The Challenges of Growing Small Businesses - International Labour ...

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Table 1: Official definitions of micro and small enterprises in the three study countries Country Microenterprise Small enterprise Ethiopia (Zewde and Associates, 2002, p. 2) Tanzania (UDEC, 2002, p. 7) Businesses with fixed assets valued < Birr 20,000 (US$ 2,500). Excludes high tech consultancies and other such firms. Those employing 4 or less persons, local authority registered and mostly home-based. Businesses with fixed assets of > Birr 20,000 (US$ 2,500) and < Birr 500,000 (US$ 62,500). Excludes high tech consultancies and other such firms. Those employing between 5 and 10 that are licensed and have business premises. Zambia (JUDAI, 2002, p. 13) Any business whose total investment – excluding land, machinery and buildings does not exceed US$ 10,000. Where the annual turnover does not exceed US$ 20,000. Employs < 10 people. Registered with the Ministry of Commerce, Trade and Industry. Any business whose total investment, excluding land and buildings, does not exceed US$ 50,000 for manufacturing and US$ 10,000 for trading and services. Where the annual turnover does not exceed US$ 80,000. Employs up to 30 people. Registered with the Ministry of Commerce, Trade and Industry. Source: Richardson and Howarth (2002b). It soon became apparent that official government definitions between the three countries differed, as shown in Table 1. Further complexity came with the addition of different definitions used by donors and development organizations working within each of these countries. For example, the Tanzanian team reported on four differing employment definitions of “small enterprise” being used Tanzania at the time. Table 2: Employment definitions of MSEs in Tanzania Organization The Economic and Social Research Foundation (ESRF) Small Industries Development Organization (SIDO) ILO (for purposes of research in Tanzania only) Employment criteria 5 – 10 employees, are licensed and have premises 1 – 49 employees 10 – 49 employees The United Republic of Tanzania’s Small and Medium Enterprise Micro enterprise: 1 – 4 Development Policy (URT, April 2003) Small enterprise: 5 – 49 employees After much discussion the team adopted the following simple working definitions for general use throughout the WED project: 8 Micro: Enterprises with up to and including 9 full-time employees (excluding the technology/knowledge based enterprises) that are registered and/or licensed. Small Enterprises with between 10 to 30 full-time employees that are registered and/or licensed. 8 Each team for their fieldwork used more specific definitions. These are detailed later in Section 3. 10
(ii) Degree of Formality Another challenge faced when trying to understand the MSEs in any country is the scale and mix of informal and formal enterprises that exist (Liedholm, 2001). The fact that much trading goes on in an informal context makes it doubly difficult to develop an accurate picture of these MSEs, which in statistical terms tends to focus on registered businesses. For example, to give some sense of scale, in Zambia in 1998 2.7 million (79 per cent of the labour force) were employed in the informal sector 9 (JUDAI, 2002). People choose to operate enterprises on an informal basis for many reasons (Karim, 2001, ILO, 2002b). Trading that exists outside of the formal frameworks of registration, taxation and regulation, is clearly an easier choice for those whose primary purpose is to generate an income, particularly when that income provides a means to survival. (ILO, 2002 a & b) In economies where because of low pay in formal employment, second incomes are often essential. Therefore, for some people informal sector enterprises provide an important opportunity to “top up” incomes, and they are often based on activities that can be fitted in around a main job (ILO, 1995; JUDAI, 2002 and CSO 1996). Another reason for ignoring or resisting formalization is that the processes and requirements of formalization can often be complex and expensive. This is a particular issue where literacy levels are low and entrepreneurs have to engage help in completing the paperwork required by registration. Furthermore, multiple definitions of the “informal economy” exist (ILO (2002a): Report on the Committee on the Informal Economy, ILC, Provisional Record 25, Nineteenth Session 25/1, ILO, Geneva). For the purposes of this research, the term informal business was taken as those enterprises that were not registered and/or licensed with any government institution within their country. The secondary research clearly included information about the informal sector based largely on data available from national statistics. However, the primary field research each team agreed to focus on formal, registered businesses and applied the basic registration format appropriate to their country. (iii) Women’s Enterprise The WED Study focussed on women entrepreneurs and women’s enterprise. In doing this there was a need to agree a collective understanding of the categories and terms “woman entrepreneur”, a “woman business owner” and “women’s enterprise”. Research has shown that a whole range of legal and cultural issues frequently hinder women from being registered as formal owners, and hence women have a relatively higher presence in the informal sector. One consequence of this is that many institutions concerned with registration do not distinguish ownership on the basis of sex, and hence less attention has been paid to what formally constitutes a woman’s enterprise. After a wide-ranging discussion on this matter, the research team agreed that for the WED project a working definition of a woman’s enterprise 10 would be as follows: • Women have the majority ownership (meaning >50 per cent); • Women manage the enterprise; • Women make the key business decisions; and 9 This report follows the ILO use of the term ‘informal economy’ rather than ‘informal sector’, although informal sector is the term used in national statistics. The use of informal economy is preferable to informal sector because the workers and enterprises in question do not fall within any one sector of economic activity. See ILO, 2002 a & b. 10 Throughout this report the terms woman entrepreneur, women’s enterprise, woman business owner and women’s businesses are used interchangeably. 11
Page 1 and 2: SEED Working Paper No. 47 Series on
Page 3 and 4: Foreword The ILO’s Programme on B
Page 5 and 6: Table of contents Foreword ........
Page 7 and 8: 5.2.2 Abilities, skills, and experi
Page 9 and 10: Executive summary This report provi
Page 11 and 12: Acronyms AEMFI BDS CSA CSO COMESA E
Page 13 and 14: WED WED Study WEDAZ WEPC WEDGE ZCSM
Page 15 and 16: The Gender lexicon Gender was taken
Page 17 and 18: 1. Introduction and background 1.1
Page 19 and 20: 1.2 Aims and objectives In associat
Page 21 and 22: Phase Two (July-Oct 2002) Workshop
Page 23 and 24: • The Enterprise Level, as relate
Page 25: • The Enabling Environment for En
Page 29 and 30: 1.4 The Structure of the report Thi
Page 31 and 32: The lack of up-to-date and comprehe
Page 33 and 34: employees, marketing and resources,
Page 35 and 36: eluctant to make legal agreements w
Page 37 and 38: Most of the existing research would
Page 39 and 40: promotional activities, may be ques
Page 41 and 42: Tanzania, the Women and Gender Deve
Page 43 and 44: Throughout the preliminary reports,
Page 45 and 46: 3. Jobs, gender and enterprise in A
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Page 51 and 52: networking skills for business. Ind
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In Tanzania the research acknowledg
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Figure 12: Ingredients for a succes
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men business owners surrounding the
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and also help to diversify risks; a
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(iii) Attitudes to collateral One m
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egulations. There is no recognized
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6. Key recommendations from the Nat
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oadly similar in nature and focus,
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appropriate services that are desig
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- Are sometimes regarded as “mino
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addressed effectively with positive
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Abdulahi, Hayat (1997): “Constrai
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Economic Commission for Africa (ECA
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Hulme, D. and Mosley P. (1998): Mic
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Maliyamkono, T. L. and Bagachwa, M.
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Oyhus, A. O. (1999): “The importa
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Temu, S. S. (1997): Financing and I
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Wangwe, S.M. (1993): “Small and m
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Identify ways in which Governments,
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Elements impacting on successful mi
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1.3 The research approach The WED S
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Market access and developing BDS (a
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III. IV. Special efforts should be
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II. III. IV. Women entrepreneurs an
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110 V. As women experience particul
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Access to resources and finance (a)
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114
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22. “Ajuste Local à Globalizaç
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59. “Facilitating Youth Entrepren
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