BDS market development guide.pdf - PACA

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8 • Efficiency—The cost bases of providers and their ways of working seemed more appropriate to the world of donors than did those of SMEs. Drawing on the microfinance experience, in which open comparison and learning had been a key foundation of progress, practitioners instigated a major review, resulting in, in the first instance, preliminary guidelines based on core principles of good practice. 5 Among the key conclusions reached were the following: • A key cause of poor performance had been a supply-led orientation, by which development agencies decreed what was good for SMEs (rather than listening intelligently to them). • The key general points in a “market-friendly” environment had not been transferred to BDS for SMEs; the prevailing view had been that many BDS should be an extension of the state. Indeed, many donor-supported interventions, especially in low-income countries, had contributed to massive market distortion and led to governments playing inappropriate roles and to the development of “fat” providers. • Donors failed to learn key lessons from microfinance—notably that poor people (and SMEs) are prepared to pay realistic prices for useful services and that they are discerning consumers, desirous of good services, not charity. • The best providers of BDS were close to SMEs in terms of their systems, values, and people. The lesson emerging from this process was clear: The basis for effective and sustainable BDS is business and market relationships between providers and SMEs. On the basis of this finding, a new approach has evolved. WHAT IS NEW ABOUT BDS MARKET DEVELOPMENT? The above rationale encapsulates four major differences between the new approach of BDS market development and “conventional” approaches to BDS. 6 Figure 3: What Is Believed (stated or implied) SMEs as: Key providers: The Old Thankful beneficiaries of charity Government/government organizations The New Discerning consumers of services Private sector in functioning markets BDS as: Primarily public goods Private services 5 6 Committee of Donor Agencies for Small Enterprise Development (January 1998). In reality, there have been gradations of change among agencies over several years rather than the sudden, dramatic shift implied here. Microenterprise Best Practices Development Alternatives, Inc.
9 BDS financed: Primarily by the state Through provider– consumer transactions What BDS Is The Old: Previously, definitions of BDS, reflecting the above beliefs, emphasized donors’ (supply-side) view of what was good for SMEs, focusing on training and counseling. The New: From a market development perspective, the new definition of BDS reflects SMEs’ own views (demand-side) and is therefore much broader, in keeping with the breadth of services suggested by Figure 3. BDS is: any nonfinancial service to business, offered on either a formal or an informal basis. This definition requires further clarification. Included in the definition are services such as training/skills development, design, advertising, network brokering, courier delivery, computer services, business consultancy, security services, legal services, commission sales, accounting/auditing, market research, technical information, Web-site design and management, equipment repair and maintenance, and conference organizing. These correspond to intermediate or producer services (within the broad tertiary, or services, sector) as defined in the standard industrial classification—that is, services that are sold from one business to another (and not to the final consumer). Also included are services in which no formal fee-paying transaction takes place and services that are hidden in economic statistics but that nonetheless are important. 7 Especially important are services offered formally or informally from one business to another—such as advice, training, introductions, and market information. Excluded from the definition are: • Financial services; 8 • Physical products: manufactured goods or raw materials; • Utilities: water, electricity, and gas; • Government services aimed at the wider community, including infrastructure, community and social services, and basic health care and education; 7 Anderson (April 2000) presents findings from a survey he conducted on the access to and use of BDS in these countries by microenterprises. The revealing finding of this study is that many BDS are embedded in existing trade relationships or in informal networks, and that these are the primary channels for service access for small firms. This finding requires BDS practitioners to look beyond fee-for-service transactions to a range of different service-delivery channels and payment options. 8 These are business services but are the subject of many other guides and are not the focus here. Chapter One—Why BDS Market Development? Why It Is Important and What Is New about It
Page 1 and 2: BDS Market Development: A Guide for
Page 3: Alan Gibson is a co-founder of The
Page 6 and 7: ii CHAPTER FOUR HOW DO WE GET THERE
Page 8 and 9: iv Table 1 Implications of Differen
Page 10 and 11: vi How to Use This Guide: A Quick R
Page 12 and 13: 2 • To address poverty, governmen
Page 14 and 15: 4 • Potentially, a range of provi
Page 16 and 17: 6 Figure 2: Flows of Services in th
Page 20 and 21: 10 • Advocacy: for the business c
Page 23 and 24: 13 CHAPTER TWO WHERE WE ARE NOW—A
Page 25 and 26: 15 The flow diagram of an effective
Page 27 and 28: 17 KEY CHARACTERISTICS OF EFFECTIVE
Page 29 and 30: 19 Figure 7: Quadrant of Supply-sid
Page 31 and 32: 21 • Consumers—such as female-o
Page 33 and 34: 23 WHERE SHOULD INTERVENTIONS FOCUS
Page 35 and 36: 25 Figure 10: Matching Market Analy
Page 37 and 38: 27 CHAPTER THREE WHERE DO WE WANT T
Page 39 and 40: 29 Markets are institutions. Develo
Page 41 and 42: 31 What Needs to Be Done?—Key Sup
Page 43 and 44: 33 Box 7: Key Considerations in Ass
Page 45 and 46: 35 Figure 12: Functions of the Stat
Page 47 and 48: 37 Table 2: Sustainability Framewor
Page 49 and 50: 39 CHAPTER FOUR HOW DO WE GET THERE
Page 51 and 52: 41 Figure 13: Where to Intervene to
Page 53 and 54: 43 • Consistent Policies and Appr
Page 55 and 56: 45 • Have been developed to be pe
Page 57 and 58: 47 Avoiding overloading may involve
Page 59 and 60: 49 C For new product development, a
Page 61 and 62: 51 • Precisely, what are they goi
Page 63 and 64: 53 Existing MARKET (sub-sector, ent
Page 65 and 66: 55 To Reach Female-Owned Businesses
Page 67 and 68: 57 C Informal, and C Individuals. T
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59 The drawbacks of tender-based se
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61 CHAPTER FIVE HOW DO WE ASSESS OU
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63 • How well?—the quality dime
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65 day income * This highlights key
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67 Beyond SMEs—Unchanged Indicato
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69 Figure 16: Measurement Methods i
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71 • Donors may be interested in
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73 and poverty reduction? Or is the
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A-3 KEY REFERENCES Anderson, Gavin,
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A-5 Hitchins, R and Gibson, A; "The
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