2009) examples of PMSs such as BSC in the third
sector are still relatively rare in the literature; several studies however have been
identified of the use of the BSC in the public sector. These different studies identify
many different elements that need to be taken into account when developing a new
BSC model (see table 3.2).
Authors Main findings
Wisniewski and
Dickson (2001)
Wisniewski and
Olafsson (2004)
McAdam, et al.
(2005)
• Illustrate the use of the BSC by Dumfries and Galloway Constabulary
in Scotland as part of a strategic policing initiative
• Discuss the experience of local authorities in using the BSC to
improve performance
• Demonstrate such improvement through effective performance
measurement
• Explored issues involved in developing and applying performance
management approaches within a large UK public sector department
• Found that staff at all levels had an understanding of the new system
and perceived it as being beneficial
• There were concerns that the approach was not continuously
managed throughout the year and was in danger of becoming an
annual event, rather than an on-going process
• The change process seemed to have advanced without corresponding
changes to appraisal and reward and recognition systems
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Greatbanks and
Tapp (2007)
Manville (2007)
Irwin (2002)
MFC (2007)* °
Cobbold and
Lawrie (2004)
Meadows and
Pike (2009)*
• The business objectives were not aligned with motivating factors within
the organization
• The strategic integration of the stakeholder performance measures
and scorecards was found to be essential to producing an overall
stakeholder driven strategy within the case study organization
• Consider the impact of implementing and using the BSC within a
public service city council environment
• A longitudinal case study approach is adopted in order to evaluate the
impact of scorecards at three levels:
o Strategic planning;
o Team management;
o Individual staff performance.
• Evidence suggests that the use of scorecards enabled employees to
appreciate their role, and focus on delivery of performance related
measures, which support organizational strategy
• Clarity of role appears to have a positive influence on the achievement
of the organization’s business plan and excellence goals regarding the
delivery of customer service
• Study about the implementation of a PMS using the BSC within a not
for profit small and medium sized enterprise (SME)
• Noting that the motivation for adopting the scorecard were both
internal and external due to the heavily regulated nature of the
organization
• Explores the use of strategy mapping (which demonstrates links
between scorecard perspectives) as a tool to develop strategy in a
public sector agency
• Suggests a simplified version, which can communicate that strategy
effectively, both inside and outside the organization
• Describe changes to the definition of the BSC framework that have
occurred since the early 1990s, recognizing within these changes
three distinct generations of BSC design
• Observed that these changes have improved the utility of the
framework as a strategic management tool
• Developed the Social Enterprise Scorecard
• The four perspectives typical of the Kaplan and Norton model (see
figure 3.1) have been replaced with others more suited to the needs of
a leading investor, operating in the field of social venture capital:
o Financial Perspective ! Financial Return
o Customer Perspective ! Social Return (On Investment)
o Business Processes ! Business Model
o Learning & Growth ! Organizational Development
• Three boxes represent different time perspectives:
o The innermost box presents a picture of the current situation
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Gomes and
Liddle (2009)*
o The middle box provides an indication of where the social
enterprise wishes to be in 18 months—2 years time
o The outermost box projects a much more long term—5 to 10
year perspective
• The intention is to highlight the connections and continuities in the
organization’s actions and strategies over time
• A number of problems were experienced while using the Social
Enterprise Scorecard Empirically:
o The scorecard-based approach was not fully introduced to the
organizations concerned prior to the initial assessment visit
o Some of the early users expressed frustration during their initial
attempts to use the tool
o Some users had not encountered anything similar before;
o Some were suspicious of it as a private sector model invented
in business schools
• It is clear that the Scorecard has to be used flexibly, if it is to be of real
value to investor and investee
• Used as an illustrative case study for the third sector, by using an
organization that does not aim to produce a profit, rather, it was
concerned with managing resources to foster research results at a
lower cost and to act as a tugboat for public universities by improving
efficiency and nimbleness
• Concluded that the case study organization, although it does not
pursue profits, desperately needs financial stability in order to survive
• This is ensured by good financial performance
• Therefore they decided to put the financial dimension at the top
Table 3.2: Performance Management Beyond the Private Sector (Author)
° Model
!
discussed in paragraph 2.2.3
* Model presented in appendix B
3.4 Characteristics of Micro and Small Entrepreneurs
Since the focus of this research is on entrepreneurs supported by MF-points, the next
step is to identify the characteristics of these Micro and Small Entrepreneurs (MSE).
3.4.1 Planning in the Small Business Sector
‘Failing to plan is planning to fail’ (Unknown)
According to Watts, et al. (2009b) there is one universal theme in the SB literature:
few MSE have a well-developed strategy (see table 3.3). As the tabled literature
suggests, inadequate planning appears to have a negative effect on the small firm’s
performance and sustainability, as evidenced by higher failure rates for those MSE
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that fail to effectively plan for the future of the business (Davig et al., 2004; Orser et
al., 2000; Shrader et al., 1989). One of the reasons given for this failure to plan is the
limited time available to entrepreneurs, who are often engaged actively in day-to-day
operations. In addition, some argue that formal planning would actually negatively
affect the flexibility of the firm, seen as a key competitive advantage for many SBs,
they can proactively shift operations and focus to meet changing customer
requirements (Davig et al., 2004; Knight and Knight, 1993).
Author(s) Main Findings
Knight and
Knight (1993)
Davig, Elbert
and Brown
(2004)
Van Auken and
Sexton (1985)
Fitzgerald and
Moon (1996)
Orser, Hogarth-
Scott and
Riding (2000)
• SB planning is unstructured, irregular, sporadic and reactive
• SBs only see need for formal planning when seeking financing
• Formal planning may impair flexibility, which is critical to SBs success
• Insufficient time for planning exists in SBs
• Formal planning may impair flexibility
• Size differences impact these patterns
• Little or no strategic planning in SBs
• Operational planning is more prevalent
• Objectives of planning, when done, are often vague, pragmatic, and
extremely short-range
• Performance of SBs who engage in some form of planning exceeds
that of the SB firms that do not undertake planning
• In the US, over 64% of SBs do no formal planning
• Growth occurs only when al threshold of administrative and
managerial acumen is attained by the management team
• The presence of a business plan was highly correlated with
performance
Table 3.3: Planning in the Small Business Sector (Watts et al., 2009b)
Most !
owner-managers are generalists with a very broad level of practical experience
yet they often lack the expertise to accomplish the planning task (Meredith, 1989).
Many owner- managers become reactive rather than proactive in their decision-
making. This fact can be seen from two perspectives; MSE operate in ‘fire-fighting’
mode because of the failure to plan effectively (Shrader et al., 1989); strategic
planning does not occur in MSE (or only occurs to a small degree) because the firm’s
viability is dependent on flexibility and a keen understanding of operational
competencies (Davig et al., 2004; Knight and Knight, 1993).
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3.4.2 Defining ‘Fit’: The Unique Features of Small Business
The following five unique characteristics of MSE can be indentified (Watts and Preda,
2004; Orser et al., 2000; Meredith, 1989):
1. Resource issues; Resource poverty is experienced in cash flow, access to
expertise or skills, human resources, and the time and energy of the owner-
manager. Smaller firms rely on a few individuals to carry out the various
management tasks necessitating the owner-manager to acquire many diverse
skills to operate the enterprise successfully; resource poverty generally
restricts this acquisition;
2. Structure; The SB is characterized as flat, with faster information flows, which
result in a faster decision-making process. The firm’s operations are generally
locally based, even though they may exceed national borders and markets.
Therefore, the strategies they employ are often informal, yet dynamic;
3. Dominant role played by the owner-manager. The owner-manager is
fundamental to the small firm, since their innovative qualities and philosophies
often shape its nature. They also create and influence the management style
of the SB; they are in many instances, the business;
4. Control; Small firms are independently owned. The owner-manager who is
also the firm’s principle decision-maker generally contributes the operating
capital. Therefore, MSE tend to be closely controlled. These owner-managers
also desire independence and rely on their own skills, talents, and hard work
to succeed;
5. Continuation; MSE have high failure rates in the first three to five years. The
causes for these early failures include managerial inadequacy, unfamiliarity
with established business practices, integration of strategic and operational
management processes, lack of managerial experience, inadequate planning,
and poor financial control and record- keeping (Gaskill et al., 1993; Pickle and
Abrahamson, 1990; Meredith, 1989).
3.4.3 Performance Measurement in the Small Business Sector
Watts, et al. (2009b) note that in the business sense, performance refers to the
accomplishment of the business’ strategies (actions) in order to achieve the
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objectives (obligations) established. The objective may be a targeted level of
profitability (key to survival) or an above-average or improved return on investment
(required for growth). Performance measurements quantify action in terms of their
efficiencies and effectiveness, which represent the degree to which the obligations of
the firm are fulfilled (Neely et al., 1995).
Watts, et al. (2009b) continue with the statement that the balanced scorecard model
(Kaplan and Norton, 1993) has promoted significant research into the characteristics
of, and approaches for developing, strategic performance measurement systems.
Combined with several related models, such as the ‘performance pyramid’ (Lynch
and Cross, 1991), integrated performance measurement systems, consistent
performance measurement systems and the results-determinants matrix (Fitzgerald
and Moon, 1996; Fitzgerald et al., 1991), it appears that there is a wide range of
potential measurement models for MSE to consider (see table 3.4).
Author(s) Main Findings
Hudson, Smart
and Bourne
(2001)
Davig, Elbert and
Brown (2004)
Laitinen (2002)
Haber and
Reichel (2005)
Orser, Hogarth-
Scott and Riding
(2000)
Fitzgerald and
Moon (1996);
• Focused on small to medium UK firms.
• Measures are often unclear, with complex or outdated data
produced; historical focus
• Small number of simple, ad hoc measures actually used including
metrics on quality, time, finance, and customer satisfaction
• Only non-specific informal feedback
• Adapted balanced scorecard to small manufacturing firm
• Size differences and industry effects found to be critical in designing
metrics for SBs
• Created integrated performance measurement system (IPMS) for
small Finnish technology firms linked with ABC
• Two external factors (financial performance and competitiveness)
and five internal factors (costs, production factors, activities, products
and revenues) linked into causal chain
• Focus on tourism industry in Israel
• Measures divided into short- and long-term groups further subdivided
into objective (financial) and subjective (non- financial) sets
• Need to incorporate SB life cycle in the design of performance
metrics
• Concur with findings of Haber and Reichel
• Developed metrics specific to service firms
• 2 categories: results (competitiveness and financial performance)
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Fitzgerald,
Johnson and
Brignall (1991)
and determinants (quality of service, flexibility, resource utilization,
innovation)
• Details multiple measures for each dimension of performance
measurement
Table 3.4: Performance Measurement Systems and MSE (Watts et al., 2009b)!
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Section II. Research Design
The previous section identified the aim of this research and discussed the relevant
studies. With the knowledge available from the other studies, the knowledge gap was
identified.
This single-chapter section will focus on how the knowledge gap will be filled through
this research. It forms the bridge between the previous section, in which the rationale
was built and the next section in which the research findings are discussed. To make
this bridge, chapter 4 focuses on how the questions posed in this research will be
answered.
Figure II-1: Thesis Overview (Author)!
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4. Methodology
4.1 Introduction
In the introduction, the reason for employing Grounded Theory (GT) was explained
(see paragraph 1.6). In order to learn from other research, however, the design is
formalised after the literature review. By doing this, the limitations of some designs
are better known than they are on forehand. In this chapter, the formal design is
presented.
This will be done in the following manner. The first step is to elaborate on the setting
in which this study will take place. The second step is to establish the philosophical
stance. Thirdly, the process of Qualitative Analysis is discussed. Fourthly the
methods of data collection are addressed. Next the literature and interviews are
discussed. Seventh the research is described. The chapter ends with an explanation
of reliability and validity issues.
4.2 Setting
During the initial literature review the three different components of microfinance in
the Netherlands have been identified (Heemskerk, 2009a):
• MF-Points;
• Coaching;
• Microcredit.
Each aspect consists of multiple different types of organizations, each with their
specific approach, aim and objective, but all have the shared goal to stimulate
entrepreneurship and assist potential entrepreneurs in their quest for starting a
sustainable business. For the purpose of this research the main focus will lay on the
work of the MF-points. These types of organizations are the starting point for the
majority of the potential entrepreneurs. These types of organizations do not provide
loans and deal with the entrepreneurs that do not have a running business yet.
As the literature research revealed, significant research has been done on the PMSs
used by medium sized enterprises and large cooperation’s, but little is known about
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the use and usefulness of PMSs by starting entrepreneurs. This is the underlying
question for the remaining of this research.
4.3 Philosophical Stance
The nature of the research is exploratory. An exploratory study is a valuable means
of finding out ‘what is happening; to seek new insights; to ask questions and to
assess phenomena in a new light’ (Robson, 2002, p. 59). According to Saunders,
Lewis and Thornhill (2009) there are three principal ways of conducting exploratory
research:
• A search of the literature;
• Interviewing ‘experts’ in the subject;
• Conducting focus group interviews.
The great advantage of exploratory research is that it is flexible and adaptable to
change. If you are conducting it you must be willing to change your direction as a
result of new data that appear and new insights that occur to you (Saunders et al.,
2009). Therefore the Thesis will be written from an interpretive perspective, this
allows indentifying the meaning individuals attach to their responses. Inline, a
phenomenological epistemology is applied with the gathering of qualitative data; this
refers to the way in which humans make sense out of the world around us (Saunders
et al., 2009, p. 116).
4.4 The Process of Qualitative Content Analysis
‘If there were only one truth, you couldn’t paint a hundred canvases on the
same theme’. (Quote from Pablo Picasso in Allen and Unwin, 1969)
The process of qualitative content analysis started during the early stages of data
collection. This early involvement in the analysis phase helped to move back and
forth between concept development and data collection (Miles & Huberman, 1994).
The content analysis started with preparing the data and proceeded through writing
up the findings in a report (Zhang and Wildemuth, 2009).
4.4.1 Step 1: Preparing the Data
Qualitative content analysis is most often used to analyze interview transcripts in
order to reveal or model people’s information related behaviours and thoughts.
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Considering the inductive exploratory approach of this study great value has been
placed on the exact response of interviewees. Therefore, (1) all the questions of the
interviewer have been transcribed; (2) the verbalizations have been literally
transcribed; and (3) observations during the interview (e.g., sounds, pauses, and
other audible behaviours) have been transcribed (Schilling, 2006).
4.4.2 Step 2: Defining the Unit of Analysis
The unit of analysis refers to the basic unit of text to be classified during content
analysis. Messages have been unitized before they were coded, since differences in
the unit definition could affect the coding decision as well as the comparability of
outcomes with other similar studies (De Wever et al., 2006). Therefore, defining the
coding unit was one of the most fundamental and important decisions (Weber, 1990).
For the qualitative content analysis individual themes have been used as the unit for
analysis. By using themes as the coding unit, the emphasis was primarily on
indentifying expressions of ideas (Minichiello et al., 1990). Thus, codes have been
assigned to text chunks of any size, as long as that chunk represented a single
theme or issue of relevance to the research question(s).
4.4.3 Step 3: Developing Categories
Categories and have been derived from three sources: the data, previous related
studies, and theories. Inductively content analysis is particularly appropriate for
studies that intend to develop theory. While developing categories inductively from
raw data, the constant comparative method (Glaser & Strauss, 1967) was used. This
enabled to make differences between categories apparent and not only focus on
original insights. The essence of the constant comparative method is (1) the
systematic comparison of each text assigned to a category with each of those
already assigned to that category, in order to fully understand the theoretical
properties of the category; and (2) integrating categories and their properties through
the development of interpretive memos. This has been done according to the step
model of inductive category development (Mayring, 2000) (see figure 4.1)
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Figure 4.1: Step model of inductive category development (Mayring, 2000)
!
4.4.4 Step 4: Testing the Coding Scheme on a Sample of the Text
To ensure clarity and consistency of the category definitions a sample of the data
was coded. Doubts and problems concerning the definitions of categories, coding
rules, or categorization of specific cases have been discussed with fellow students
(Schilling, 2006). In line with the step model of inductive category development
(Mayring, 2000) the iterative process of coding sample text, checking coding
consistency, and revising coding rules has been carried out continuously until
sufficient coding consistency was achieved (Weber, 1990).
4.4.5 Step 5: Coding All the Text
After sufficient consistency had been achieved, the coding rules were applied to the
entire body of text. During the coding process, the coding has been checked
repeatedly, to prevent ‘drifting into an particular sense of what the codes mean’
(Schilling, 2006). Because coding proceeded while new data was continued to be
collected, new themes and concepts continued to emerge.
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4.4.6 Step 6: Assessing the Coding Consistency
According to Miles and Huberman (1994) and Weber (1990) it is not safe to assume
that, when a sample is coded in a consistent and reliable manner, the coding of the
whole body of text will also be consistent. Human coders are subject to fatigue and
are likely to make more mistakes as the coding proceeds. New codes may have
been added since the original consistency check. Also, the coders’ understanding of
the categories and coding rules may change subtly over the time, which may lead to
greater inconsistency. For all these reasons, after the entire data set was coded the
consistency of the coding was checked again.
4.4.7 Step 7: Drawing Conclusions from the Coded Data
During this step, sense was made out of the identified themes, categories and their
properties. At this stage, inferences were made and the reconstructions of meanings
derived from the data were presented. This was done by exploring the properties and
dimensions of categories, identifying relationships between categories, uncovering
patterns, and testing categories against the full range of data (Bradley, 1993). It has
been a critical step in the analysis process, and its success relied almost wholly on
reasoning abilities of the author.
4.4.8 Step 8: Reporting the Methods and Findings
Qualitative content analysis does not produce counts and statistical significance;
instead, it uncovers patterns, themes, and categories important to a social reality.
Presenting research findings from qualitative content analysis is challenging,
therefore quotations are used to justify conclusions (Schilling, 2006).
When presenting the qualitative content analysis results, the author strived for a
balance between description and interpretation. Description gives the readers’
background and context and thus needs to be rich and thick (Denzin, 1989).
Qualitative research is fundamentally interpretive, and interpretation represents the
authors personal and theoretical understanding of the phenomenon under study. An
interesting and readable report ‘provides sufficient description to allow the reader to
understand the basis for an interpretation, and sufficient interpretation to allow the
reader to understand the description’ (Patton, 2002, p.503-504).
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4.5 Methods of Data Collection
In order to answer the main research question, the sub-questions will have to be
answered first. After the literature review the sub-question can be adjusted according
to the stronger focus of the research. Table 4.1 presents the data collection methods
used to answer the sub-questions.
Sub-questions Data collection method
What does the current body of literature reveal about the
different microfinance models, throughout the world?
How does the current microfinance model in the Netherlands
look like?
What different players in the Dutch microfinance model can be
identified?
How can the BSC improve the sustainability of starting
entrepreneurs supported by pre-loan BDS?
How does the BSC need to be adjusted to be suited for the
needs of these starting entrepreneurs?
What dimensions of the BSC are relevant for the starting
entrepreneurs?
How do the dimensions related to each other in an optimal
BSC?
!
As the table reveals, there will be two different types of research:
• Literature review, as carried out in section one;
Literature review
Literature review &
Interviews
Literature review
Literature review &
Interviews
Literature review &
Interviews
Literature review &
Interviews
Literature review &
Interviews
Table 4.1: How the sub questions will be answered (Author)
• Interviews will be conducted to build upon the indentified models.
This is in line with the chosen philosophical stance (see paragraph 4.2). How each
one of these methods is executed is discussed accordingly.
4.6 Literature Review
The first step of the research was an extensive review of all relevant literature
published on the subject of microfinance. The analysis of the secondary research
helped to develop a general idea about the different microfinance models in relation
to the ambition of making the Dutch model sustainable and to establish a theoretical
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ackground. The literature review performed in section one forms the primary input of
this research. The interview outline (see appendix C) is based on the findings from
this part and the identified relevant BSC models are the basis for the new model.
4.7 Interviews
The interviews will be the most essential element of this research and provide the
answer to the question; how microfinance in the Netherlands can move towards
sustainability by using the BSC.
The ideas gained from the literature review will be used to develop appropriate
interview questions. The interviews will be semi structured. This means that there is a
list of themes and questions. During the interviews the questions and order can be
different from earlier interviews (Saunders et al., 2009, p. 320). The reason for this is
that it allows the interview to go in to the direction of the knowledge and expertise of
the interviewee, while retaining a structure, which makes it comparison and coding
possible.
4.7.1 Sample Selection Interviews
The purpose of the research is to build a model. For this inductive exploratory
approach it is important to allow broad perspectives of the matter to influence the
research. For an exploratory approach it is important to interview ‘experts’ in the
subject (see paragraph 4.2). To confirm the usability of the proposed model, the
following groups of individuals would be potential candidates:
• Members of the Council for microfinance;
• Journalists;
• Professors;
• Employees of the ‘Stichting Microfinanciering en Ondernemerschap’;
• Consultants;
• Employees of a microcredit supplier (Qredits);
• Business advisors of MF-point;
• Starting entrepreneurs.
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All eight groups are interesting for discussion and input for the development of the
final model. The last three groups could be used to pilot-test the final model. Except
for the first two groups, at least one person for each group has been found willing
and available for interviews, which have been conducted. Table 5.1 presents the
people that have been interviewed.
Name Short Position Company
Karen Hofman KH Consultant McKinsey
Vicent Stulen VS Project Manager Qredits
Toon Bullens TB Professor Nyenrode University
Robert de Lange RL Founder Mydivvi
Oscar van der Ende OE Business Advisor Wijk in bedrijf Utrecht
Marjolein de Boer &
Claudia de Stefano
MB &
CS
Director &
Project manager
Alberic Pater AP Consultant Triodos Facet
Stichting Microfinanciering en
Ondernemerschap
Table 4.2: The Interviewees (Author)
These !
seven interviews with eight interviewees have secured both the aspects of
broad perspectives and expertise. All interviews have been tape-recorded and a
detailed transcription of each interview has been written. On average the transcripts
were fifteen pages long. After each interview, an analysis has been made in order to
develop codes (see paragraph 4.4). After clear patterns were shown, enough
interviews were taken (Müller, 2009).
4.8 The Research Design
Microfinance practices in other countries will act as the central starting point of this
research. The first aim is to establish what different microfinance players are present
in the Netherlands and what models are being used. The next step is to determine
how the BSC will help the different microfinance players to move towards
sustainability. After this has been established, the next step will be to evaluate for
what player the BSC will have the most potential and would be most appropriate to
apply to, thus focusing on only one player in-depth. Evaluating different BSC models
will be the next step, and what different dimensions are being used in different
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contexts? More specifically, the focus will have to be on models used for small-scale
companies. Eventually, the combination of the literature on microfinance in other
countries, the current players in the Netherlands, entrepreneurship and the BSC will
provide a solid background that will aid in steering the focus of the primary data
collection methods and that will strive to answer the research question.
The second step of the research design is to engage in the decided research method
of qualitative semi-structured interviews. The chosen interview type is semi-
structured interviews. This is done for three reasons; first the questions function as a
checklist, they are not asked in a specific sequence and are used to keep the
conversation going (Emans, 2002). This will enable knowledge to be transferred from
the interviewee to the interviewer about the discussed subject. It will allow for
flexibility in the conversation between the two parties, and also in the collected
information that can be gained after the interviews are completed. The interviews
were spread out in the months of July and August, and held in the office of the
interviewee and more specifically in a separate room that was closed off. This was
done to ensure the following; that all of the individuals would be interviewed in a
similar setting to guarantee that the conditions were comparable. All of the interviews
were held in a separate closed office, which ensured that the interviewer and
interviewee would not be distracted by external influences. It allowed both parties to
concentrate on the interview questions, and allowed for the interview to be taped with
an audio recorder. By using an audio recorder led to the following benefit; it gave the
interviewer the chance to fully concentrate on the interviewees and their answers,
which resulted in many follow-up questions that could be of great importance to the
study.
4.9 Reliability and Validity
Depending on the type of research design chosen, the reliability and validity issues
differ. As described, a qualitative approach fits this study well. In order to understand
the meaning of reliability and validity in the setting of qualitative research a definition
is provided below. Reliability has been defined by Joppe (2000) as ‘the extent to
which results are consistent over time and an accurate representation of the total
population under study is referred to as reliability and if the results of a study can be
reproduced under a similar methodology, then the research instrument is considered
to be reliable’ (Golafshani, 2003, p. 598). Patton (2002) suggests that any research
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must take into account with the reliability of the research while designing a study,
analysing the results and judging the quality of the study (Golafshani, 2003).
Specifically with qualitative research, examination of trustworthiness is crucial, from
the process of designing the study and to judging the quality of the study.
‘Trustworthiness of a research report lies at the heart of issues conventionally
discussed as validity and reliability’ (Golafshani, 2003, p. 601). However, during the
research process there will always be threats to the reliability of the study, four have
been identified by Robson (2002). These errors involve the participants and the
observer. They can be divided into the following four threats (Saunders et al., 2009):
1. Participant error;
2. Participant bias;
3. Observer error;
4. Observer bias.
Depending on the research question any of these four issues can become an issue.
However, they can be prevented if the qualitative interview questions are regulated,
similar and the interviews are held under similar circumstances.
The reliability concerns with, the consistency of the data collection and analysis
(Saunders et al., 2009, p. 156). A bigger and more divers sample group can help to
increase the reliability. To increase the reliability of the inductive data, the mentions
per category 4 are published in the appendix. This gives transparency of the
information that is used to draw conclusions. By showing the gathered primary data,
the bias of the research will be reduced and the reliability will therefore increase.
Interpreting the data must be regulated also, insuring the similar aspects to come out
of the interviews. The below checklist was used during the study to ensure reliability
in the study:
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
4 The file containing all the transcripts was over hundred pages long, therefore is has been decided,
not to included this file. Transcripts are available on request.
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Question 1 Will the measures yield the same results on other occasions?
Question 2 Will similar observations be reached by other observers?
Question 3 Is there transparency in how sense was made from the raw data?
Table 4.3: Reliability Check (Saunders et al., 2009)
!
On the other hand validity is ‘concerned with whether the findings are really about
what they appear to be about’ (Saunders et al., 2009, p. 157). In other words a term
describing a measure that accurately reflects the concept it is intended to measure
(Babbie, 2004, p. 144). For an inductive research it is important to interview the key
employees in different institutes. These individuals are those doing research or
receive results on performance. Validity is taken into account because qualitative
research indicators are measured in the same way, and inspired by questions of that
are based on the emerging theory of the subjects discussed. Furthermore the
questions are reviewed, validated and pilot-tested. Concluding, Patton (2002) states
that ‘with regards to the researcher’s ability and skill in any qualitative research also
states that reliability is a consequence of validity in a study’ (Golafshani, 2003, p.
601). If the issues of reliability, validity, trustworthiness, quality and rigor are meant
differentiating a 'good' from 'bad' research then testing and increasing the reliability,
validity, trustworthiness, quality and rigor will be important to the research in any
paradigm.
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Section III. Findings and Discussion
Seven semi-structured interviews have been conducted, audio-recorded and
accordingly all information has been transcribed. On average the transcripts were
fifteen pages long. This resulted in more than a hundred pages of data. After filtering,
the information was coded and categorised in a spreadsheet. Each mention was
allocated either to an existing type of mention or a new type of mention was created.
This section will discuss the outcome of the content analysis designed in the previous
chapter. The focus of this research is on how starting entrepreneurs can be
supported by MF-points through the BSC, in order to increase the survival rate
causing the microfinance sector as a whole to move towards sustainability. The initial
presentation of the findings will reveal the results of the qualitative content analysis.
This is carried out in chapter 5.
Once the results of the qualitative content analysis are presented, the discussion on
the information found, in relation to the existing literature, is held in chapter 6.
Chapter 7 serves as the final chapter of this dissertation in which the answers to the
research question are given and recommendations for further research will be made.
Figure III-1: Thesis Overview (Author)
!
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5. Results
5.1 Introduction
This chapter will deal with the following sub-questions:
• How can the BSC improve the sustainability of starting entrepreneurs
supported by pre-loan BDS?
• How does the BSC need to be adjusted to be suited for the needs of these
starting entrepreneurs?
• What dimensions of the BSC are relevant for the starting entrepreneurs?
• How do the dimensions relate to each other in an optimal BSC?
These sub-questions will be addressed and later answered in chapter 7, from the
perspective of the starting entrepreneur that seeks counselling through the MF-
points.
5.2 The categories
The main categories were identified during the literature study and served as the
basis for the interview outline (see appendix C). Other categories were developed
during the process of conducting the interviews. When saturation was reached about
the main categories and clear patterns became clear, enough interviews were
conducted. In the end sixteen categories relevant for microfinance in the Netherlands
have been developed. Table 5.1 shows the categories and the number of mentions
per interviewee per category.
It is not possible to draw conclusion based on the number of mentions for each
category, it only indicates how often it has been mentioned. No distinction has been
made between whether the mention indicates the category as important or not.
However it does indicate a level of significance, in order to reliably determine curtain
pattern at least five respondents need to have commented on a category.
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KH VS TB RL OE MB CS AP Total App.
Reason, Drive and Contribution 1 1 28 3 17 9 7 7 73 D
Social 5 1 17 2 7 2 4 8 46 E
Financial 6 9 27 9 16 9 4 5 85 F
Sustainability Entrepreneur 0 0 4 14 4 10 11 12 55 G
Customer and Market Research 5 7 9 17 18 13 11 1 81 H
Internal Business Processes 1 0 3 14 10 0 0 0 28 I
(Organizational) Development 7 7 3 3 13 16 6 0 55 J
Learning, Growth and Employee 0 0 8 3 5 0 0 0 16 K
Network 0 0 1 19 11 1 3 0 35 L
Business Development Services 7 5 1 0 18 2 12 17 62 M
General BSC model 4 2 14 9 17 2 2 11 61 N
Relation and Link 3 7 8 3 11 3 2 1 38 O
Most Important 2 1 4 0 0 4 0 6 17 P
Measurement and Indicators 3 0 11 1 2 0 0 8 25 Q
Sustainability of Microfinance 9 2 9 0 3 0 3 16 42 R
Qredits 7 3 2 0 1 3 1 15 32 S
Total 751
Table 5.1: Categories and number of mentioning’s (Author)!
!
The last two categories; ‘Sustainability of Microfinance’ and ‘Qredits’ do not provide
input for the development for the new model but provide information about the
development of microfinance in the Netherlands as a whole. Little more can be said
on the total categories as these were allocated by the researcher in order to make
discussion possible, presenting the findings of each individual category is more
valuable.
5.2.1. Reason, Drive and Contribution
This category has been identified as the starting point for starting entrepreneurs.
Before starting up a business, entrepreneurs need to think about their reason or drive
to start up a business and possibly about the contribution they want to make towards
the society (see appendix D). In figure 5.1 the three questions the interviewees
named are visualized.
All respondents agree about the importance of the ‘why’ question; what is the reason
to start up the business and especially; is the business not started for the wrong
reason? Reasons for people to start up a business, mentioned by the respondents
are:
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• Satisfaction, happiness;
• Using creativity, applying a trick;
• A belief, passion, drive;
• Freedom, making own decisions;
• Status, dignity;
• Sustainability;
• Employment;
• Money.
Figure 5.1: Starting point entrepreneurs (Author)!
The last two reasons are often mentioned in relation with copying behaviour. Boer
(2010) mentions that ‘people often think; ‘that person has a greengrocer’s shop and
drives a car, so starting a greengrocer’s shop it is’, the idea to start instead, for
example a bakery, does not come up’. In extension to this point, Ende (2010) notes:
‘once I went outside with one of the owners and took him across the street. He had
his shop on one corner and on the other corner there was also a greengrocer. I said
to him, look at your shop and look at the other guy’s shop, why would I go to yours?
He said: ‘shit, it looks exactly the same’.’ Ende refers with this example to the
‘Kanaalstraat’ a street in the Lombok area in Utrecht. After the interview I went to this
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street and within an area of 500 meters, I counted eleven greengrocers or other little
shops that besides other products (e.g. meat, nuts, bread) offered vegetables. Ende
(2010) describes the result of this phenomenon; ‘entrepreneur think that when the
neighbour lowers the price of the tomatoes by two cents, I need to lower them by
three, cause that is how it goes and now they default, because you cannot keep on
doing that’. This is recognized by Pater (2010) whom, with his experience from
developing countries points out that; ‘those people create a stiff competition for each
other’ and ‘it is not going to be a very profitable business, they will be able to repay
their loan and they will have something left’. To prevent this, Boer (2010) notes; ‘it is
very important that people do not start when it does not make sense’ and ‘I
understand from the MF-points that those people are positively discouraged, after a
couple of conversations’.
Bullens (2010) goes one step further and argues; ‘that you need to have perfectly
clear, what role you want to play in the society’. He argues that the first question a
starting entrepreneur should think about relates to the question; ‘what contribution do
you think you are going to make for the society?’ The reasoning behind this is that in
the end all the stakeholders related to the business are part of the society. When a
business makes a clear contribution towards that society all stakeholders; customers,
employees and investors benefit and are automatically satisfied. This makes it easier
to focus the operational activities. Later interviewees supported this view.
Two interviewees mentioned the ‘where question’ as a tool to give direction, to help
the entrepreneur picture his future by setting (small, simple and) SMART 5 formulated
targets. Ende (2010) states; ‘if you do not know where you are going you will
probably end up somewhere else’.
5.2.2. Social
All respondents acknowledge the importance of the social aspect (see appendix E).
Hofman (2010) states; ‘otherwise you would not have microfinance but you will just
be a bank’. In line with this statement Stulen, from Qredits, notes; ‘the complete
picture is being analyzed, the financial plan, the business plan, the entrepreneur but
not so much at the ratios. In that sense we are not like a bank’.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
5 Specific Measurable Attainable Relevant and Time-bound
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However, when a crude distinction is made, there seems to be a difference between
the way interviewees colour this aspect. The group that is involved with microfinance
from the perspective that a loan is provided seems to have a strong focus on the
creation of jobs. The other group, under command of Bullens (2010), more explicitly
puts the emphasis on the social aspect. In line with his previous statements
(paragraph 5.2.1) Bullens (2010) states; ‘a business should only be created and
supported when it clearly and explicitly has an economic, social or ecological
objective’.
All respondents agree that also social objectives need to be measurable. Bullens
(2010); ‘also social objectives need to be able to be measured otherwise they are not
good’ and Pater (2010); ‘for example, they want to improve the living conditions of
their costumers. How do we create insight, and how can we check whether that is
really happening? In first instance that is really about the measurement, how do you
make sure you measure something so that you know how well you are doing?’
5.2.3. Financial
This aspect is one of the most discussed categories (see table 5.1). In line with the
previous category the same crude division seems to apply. The interviewees that
look at the aspect from the perspective that there is a loan involved find the financials
one of the most important aspects. The other interviewees are strongly in favour of
not making this aspect predominantly important and argue that the financials should
not be a dominant dimension of the model, but should solely have a facilitating or
serving role towards the other aspects (see appendix F).
Two aspects that were indicated by the majority of the interviewees as important are
liquidity and investors. Liquidity is identified as an important management tool and
essential for every business regardless of the size. Ende (2010); ‘in general
companies that are started up and do not need a lot of capital, which is the case for
most service related start ups, with one computer you can do a lot. It is important to
have a look at your liquidity; where will you need some additional funding or income?
I think that is the most important management tool’. The investor is identified as an
important stakeholder and somebody to keep satisfied, not from the perspective to
maximize the return on investment, but in order to secure access to capital.
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A final aspect that is exceedingly important in developing countries is the financial
education; the main goal is to prevent over-indebt-ness. This is a hot topic after the
first microfinance bubble has busted in Nicaragua because too many people had
taken on too much debt and where unable to repay causing the MFIs to default
(Pater, 2010). In the Netherlands this is not yet an issue, but another aspect of
financial education that is relevant in the Netherlands is, explaining entrepreneurs
about the financial administration. The interviewees expressed their concerns about
the knowledge the average starting entrepreneur has about accounting.
5.2.4. Sustainability Entrepreneur
Three different aspects have been identified that influence the sustainability of a
starting entrepreneur (see appendix G).
First of all, personal factors play a role. Pater (2010) described how business loans
are used for personal consumptive investments in developing countries; ‘that loan is
not always used to start up a business, you can also get a loan and use is for a flat
screen television to put it oddly, but it happens, maybe not a flat screen television but
the marriage of the daughter’. Within the Netherlands similar actions occur due to
demanding partners or other relatives that command a share of the return for
consumptive means as described by Boer (2010); ‘entrepreneurs who started up
their business and have a wife that will say; 'o, now you are an entrepreneur, so I can
start driving an BMW'.’ and later ‘people from other cultures who have become an
entrepreneur, will have family that will say; 'well, you are a success now, so you can
start taking care of us’. The signs that I receive now, is that people also need
coaching about how they should get their family of their back. Apparently that is
particularly common in the Surinamese society’.
The second aspect related to the sustainability of an entrepreneur is that in the
modern world overhead cost can be very low. Due to the modern technology such as
Internet and other virtual networks it is not necessary to sustain an expensive
network or other forms of infrastructure. Especially a service oriented small business
can be started up without any major investments.
The third aspect that is mentioned by the majority of the respondents is growth. It is
identified as an indicator for the demand of the customers. Some argue that it is a
determinant of the success of microfinance as a whole and arguments have been
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proposed to focus on those entrepreneurs with sufficient growth potential to ensure
continuity and growth in the labour market. Not necessarily already at the start but
after a couple of years the majority of the respondents believe the business should
be able to show some growth.
5.2.5. Customer and Market research
This combined category is one of the most discussed categories (see table 5.1) and
can be divided in six sub categories that are all mentioned by the majority of the
interviewees and stand in relation to each other. These sub categories are; demand,
market research, satisfaction; marketing, competition and differentiation (see
appendix H). Three sub-categories are discussed below.
All interviewees identified market research or determining the demand of a product
as important. The interviewees strongly agree on the importance of these aspects
and express concerns that this is something underestimated by starting
entrepreneurs and often not carried out seriously. Stulen (2010) indicates this as the
most important aspect and notes; ‘the entrepreneur really needs to show that he has
thought his plan through. He needs to know what his customers want. Show that he
has done market research’.
Acknowledged is that determining the exact demand of a product can be difficult, the
respondents propose many different types of market research that can assist in
developing an estimation of the actual demand within a curtain area. Depending on
the product or service and location of the business the following widespread types of
market research are proposed for MSE:
• Internet;
• Ask people on the street;
• Conduct questionnaires (online or on the streets);
• Create interaction through platforms or forums;
• Go to peer groups;
• Mail people;
• Visit companies.
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For the model Stefano (2010) proposes to; ‘work with numbers, you can say; 'you
need at least 100 or 200 people that you have asked detailed questions in whatever
way, by questionnaires or interviews’, that way you can make it quantitative’. In
extension to this proposition Ende (2010) said; ‘build into the model an evaluation
moment for entrepreneurs to review whether they still offer what the customers
demand’ and ‘continuing market research would improve the survival rate of the
small entrepreneurs’.
In relation with the earlier indentified copying behaviour, interviewees mentioned that
considerable amounts of starting entrepreneurs are afraid of competition.
5.2.6. Internal Business Processes
This is one of the categories that were scarcely mentioned (see table 5.1 and
appendix I). The only aspect discussed here, is that the interviewees mentioned that
although it is a micro-organization there are several sub-roles to be fulfilled. Ende
(2010); ‘that is something starting entrepreneurs do not realize. I always ask; 'do you
have a marketing department, a purchase department, a (traveling) sales force,
inside staff?’ They will reply; ‘no I am just by myself’’ and ‘a lot of people realize that
they are to late with their acquisition. The acquisition should be an ongoing process.
Often when people have a new job or order they stop with the acquisition’. Lange
(2010) agrees and states; ‘do not be too cocky and think you can do it yourself’.
5.2.7. Organizational, Personal Development
In relation to the previous category Hofman (2010) states; ‘For a start up company,
things like IT and Management Teams are not at all important, since it is usually one
man starting up the company. It is a shop, maybe with Internet, more important are
the capabilities of the founder, the one person starting up the business’. All
respondents identified the capabilities of the founder as important. A distinction can
be made between professional capabilities and personal characteristics or traits (see
appendix J).
For the professional capabilities the respondents mentioned; the business sense,
business skills, education, experience and competencies of the entrepreneur. Stulen
(2010) said; ‘the entrepreneur needs to convince us about his abilities and the plan
he is presenting and how he is going to make it’.
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The personal characteristics, the traits are compared with the traits of a ‘real’
entrepreneur. Boer (2010) notes; ‘in general, it is important that someone remains
flexible no matter what happens and keeps seeing opportunities, real entrepreneurs
do that’ and ‘how do you cope with failures? If that makes you depressive than you
should not do it. Those are psychosocial factors’. In extension Stefano (2010)
mentions; ‘real entrepreneurs always see chances, opportunities, always keep
thinking in chances. Not that you give up after one disappointment. They will find that
a pity, an inconvenient, but they are able to get over that very quickly’.
5.2.8. Learning, Growth and Employee
This category was only mentioned sixteen times. Three different respondents
mentioned it from three different perspectives (see appendix K). Because none of the
perspectives has been supported or mentioned by other respondents, the
perspectives are not reliable enough to include in the model.
5.2.9. Network and Business Development Services
These strongly related categories are identified as important aspects for starting
entrepreneurs. Some interviewees argue that part of the potential success can be
measured from these aspects (see appendix L and M). A distinction is made between
private and professional networks. Another type of network that can be used is a
social networking site. For these sites the same distinction can be made between
professional and private.
The respondents agree that although a private network appears to be
straightforward, it is not always used to its full potential by the starting entrepreneur.
This also counts for the professional networks, which can have many different forms
and sizes. Some examples that have been mentioned by the respondents are; the
contacts of the private network as well as their contacts, fellow starting entrepreneurs
both from related and unrelated industries possibly through BDS programs, create an
advisory board or brainstorm group, develop a good relation with customers, become
a member of relevant groups on social networking sites, visit related social
gatherings and call people. The respondents generally agreed that the assertiveness
of a starting entrepreneur plays a vital role in developing his professional network
and that stimulating this will increase the survival rate of start up enterprises. Lange
(2010) refers to his own experience and mentions; ‘just call people and say; 'you
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know a lot about this topic', often we knew them personally or through other people
or those people would refer us again to other people. That made it possible to go
extremely quickly during the first six months. Not because we thought we could do it
ourselves, even though we have a big part of the background, but by focusing on
experts, people that are top of the bill. It might be difficult if you do not have a big
network at first instance, but talk to a lot of people and just cheeky call them’. Another
advantage of a network is indicated by Ende (2010); ‘that would enable them to pass
on work if they were too busy, but also get work when they did not have so much and
collaborate with other people to take on bigger tasks together, create a network
instead of only keep on working by yourself’.
5.2.10. General BSC model
This category contains a variety of information. Numerous comments about the new
to be developed BSC have been made. The comments can be divided as follows;
usefulness, make it visual, helps think through and two respondents describe a
similar system from which lessons can be learned (see appendix N).
In general all respondents think the model will be an added value for starting
entrepreneurs. Only Pater (2010) expressed his concern about the ability of a single-
starting entrepreneur to generate the necessary input on which the model drives
when analyzing the progress of the business.
In a similar vein, Ende (2010) argues that tools for starting entrepreneurs need to be
simple, easy to use and make things visible. In general the respondents believe the
model will be able to make the different elements that are necessary for a business
visible and therefore be worthwhile for a starting entrepreneur to use and that it will
enable, ‘force’ an entrepreneur to critically think about the business he is starting up.
5.2.11. Relation and Link
This category focuses on the relation between the identified aspects and serves to
identify any imbalances that the respondents pointed out during the interviews. Some
interviewees found it difficult to indicate the exact relation between the aspects. A
distinction has been made between aspects that are equally related, aspects that are
less related and aspects that are strongly related (see appendix O).
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In line with the earlier crude distinction made between two groups of respondents,
the same distinction seems to apply for this category. One group is in favour of
making the financial aspect a separate dimension and to give this dimension a
serving role towards the remaining dominant perspectives. Although the financial
aspect should not be the main target of the business, the investor is still a
stakeholder to keep satisfied. The other group, on the contrary, considers the social
aspects to be a separate dimension. Separate from the relationship the entrepreneur,
his business and the demand of the product have in order to generate sufficient
financial return.
Both groups confirm the relation between those remaining aspects, the entrepreneur,
the business and the demand of the product. The difference is that one group argues
that the focus should be on those aspects to make sure that the entrepreneur will
have sufficient financial return. The other group argues that the focus should be on
the contribution towards the society including the related stakeholders; customers,
‘employees’, the society and the investors to make sure everybody is satisfied and
when that is ensured that the financial return will follow automatically.
5.2.12. Most Important
In line with the previous paragraph there are different views on what is the most
important. All the previous discussed categories are mentioned by different
respondents as important; financial, social, demand, personal, satisfaction, reason to
start and network (see appendix P).
5.2.13. Measurement and Indicators
In a similar vein as the previously held discussion at the financial aspect,
respondents suggested not to explicitly focus on, and only measure the financial
return but instead ensure that all-important stakeholders are satisfied.
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5.3 Summary
Based on the empirical findings, tables 5.2 – 5.5 present the answers to the following
four sub-questions (the X indicates the elements that are included in the new model):
• How can the BSC improve the sustainability of starting entrepreneurs
supported by pre-loan BDS?
• How does the BSC need to be adjusted to be suited for the needs of these
starting entrepreneurs?
• What dimensions of the BSC are relevant for the starting entrepreneurs?
• How do the dimensions relate to each other in an optimal BSC?
Sub Question Proposition Concrete Result
How can the
BSC
improve the
sustainability
of
starting
entrepreneurs
supported
by pre-loan
BDS?
!
Make clear what
needs to be done
to start and run a
business
Clearly show how
dimensions relate
to each other
Focus on
appropriate
dimensions
Easy, visual and
simple to use
model
See next subquestions
Enables them to think their
plans through
Increase the survival rate X
Discourages people that do
not start for the right reasons X
Increase the sustainability of
the enterprise
Sub Question Proposition Concrete Result
How does the
BSC need to
be adjusted
to suite the
needs of
starting
entrepreneurs?
!
!
!
Table 5.2: How can the BSC improve the sustainability of starting entrepreneurs? (Author)!
Easy, visual
and simple
to use
model
Focus on
appropriate
dimensions
Clearly show where
the entrepreneur
needs to focus on
Enables the entrepreneur to
ensure the appropriate balanced
between all dimensions and
increase the sustainability
See next sub-question Increase the sustainability of the
enterprise X
Table 5.3: How does the BSC need to be adjusted? (Author)!
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X
X
X

Question
What
dimensions
of
the BSC
are
relevant
for the
starting
entrepreneurs?
!
!
Proposition Concrete Result
Reason,
drive and
contribution
Social
Financial
SustainabilityEntrepreneur
Customer,
Market
Research
Internal
Business
Processes
Personal
Development
Why Question; reason
to start the business
Where Question; clear
targets
What Question; contribution
towards society
Make sure entrepreneurs start for
the right reasons
Focussed operations activities X
Able to satisfy all related
stakeholders
Employment Job Creation X
Measurable Reachable Targets X
Not dominant Serving role to other dimensions X
Liquidity Sufficient capital at all times X
Satisfy Investors Secure access to capital X
Education
Proper administration
How to deal with family and
Personal factors prevent over-indebt-ness
Low (initial) investment Not much capital is needed
Growth
Prevent copying
behaviour Continuing Market
Research
What roles need to be
fulfilled?
Professional
(capacities; education,
experience, skills, etc.)
Personal (traits, ‘real’
entrepreneur; driven,
optimistic, etc?)
Secure sustainability; focus on the
niche.
Determine demand X
Adjust to needs of customers X
Improve product X
Increase satisfaction
Inside in what the entrepreneur can
X
do himself and for what he will
need assistance, trough his
networks or BDS?
X
Learning
by doing
Expanding private and
professional network
Do not start if you cannot handle
disappointments, stress, etc.
Sub Question Proposition Concrete Result
How do the
dimensions
relate to
each other
in an
optimal
BSC?
!
!
Table 5.4: What dimensions are relevant for starting entrepreneurs? (Author)!
Focus on
satisfying all
related
stakeholders
All stakeholders
are equally
important
Customer Buys products and allows X
Society
you to run your business X
Entrepreneur Personal satisfaction X
Investors Provides capital X
If any of the stakeholders
is unsatisfied it could be
the end of the business
Sustainable enterprise
Table 5.5: How do the dimensions relate to each other in an optimal BSC? (Author)!
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X
X
X
X

6. Discussion
6.1 Introduction
This study explored the role the BSC can play in the Dutch microfinance sector. The
focus of this study was towards the starting entrepreneurs that seek counselling at
the MF-points (for pre-loan BDS). I have found support for the idea that the BSC can
make a contribution towards the sustainability of the microfinance sector, by
improving the survival rate of starting entrepreneurs. Certain empirical findings arose
as conflicting, other as interesting, when compared to literature concerning
microfinance and the BSC; these will be discussed in the following chapter.
6.2 A Balanced Scorecard for Micro and Small Entrepreneurs
The previous chapter ended with a summary of all the empirical findings (see table
5.2). Table 5.2 also already indicated which elements have been included in the new
model. The new model is presented by figure 6.1.
Figure 6.1: ‘Equally’ Balanced Scorecard for Micro and Small Entrepreneurs (Author)
!
6.2.1. General ‘Equally’ Balanced Scorecard Model
Figure 6.1 shows that the model has four dimensions, which represent the four
identified stakeholders important for MSE. The shape of the model is inspired by the
Social Enterprise Scorecard (Meadows and Pike, 2009, p. 136). The model clearly
indicates that each stakeholder is equally important and the aim is to keep each
stakeholder optimally satisfied. The model indicates that the business is as
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successful as the weakest dimension and therefore clearly indicates the dimension
the entrepreneur needs to focus on. Finally the model clearly illustrates how all
dimension are linked, something the BSC is often criticized for by theory (Nørreklit,
2000; Kunc, 2008).
For each stakeholder a separate matrix will be developed where measurable targets
and objective are set. The matrix will be similar to the BSC matrix of the MFC (2007)
(see figure B-1 at appendix B). Developing SMART objectives with appropriate lead
and lag indicators will be a crucial step and the proposition is that this is done during
sessions with the business advisor of the MF-point. When a target is reached the
square in the model grows to the next level. Accordingly each aspect of the model
will be discussed and linked with findings from the literature review.
6.2.2. Social
Based on the work of Meadows and Pike (2009) this aspect was identified as an
important element. This has been supported by empirical evidence. The suggestion
was made that each business, regardless of size, should have a clear economic,
social, or ecological objective. When a business makes a clear contribution towards
the society it secures its ‘licence to operate’, something the business depends on
from the society. Taking a holistic view, each separate stakeholder is part of the
society, when the business satisfies the society all the separate stakeholders are
implicitly satisfied as well. This makes it easier to focus the operational activities.
6.2.3. Financial
Since the time of Friedman, business models have had a strong focus on the
financial aspect and on maximizing shareholders return. The traditional BSC (from
Kaplan and Norton) is no exception. Empirical evidence indicates that times are
chancing and different, more appropriate PMS are needed. However contested
empirical evidence suggests releasing the financial aspect from its predominantly
important role and moving it towards a facilitating, more serving role towards the
other dimensions. Sufficient capital is of crucial importance, therefore satisfying
investors and liquidity are of major importance, but the financial return should not be
a mean of itself.
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6.2.4. Sustainability Entrepreneur
Theory suggested that small businesses are a critical component of the global
economy. Policy makers generally believe that small businesses play a crucial role in
reducing unemployment and generating economic growth (Council for microfinance,
2007; Lämmermann et al., 2007; Molenaar, 2009). This view has been contested by
other theory, since the typical start up is not innovative, creates few jobs and
generates little wealth, rather they are founding wage-substitution business that have
more in common with self-employment than with the creation of high quality, high
growth companies (Shane, 2009). Empirical evidence supports this last view and
mentioned the phenomenon ‘copying behaviour’, which creates a stiff competition,
few jobs and high failure rates. Theory indicated managerial inadequacy, unfamiliarity
with established business practices, integration of strategic and operational
management processes, lack of managerial experience, inadequate planning and
poor financial control and record-keeping as causes of high failure rates within the
first three to five years (Gaskill et al., 1993; Pickle and Abrahamson, 1990; Meredith,
1989).
Theory suggested that government officials, although not able to ‘pick winners’, can
identify start-ups with a low probability of generating jobs and enhancing economic
growth. By eliminating incentives to create these low probability companies, policy
makers can improve the average performance of new businesses (Shane, 2009).
Empirical evidence supports this suggestion. The new model will enable government
officials and starting entrepreneurs to indentify the potential growth.
6.2.5. Customer and Market research
The customer perspective plays an important role in all traditional BSC models
(Kaplan and Norton, 1996a; Lynch and Cross, 1991), by indentified recent models it
has only been replaced once (Meadows and Pike, 2009). For all other model of the
BSC beyond the private sector the customer perspectives plays an important role
(MFC, 2007; Gomes and Liddle, 2009; McNair and Watts, 2009; Watts et al., 2009b).
Empirical evidence strongly confirms this importance and confirms that the market
research needs to be a continuing process in order to identify trends and changes in
the needs of customers, allowing an entrepreneur to adjust his product or service
towards these needs and secure demand. The theory identified, this flexibility and
ability to proactively shift operations and focus to meet changing customers
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equirements as one of the key competitive advantages for many small businesses
(Davig et al., 2004; Knight and Knight, 1993).
6.2.6. Internal Business Processes
Literature formulated three related aspects (Watts and Preda, 2004; Orser et al.,
2000; Meredith, 1989). The first aspects related to resource issues; smaller firms rely
on a few individuals to carry out the various management tasks necessitating the
owner-manager to acquire many diverse skills to operate the enterprise successfully,
resource poverty generally restricts this acquisition. The second point made was that
structures of small businesses are generally flat, with fast information flows allowing
a fast decision making process. The third point, strongly related to the second was
that a dominant role is played by the starting entrepreneur; recognizing that he is
fundamental for the small firm, since their innovative qualities and philosophies often
shape its nature and they also create and influence the management style. In many
instances they are the business! Empirical evidence supported this view and
suggested to put more emphasis on the potential of the network every person has or
assertively can create and extend.
6.2.7. Organizational, Personal Development
Since the entrepreneur is the business, the traditional dimension; internal business
processes, is not included in the model. The proposition is that when the business
advisor of the MF-point, together with the starting entrepreneur, adjust this model to
the specific needs of the business, that one of the first steps is to identify what tasks
need to be carried-out. When these tasks are place in the entrepreneurial dimension,
the next step is to realistically, concerning time, skills, experience and education,
identify which tasks can be carried-out by the starting entrepreneur (and his network)
and more importantly, for which tasks he will need to seek assistance.
Theory suggested placing extra emphasis on the planning and acquisition, to prevent
operating in ‘fire-fighting’ mode (Shrader et al., 1989). This has been supported by
empirical evidence. It was noted that (in particular, for ZZP-ers) the acquisition
should be a continuing process in order to prevent having to search for a new order
or contract after one is finished.
6.2.8. Learning, Growth and Employee
See paragraph 6.2.6 and 6.2.7
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6.2.9. Network & Business Development Support
See paragraph 6.2.6 and 6.2.7
6.2.10. Reason, Drive and Contribution
Empirical findings identified three questions as the starting point of the entrepreneur.
The ‘what’ question has been incorporated in the social dimension (see 6.2.2). For
the ‘why’ question, the proposition is that it should primarily be addressed by the
business advisor and secondly be incorporated in the entrepreneurial dimension. For
the ‘where’ question theory states that; in the business sense, performance refers to
the accomplishment of the business’ strategies (actions) in order to achieve the
objectives (obligations) established. The objective may be a targeted level of
profitability (key to survival) or an above average or improved return on investment
(required for growth). Performance measurements quantify action in terms of their
efficiencies and effectiveness, which represent the degree to which the obligations of
the firm are fulfilled (Neely et al., 1995). As with many business models since
Friedman, the emphasis is placed here on the financial aspect. Empirical findings
suggest not to determine the performance of a business based on its financial return,
but to focus on aspects such as satisfaction and measure relevant returns. The best
way to illustrate these points is by quoting Bullens (2010);
‘Why do we make the financial perspective so dominant? Say you are a
customer at Albert Heijn and you need to pay twice as much for your product,
but you are still satisfied. Does Albert Heijn have a problem then?’
‘Why is that financial perspective then so important? I'll give you the
answer. Everybody thinks it is important, because the paradigm we have
created, the financial model dominants for the perception whether we should
be satisfied. At the FNV federation, they think that when they arrange a salary
increase for the people, members of the FNV, that they will be satisfied. That
is their stand while negotiating. Same for interest for shareholders,
companies argue that when shareholders have a higher return they will be
satisfied. That is the dominant thinking. Why not ask are you satisfied? We
developed those financial models when they were needed. By that time we did
not have enough calculation capacity. But do we still need it?’
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‘Everything is setup to reach the best profitability and we have very bad
measurement systems to check that. One liter of oil, does that represent a cost
or a benefit?’
‘In my opinion the financial dimension should only be serving the other
perspectives. I understand that it is very difficult, but you should do the output
measurement in bags of potatoes or something similar. It is completely
irrelevant if I have made !100.000, -‘
6.2.11. Relation and Link
See paragraph 6.2.1.
6.2.12. Most Important
See paragraph 6.2.1
6.2.13. Measurement and Indicators
Coming back to model and the ‘where’ question, the proposition is to focus on
satisfaction. The goals and objectives have to be set by the entrepreneur during the
sessions with the business advisor, since this is one of the most critical elements of
the BSC and to ensure that they will be measureable. Targets can be very simple
and small, for example for the entrepreneur dimension, the target can be to be able
to eat, maintain the family and pay the rent or mortgage of the house (see figure 6.2).
Figure 6.2: ‘Equally’ Balanced Scorecard for Micro and Small Entrepreneurs (Author)
!
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The discussion is ended with a final quote, from Boer (2010);
‘Research shows that entrepreneurs are happier than people that do not
do that, as long as they have an annual turnover of around !22.000. That
is just above social welfare level, it is not ridiculously high. Below that, it
really depends on whether the partner makes any money’.
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7. Conclusion, Recommendations and Limitations
7.1 Introduction
First an answer to the research question is provided. Subsequently the theoretical
contributions and practical implications are discussed. Followed by a research
reflection where advantages and limitations are described. Finally suggestions for
further research are presented.
7.2 Concluding Remarks
The purpose of this study is making a contribution towards the existing literature and
meanwhile enhancing the sustainability of the Dutch microfinance sector by adjusting
(foreign) performance measurement systems to the specific needs of an important
player in the field.
The formulated research question is; ‘how can the Performance Measurement
Systems (PMS) used (by Microfinance Institutions) in both developing and
industrialized countries be used to provided the best added value for the
microfinance sector in the Netherlands?
7.2.1 From the Literature Review
Based on the literature, the following conclusions were drawn:
• This study has the most added value when focussing on the pre-loan Business
Development Services (BDS) in the Netherlands. This conclusion is threefold:
o BDS are of major importance for the survival rate of starting
entrepreneurs. Improving this survival rate will have a significant
contribution towards the sustainability of the complete sector;
o At the time of research no specific PMS has been found that is being
used or provided by pre-loan BDS to start up micro and small
entrepreneurs;
o The relative late introduction of microfinance in the Netherlands enabled
the single (major) microcredit supplier, Qredits, to learn from foreign
experiences and develop a PMS that incorporates many of the
advantages a Balanced Scorecard (BSC) related PMS could generate;
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• Since the development of microfinance in Europe, BDS have been regarded
as an essential factor for the successful realization of a microloan. This stands
in contrast to microfinance in developing countries, where credits are more
often delivered without additional business support.
• BDS are expensive and rely heavily on government subsidies, therefore
government officials need to limit BDS to starting entrepreneurs with sufficient
growth potential;
• MFI cope with a double bottom line, therefore they are in pursuit of a PMS that
allows them to measure both financial and non-financial results. A PMS that is
invented to deal with financial and non-financial measures is the BSC.
7.2.2 From the Empirical Findings
Based on the empirical findings, sixteen different categories emerged. After
analyzing the empirical findings and comparing them with the theory, the following
major conclusions can be drawn:
• Starting point; potential entrepreneurs need to ask themselves three
questions before starting up a business:
o Why do I start this business?
! To discourage those that start for the wrong reasons
o Where do I want to be in ‘three’ years?
! In order to develop appropriate and measurable targets
o What contribution do I make towards the society?
! In order to ensure satisfying all related stakeholders and
focussing the operational activities;
• Social; taking a holistic view, each separate stakeholder is part of the society.
When the business satisfies the society, by explicitly making an economic,
social or ecological contribution, all the separate stakeholders are implicitly
satisfied as well. This makes it easier to focus the operational activities;
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• Financial; since the time of Friedman, business models have had a strong
focus on the financial aspect and on maximizing shareholders return.
Empirical evidence suggests releasing the financial aspect from its
predominantly important role and moving it towards a facilitating, more serving
role towards the other dimensions;
• Investor; financial return should not be a means of itself but, sufficient capital
is of crucial importance. Therefore, in order to secure access to capital,
satisfying investors is of major importance;
• Sustainability Entrepreneur; typical start up businesses have high failure
rates within the first three to five years. This is caused by the following
reasons:
o Copying behaviour; the typical start up is not innovative, creates few
jobs and generates little wealth;
o Managerial inadequacy; unfamiliarity with established business
practices, integration of strategic and operational management
processes, lack of managerial experience, inadequate planning and
poor financial control and record-keeping;
• Therefore government officials should eliminate incentives to create low
probability companies and focus on start up companies with a lot of (growth)
potential.
• Customer and Market research; market research needs to be a continuing
process in order to identify trends and changes in the needs of customers,
allowing an entrepreneur to adjust his product or service towards these needs
and secure demand. This flexibility and ability to proactively shift operations
and focus to meet changing customers requirements is one of the key
competitive advantages of micro and small entrepreneurs;
• Entrepreneur; the entrepreneur often is the business. It is important to identify
what tasks can be done by the entrepreneur and for what tasks he will need to
seek assistance through his private or personal network or BDS.
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7.2.3 The Model: ‘Equally’ Balanced Scorecard
In order for the model to be useful for starting entrepreneurs, the model clearly needs
to indicate:
• That each stakeholder is equally important;
• The dimension(s) the entrepreneur needs to focus on;
• How all dimensions are linked.
The following dimensions are relevant for these starting entrepreneurs:
• Society;
• Investor;
• Customer;
• Entrepreneur.
7.3 Theoretical Contribution
Most important, but not limited to the theoretical contribution, is that we need to shift
the thinking model, the perspectives we consider to be important. The majority of the
business models have a strong emphasis on the financial perspective and
maximizing shareholders returns. Times are changing and different more appropriate
PMS need to be developed.
The model as concluded in the previous paragraph is by itself a contribution to the
theory. As far as the scope of this research could reach; no similar model has been
found used by MFIs.
7.4 Practical Implications
The first question addressed to a starting entrepreneur should be; ‘why do you want
to start a business?’ Although difficult, the business advisor really needs to determine
what the real reason for the person is to start a business. When the business advisor
has doubt or thinks the person starts for the wrong reasons the business advisor
should discourage this person to start up a business.
Policy makers need to realize that microfinance is not the single solution to generate
economic development. The typical start up is not innovative, creates few jobs and
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generates little wealth, rather they are founding wage-substitution business that have
more in common with self-employment than with the creation of high quality, high
growth companies (Shane, 2009).
7.5 Research Reflection
This qualitative study has a number of advantages but also includes several
limitations. Advantages are that by conducting a qualitative study the researcher is
giving the opportunity to reflect on the results of the interviews. After 20% of the
interviews were conducted a pattern emerged that the financial perspective should
not be predominantly important and greater emphasis should be put on the society.
This led to the following alterations; questions were asked about what role the
interviewees felt the financial perspective should play and what returns are important.
These questions allowed for further insight to be gained on how the interviewees
view these aspects from the role they play within the microfinance sector. The results
showed that a crude distinction could be made between players that are involved
with loans and those that are not.
Another benefit of using a qualitative method for this study is the position of the topic.
Microfinance is a new phenomenon in the Netherlands that previously has not been
researched from the perspective to develop a PMS for starting entrepreneurs. The
interviews did not limit respondents from delivering a diverse set of information on the
topic, resulting in new insights being gained and giving this study a purpose. The
interviews allowed individuals to respond how they wanted to, without creating
boundaries in which they needed to remain. This openness also made the
respondents feel that their opinion was very valuable, giving them more confidence in
answering the questions and increasing the value of the interviews.
In this study evidence is found that the ‘Equally’ Balanced Scorecard for micro and
small entrepreneurs can make a contribution towards the sustainability of the
microfinance sector. However, these findings may be an exception to the rule; due to
the limited time available for the research, the respondents’ sample is limited. The
research was conducted during a busy time for most of the respondents, therefore
the available time for the interview was often limited to one hour.
Another limitation of this study can be found in the validity of the research. Although it
was taken into account throughout the entire study, there are certain limitations that
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cannot be controlled by the researcher. First of all, it is difficult to have the full
confidence in criticizing the answers of the respondents as true and if they truly
understand the question. The pilot-interview has been conducted in English, when
the mother tongue of the interviewee and the interviewer were Dutch. This resulted in
certain questions not being fully understood, but more importantly resulted in not
being able to fully word what the interviewee wished to say. This means that the
interviewee may have meant one thing but said another, due to the lack of English.
Therefore the remaining interviews have been conducted in Dutch.
To increase the understanding upfront explanations and descriptions of the topic
were sent to each respondent before the interview in order to allow them to get
acquainted with the subject. The reliability was covered in this research because
there was a balance between having eight ‘experts’ from different viewpoints all
interviewed in a similar, familiar setting for the interviewee.
In the end, all research, whether theoretical or empirical in nature, retains flaws and
opportunities for future improvement. The work was, as is always the case, shaped
by the experiences and the knowledge of the researcher. By definition that means
that some work may have been overlooked, others improperly evaluated or
assessed, and leaving yet other weaknesses and options un-contemplated and
hence unaddressed.
7.6 Future Research
The challenge that remains is to empirically determine whether the ‘Equally’
Balanced Scorecard for Micro and Small Entrepreneurs is useful for these
entrepreneurs. The number of ways that these empirical tests can be performed is
practically limitless. Experiments could be run to see if the ‘Equally’ Balanced
Scorecard for Micro and Small Entrepreneurs metrics improve a decision-maker’s
ability to choose the best action among a set of options. Longitudinal field studies
and action research could be undertaken to determine if the application of the
proposed model and set of metrics would improve planning and performance in small
businesses. These are just two of many options available for future work.
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List of Appendices
Appendix A: Thesis Proposal
Appendix B: Performance Measurement Systems Beyond the Private Sector
Appendix C: Interview Outline
Appendix D: Reason, Drive and Contribution
Appendix E: Social
Appendix F: Financial
Appendix G: Sustainability Entrepreneur
Appendix H: Customer and Market research
Appendix I: Internal Business Processes
Appendix J: Organizational, Personal Development
Appendix K: Learning, Growth and Employee
Appendix L: Network
Appendix M: Business Development Services
Appendix N: General BSC model
Appendix O: Relation and Link
Appendix P: Most Important
Appendix Q: Measurement and Indicators
Appendix R: Sustainability of Microfinance
Appendix S: Qredits
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Appendix A – Thesis Proposal
According to TiasNimbas’ rules and regulations, the proposal in this appendix is
identical (except for the page numbers and font) to the one submitted to TiasNimbas
on the 16 th of June 2010. The actual design followed in this study is explained in
detail in Chapter 4 of the main body of this thesis.
___________________________________________________________________
Thesis Proposal
Microfinance stimulating entrepreneurship in the Netherlands
Searching for a sustainable model
Student: Elmar Hoogendoorn
Student ID: 200962009
Address: Maliesingel 44 bis
3581 BL, Utrecht
Contact: elmar.hoogendoorn@gmail.com
Mobile: +31 (0) 6 123 7 321 7
University: TiasNimbas Business School
Master of Science: Financial Management
Supervisor: Mr. Michael Bier MBA
Due date: June 16 th 2010
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Table of contents
Table of contents 85
1. Abstract 86
2. Background 86
3. Aims and objectives 91
4. Research question 92
5. Theoretical and practical relevance 92
6. Methodology / data sources 93
7. Expected outcome and recommendations 95
8. Table of contents 96
References 98
Workprogram 100
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1. Abstract
The Thesis Project will focus on the practice of microfinance in the Netherland to
stimulate entrepreneurship. It will create an overview of different microfinance models
currently in practice. It will pay special attention to those models currently sustainable
and independent of external finance. After extensive literature review, a benchmark
will be created to develop a framework for a sustainable microfinance model. An
inductive research, by interviews, will be conducted to finalize the framework by
analyzing the views of, journalists, entrepreneurs, professors and other parties
involved. The results, a framework for a sustainable model, will be useful for all
parties involved in the microfinance process in the Netherlands.
2. Background
Microfinance in developing countries
Initially, most developing countries accepted microfinance as an instrument to
combat poverty. Then it was acclaimed as an instrument to boost entrepreneurial
initiatives. Subsequently, microfinance institutions (MFIs) developed comprehensive
programs offering a wider range of products and services to micro-entrepreneurs.
Now, the sector is considered an industry, and legalization and regulatory
frameworks are developed and introduced in support of the sector (Molenaar, 2009).
Microfinance in Central and Eastern Europe
According to the European Microfinance Network (EMN) the state of microfinance in
Central and Eastern Europe (CEE) and the New Independent States (NIS) is much
more developed than in Western Europe (Evers and Jung, 2005). In CEE
microfinance began as an economic development tool after the fall of the Berlin Wall.
Within 5 or 6 years, microfinance institutions in CEE and in the NIS had attracted
more than 1.7m borrowers and 2.3m depositors, with an average client growth rate of
30% per year (European Investment Fund (EIF), 2009).
The Microfinance Centre (MFC) (for CEE and the NIS) has developed the Strategic
Management Toolkit to help MFIs professionalize their strategic management
processes and improve their double bottom line. The toolkit minimizes the risk of
mission drift for those MFIs, which grow fast, transform themselves into regulated
institutions, and/or compete aggressively with other market players (MFC, 2007).
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The success of MFIs in CEE is majorly due to a favorable environment for
microfinance. They enjoy an appropriate banking regulation with a micro-finance
lending window, a high level of demand and low price sensitivity. Their profitability is
partly due to being able to concentrate on their lending activities. This is different
from most EU based microfinance organizations that have to deliver higher levels of
business support. This is due to a more complex enterprise regulation and
environment and also to the fact that these microfinance organizations focus on
clients starting out of exclusion rather than the established entrepreneurs which is the
typical area of focus for MFIs in transition and developing countries (Evers and Jung,
2005).
Microfinance in Western Europe
Micro-credit and microfinance in Western Europe are rather new phenomena and
were first put seriously on the agenda in the early nineties. In a relatively short period
both have been embraced fully by politicians at the European Union - and at some
national levels - as a valuable instrument for social and economic development
(Molenaar, 2009). There is a spread belief in Europe that microcredit can play an
important role within the Lisbon strategy for growth and employment and achieve
social inclusion (Canale, 2010).
For the European Initiative to be effective, coherence between the European and
national policies needs to be sought. In the 2007 Survey of the Microfinance sector in
Europe (Jayo et al., 2008) an assessment was also made of the Mission Statements
of the majority of the organizations. These could be classified into the following four
main categories:
• Job creation and entrepreneurship promotion;
• Small and Medium Enterprise (SME) and economic development;
• Financial inclusion;
• Social inclusion and the fight against poverty.
Different models within Western Europe
Due to the different missions of different organizations, different perspectives and
models have been developed. One perspective about microfinance is that it is
sustainable: “Dozen of institutions have proved that financial services for poor people
can cover their full cost, through adequate interest spreads, relentless focus on
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efficiency, and aggressive enforcement of repayment” (Littlefield and Rosenberg,
2004). An opposite perspective is: “MFIs that focus on financial self-sufficiency bear
the burden of proving that they are truly reaching the very poor. If not, then they are
pushing the microfinance industry to abandon its value-based roots, and concern for
the poor, however earnest, can be become simply an excuse to make a buck.”
(Woller, Dunford and Warner, 1999).
Based on different perspectives and missions, different models have been
developed. In a research done by Granger and Lämmerman (2009), two different
successful French organizations, Adie and France Initiative are being compared.
Both organizations have reached considerable results; together they have provided
more than 25,000 loans. They work very efficiently while reflecting different visions,
aims and operating models. Both organizations were set up in similar political and
economic contexts, but they operate upon different models and target a different
clientele.
Public money represents more than 80% of the resources of the two networks; but
while Adie wants to escape this and become independent, and “financially
sustainable”, France Initiative explicitly wants to work with public money, considering
that financing new businesses for people in trouble is a public duty.
Beside these very evident and important differences regarding their visions and
operations, both organizations nevertheless also work based on significant
similarities: both rely heavily on the involvement of volunteers regarding their
Business Development Services (BDS) provision and final decision on loan provision
as well as on partnerships of all kinds, thereby keeping operational cost as low as
possible (Granger and Lämmerman, 2009).
Armendáriz (2009), who compares Adie with a Belgian microfinance organization
called Crédal, has done similar research.
Microfinance in the Netherlands
In 2007, the Dutch Ministry of Economic Affairs, under the management of State
Secretary Frank Heemskerk, appointed The Board of Microfinance. One of the
members of this board is Her Royal Highness Princess Maxima of the Netherlands,
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who was a member of the UN advisory committee during the year of microcredit
2005.
Significant groups of potential entrepreneurs (dropouts, re-entrants and recipients of
social security benefits) were unable to get a loan from the conventional banks. For
banks it is difficult to indicate the level of credit risk, because small entrepreneurs do
not speak the financial language and the costs of such small loans are relatively high
(Heemskerk, 2009).
With the help of four big banks (ING Bank, Rabobank, ABN AMRO Bank and Fortis
Bank) the foundation Qredits was erected in October 2008. Supported by the Ministry
of Economic Affairs, the foundation provides loans up to a limit of !35.000,- to
entrepreneurs without social security benefits. Besides financial support, all
entrepreneurs are also linked to a coach that will assist during the difficult period of
starting up a business.
According to a research, conducted in 2006, by 21minuten.nl and the Dutch
Chamber of Commerce, 3.000.000 people think about starting their own business
within five years and 600.000 have concrete plans to do so (see Figure 1). Annually
only 70.000 people actually start their own business. The main reasons for this
relatively low number are; lack of assistance, financial barriers and insufficient
knowledge and capacities (Microfinanciering, 2006). The provision of microfinance, in
combination with the assistance of a coach, can take away these barriers.
Future development
The ambition of microfinance in
the Netherlands is stated in an
advisory report conducted by
McKinsey & Company in
November 2009. This report
states that the target should be
to grow by several thousands
credits annually, resulting in a
substantial increase in the
number of starting
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entrepreneurs, compared to the current amount of starters. Due to this increase in
scale, microfinance will be able to become self-sufficient and will be able to attract
money from private investors. Until that moment, microfinance will remain financially
depended on the government (Oberman and Roelofsen, 2009).
Important perspectives from research and other literature
First, McKinsey & Company advises the Dutch government that microfinance should
and can become sustainable by providing 5.000 loans annually by 2015. This
increase will allow the foundation Qredits to benefit from economies of scale, which
will make them able to cover their own costs by the interest they receive on loans
(Oberman and Roelofsen, 2009).
Second, many researchers disagree with this perspective. One of the main
arguments is that “Western European microfinance markets are over-crowded with
social support organizations” (Jayo, Rico et al. 2008). Evers and Jung (2007)
summarize this view as follows; “Microfinance programmes in Western Europe are
not and possibly will not become profitable, but make economic sense. The average
costs for someone supported with a microfinance scheme are often below the cost
for one year of support in the traditional social welfare system, where cost thereby
incurred are “lost subsidies”.” Also the EIF (2009) doubts whether sustainability is
possible, to their knowledge there is not a single microlender that has achieved
financial sustainability in Western Europe.
Third, since the conditions are not favorable in Western Europe to become
sustainable, other approaches toward microfinance have been developed. Two
approaches to measuring social value seem interesting for microfinance
organizations. Social accounting and social return on investment (SROI) are both
used within this sector (Ramsden, 2009).
Fourth, although there is a widespread debate about the critical success factor of
microfinance in developing countries, there seems to be modest agreement about
the positive influence of the group lending practice. Gomez and Santor (2003) found
empirical evidence that group lending lowers borrower default rates more than
individual lending, and that the effect operates through the dual channels of selection
into the peer lending program and, once inside the program, greater group borrower
effort. Also later research done by Bhole and Ogden (2009) supports this view; “We
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show that if, (1) the amount that a successful borrower owes for his defaulting partner
is optimally determined, and (2) the penalty is allowed to vary across group
members, then even in the absence of any social sanctions or cross-reporting, (1)
expected borrower welfare is strictly higher with group lending when both group
lending and individual lending are feasible and (2) group lending is feasible for a
greater range of opportunity cost of capital. These results are robust to collusion
between borrowers.”
Fifth, knowing that there are sustainable microfinance examples in CEE and
developing countries, it is important to know the difference between those regions
and Western Europe. According to Molenaar (2009), the key characteristics of
microfinance in Western Europe compared to the other regions are; individual loans
rather than group-based lending, higher average loan size (around !11.000), tailored
business and financial support, general for a longer period, higher average interest
rate and in addition to interest, most MFIs in the EU area charge loan application
fees, loan processing and interest penalties on top of the interest as a means of
covering operational costs. This is most common where MFIs strive for their own self-
sustainability. Granger and Lämmerman (2009) argue that comparing microfinance
development conditions is impossible, because wealth in the countries is different, as
is the concept of involvement of public money in microfinance. Even the concept of
the aims and the concept of entrepreneurship as a model for microfinance are
different.
Finally, within Western Europe, some important players like, Adie in France (based
on the Grameen Bank model), are making a short-term objective out of becoming
sustainable (Genet, 2009). Adie for example has established six pilot branches called
Adigo branches. A person who would like to take out a loan has to gather three other
persons who each have an individual business project and need a loan. Each person
in the group obtains a loan and needs to show solidarity for the loan repayment of
each other member of the group (Granger and Lämmerman, 2009).
3. Aims and objectives
The aim of the Thesis Project is to find out how the Dutch microfinance model (used
to stimulate entrepreneurship) can be made sustainable. This will be done, by
analyzing successful (foreign) examples.
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The Thesis Project has several objectives:
• Create an overview of all relevant literature about microfinance (models);
• Create an overview of all relevant literature about government stimulating
entrepreneurship programs;
• Create an benchmark and compare the current Dutch microfinance model;
• Conduct interviews with important players in the microfinance sector;
• Develop a framework a sustainable microfinance model in the Netherlands.
4. Research question
The main question of the Thesis Project is:
• How can the Dutch microfinance model (used to stimulate
entrepreneurship), be made sustainable, by lessons learned form
successful examples?
The following are examples of sub questions that will be used to answer the main
question:
• What relevant microfinance models are or have been used worldwide to
stimulate entrepreneurship?
• What microfinance model is currently used in the Netherlands?
• How does the current model stimulate entrepreneurship?
• How is this going to change in the future?
• Will it be possible to remain or lower the interest rates?
• How do foreign models stimulate entrepreneurship?
• When are models successful?
• Why are some foreign models successful?
• What factors are important for this success?
• How is it possible to integrate these factors into the Dutch model?
5. Theoretical and practical relevance
Pamela Feleüs from Roosendaal has realized her dream. She was able to start her
own hairdresser’s saloon, thanks to the money from the microcredit office West
Brabant. Conventional banks did not want to help her, and told her to come back next
year. According to Heemskerk is Pamela the hundredth starting entrepreneur that
was helped by this form of ‘soft’ loan. The institute providing the loans, Qredit, has
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had around eight hundredth request for a loan so far (BN De Stem, 2009).
Although there seems to be no downside to the practice in the paragraph above, the
loans provided, usually have a relatively high interest rate. The reason for this is that
the interest has to cover for the default risk of the entrepreneurs and because the
costs of providing such a loan are relatively high, compared to the amount of money
actually borrowed.
In order to make the Dutch microfinance model sustainable and the governments
ambition to withdrawal financial support there is a possibility that interest rates will
have to go up in order to cover the costs. This will have huge consequences.
Furthermore the Thesis Project will examine current theories and literature on
microfinance models and will suggest practically based solutions, developed within a
theoretical context.
Therefore, the Thesis Project will be useful for all parties involved in the provisions of
microfinance.
6. Methodology / data sources
The Thesis Project will be written from an interpretive perspective, this allows
indentifying the meaning individuals attach to their responses. Inline, a
phenomenological epistemology is applied with the gathering of qualitative data; this
refers to the way in which humans make sense out of world around us (Saunders,
Lewis and Thornhill, 2009, p. 116). The methodology used for the Thesis Project will
be inductive, interviews based on grounded theory.
The research process consists of the following steps; literature review, data collection
and analysis, model building and conclusions
Secondary research
The first step of the research will be an extensive review of all relevant literature
published on the subject of microfinance models. The analysis of the secondary
research will help to develop a general idea about the different microfinance models
in relation to the ambition of making the Dutch model sustainable and to establish a
theoretical background.
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Based on the results from the literature review a benchmark will be created. This
benchmark will be used to understand how the Dutch model currently stimulates
entrepreneurship. In other words, how the model helps entrepreneurs to start up a
(new) business.
Primary research
The ideas gained from the literature review will be used to develop appropriate
interview questions. The interviews will be semi structured. This means that there is a
list of themes and questions. During the interviews the questions and order can be
different from earlier interviews (Saunders et al., 2009, p. 320).
Dutch MFIs will be asked to talk about their experiences and opinions in order to
create a general view of the ideas about a sustainable microfinance model. Before
conducting the interviews, the questions will be used within a pilot study.
Additionally prominent journalist, professors, starting entrepreneurs, successful
entrepreneurs or other parties involved will be interviewed until theoretical saturation
is reached. Goal is to understand their analysis of the current microfinance model
and their recommendations for a more sustainable model.
Grounded theory
The procedures of grounded theory are designed to develop a well-integrated set of
concepts that provide a thorough theoretical explanation of social phenomena under
study. A grounded theory should explain as well as describe (Corbin and Strauss,
1990). According to Corbin and Strauss (1990) the procedures and canons of
grounded theory are as follows:
1. Data Collection and Analysis are Interrelated Processes
2. Concepts Are the Basic Units of Analysis
3. Categories Must Be Developed and Related
4. Sampling in Grounded Theory Proceeds on Theoretical Grounds
5. Analysis Makes Use of Constant Comparisons
6. Patterns and Variations Must Be Accounted For
7. Process Must Be Build Into the Theory
8. Writing Theoretical Memos Is an Integral Part of Doing Grounded Theory
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9. Hypotheses About Relationships among Categories Should Be Developed and
Verified as Much as Possible during the Research Process
10. A Grounded Theorist Need Not Work Alone
11. Broader Structural Conditions Must Be Analyzed, However Microscopic the
Research
After each interview an analysis will be made, in order to develop codes (Müller,
2009). When a clear pattern is shown, enough interviews are taken. In order be
significant, these interviews have to cover different financial institutes.
Validity
Validity is used to show whether the findings are really about what they appear to be
about (Saunders et al., 2009, p. 157). For an inductive research it is important to
interview the key employees in different institutes. These individuals are those doing
research about microfinance or receive results on performance of different MFIs.
Reliability
The reliability concerns with, the consistency of the data collection and analysis
(Saunders et al., 2009, p. 156). A bigger and more divers sample group can help to
increase the reliability. To increase the reliability of the inductive data, the interviews
will be published in the appendix. This gives transparency of the information that is
used to draw conclusions. By showing the gathered primary data, the bias of the
research will be reduced and the reliability will therefore increase.
7. Expected outcome and recommendations
The outcome of the Thesis Project should be a framework for a sustainable
microfinance model, to stimulate entrepreneurship in the Netherlands.
It is proposed that the Thesis Project will recommend further research and pilot test
the framework.
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8. Table of contents
Preface
List of Tables
List of Figures
List of Abbreviations
1. Introduction
1.1 Subject matter
1.2 Background of Thesis Project
1.3 Aim of the Thesis Project
1.4 Theoretical and practical motivation
1.5 Research questions
1.6 Objectives
1.7 Thesis Project structure
2. Background – Microfinance in the Netherlands
2.1 The role and importance of Microfinance in the Dutch economy
2.2 Ambition for sustainable model
2.2.1 Financial demand from Dutch starting entrepreneurs
2.2.2 Financial structure of the Dutch microfinance institutes
2.3 Current microfinance Dutch microfinance model
3. Theory and Literature review Microfinance
3.1 Scope of review and availability of literature
3.2 Definitions
3.3 The research process and conceptual framework
3.4 Different microfinance models
3.5 Successful microfinance models
3.5.1 Success factors
3.5.2 Can these factors be integrated at first sight?
3.6 Conclusions on the literature review
3.6.1 Draft for framework for sustainable model
4. Pre-research interviews
4.1 Conclusions on background and literature review
4.2 Pre-research interviews
4.2.1 Pilot test interviews
4.2.2 Data from conversations
5. Methodology
5.1 Introduction
5.2 Philosophical stance
5.3 Scope of the research
5.4 Secondary data collection
5.4.1 Literature review
5.4.2 Desk research
5.5 Primary research
5.5.1 Interview design
5.6 Limitations of the research
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5.7 Expectations
5.8 Conclusion on the primary research
5.8.1 Reliability
5.8.2 Internal and external validity
5.8.3 Overall conclusion
6. Results
6.1 General responses
6.2 Results from interviews
6.2.1 Introduction
6.2.2 Institution profiles
6.2.3 Outcome of the interviews
6.2.4 Summary of key results
6.3 Conclusion on primary research
6.3.1 Introduction
6.3.2 Analysis of results
6.3.3 Linking theory and findings
6.3.4 Discuss the findings
6.3.4.1 Reflection on research process
6.3.4.2 To what extend have the objectives been met?
6.3.4.3 Difficulties during the research
6.3.4.4 What other research could have been undertaken?
6.3.4.5 Key findings during the research
6.4 Summary
7. Conclusion
7.1 Research aim
7.2 Answers to research question
7.3 Differences and similarities between the primary and secondary research
7.4 New perspectives
7.5 Overall conclusion microfinance
8. Recommendations
8.1 Recommendations for institutes involved
8.1.1 Microfinance institutes
8.1.2 Starting entrepreneurs
8.1.3 The Ministry of Economic Affairs
8.2 Recommendations for further research
References
Appendices
Appendix 1 Thesis Proposal
Appendix 2 A short history of Microfinance
Appendix 3 List of interviewees
Appendix 4 Interviews
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References
Armendáriz, B. 2009, 'Microfinance for Self-Employment Activities in the European Urban
Areas', Working Paper for CEB research institute in Management Sciences, Brussels
Bhole, B. and Ogden, S. (2009), 'Group lending and individual lending with strategic default',
Journal of Development Economics, New York, p. 21.
BN De Stem (2009), Een eigen zaak, dankzij microkrediet [online], BN De Stem, Available
from: http://www.bndestem.nl/algemeen/economie/4850724/Een-eigen-zaak-dankzij-
microkrediet.ece [Accessed: 23.3.2010].
Canale, R. R. (2010), Microcredit in advanced economies as a "third way": a theoretical
reflection, University of Naples "Parthenope".
Corbin, J. and Strauss, A. (1990), 'Grounded Theory Research - Procedures, Canons, and
Evaluative Criteria', Qualitative Sociology, Vol. 13, No.1, pp. 3-21.
European Investment Fund (EIF) (2009), Microfinance in Europe - a market overview, EIF,
Luxembourg, p. 21.
Evers and Jung (2005), Reaching the potential of microfinance for economic growth, social
inclusion and regional development through a coherent European funding policy, European
Microfinance Network, p. 2.
Evers and Jung (2007), Status of microfinance in Western Europe – an academic review,
Paris: European Microfinance Network (March), p. 10.
Genet, M. (2009), “Microfinance in Western Europe and Sustainability: Dream or Lack of
Ambition? In The European Microfinance Network Bi-Annual Magazine on Microfinance in
Europe, Paris.
Gomez, R. and Santor, E. (2003), 'Do Peer Group Members Outperform Individual
Borrowers? A Test of Peer Group Lending Using Canadian Micro-Credit Data', Bank of
Canada Working Paper, Ottawa, p. 14.
Granger, B. and Lämmerman, S. (2009), 'MFI efficiency and State intervention - what
correlation?', First European research conference on microfinance, June 2-4, 2009, Advancia
Business School, Paris, p. 19.
Heemskerk, F. (2009), Stimuleer en steun starters [online], Zicht op Ondernemen, Jaargang
13, No. 4, p. 1., Available from: http://www.qredits.nl/assets/Downloads/
Zicht_op_ondernemen.PDF [Accessed: 19.3.2010].
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Jayo, B., Rico, S. et al. (2008), Overview of the Microcredit Sector in the European Union,
EMN, Brussels, p. 21.
Littlefield, E. and Rosenberg, R., CGAP (2004), 'Microfinance and the Poor: Breaking
Down the walls between Microfinance and the Formal Financial System', Finance &
Development, June, pp. 38-40.
Microfinance Center (MFC) (2007), From Mission to Action - Management Series for
Microfinance Institutions, MFC, Warsaw, p. 2.
Molenaar, K. (2009), 'Microfinance, its concepts and development, lessons to draw for
Europe', Implementing the EU Microcredit Initiative - What can be learned from developing
and transforming countries?, January 26-27, 2009, European Microfinance Network, Berlin,
p. 3.
Müller, R. (2007), Research Methods Slides, TiasNimbas Business School, Utrecht.
Müller, R. (2009), Lecture on Research Methods 2, October 5 th -7 th , 2009, TiasNimbas
Business School, Utrecht.
Oberman, R. and Roelofsen, O. (2009), Microfinanciering als aanjager van
ondernemerschap in Nederland - Advies aan het Ministerie van Economische Zaken [online],
McKinsey & Company, p. 3., Available from: http://www.microfinanciering.com/
resources/uploads/files/adviesrapport_mckinsey_2009.pdf [Accessed: 19.3.2010].
Ramsden, P. (2009), “Microfinance and Social Objectives: How can MFIs demonstrate that
they are socially useful? In The European Microfinance Network Bi-Annual Magazine on
Microfinance in Europe, Paris.
Saunders, M., Lewis, P. and Thornhill, A. (2009), Research methods for business students,
5th edition, Prentice Hall, Harlow.
TiasNimbas Business School (2009), Thesis Project Guidelines - Full Time Programme,
MFM / MIBM, TiasNimbas Business School.
Wiersema, W. J. (2009), Thesis Proposal - How service marketing can increase positive
word of mouth in Dutch leisure companies, MIBM, TiasNimbas Business School.
Woller, G. M., Dunford, C. and Warner, W. (1999), 'Where to Microfinance?', International
Journal of Economic Development, Vol. 1, Issue 4, pp. 26-27.
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Work program
March
April
Week number 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Exams and other deadlines
Choose Research Topic
Read literature on topic
Read methodology literature
Write Research Proposal
Submit Research Proposal
Supervisor appointed
Meetings with supervisor
Review proposal
Attent MF conference
Arrange interviews
Develop interview
Pilot test interview
Conduct interviews
Analyse data interview
Write result chapter
Write conclusion chapter
Finalize draft
Last adjustments
Print and bind
Submit Thesis Project
Deadline submission Thesis
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Appendix B – Performance Management Beyond the Private sector
Examples of Performance Management Models Beyond the Private Sector, as
discussed in paragraph 3.3:
Figure B-1 Example of a BSC matrix (MFC, 2007)
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Figure B-2 Simplified Strategy Map (MFC, 2007)
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Figure B-3 The Social Enterprise Scorecard (Meadows and Pike, 2009, p. 136)
Figure B-4 Strategy Map (Gomes and Liddle, 2009)
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Figure B-5 Comprehensive Performance Management System
(McNair and Watts, 2009)
Figure B-6 Performance Measurement for Small Business (Watts et al., 2009b)
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Appendix C – Interview Outline
!
Social Return
• What are currently important aspects / trends / elements for this dimension?
• (What is going well?)
• What aspects can be improved? And how? How long will this take?
• What are important performance indicators for the SHORT term?
• What are important performance indicators for the LONG term?
• Prioritize / what is most important / best way to measure?
Financial Return
• What are currently important aspects / trends / elements for this dimension?
• (What is going well?)
• What aspects can be improved? And how? How long will this take?
• What are important performance indicators for the SHORT term?
• What are important performance indicators for the LONG term?
• Prioritize / what is most important / best way to measure?
Business Model
• What are currently important aspects / trends / elements for this dimension?
• (What is going well?)
• What aspects can be improved? And how? How long will this take?
• What are important performance indicators for the SHORT term?
• What are important performance indicators for the LONG term?
• Prioritize / what is most important / best way to measure?
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Organizational Development
• What are currently important aspects / trends / elements for this dimension?
• (What is going well?)
• What aspects can be improved? And how? How long will this take?
• What are important performance indicators for the SHORT term?
• What are important performance indicators for the LONG term?
• Prioritize / what is most important / best way to measure?
General
• What perspective do you think is the most important / deserves the most
attention?
• What (important) element / stakeholder is not covert by the four dimension?
What perspective should be added? If any.
• Coaching?
• What perspective is less important / could be replaced? Why and by what?
• How do you think the perspectives are related to / influence each other?
• Any general comments that can be of use for the research / development of
the framework?
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Appendix D – Reason, Drive and Contribution
!
Yellow = Why Green = What Blue = Where
KH a person really makes or breaks it, does he have the appropriate spirit and enthusiasm to do it or not?
VS The complete picture is being analyzed, the financial plan, the business plan, the entrepreneur and his
reason to start up a business
TB The first question relates to the question: What contribution do you think you are going to make for the
society?
TB what are you going to contribute to this society?
TB The only question that AH should ask themselves; ‘how do I give Toon Bullens the best access to
cleaning material and food’, is probably one of the few questions that is never being asked at the board
of the AH.
TB Everywhere you see quasi-paying system being erected. Why do they start? Not because they say,
yeah, the systems that exist are so good.
TB At a curtain point the government mentally taught; ‘we should create facilities where the people can
help each other’.
TB Is less grain coming out of the ground due to the financial crisis?
TB We need to learn again, what the role of those financial institutions was?
TB Banks have an intermediary role between people that want to invest part of their current income in
future income.
TB I think those three, ecologic, social and economical than you have the complete picture.
TB ‘we have the responsibility to ensure economic, social and ecological development, your plan does not
fit within these lines, or it will only fit when you will make curtain adjustments in your business model’.
TB At that time they would ask themselves does this what we do, fit, not explicitly, within our economic,
social or ecological objectives?
TB Due to active member policies, and have member boards in every village where they work. That tries
to translate signals from the society into the mismanagement.
TB you should only create and support a business when it clearly and explicitly has an economic, and or
social and or ecological objective.
TB That has been our contribution to the performance of the agriculture industry in the Netherlands. That
interest rate would be below the interest rate of government loans, structural below the interest rate.
TB focus on one clear aspect,
TB he still had a small role in the company, and did not get money from social welfare. Probably when
you would measure it, it would not be a economical relevant contribution, but he made a contribution.
TB when somebody can do something very well and it has a curtain value for the society, you should do it.
TB It is not about the institutions or about the scale, but about the contribution and in particular from the
knowledge perspective.
TB That you need to have perfectly clear, what role you want to play in the society.
TB Always we will end up with a model that says, do not primarily look at the system, but look primarily at
what you economically, socially, or ecologically can contribute?
TB Social; what do you want to accomplish as specie?
TB Ecological; how do you cope with the limited material this planet and it surroundings offers?
TB By definition for both also the economical parameters are connected. That is what the economy is
about, to make good use of the limited raw materials.
TB maybe we should include an ethical perspective as well.
TB the most important thing is that he is satisfied, why does he need to make money than?
TB ‘it is not about what you have, but about what you are’.
TB If he says; ‘I do not make profit, but I really enjoy my work’, what would be wrong about that?
TB There are a lot more people that have that drive. But we did not setup the companies’ correctly for this,
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RL start at the core; 'why do you want to start this company?' That includes your vision, but it is much
wider.
RL First the why; ‘why do we do it?’
RL It started out of frustration, because we couldn't publish
OE ‘If you do not know where you are going, you will probably end up somewhere else’.
OE where will you be in 2 - 3 years, how much will you earn? They usually haven't thought about that.
OE For the counselling that is the first starting point, where do you want to be in 3 years?
OE In general they do not have a lot of creativity
OE not always looking at the neighbour, but what can I do different
OE A lot of people want to use their own creativity to generate an income.
OE They want to show the world that they can do a trick / act, and they can do that better than the boss
they work for.
OE Some people do not find a job, for whatever reason that might be.
OE Some people indeed say; ‘I can do that better and I want to make my own decisions’.
OE Start with the mission, what do you want to contribute.
OE they just want to do it at home and that makes them happy
OE But for most the freedom and ability to make their own decisions is most important.
OE That is something we really talk about in-depth. What is the motivation to start a business?
OE Especially the first question; 'why do you so badly want to have your own business?' The first three
years you will be in the shit.
OE it is very important to realize: ‘I choose for this because, ... ‘
OE People do not look at other things they could offer, and you see a lot of copying behaviour.
OE than back to the action plan, where do you want to be in 6 months, and what needs to be done in the
mean time?
OE When you say now, in five years I want to do this and this, it does not mean that you cannot change
your plan in the mean time
MB 'that person has a greengrocer and drives a car, so starting a greengrocer it it'. The idea to start
instead, for example a bakery, does not come up.
MB a lot of people that will have to think about these things, will come to a moment where they think; 'men,
I do not know how this works, or I do not want all this'.
MB you can help a starting entrepreneur a lot by setting financial targets.
MB When they go through these steps and realize what it all means and than still want it…, but a lot of
people will draw the conclusion that it is not for them.
MB I understand from the MF-points. That people are positively discouraged, after a couple of
conversations
MB That is very important that people do not start when is does not make sense.
MB if someone can live from it and is happy with it, than it is fine for me.
MB Entrepreneurs are happier than people that do not do that, as long as they have an annual turnover of
around !22.000.
MB From that level people are happier when they started for themselves compared to people that did not
do that. Below that, it really depends on whether the partner makes any money.
CS When somebody succeeds with his enterprise, within a curtain time, that is an contribution to the
economy.
CS when somebody really has a passion then...
CS look at big successful entrepreneurs, they had a passion and from there they started making money.
That is another way of working.
CS in the Netherlands, you get the change to show whether you are an entrepreneur or not.
CS If you than find out that it is not for you, but that paid employment suits you better. You should draw
your conclusion
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CS a woman that makes jewellery and has an annual turnover of !4000,-. Everybody laughs about that,
but in the meantime she is busy, has her own business and might have a curtain dignity and status
within her scene. That is also a contribution
CS primarily the objective is to get somebody to work, he can get other people to work, that they are out of
that circuit and can become sustainable,
AP a lot of people copy each other’s business
AP Somebody has an idea and than they do the same. Those people create a stiff competition for each
other.
AP It is not going to be a very profitable business, they will be able to repay their loan, they will have
something left, and because they had nothing everything that will be left is a substantial improvement
AP That is exactly the same, they do not innovate, that is true.
AP people are rational nuts maximizers, if it does not work they will stop with it.
AP from a relative perspective it does make a difference.
AP It can cause an increase in income of sometimes thirty to forty percent. That percentage of almost
nothing is still almost nothing, but it is a little bit more than you had before.
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Appendix E – Social
!
KH jobs created and the impact on the community
KH It can bring people together, it can increase the cohesion of the community
KH Increase the cohesion and it will increase the labour participation of people and it will bring economic
growth and therefore it will also generate social return
KH otherwise you would not have microfinance but you will just be a bank.
KH Jobs created, impact on social community, does the person have a job right now or not?
VS very social programs rely heavily on funds from the government
TB everything has become more businesslike.
TB for a new product, there needs to be made a business plan and that plan only looks at the financial
performance of that product, not at what the spinoff for the society will be.
TB primarily arrange the system that that the social objective is also reached.
TB the social return needs to cover the return for the society.
TB make the social aspect important. What do you want to contribute to the society? Empowerment of
people, growth. Ask yourself, what do you want to achieve?
TB release the internal focus and to start looking at how to relate to the society.
TB How do you make the member councils relevant to the business model of the company?
TB a company only needs those material, facilities to be able to serve the society in a economical, social
or ecological way in the long term.
TB you can say that the social aspects are not interesting for the capital provider, but than it is difficult to
explain why the Triodos Bank and ASN still attract clients. So people are somehow already thinking
about that.
TB because the relationship with the society was so explicitly as was the control of the financial model.
TB also social objective need to be able to be measured otherwise that are not good.
TB From a mini perspective you can argue that it is inefficient to use people that need twice the time to
clean a cup of coffee.
TB When you use two of those half people, you can spare one whole person, which can do something
else. What is than more economic?
TB When a bank says, I am not the system, but a curtain role and the way I fulfil that role is dominate for
how, customers and employees, fulfil curtain sub roles within that.
TB Than you shift you thinking model from the system and system preservation and efficiency of the
system towards the interest of the society.
TB entrepreneurs need to make decisions. Maybe he can get so many funds from the market that he is not
interested in a social contribution as long as he can maximize financial return.
TB That you need to have perfectly clear, what role you want to play in the society.
RL it is a nice idea, and that is also what it is about. All three of us at a different level, but overall still for
the good cause, for the bigger picture.
RL The social is the result of the product.
OE for our clients the social return plays an important role. Especially with the creative sector that we serve
OE People find it important that they can play a role in the society.
OE 'from what we earn we want to use a small percentage, for welfare clubs’
OE making a financial contribution to charities
OE we have a lot of catering lately and about 50% is all about that it needs to be healthy and neatly
reconstructed
OE some want to donate some money to welfare
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OE the investment was !3.000.00, - and I taught that !10.000.000,- came back again. By taxes and social
welfare money that didn’t need to be paid anymore.
MB It contributes to the combat against poverty.
MB The social yield
CS I think you have to remain realistic and that it stays useable.
CS It will of course be very nice, but it is almost optional.
CS People’s pride and dignity, is also a social aspect.
CS a woman that makes jewellery and has an annual turnover of !4000,-. Everybody laughs about that,
but in the meantime she is busy, has her own business and might have a curtain dignity and status
within her scene. That is also a contribution
AP For example MFI want to improve the living conditions of their costumers. How do we create insight,
and how can we check whether that is really happening?
AP In first instance that is really about the measurement, how do you make sure you measure something
that you know how well you are doing?
AP Second how do I use the information I measured in my internal business processes, to use that in a
strategic way. When I see, that my customers, my microfinance customers do not get better from it, by
income or assets or whatever.
AP What I find important is that when you implement this at a MFI, than what is the mission of that MFI?
When that is the empowerment of women, if that is your mission, than you need to be able to say
something about that.
AP Is that going good, how many women did we empower, what is that and how do we measure that?
AP If you are a MFI that does not focus on woman, than I do not think it makes a lot of sense to measure
the percentage of women.
AP In that perspective, if you talk about do you measure millennium goals, which are still relatively broad. I
am more specific, I sit down with them and talk about; 'what is your mission and what concrete
objectives can you filter from that, and from there measure.
AP you can look at several things, you can look at what type of customers do I have? Most organizations
say we focus on poor costumers. Than, I want to see that. Than you will help such an organization to
measure whether they are helping the right target group.
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Appendix F – Financial
!
Liquidity Facilitative Not Predominantly Investors Education
KH the financials are the most important part
KH how is the company going to make money? What is the companies’ financial plan? How much money
do they need? What does their budget look like? When will they start to make profit?
KH Does he take into account that he has to pay rent, costs for his goods sold, payback his loan and pay
himself?
KH Is he going to do the accounting himself?
KH banks only look at the financials
KH Will he be able to generate the revenue that he has told us?
VS when you borrow !20.000, - and you have a personal dept open of !2.000, - where they charge you
20% interest. Then it is possible that we include that, because for the overall financial situation it is
much better.
VS when somebody needs little additional fund for the costs of living. The entrepreneur will need to show
that for example after three months, he will be able to cover those costs himself because he starts
making money in the fourth month.
VS The exploitation budget, the estimation of the liquidity, the complete picture the opening balance,
outstanding debt, repayment history, investment budget, financing budget, own contribution,
VS maybe already has a loan from friends, family or by the bank and only needs the final financial push.
VS At minimum we need the prognosis of one year, sometimes we will also ask for the second year.
VS he needs to start making turnover and show that he can make a profit.
VS An activity based budget needs to show what the minimal estimation is for turnover, what the realistic
estimations is and what the difference between the two is, the margin.
VS Existing entrepreneurs have to provide the most recent annual figures, their activity plan and their
investment budget.
VS · The credit need
- exact amount
· The financial analysis
- balance sheet and
- liquidity
TB The second question is how does this influence your business model and financial plan?
TB the view was created in the society that organizations needed to be profit-driven. That is just not true!
TB Ever since, shareholders return has been very important. But it is all bullshit it really is all bullshit. The
shareholders, that are you with you pension fund that is me with my pension fund, my bank and my
insurance company.
TB We have invented a system, to be able to make calculations, Friedman was an economic, at a curtain
point that structure, that mental structure had become more important that the business integrity.
TB What we are doing now with the financial systems is trying to repair a water pipeline that is already
leaking for years.
TB economic behaviour is learned.
TB From a financial point of view, that does not make sense, you need to give them food, they are not
professionals, spent time, do not have the same focus. From the financial perspective nothing works.
TB build systems, which do not allow people to implicitly say; ‘the appreciating for a career is money’,
TB Everything is setup to reach the best rent ability / profitability. And we have very bad measurement
systems to check them.
TB never had the objective to make profit
TB for who is the financial relevant?
TB why do we than make the financial perspective so dominant?
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TB Everybody thinks it is important, because the paradigm we have created, the financial model
dominants for the perception whether we should be satisfied.
TB If you need to pay twice as much for your product, but you are still satisfied. Does the company have a
problem than?
TB We developed those financial models when they were needed. By that time we did not have enough
calculation capacity. But do we still need it?
TB why don't we abolish it? I am really in favour to do so. Or at least in combination with things that really
matter.
TB Do not make the bottom-line so important. But for a starting company still look at how he thinks to
finance the plan.
TB What is now the value of the financial objectives? Let say we need to make 100.000 Euros, what did
we earn than. What is the equivalent?
TB do the output measurement in bags of potatoes or something similar. It is completely irrelevant if I have
made !100.000, -
TB the goal should be to break even
TB 90% is about rewards. I know from experience that that is not true, especially for people of my age.
TB the financial should only be serving the other perspectives.
TB first social, financial only serving, than costumer
TB Do not start from the financial perspective. But accepted that the financial is only there to facilitate the
other aspects. Go to the costumer and employee and ask what do you really want.
TB it is an aspect of the relation a company has with a supplier, and an aspect between the company and
the society. So it is not the main goal, not even for a financial organization.
TB you have a mental model for a couple of stakeholders, costumer, employee, I think a capital provider
should be included, also the society.
TB the most important thing is that he is satisfied, why does he need to make money than?
RL then we taught; 'he guys maybe we should be able to make some money with this'.
RL At the end we looked at how we could link that to some finance model.
RL later we had a look at how we could make some money out of it.
RL One is the goodwill, but that is quite difficult.
RL the other is the income through your services. For the business process, the customer value, for all the
services that you have,
RL You also need to satisfy your investors. That is part of the financial return.
RL In the end that is your income and related to you’re turnover and return on investment.
RL We are looking now for investors that are related to the IT. When they provide people they will make
sure that they provide good IT people. In order for their return to be higher
RL In the end we will, definitely look at the financial figures, because you can have a lot of users, but if
they do not use our services, then we still have nothing.
OE I have to say that for a lot of our clients, the financials are not leading.
OE We often hear people say; 'As long as I can eat, its fine'
OE the financials are more facilitative
OE I am happy, because I am able to make my own decisions and to put my own creativity to use, that is
more important than to become rich'.
OE things we look at are: Opening balance, investment and finance, exploitation budget, liquidity budget
OE We try to look 3 years ahead, but that is difficult for a lot of people, so in that case 2 years
OE Strange thing of this book is that it does not have a liquidity budget included
OE liquidity budget is the most important. For companies that are started up and do not need a lot of
capital, it is important to have a look at your liquidity. I think that is the most important management tool
OE you can make an exploitation budget as profitable as you want, as long as you have a lot of patience.
But you need to have a look whether the money is coming in.
OE I think that only 5% of the people that come here will need external funding.
OE The Bank is difficult, they do not wake up for loans below !100.000, -.
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OE through friends and family and a lot of subordinated loans. A while ago I had one that could get a loan
from a bank, but that is extraordinary.
OE One of the pit holes of advisory services is that they focus too much on the financial aspect. Of course
it is important that the plan is financially feasible, if you do not cover your costs it is end of story.
OE I always say; 'the financials are the foundation of your plan'. It should not be the drive
OE Financials on the side, only facilitating. It is important but should not be the drive.
OE that they can life from the money they make is only an additional advantage
MB most entrepreneurs do not have an idea of what they want to get out of it financially, do not consider
the opportunities, but only look at what they will need to be able to live.
MB Calculate back to what does that mean for the wages they charge for the product or the amount they
have to produce.
MB you can help a starting entrepreneur a lot by setting financial targets.
MB The financials is not only about how to setup your business, but also about explaining.
MB Make it comprehensible what all the costs are, make it comprehensible what insurances they will need,
or not.
MB develop a sort of assertiveness, about all those aspects. That in the end, what you will have earned will
also be up to you, to decide how you are going to spent / invest it.
MB people do not realize, how long they will have to for wait money and what they have to pay themselves
MB The financial administration is something you have to focus on, navigate. I think that a lot of those
entrepreneurs lack that information
MB Financials are than not the drive but just facilitating
CS Explain, make it comprehensible, in a way that they understand what all the costs are.
CS The budget has to be accurate
CS Reach a curtain break-even-point
CS most pit holes for entrepreneurs are that they want to make money; that is their target. How, is a
question they answer later.
AP That is an issue, the data quality. No so much that the customers will lie about that. But for example,
the person that fills in the form does that together with the loan officer of the MFI.
AP If the loan officer has a personal interest, due to financial incentives, he might reflect the situation of
the customer differently. Maybe part of the loan officers’ income depends on the percentage of women,
or poor people, that is easier to deceive.
AP There financial education is much more useful, to make sure people do not take on to much debt.
AP the focus will now be more on financial education, because there is a bubble growing under the
microfinance market. The first priority is to prevent over-indebtedness.
AP The average [Dutch] starters is already happy when he has a decent accounting system, they usually
hire someone for that.
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Appendix G – Sustainability Entrepreneur
!
Yellow = Low (overhead) costs Green = Growth Blue = Personal Factors
TB In the past we needed infrastructure and buildings where people were working and expensive
computers. But do we still need all that?
TB In financial markets you can do everything from a complete virtual identity. Why do we need than those
big bank buildings?
TB If we have all those virtual networks, where do we need the offices for?
TB you need to step away from idea that you need to increase the scale to make it cheaper, that is
probably not the case
RL We grow when we have more users, which spent more. There are two ways to grow, either by having
more users, or when each individual user, uses more services.
RL look at other sites and the cumulative grow figures they use. Aim for the same growth, maybe a bit
less, but comparable.
RL We have firm growth figures for that. We do not have a lot of overhead costs. Most of our costs are
variable,
RL we have firm growth targets, which have to be reached.
RL From the growth figures we can determine whether people are using our services.
RL The growth figures covers a lot, if it does not grow than people probably do not like it or do not think it
is good.
RL in these times, especially when you are just by yourself, focus on just giving information from one
person to the next.
RL Also for the small scale, as long as you have a bit more information than the other, so that you can give
it from one to the next.
RL Another trend is that, you can do that by using a lot of resources, not only from yourself but also from
others
RL We try to outsource as much as possible
RL Everybody else can do it better than us, so let them do it. Through Internet you can do anything,
RL co-creation is about how you can use the society to improve your business.
RL you do not need a lot. You do not need a store, no product, when you offer a service.
OE give them a product/customer matrix and tell them to first focus on that.
OE in two years maybe an additional product or service, in three years maybe two extra customer groups
and that is the way to build.
OE continuing market research would improve the survival rate of the small entrepreneurs. Especially the
niche is where the small entrepreneurs can jump in.
OE For example a lot of the ZZP-ers do not want to grow. They do not want employees
MB you should not overestimated the financial sustainability of a starting entrepreneur.
MB a lot of people that do not realize how much money they need to set aside. Besides the normal costs
you have, you also have to reserve money for the tax-authority, investments and those kind of things.
MB entrepreneurs who started up their business and have a wife that will say; 'o, now you are an
entrepreneurs, so I can start driving an BMW'
MB people from other cultures who have become an entrepreneur, will have family that will say; 'well, you
are a success now, so you can start taking care of us'.
MB The signs that I receive now, is that people also need coaching about how they should get their family
of their back. Delta Lloyd is now training people to do that.
MB Apparently that is particularly common in the Surinamese society
MB I think that growth objectives is something that starters are not looking at
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MB that has to do with you financial prognoses and especially for yourself. In the end it is interesting
whether people will hire others. That is very interesting.
MB how important is that for really the start?
MB It is important that you think about how you can become sustainable, but how important is it whether
you will hire people in a couple of years?
CS But if someone after three years still didn't make it... I think you should also look at that.
CS you can see it by the financials that is where you see your income and your costs. That way you can
tidy take that away from the potential of the business.
CS after two years, your company should have grown from 1 FTE to 1.8 FTE. That are factors that
determine whether the necessary growth is there.
CS at some point they have to be able to hold up their own pants. That is how it works, and that is
something you can do or not. It can take a year or two.
CS Similar with when you win the lottery. That you are put right away under some management, because
people do not know what to do with that kind of money and that all of a sudden everybody is their
friend.
CS It has to lead to something and you really have to work for it.
CS I think you can see that by the figures, the financial figures.
CS A bank will also ask your annual reports and there should be some growth.
CS There are curtain models for entrepreneur, where they should have setup their business within 1-5
years.
CS it used to be that you have to invest a lot in the first three years, but after three years you need to start
making money. That growth curve needs to be there.
CS get somebody to work, so he can get other people to work, that they are out of that circuit and can
become sustainable, able to pay for his one cost of living.
AP Somebody has an idea and than they do the same. Those people create a stiff competition for each
other
AP It is not going to be a very profitable business, they will be able to repay their loan, they will have
something left, and because they had nothing everything that will be left is a substantial improvement
AP There are people that have an entrepreneurial spirit and manage to build something
AP Most people are already happy that they can get a loan. That loan is not always used to start up a
business,
AP you can also get a loan and use is for a flat screen television to put it oddly, but it happens. Maybe not
a flat screen television but the marriage of the daughter.
AP It is all about survival, staying alive. If those people would have the choice, than they would not be
entrepreneurs.
AP They would prefer to have a steady job, but those are not available, so to stay alive they will have to do
something. In developing countries that is 99% of the people.
AP There a lot of people had too much loans and just couldn't pay back anymore, causing the MFIs to
default.
AP There is a gap between MFI and big banks. In between it is difficult to find finance, which is also the
gap where more the real entrepreneurs are, the SME.
AP The missing middle, loans of !10.000 - !100.000. Those amounts are too big for the MFI and too small
and risky for the mainstream banks. That is the birth room of entrepreneurship.
AP the focus should be on that group, because they have the most growth potential,
AP everybody that is in the missing middles comes from the microfinance sector. How do you make sure
that from the microfinance those people flow to the next level?
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Appendix H – Customer and Market research
!
Demand Market research Satisfaction Marketing Competition Differentiation
KH the belief that we think the product will be sold
KH how do I differ from the other ten?
KH Is there already another vegetable shop in the neighbourhood?
KH What does your competition look like? Sizing the market and sizing the demand for the product.
KH Do you believe that it will indeed bring what you promise or think it will bring?
VS The entrepreneur really needs to show that he taught his plan through. He needs to know what his
customers want.
VS Show that he has done market research, searched the Internet. This can be very handy, although not
for a small regional start-up.
VS ask people on the corner of the street about what their needs are and what they will demand from your
story instead of comparing your findings with that of the Internet.
VS go to the corner of the street and ask people if they demand / require your product. What their needs
are.
VS Conduct a questionnaire to find out what the people want and what they are looking for when you are
opening a store.
VS When somebody hasn’t done his homework you will notice that soon enough.
VS · The business plan;
- product,
- market and
- marketing
TB focused on simple things as customers and employee satisfaction.
TB Why not ask are you satisfied?
TB I used the costumer and employee aspect.
TB companies spent a huge amount of money to facilitate that. This is done by commercials.
TB Why would you not just talk to people? Why don't we setup councils for members or customers, and
than talk with them. That way you create discourse.
TB when somebody can do something very well and it has a curtain value for the society, you should do it.
TB You will need to look, what from an economic, social, ecological perspective is relevant for a target
group.
TB from the perspective that the customer/employee is a participant in the society and that you provide
services to them, he is very important.
TB It goes wrong when you disconnect customers and employees in your mental model
RL Third the What. What are we providing?
RL One trend in the world is that you should consider each customer as a unique one, with a unique set of
demands and wishes.
RL we strongly believe in; 'see the need' if there is a demand for something than for the marketing you
only need tell people; 'here is the product'.
RL When the product is clear and when there is a demand for it, then people will buy it. With good product
you don't need marketing.
RL is there demand? Yes, well than we do something with that. Instead of thinking: 'I can do something
really cool', when actually it is something nobody needs.
RL The marketing part; how many new users do we have, how is the interface, how often do people use
the helpdesk, is it user friendly?
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RL You can test it, by launching for example three different sites, a red, blue or yellow one. Than you can
statistically analyze which one is most often used.
RL ask questions like did you find what you where looking for, was it useful, did it go fast enough, do you
have suggestions?
RL by platforms and forums, through those tool, to create interaction. People are very empowered in that
and especially when you listen to them, they are willing to help you.
RL we want as much interaction as possible with our users.
RL the first step is to see where the demand is. Without demand, you do not even need to start.
RL When you have something, work it out, go to peer groups, talk to people, stalk people, mail people
through whatever website,
RL go and ask people on the street, visit companies if you think they will be your target company.
RL Ask people what they do not like about the product, or what could be better,
RL people like it when somebody listens to them. They really like it when they can talk about it.
RL From the growth figures we can determine whether people are using our services.
RL The growth figures covers a lot, if it does not grow than people probably do not like it or do not think it
is good.
OE That he focuses on his customers. That is already important.
OE 'I will make a table and the whole world wants that table. I know a trick and I will make it'.
OE they often need to adjust
OE Do not go for the quick fix
OE how can you adjust that in such a way that you are making / providing something that the people
demand?
OE They need to start with market research and making choices.
OE to whom are you going to sell? They’ll say: ‘to everybody’. Than I say: ‘that would be very nice, but that
is not going to work’.
OE They do not think about it enough.
OE Try to make the majority of the costumers, regular costumers. Really try to establish a relationship with
their costumers.
OE people should reflect what they are doing with the world they are living in.
OE People do not look at other things they could offer, and you see a lot of copying behaviour.
OE The neighbour lowers the price of the tomatoes by 2 cents. I need to lower them by 3. That is how it
goes. And now they default, because you cannot keep on doing that
OE continuing market research would improve the survival rate of the small entrepreneurs. Especially the
niche is where the small entrepreneurs can jump in.
OE Build into the model an evaluation moment for entrepreneurs to review whether they still offer what the
customers demand. If you would manage this, that would already be a big step
OE when there are no customers, it is end of story'.
OE Make sure you can answer to the demand of the costumer
OE That is something we focus on, building relations and networks.
OE The problem there is that they do not have time to watch, what is happening in the world around them,
or read magazines related to their business.
MB A lot of people seem to be worried about the competition,
MB that is what it is about. Do you provide something that fulfils a need?
MB it is difficult to do proper market research and determine the demand of you product.
MB advice people to do market research in their area, not with friends and family who are not objective.
But, indeed, in the street and neighbourhood,
MB do not only ask people that already buy such a product
MB preferably with a prototype and do it seriously. It is quite difficult.
MB avoid all the pit holes of copying the business of the neighbour
MB Developing the right questions is very difficult. That is something they could get help with
MB That could be something very nice to include into this model. If you see that somebody has already the
first three customers
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MB that is an indication that you have a product that already goes quite well. I can imagine that you can
see that in this model.
MB If someone already has a deal with a bakery that will buy products. Then for you marketing plan you
already have quite some information
MB she already knows that there is demand and there is already a customer.
MB ZZP-ers will only start for themselves if they already have some customers or contracts. Then the
demands that you make for the marketing side, are a bit softer, because you already have a lot of
prove.
CS Your price, promotion, actually all the P's, competition.
CS I would like to take the edge of the sentence; 'when it is a good product it will sell itself'. I believe that it
is a combination.
CS There are a lot of good ideas, but if you do not get your marketing up and running it is never going to
work.
CS A problem is that when a product does not exist yet, people find it difficult to imagine whether they will
need it.
CS That is something to be careful with, because sometimes you do not expect it, but it can become big
business
CS You think this is not going to work, but maybe there is a lot of demand for it. That is always difficult to
determine. You do not know that.
CS products will not be so innovative that people will not understand what you talk about.
CS when you go ask on the street, people will say; 'that is a very crappie idea' while it might actually be a
very good idea. Than it is difficult to determine the actual demand.
CS work with numbers, you can say; 'you need at least 1000 or 500 people that you have asked detailed
questions
CS in whatever way, by questionnaires or interviews’, that way you can make it quantitative.
CS Developing the right questions is very difficult
AP Sometimes questionnaires, sometimes by focus groups, or idea boxes, those kind of things, or a
helpdesk, if you are not satisfied you can call this number.
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Appendix I – Internal Business Processes
!
KH Is he going to do the accounting himself?
TB The second question is how does this influence your business model and financial plan?
TB how that influences your business model and what is you own ambition?
TB The next question is; ‘how are you going to do that?’
RL Second, How are we doing it?
RL We turned the business model around and say we do it all for free.
RL in these times, especially when you are just by yourself, focus on just giving information from one
person to the next.
RL Also for the small scale, as long as you have a bit more information than the other, so that you can give
it from one to the next.
RL business model is really inwards looking, internally focussed.
RL Another trend is that, you can do that by using a lot of resources, not only from yourself but also from
others
RL We try to outsource as much as possible
RL Everybody else can do it better than us, so let them do it. Through Internet you can do anything,
RL It is also innovative, and what makes the model interesting.
RL Do not be too cocky and think you can do it yourself,
RL co-creation is about how you can use the society to improve your business.
RL you do not need a lot. You do not need a store, no product, when you offer a service.
RL How fast does it go, how many people can access the site at the same time, do people find what they
look for?
RL how do you put it together, internally?
OE 'Do you have a marketing department? A purchase department? A (travelling) sales force? Inside
staff? No I am just by myself.
OE What do you have and what don't you have?
OE For starting entrepreneurs it is particularly important to know what they don't have, so they know what
to get from somewhere else?
OE The internal process plays a part but on a different level.
OE realize that when you hire people that you will need to pay them. They need to think about the
consequences of that trade-off.
OE When they hire people, they will need to generate more income.
OE The complete picture, it is not written in stone. When you change something, something else will
change as well. That demands flexibility.
OE The acquisition should be an ongoing process. Often when people have a new job or order they stop
with the acquisition.
OE he has an advantage and should focus on because he is so small. Things like flexibility, able to react
quickly, one-on-one contact
OE they are on the marketing chair as well as on the sales chair.
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Appendix J – Organizational, Personal Development
!
Professional Capacities Personal Traits Private Situation Drive
KH it is usually one man starting up the company. Important is the capabilities of the founder, the one
person starting up the business.
KH does the person have a sense of business and is willing to take an accounting course or had a course
in accounting.
KH relevant degrees, education, kind of jobs he had.
KH If the person quits his job every two months, than he will not be the person that will try to make it.
KH Does he have experience with the product?
KH Is he going to do the accounting himself?
KH a person really makes or breaks it, does he have the appropriate spirit and enthusiasm to do it or not?
VS we do not provide loans while we have doubts about the feasibility of the business plan and the
entrepreneur who has to execute the plan.
VS For the entrepreneur it is also very important that his plan has a realistic change of succeeding,
otherwise he might end up with a business that failed, and will be left behind with financial and private
problems.
VS The entrepreneur needs to convince us about his abilities and the plan he is presenting and how he is
going to make it.
VS The entrepreneur;
- experience,
- education and
- (entrepreneurial) competences (E-scan)
VS Starting entrepreneurs will have to provide a feasible business plan and do a test to indicate their
entrepreneurial skills
VS During the screening process, the business consultant critically analyzes both the entrepreneur and his
business plan, but also has a critical look at the entrepreneurs’ personal situation.
VS Whether or not the entrepreneur owns a house or has a partner with a stable income can influence the
granting process of the loan.
TB by doing so you not only give the entrepreneur a quality impulse, cause when you ask him that
question he needs to think about it
TB ‘it is not about what you have, but about what you are’.
TB If he says; ‘I do not make profit, but I really enjoy my work’, what would be wrong about that?
RL Not because we taught we could do it ourselves, even though we have a big part of the background,
but by focussing on experts
RL Do not be too cocky and think you can do it yourself,
RL instead of that you can do only one thing very good and try to keep everything internal
OE 'Do you have a marketing department? A purchase department? A (travelling) sales force? Inside
staff? No I am just by myself.
OE What do you have and what don't you have?
OE For starting entrepreneurs it is particularly important to know what they don't have, so they know what
to get from somewhere else?
OE People also need to learn what is means to be an entrepreneur. The activities they do need to be
manageable.
OE the Business Improvements Gropus (BIG) has a lot of simulations, exercises to pull up the
entrepreneurship
OE People are afraid to sell something.
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OE he has an advantage and should focus on because he is so small. Things like flexibility, able to react
quickly, one-on-one contact
OE It are small business, with micro-entrepreneurs so that are not the people with a vision.
OE the manager disease is often there.
OE In general they do not have a lot of creativity
OE not always looking at the neighbour, but what can I do different
OE entrepreneurs first do something and will think later.
OE that is something of an entrepreneur. It is do-think-do.
MB what does his social network look like? That appears to be important for repaying loans.
MB entrepreneurs who started up their business and have a wife that will say; 'o, now you are an
entrepreneurs, so I can start driving an BMW'
MB people from other cultures who have become an entrepreneur, will have family that will say; 'well, you
are a success now, so you can start taking care of us'.
MB The signs that I receive now, is that people also need coaching about how they should get their family
of their back. Delta Lloyd is now training people to do that.
MB Apparently that is particularly common in the Surinamese society
MB most important are a lot of personal characteristics. Things will go very differently than how you have
planned them. That is the only thing you know for sure
MB The income is going to be different, you costs are going to be different, you costumers are going to
react differently, everything is going to be different.
MB In the end, the personal characteristics are the most important, how are you going to deal with that?
MB Whether you remain an entrepreneur is whether you remain calm and see opportunities. I think those
things are more important than all those other things.
MB How does he as a person work?
MB In general, it is important that someone remains flexible no matter what happens and keeps seeing
opportunities. Real entrepreneurs do that.
MB a trait of entrepreneurs is; a lot of ADHD and see a lot of opportunities CS: Very positive
MB how do you cope with failures? If that makes you depressive than you should not do it. Those are
psychosocial factors.
MB Entrepreneurial capacities are important. I think that 'secretly' that is one of the most important things.
MB If someone does not sleep anymore and gets out of control, than it does not work and is not worth it.
MB minimize the risks by really going over that with someone. Plan things, that is something very
important, but there will always be risks.
CS A lot of ZZP-ers are now sitting home on the couch, because there is no work for them. Can you
determine based on that whether or not someone can do it?
CS someone would have a good idea but would look weird. Then they would say; 'you are not going to
bring that product to the market', that is just not going to work.
CS someone has it or not, you can try to learn it, but it has to lead to something and you really have to
work for it.
CS real entrepreneurs always see chances, opportunities, always keep thinking in chances. Do not give up
after one disappointment.
CS They will find that a pity, an inconvenient, but they are able to get over that very quickly.
CS do a personality test.
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Appendix K – Learning, Growth and Employee
!
TB focused on simple things as customers and employee satisfaction.
TB I used the costumer and employee aspect.
TB employees have their children at their work, in the office. That makes a strange impression, but is that
so strange? And from what perspective is it strange?
TB from the perspective that the customer/employee is a participant in the society and that you provide
services to them, he is very important.
TB It goes wrong when you disconnect customers and employees in your mental model
TB the children of those employee's are just as important.
TB ‘I expect that you perform this role, with a couple of performance measurements so you know what is
expected’.
TB Whether you do that at home, at a station, in the morning or at night, that is all fine by me. That makes
a big difference.
RL the head of the IT people also buys shares, also undertakes and is part of the enterprise.
RL part of the contract is covering fixed costs, but also when their products are used more often, they will
receive a monthly payment of !X.
RL they also undertake in part of the business and that is also what they like.
OE Learning and growth is about learning by doing. Trial and error. Just start and because you are just by
yourself or with two people you just need to experience it.
OE People also need to learn what is means to be an entrepreneur. The activities they do need to be
manageable.
OE it is more just do it and than afterwards; ‘ok, next time I need to do that differently’
OE Learning goes along the way and often you do not realize that you are learning things.
OE For example a lot of the ZZP-ers do not want to grow. They do not want employees
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Appendix L – Network
!
Professional Network Private Network Social Network Sites
TB When that happens, people that will come will start trusting each other and over time a network will be
created.
RL We have an advisory board, with which we discuss our plans.
RL We present something and they have a critical look at it and refer us to a contact they have or say this
and this should be better or faster.
RL a group of five IT people, with whom we did a brainstorm session where we went through the whole
idea and when we are one step further we will go over the process again.
RL They come with information from a lot of different points of views so that way we get a lot of useful
information very quickly.
RL the first six months, we had one or two meetings a week with external people
RL we know them personally, by other people or people refer us again to other people. Just ask them if
they have thirty minutes time to have a cup of coffee and talk for a bit.
RL That made it possible to go extremely quick the first six months.
RL That is how we learned a lot and how we created a good network. Those people help us now to get to
the next step.
RL your network is extremely important especially when you offer a service.
RL In the new modern world, you have a lot of resources and have to work together with external parties.
It is extremely important that you see those possibilities and talk to people
RL instead of that you can do only one thing very good and try to keep everything internal
RL have the target, to meet a new expert from your sector every week, that is something very measurable
RL put the level at the top, really want to talk to the top of the bill
RL Just call them, and hope you meet people at social gathering that can help you further.
RL use the social networks. Become a member of the group where somebody is a part of, than you
automatically have a link with that person.
RL Look at every unique costumer and try to become a network organization,
RL when you do not have a lot of money, go on the Internet by Twitter, LinkedIn, Hyves, Facebook, and all
those social sites.
RL because he has a lot of friends from all over the world now, that help him. It does not have to
expensive.
RL go and visit other people. There are a lot of people that do know what to do, do not be afraid to go
there.
OE 'Do you have a marketing department? A purchase department? A (travelling) sales force? Inside
staff? No I am just by myself.
OE What do you have and what don't you have?
OE For starting entrepreneurs it is particularly important to know what they don't have, so they know what
to get from somewhere else?
OE get them working together, and create a network.
OE That enables them to pass on work if they are too busy, but also get work when they do not have so
much and collaborate with other people to take on bigger tasks together.
OE Create a network instead of only keep on working by yourself.
OE That is something we focus on, building relations and networks.
OE Try to make the majority of the costumers, regular costumers. Really try to establish a relationship with
their costumers.
OE The Business Improvement Groups also plays a role in that. We have done two groups now. Both went
on by themselves, although some people will stop coming or join other networks.
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OE Those two groups merged later on, that is nice and shows that people like it.
OE That some people go to other networks is logical.
MB what does his social network look like? That appears to be important for repaying loans.
CS if you are a micro-entrepreneur, really just by yourself, and you do not have a lot of people that support
you or your idea, then is will also be much harder.
CS if you know by accident a journalist that can publish your product with a picture, that really makes a
difference.
CS part of the potential success can be measured form that.
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Appendix M – Business Development Services
!
Professional Network (types of) BDS Sustainability BDS Compulsory
KH The ‘ondernemerspunten’ provide support writing the business plans
KH you should build a voluntary network.
KH I can find 20 people here at the office that are willing to do something like once a month. Or people
from the banks.
KH you can find people, especially here in the city.
KH Provide every ‘ondernemingspunt’ with a checklist.
KH 'we do not really believe in it, but with the right coaching he will make it'.
KH One person does not have accounting skills, so with him we focus on that.
VS The entrepreneurial test indicates specific entrepreneurial skills. This will be used as input during the
coaching sessions. The result of the test will be compared with the standard from the industry.
VS Based on these points and the personal impression, a first assessment will be done by the consultant
and the type and intensity of coaching will be identified
VS Based on the Qredits-rating the entrepreneur will get a login code for the digital coaching network
called ‘Coachingsplein’
VS On this network different coaches have ads for their services. These services can be for free or for a
financial return.
VS The site more or less works like eBay. The entrepreneur can choose a coach and makes
arrangements with the organization.
TB you should only create and support a business when it clearly and explicitly has an economic, and or
social and or ecological objective.
OE They determine when they come in. I always say; 'when you run, I'll run, when you walk, I'll sit down'. It
is your company. I am not going to sit on the chair of the entrepreneur.
OE people enter and ask what do I need to do. Some I will give that book [how to write a business plan]
and tell them to come back when they have read it.
OE With others it is even worse and I will tell them to read the website and to start thinking about what they
want.
OE Others will ask me to email them once a month to ask how far they are with their business plan. Well
that is fine. I always say; 'use me'.
OE If you want me to be the stick behind your door, than I'll be that.
OE the progress is the responsibility of the entrepreneur.
OE specific assistance depends on the questions they have
OE if we cannot help them, we have a big network of accountants, lawyers etc.
OE Someone will bring in a problem; ‘this is something I encounter’. Than with the group, who recognizes
this and what did you do than? People really like it.
OE Around the start people will be at home behind their computer, wondering how the rest of the world
started up a business.
OE How can the BDS institutions, be made sustainable? Many people have tried to answer that question,
but the chance of succeeding is very small.
OE That will remain depended on governmental financial support. What I think is all right.
OE The micro-credit people, or the people from Qredits want to work with volunteers. In my opinion that is
not a good thing.
OE they want to develop entrepreneurial soundboards. For that I have my questions marks, because a
good entrepreneur does not have to be a good advisor.
OE Counselling is also a specific trick.
OE 'A good soccer player does not have to be a good coach'.
OE The ‘Programma Uitzending Managers’ send managers to third world countries to advice companies,
those cocky managers will tell the entrepreneur what he needs to do.
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OE I am not going to sit on the chair of the entrepreneur. I'll watch out for that. He has to do it himself, that
is the trick of counselling.
MB the personal characteristics are the most important, how are you going to deal with that? You can help
someone a little bit with that
MB Developing the right questions is very difficult. That is something they could get help with
CS tighten, improve the business plan.
CS the MF-points are all different. All work differently, all apples, peers, strawberries and mango's mixed
up. Who works well, who doesn't and why is that, what is behind it?
CS help people get started
CS But if someone after three years still didn't make it... I think you should also look at that.
CS at some point they have to be able to hold up their own pants. That is how it works, and that is
something you can do or not. It can take a year or two.
CS Similar with when you win the lottery. That you are put right away under some management, because
people do not know what to do with that kind of money and that all of a sudden everybody is their
friend.
CS You cannot indefinitely coach someone, there has to be a point where it ends.
CS when a company is not getting of the ground, how far do you go?
CS 'ok, the external factors might have been a bit of an influence, but now we are not going on with it
anymore'?
CS The author argued, that microfinance does not help the micro entrepreneur, because they all start the
same thing and compete each other to dead.
CS instead focus on the SME, because those are companies that are able to create jobs. Those are
different kinds of companies.
CS Instead of focussing on the lowest end you should more focus on the middle.
AP No, that is too expensive. There are things like entrepreneurial courses. That is what happens. But that
is a very different level.
AP There financial education is much more useful, to make sure people do not take on to much debt.
AP When you focus on different amounts of money you are going towards another group of people. There
you can propagate some more entrepreneurial skills, accounting and those kinds of things.
AP most MFIs make sure they are not going to sit on the chair of the entrepreneur. They have classes for
entrepreneurs, so it does happen. But the majority of the MFIs does not do that.
AP They do not do a lot of BDS, they just provide the loan and than look what happens, although there are
exception.
AP That is very focussed, not so much on the entrepreneurial side but on the technical aspect, skills. That
works.
AP At the same time you have to realize that those things cost money so that in the end the interest rate
will have to go up. Unless you make people pay for that, that is a trade- off you have to make
AP It really depends on the type of BDS that is provided and it depends on the way it is offered.
AP the focus will now be more on financial education, because there is a bubble growing under the
microfinance market. The first priority is to prevent over-indebtedness.
AP Some organizations want to help their customers with improving their business. That is something that
happens with the bigger loans.
AP when you offer something, you not only say we trained so much people but also show how much that
has yielded.
AP There is a gap between MFI and big banks. In between it is difficult to find finance, which is also the
gap where more the real entrepreneurs are, the SME.
AP The missing middle, loans of !10.000 - !100.000. Those amounts are too big for the MFI and too small
and risky for the mainstream banks. That is the birth room of entrepreneurship.
AP the focus should be on that group, because they have the most growth potential,
AP everybody that is in the missing middles comes from the microfinance sector. How do you make sure
that from the microfinance, those people flow to the next level?
AP In the seventies it was often compulsory. But the classes were not demand focussed, so the quality did
not match with the requirements of the target group. In the end the target group did not benefit from it.
AP When you approach it more from a market perspective and charge people for it, then they will also
make demands
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Appendix N – General BSC model
!
Usefulness Visual Think Similar Model
KH coaching is a really important part of microfinance, but not part of the model.
KH it would be great if it will be something that is actually going to be used.
KH Provide every ‘ondernemingspunt’ with a checklist.
KH when you have a sufficient amount of yes’s this will happen. If you have less amount of yes’s than you
will get additional coaching, but we still say yes. But if not than it will be no.
VS The complete picture is being analyzed, the financial plan, the business plan, the entrepreneur but not
so much at the ratios.
VS At the end you look at the complete picture and you can cross things out against each other. It is quite
subjective.
TB We need to re-invent the business model and need to eliminate the impact the Friedman’s had. We
need to make that mainstream.
TB Do not start from the financial perspective. But accepted that the financial is only there to facilitate the
other aspects. Go to the costumer and employee and ask what do you really want.
TB look at Norton and Kaplan, from a view that they were also looking at it from the same idea as
Friedman. You need to get a curtain benefit from the system.
TB pick only one [economical, ecological or social] and focus on that. Next you adjust your business plan,
what do I need for the organization. Next you need to know how your employee's and customers fit in
that. The financial is than separate.
TB when you are developing such a vision for entrepreneurs, than other things will become easier as well
TB Because you have a grip
TB you do not only give the entrepreneur a quality impulse, cause when you ask him those questions he
needs to think about it, but that you also give your own financial organization a quality impulse.
TB You only need to change your focus to see the solution
TB What values we want to provide to our clients? What values do we want to provide to our money
supplies or shareholders? And what value do we want to provide to the employees of our organizations
and to the society as a whole?
TB From the perspective that when the society would not provide or withhold you the license to operate,
you are done. If you cannot get employees or clients you are also done. Same for money.
TB always focused on the relation between those four
TB you have a mental model for a couple of stakeholders, costumer, employee, a capital provider should
be included, also the society.
TB measure all those four, from the perspective what do you want to achieve with that business model,
form a social, ecologic and economical perspective?
TB Than connect objective and indicators to those aspects
RL Finance, goes to customer proposition. Under that you have the process, for every function. Than you
have the people that work with that.
RL The Balanced Scorecard gives a good overview.
RL you can see where it goes wrong, by following the arrows you can see what is linked to it.
RL It forces you to think something through.
RL when you start to work it out you will run into problems that you did not foresee.
RL It is better to encounter those problems in an early stage, than when you are already half way setting
up your business and invested money.
RL Better to first think about it, so I think the model is very useful.
RL The traditional model is less suitable for when you offer services
RL it is ‘old school’, based on the old manufacturing processes. That is not the modern world. On the
Internet you can do so much more.
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OE you need to make it visual.
OE the people come in here with a head full of ideas, than we need to pull the wires and make them start
thinking about how they are going to realize that.
OE Strange thing of this book is that it does not have a liquidity budget included
OE The good thing about the book is that it is related to an example start up company, so people do not
need to invent the wheel again.
OE usually people get scared when they need to make a business plan.
OE 'it is more the process that you enter, than the book that you will end up with, unless you need a loan,
than you will need a decent plan'.
OE The first question does not give an answer, but causes more questions; try to put them in the correct
place. That is more important than the business plan that you’re never going to look at again.
OE They do not think about it enough.
OE Build into the model an evaluation moment for entrepreneurs to review whether they still offer what the
customers demand. If you would manage this, that would already be a big step
OE continuing market research would improve the survival rate of the small entrepreneurs. Especially the
niche is where the small entrepreneurs can jump in.
OE Action plans are always handy, matrixes are good, some drawings, but reading a book no.
OE just the big highlight, the things that are important.
OE clearly show in the model what is connected to what.
OE Make clear that when this pawn falls, somewhere else something will fall as well.
OE make this model into some kind of action plan, where we can show, if you do this than that will happen.
If you do not do this than that will happen. That will be worthwhile for an entrepreneur.
OE you could say: ‘here is the model, use it for your own company’.
OE you can demonstrate it in a morning and show what aspects come into play and how it is related and
works together
MB a lot of people that will have to think about these things, will come to a moment where they think; 'men,
I do not know how this works, or I do not want all this'.
MB When they go through these steps and realize what it all means and than still want it..., but a lot of
people will draw the conclusion that it is not for them.
CS that is quite innovative and something you can help the MF-points with.
CS the MF-points are all different. All work differently, all apples, peers, strawberries and mango's mixed
up. Who works well, who doesn't and why is that, what is behind it?
AP you measure curtain aspects of your organization, at the level of the customer, organization level and
just measure what the results are.
AP When that is higher than a curtain threshold value, a red light will turn on. Than you will look at what is
causing that? Is it an accident? Or is it something structural and what can we do about it?
AP basically it is used to translate your mission to measurable objectives and based on the results you
have a feedback loop.
AP It is really about operationalizing your mission into concrete objectives and linking those to several
indicators. The results are used to improve you internal business processes.
AP In the microfinance sector people think very heavy, weighty about it. I do not find it more than just
doing good management. You see that it becomes more important for the MFIs
AP when you see results you can have a look at what is causing that. Improving the internal processes is
what it is about.
AP When you look at the basic things starting entrepreneurs do, than he does not need such a BSC.
AP That is more for entrepreneurs that are already in business for a while and wants to consolidate their
business.
AP When you start you have a business plan and than you just need to do. An entrepreneurship is more
about doing.
AP This is more an analytical model, which has value, when your organisation is at a curtain level.
AP This model also drives on being able to get the right information from somewhere. The average
starters is already happy when he has a decent accounting system, they usually hire someone for that.
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Appendix O – Relation and Link
!
Equally Related Less Related Strongly Related
KH Except for the social aspect it is all related. The organizational model and the product will lead to
whether you will reach your financial plan. There is a link, a large link between them.
KH Your financials can be very good, but if you are selling the wrong product, or if you are not the right
person to do so, you are not going to make it
KH The three aspects are related and the social aspect is more by itself
KH if you are not the right person to execute it, and you are not selling the right product, at the right place
and the right time and have a lousy service, it will just not bring you to the financial plan.
VS During the screening process, the business consultant critically analyzes both the entrepreneur and his
business plan, but also has a critical look at the entrepreneurs’ personal situation.
VS Based on these points and the personal impression, a first assessment will be done by the consultant
and the type and intensity of coaching will be identified
VS Based on points awarded to nine different subjects an overall view is created. The loan officer gives his
own view at the end. These nine subjects are divided into the following categories:
VS The entrepreneur;
1)- experience,
2)- education and
3)- (entrepreneurial) competences
VS The business plan;
4)- product,
5)- market and
6)- marketing
VS The credit need
7)- exact amount
The financial analysis
8)- balance sheet and
9)- liquidity
VS Each point will get a score from 1-5 points; the overall score will be between 9-45. This will be the
basis for the Qredits-rating that will determine the coaching’s intensity
TB We can only do that by repairing the link between those organizations and the society.
TB That also counts for Norton and Kaplan, when you organize such a Balance Scorecard from different
domains than the relation between those parts is relevant.
TB What values we want to provide to our clients? What values do we want to provide to our money
supplies or shareholders? And what value do we want to provide to the employees of our organizations
and to the society as a whole?
TB From the perspective that when the society would not provide or withhold you the license to operate,
you are done. If you cannot get employees or clients you are also done. Same for if you cannot get
money.
TB always focused on the relation between those four
TB the financial should only be serving the other perspectives.
TB first social, financial only serving, than costumer
TB It goes wrong when you disconnect customers and employees in your mental model
RL Finance, goes to customer proposition. Under that you have the process, for every function. Than you
have the people that work with that.
RL The Balanced Scorecard gives a good overview.
RL you can see where it goes wrong, by following the arrows you can see what is linked to it.
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OE clearly show in the model what is connected to what.
OE Make clear that when this pawn falls, somewhere else something will fall as well.
OE That is something we really talk about in-depth. What is the motivation to start a business?
OE Especially the first question; 'why do you so badly want to have your own business?' The first three
years you will be in the shit.
OE it is very important to realize: ‘I choose for this because, ... ‘
OE I always say; 'the financials are the foundation of your plan'. It should not be the drive
OE Start with the mission, what do you want to contribute? Financials on the side, only facilitating. It is
important but should not be the drive.
OE When you say now, in five years I want to do this and this, it does not mean that you cannot change
your plan in the mean time
OE than back to the action plan, where do you want to be in 6 months, and what needs to be done in the
mean time?
OE When you say now, in five years I want to do this and this, it does not mean that you cannot change
your plan in the mean time
OE First really think about why you want to start and from there make sure you offer something that people
demand.
MB Its difficult to prioritize and relate those things. In the end if you can life from it is very important. It
might be first the person, should he try to be an entrepreneur? Second can he life from that, and that is
related to his product and the demand.
MB Financials are than not the drive but just facilitating
MB In general, it is important that someone remains flexible no matter what happens and keeps seeing
opportunities. Real entrepreneurs do that.
CS someone would have a good idea but would look weird. Then they would say; 'you are not going to
bring that product to the market', that is just not going to work.
CS someone has it or not, you can try to learn it, but it has to lead to something and you really have to
work for it.
CS It will of course be very nice, but [the social aspects] is almost optional.
CS I think you have to remain realistic and that it stays useable.
AP Social objectives, but it can also be environmental objectives. Often you see that there are also
financial objectives related to that.
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Appendix P – Most Important
Financial Social Demand Personal Satisfaction Reason to Start Network
KH The financials in general, and do those ads up to profit. A real in- depth check, does this make sense?
KH on the one hand the social aspect and on the other hand the more financial side, those are the two
main important things.
VS The entrepreneur really needs to show that he taught his plan through. He needs to know what his
customers want. Show that he has done market research, searched the Internet.
TB the most important thing is that he is satisfied, why does he need to make money than?
TB Do not start from the financial perspective. Accepted that the financial is only there to facilitate the
other aspects. Go to the costumer and employee and ask what do you really want.
TB make the social aspect important. What do you want to contribute to the society? Empowerment of
people, growth. Ask yourself, what do you want to achieve?
TB you should only create and support a business when it clearly and explicitly has an economic, and or
social and or ecological objective. I really mean that.
RL the first step is to see where the demand is. Without demand, you do not even need to start.
RL your network is extremely important especially when you offer a service.
OE That is something we really talk about in-depth. What is the motivation to start a business?
OE Especially the first question; 'why do you so badly want to have your own business?' The first three
years you will be in the shit.
OE it is very important to realize: ‘I choose for this because, ... ‘
MB That is very important that people do not start when is does not make sense.
MB most important are a lot of personal characteristics.
MB Things will go very differently than how you have planned them. In the end, the personal characteristics
are the most important, how are you going to deal with that?
MB Entrepreneurial capacities are important. I think that 'secretly' that is one of the most important things.
MB Whether you remain an entrepreneur is whether you remain calm and see opportunities. I think those
things are more important than all those other things.
MB In the end if you can life from it is very important.
AP For example MFI want to improve the living conditions of their costumers. How do we create insight,
and how can we check whether that is really happening?
AP In first instance that is really about the measurement, how do you make sure you measure something
that you know how well you are doing?
AP Second how do I use the information I measured in my internal business processes, to use that in a
strategic way. When I see, that my customers, my microfinance customers do not get better from it, by
income or assets or whatever.
AP What I find important is that when you implement this at a MFI, than what is the mission of that MFI?
When that is the empowerment of women, if that is your mission, than you need to be able to say
something about that.
AP Is that going good, how many women did we empower, what is that and how do we measure that?
AP If you are a MFI that does not focus on woman, than I do not think it makes a lot of sense to measure
the percentage of women.
AP In that perspective, if you talk about do you measure millennium goals, which are still relatively broad. I
am more specific, I sit down with them and talk about; 'what is your mission and what concrete
objectives can you filter from that, and from there measure.
AP you can look at several things, you can look at what type of customers do I have? Most organizations
say we focus on poor costumers. Than, I want to see that. Than you will help such an organization to
measure whether they are helping the right target group.
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Appendix Q – Measurement and Indicators
!
KH How many people actually visit the location? How long do people stay?
KH similar to job interviews, how do you know the person can do it?
KH have an interview for the last round with someone, than you will get a feeling.
TB The first group relates to the objectives of the performance of the individual expansion. What is the
quality of a debtor of such a business plan etc, etc?
TB The second set of standard, measurements relates to the performance of your credit organization.
What are my costs, what are the costs of funding, what are my financial characteristics, what is the
rating of my organization?
TB The third set of observations relates to the question, what economic, what social and what objectives
has this bank in the given working area, a country, county, city, village, maybe a enterprise network,
the farmers bank in... etc, etc?
TB How are these objectives formulated? And what measurements do you have to check whether the
bank is making a contribution towards that?
TB From there, you could start developing some kind of Balanced Scorecard and than it would appear that
in most of the cases initially a lot of attention is for the performance
TB also social objective need to be able to be measured otherwise that are not good.
TB the economical output of that group needs to provide a contribution, for example to the GDP that is the
same as the contribution of the average Dutch person.
TB it goes wrong due to the measurements and especially the financial measurements that we link with to
a single perspective. From the lending company or the investing company
TB do the output measurement in bags of potatoes or something similar. It is completely irrelevant if I have
made !100.000, -
TB the goal should be to break even
TB Also HRM systems, 90% is about rewards. I know from experience that that is not true, especially for
people of my age.
RL we know that people will use the site to search, but how do you measure a search function?
OE than back to the action plan, where do you want to be in 6 months, and what needs to be done in the
mean time?
OE When you say now, in five years I want to do this and this, it does not mean that you cannot change
your plan in the mean time
AP For example MFI want to improve the living conditions of their costumers. How do we create insight,
and how can we check whether that is really happening?
AP In first instance that is really about the measurement, how do you make sure you measure something
that you know how well you are doing?
AP Second how do I use the information I measured in my internal business processes, to use that in a
strategic way. When I see, that my customers, my microfinance customers do not get better from it, by
income or assets or whatever.
AP What I find important is that when you implement this at a MFI, than what is the mission of that MFI?
When that is the empowerment of women, if that is your mission, than you need to be able to say
something about that.
AP Is that going good, how many women did we empower, what is that and how do we measure that?
AP If you are a MFI that does not focus on woman, than I do not think it makes a lot of sense to measure
the percentage of women.
AP In that perspective, if you talk about do you measure millennium goals, which are still relatively broad. I
am more specific, I sit down with them and talk about; 'what is your mission and what concrete
objectives can you filter from that, and from there measure.
AP you can look at several things, you can look at what type of customers do I have? Most organizations
say we focus on poor costumers. Than, I want to see that. Than you will help such an organization to
measure whether they are helping the right target group.
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Appendix R – Sustainability of Microfinance
!
KH How can it be made financially sustainable but than as a whole, so on a large scale, not on one
specific grant.
KH Than you are almost getting toward a bank that only takes the interesting people and the social part is
left out.
KH There is demand, definitely, but it depends on how you promote it. Currently the money is the
bottleneck.
KH The more money you get, the more money you should invest in the microfinance ‘ondernemerspunten’
to ensure your promotion and make sure you get enough applications.
KH When you have more money, you will promote more and than there will be more clients.
KH It is like a spy roll, when more people apply, more people will know about it, more people will apply.
KH If you have enough capital and microfinance really gets known it can be doable
KH In that case the government should decide whether they want it and if yes than finance it
KH Companies or even private people can invest in microfinance. If it got sufficient return, it will be
interesting to do so.
VS in the developing countries organizations provide loans just to provide loans. Interest rates of 25% or
50% are no exception and can even go up to a 100%. The highest heard of so far is 400%.
VS Often these organizations started out from a social point of view but turned into being economically
driven.
TB In the past we needed infrastructure and buildings where people were working and expensive
computers. But do we still need all that?
TB why do we need that expensive infrastructure?
TB In financial markets you can do everything from a complete virtual identity. Why do we need than those
big bank buildings?
TB The whole crisis has to do with the institutions that have had their time and were important. We do not
need them anymore; we really do not need them anymore. There are markets and trade areas, and
paying systems
TB Does that need to be of a curtain scale? I doubt it. There are banking systems, also in Ethiopia, really.
Why could we not use those systems for objectives that are small of scale?
TB If we have all those virtual networks, where do we need the offices for?
TB Things go wrong when we have systemized them, then things go wrong and lead to crises.
TB you need to step away from idea that you need to increase the scale to make it cheaper, that is
probably not the case
TB in most of the cases initially a lot of attention is for the performance of the organization. It is excepted
that because of grants and donations the contribution towards the society can be continued.
OE How can the BDS institutions, be made sustainable? Many people have tried to answer that question,
but the chance of succeeding is very small.
OE That will remain depended on governmental financial support. What I think is all right.
OE The micro-credit people, or the people from Qredits want to work with volunteers. In my opinion that is
not a good thing.
CS The author argued, that microfinance does not help the micro- entrepreneur, because they all start the
same thing and compete each other to dead.
CS instead focus on the SME, because those are companies that are able to create jobs. Those are
different kinds of companies.
CS Instead of focussing on the lowest end you should more focus on the middle.
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AP Somebody has an idea and than they do the same. Those people create a stiff competition for each
other
AP There has been created a big myth around microcredit, a view that costumers start a business, that
that works successfully and that they hire employees. That is nonsense, absolutely nonsense.
AP in developing countries the MFI usually are sustainable.
AP The competition is increasing, in the first years it did not matter what you did, you would 'get ride of'
your money any way, get ride of, be able to disburse enough loans.
AP Now you see the competition increasing and the more professional your organization is, the better you
will get out of that battle
AP there is a bubble growing under the microfinance market. In some countries the bubble already
bursted. A lot of people had too much loans and just couldn't pay back anymore, causing the MFIs to
default.
AP When you provide a loan of hundred euros, than you cannot add a lot of extra costs, because it needs
to remain financially sustainable. On a bigger loan you can do more.
AP There is a gap between MFI and big banks. In between it is difficult to find finance, which is also the
gap where more the real entrepreneurs are, the SME.
AP The missing middle, loans of !10.000 - !100.000. Those amounts are too big for the MFI and too small
and risky for the mainstream banks. That is the birth room of entrepreneurship.
AP the focus should be on that group, because they have the most growth potential,
AP everybody that is in the missing middles comes from the MF sector. How do you make sure that from
the MF those people flow to the next level?
AP I find the idea of microcredit in the Netherlands relatively ridicule,
AP I can imagine that in the Netherlands the primary goal is to make that sustainable.
AP maybe it can not be financially sustainable, but as a society we find it so important that we want to
spent public money on that. Make a clear decision on that.
AP That really depends on your objectives, do you only want to focus on those entrepreneurs, where you
know or expect that they will make it.
AP upfront you can never predict that, in that sense it will be a guess.
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Appendix S – Qredits
!
KH The main outcome was to bring Qredits really up to scale so that the interest rate will cover the default
rate and cover the cost for Qredits
KH than the financial part and whether you belief in really the business case, is much more important to
you than the social aspect.
KH That is a trade-off that Qredits needs to make. You do not want Qredits to finance only the none risk
KH focus on people who do not get a loan from a normal bank that means your social part is much more
important,
KH it shouldn’t be an easy way of borrowing money, the people need to invest themselves as well to
ensure that they really feel committed to it.
KH a balance between financial and social and it is up to them how they want the balance to look like.
KH Whether they only want to focus on strong business cases or also want to help people that do not have
a lot of other opportunities left.
VS because we are still so young we are quite vulnerable and if we were to default it would be the end of
this type of credit supply for entrepreneurs.
VS We are a foundation so we are not profit driven but are aim is to become sustainable.
VS We have a clear business target group and do not provide personal loans.
TB Do not only look at the individual relation but also at the relation for the whole society and whether that
is what you want to realize
TB by doing so you not only give the entrepreneur a quality impulse, cause when you ask him that
question he needs to think about it, but that you also give your own financial organization a quality
impulse
OE The micro-credit people, or the people from Qredits want to work with volunteers. In my opinion that is
not a good thing.
MB The dialectics of progress
MB They do not have Business Development Services. That makes it easier to become sustainable
MB They do have a ‘coachingsplein’, where entrepreneurs can find a coach, but financially that is
separated
CS The budget has to be accurate, if you need !60.000, Qredits is not the right place to go. Maybe it is,
maybe it’s not. They have a maximum.
AP Qredits is not yet financially sustainable, and still depends on subsidises of the government,
AP When the goal is to stimulate entrepreneurship, than you should be able to measure that, especially
because a lot of tax money is spent on it, subsidies from the government.
AP An MFI as well as any organizations should be able to transparently communicate the results, if it
where only for your shareholders. Especially when you borrow form government subsidies,
AP If you need twenty-five people to disburse 800 hundred loans, I think that is quite large.
AP when you find it difficult to provide 800 loans, than I think you can not be to strict and say we only focus
on people that are under the... on the other side, in the end you need to know who your target group is,
why you where erected.
AP You need to relate that to the reality, such an organization is in. If you only helped 800 people the
previous two years, than you cannot be too strict. Then you also need to let go of these ambitions.
AP I find MF in the Netherlands ridicule. I think the target group is just too small; maybe there are only 800
people that qualify for that.
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AP If you focus on the group that cannot get a loan from a bank, than you need to show that those people
cannot get loans from banks.
AP I find 25 people for 800 loans quite a lot
AP you need to be able to justify why that money is being used, and you can only do that by clearly saying
we are focusing on this target group,
AP those people are unable to get a loan at the bank, but because we invest money in them, they are able
to start there own business, that creates so many jobs,
AP people want development work to be more accountable for their results. It should be the same for
development work within the Netherlands, what this is, so here it should also be done.
AP how far you can go with getting involved with the entrepreneurship. In the end you customer is the
entrepreneur and he or she decides what he wants to do.
AP The only things a financial institution can do are giving advice and in the end determine whether they
invest or not.
AP When the financial institution gets to much involved, than you will get in a conflict of interest
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