BDS market development guide.pdf - PACA

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32 • Research and Development: to develop new insights into market mechanisms, underlying market trends, and changes in SMEs that may eventually be useful in applied product development work; and • Regulation and Policy-making: the overarching framework of rules and policies within which markets operate. Often, regulation requires only a light touch to ensure that markets work effectively and reasonably freely. In addition, there are other functions that are possibly less important but may be useful in some situations. These include: • Basic Information Provision, which, for example, supports the development of markets generally rather than specific products (and providers). In many markets, information will be contained within products. Moreover, advances in technology, in urban and more developed economies, have created information-rich environments that reduce the need for a separate effort to provide information. • Advocacy, which, it could be argued, is important to ensure appropriately balanced government involvement in markets; and • Coordination: for some BDS, initial coordinating work might be necessary to develop the supply-demand relationship or to break down organizational barriers to cooperation (such as in cluster development or networks involving universities and the private sector). In many markets, of course, there is no coordination or any need for coordination. Who Are the Main Players?—Main Potential Actors on the Supply-side of a Market Having identified the key supply-side functions in the marketplace, we then need to think about who may undertake these. There are only a few options: a) Government and Government Organizations: this can be broken down further (local or regional government, etc.) but is essentially the public sector; b) For-profit Businesses, of any size or ownership form, ranging from self-employed to substantial corporations; c) Networks: formal or informal, business networks can be a powerful source of services— advice, contacts, skills, and the like; d) Business Membership Organizations: sector associations, chambers of commerce, and employers’ organizations whose principal role is advocacy; and e) Not-for-Profit Business: this could include nongovernmental organizations but also universities and educational institutions that may have some autonomy from government. Microenterprise Best Practices Development Alternatives, Inc.
33 Box 7: Key Considerations in Assessing the Role of the State in BDS Any valid picture of sustainability in BDS markets has to consider the role of government—what governments should and should not do. In doing so, a number of factors need to be taken into account. Key Principles and Issues: from the broad consensus on a market-friendly approach, the key priorities for governments pursuing poverty reduction are those functions that only they can do or that they can do better than others—meaning health, education, security, macroeconomic management, etc. Focus on core competence and subsidiary—delegating to the lowest possible level—is the key principle. Rationale: governments’ involvement in marketplaces (such as BDS) can be justified on two grounds: market failure and equity concerns. Within these two headings, governments should focus on: • Public Goods—which are non-rival and non-excludable, meaning that consumption by one user doesn’t reduce supply to another and users can’t be prevented from consuming the good. These are regarded as a top priority for state intervention. • Markets Where Externalities and Imperfect Information Are Particularly Evident—where there are wider benefits to society from the consumption of a good beyond the individual consumer and where consumers and/or suppliers don’t have enough information to make the right decisions. These markets—where there are public goods aspects—are regarded as a secondary priority for state intervention. In fact, there are very few pure public goods. There are many more goods that fall into the second category—such as training— where there may be positive externalities, but the case is hardly clear-cut. There can be major information constraints in some markets, such as training—benefits from training are often not immediate or tangible. However, although public subsidy for training is common, there are also vigorous and completely private training markets in many low-income countries. The key problem here is that these arguments for intervention—drawn from economic theory—can be used to justify state intervention in most markets. Markets are never perfect, and there’s always inequality. Does this mean we should always intervene? Clearly not! Capacity: a more practical way of thinking through governments’ potential role is to consider a hierarchy of functions of the state (Figure 11). From this, governments with limited capacities should focus on doing a small number of basic things well, rather than many things badly. In terms of BDS, this might mean, for example, only appropriate regulation or funding for core research. What About the Example of High-income Economies? In many wealthy countries, government involvement in BDS is widespread, posing the question of whether low-income countries should seek to emulate this role. Several points need to be made here: • In some countries, there is a historic, relatively close relationship between competent states and the private sector that allows governments to play a more active role in BDS. More commonly, governments intervene for a variety of social and political reasons that have little to do with improved market functioning. Unfortunately, it is often this latter approach that is exported to low-income countries through aid-funded projects. • Despite the efforts of governments, for most businesses in most industrialized economies, BDS is provided through the marketplace. In the United Kingdom, for example, one study showed that only 14 percent of business advice—a cornerstone of SME policy—is provided by official government-supported agencies. • The quality and effectiveness of much officially supported BDS in these countries is highly questionable and, at its worst, akin to a welfare state for struggling enterprise. In the United Kingdom, there is a negative correlation between usage of public sector sources of advice and profitability; in other words, subsidized advice has been taken up by badly performing SMEs (many of which were actually seeking financial assistance). • The resource base of industrialized countries dwarfs that of low-income countries, and the practices that have developed are those of rich states where sustainability concerns press only lightly. In short, the role of governments in BDS often followed in high-income countries are typically ineffective and/or hugely expensive and depend on subsidies. BDS projects that are modeled on these approaches are inappropriate—and indeed damaging—for low-income countries. Chapter Three—Where Do We Want to Go?— Developing a Clear Picture of Sustainability
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 18 and 19: 8 • Efficiency—The cost bases o
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: 31 What Needs to Be Done?—Key Sup
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
Page 69 and 70: 59 The drawbacks of tender-based se
Page 71 and 72: 61 CHAPTER FIVE HOW DO WE ASSESS OU
Page 73 and 74: 63 • How well?—the quality dime
Page 75 and 76: 65 day income * This highlights key
Page 77 and 78: 67 Beyond SMEs—Unchanged Indicato
Page 79 and 80: 69 Figure 16: Measurement Methods i
Page 81 and 82: 71 • Donors may be interested in
Page 83 and 84: 73 and poverty reduction? Or is the
Page 86 and 87: A-3 KEY REFERENCES Anderson, Gavin,
Page 88 and 89: A-5 Hitchins, R and Gibson, A; "The

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