BDS market development guide.pdf - PACA

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effective institutions or mechanisms to support SMEs are those that look like SMEs. 33 The
challenge for interventions is to build on (or create) this ownership, rather than displacing it
through external initiatives and control. Stimulating individual ownership requires exposure
to risk and reward, ideally in the form of the partner’s personal investment and equity. This is
difficult territory for development agencies that are more familiar with giving assistance and
reducing risk, and that have a tendency to work with partners most similar to their own
institutional culture, often a very different culture from that of entrepreneurs and business.
Building on existing ownership (what’s there) is an effective of way of leveraging an
intervention because:
• Not starting from scratch can be less expensive;
• An existing owner should be able to match investment from a facilitator; and
• An existing owner has a strong stake, which creates:
C Commitment; and
C Incentives: the risk and reward, which is at the heart of entrepreneurial behavior.
Investing in Potential
Leveraging intervention is similar to investment; donor agencies are looking for a return
(achievement of objectives) on their investment (project inputs). The decision of where to
invest or who to invest in should be based on identifying winners or potential (either
demonstrated potential or latent potential). Donor support is not best utilized propping up
failing organizations and individuals who see donor support as a last respite.
The challenge for agencies (aside from actually finding potential investments) is to ascertain
whether they should support existing potential (which may create nothing additional or be
distorting) or support new potential (which carries more risk, but may have less potential for
distortion). The options for the donor are somewhat like a business (Figure 14).
Figure14: Options for Support: Support Existing or Develop New
33 This point is at the core of the BDS good practice principles.
Microenterprise Best Practices
Development Alternatives, Inc.