Designing self sustaining support for micro-enterprises in sub-Saharan Africa : a pilot

Small and micro-enterprises play a significant part in most economies. However, in developing countries these enterprises have often been planned and implemented from a poverty alleviation perspective, rather than as entrepreneurial activities and growing businesses (Mead & Liedholm 1998, Toye 1993). This paper explores a model for sustainable support to micro-enterprises in a developing country context. Sustainability is critical if micro-enterprises are to grow. The traditional philanthropic model for funding micro-enterprises leaves local communities dependent on the priorities of donors which may not always be consistent with those of the community. Long term sustainability requires a move to a model that broadens the base of both economic and intellectual resources, that builds capacity as well as providing ‘start-up’ funding through mechanism such as micro-credit (Elkington & Hartigan 2008). Designing for sustainable enterprise development includes responding to the community’s priorities, investigating individual problems and solutions, encouraging agency and active involvement in goal setting, with on-going consultation and co-development of solutions. Recognising the importance of experimentation we have moved beyond existing forms to prototype new ways of working which provide continuity of financial and intellectual support for local initiatives. The paper reviews existing micro finance and microcredit practices and suggests a new approach to establish and support enterprises with financial and knowledge resources for sustainable business practices. Principles underlying such a program and the initial steps are described.

The role of transport infrastructure in facilitating the survival and growth of micro-enterprises in developing economies

Transport and logistics are essential to effective business. Very little is currently known about the impact of improved transport on micro-enterprises in developing economies and whether improvements in this area would assist the very poor. This paper looks at the obstacles of an inefficient transport facilitation system and the high costs incurred by 22 survival micro-entrepreneurs funded by the same local NGO and operating in diverse industry sectors in a peri-urban context in Mozambique. Six case studies are selected to illustrate the most common constraints they face. The perspectives of the micro-business owners are confronted with those of government officials and community leaders for two reasons: to identify any mismatch and to discuss possible solutions. Significant discrepancies are detected between government agenda and needs of the population, while community-based entrepreneurship (CBE) is discussed as a possible collective strategy in dealing with the problem.

Micro-credit is not sufficient for the success of micro-enterprises at the bottom of the pyramid

This study examines the factors affecting the successful provision of micro-credit to people at the bottom of the pyramid and discusses the activities required to support entrepreneurial activities in a peri-urban African setting. The findings enable us to better understand why micro-credit, though useful, is only part of the solution, in a setting characterized by extreme resource constraints with an institutional fabric lacking the infrastructure that assists market development. We depict the crafting of new entrepreneurial activity as an ongoing process and present an emerging research agenda for future developments.

Developing support for micro-entrepreneurs in a developing economy in Africa

The purpose of this paper is to explore the means of building the capacity of those who are running an organisation designed to support and resource start-ups and growing micro enterprises among some of the world’s poorest urban poor. The project is based in Beira, Mozambique, one of the poorest countries in the world. The result of this study is the development of a model for providing ongoing, inexpensive, effective, capacity building in developing economies. The model also provides a base for the further development of strategies to provide better support to micro entrepreneurs in poor developing economies.

A sustainable model for supporting entrepreneurship in developing countries

Principal Topic Small and micro-enterprises are believed to play a significant part in economic growth and poverty allevition in developing countries. However, there are a range of issues that arise when looking at the support required for local enterprise development, the role of micro finance and sustainability. This paper explores the issues associated with the establishment and resourcing of micro-enterprise develoment and proposes a model of sustainable support of enterprise development in very poor developing economies, particularly in Africa. The purpose of this paper is to identify and address the range of issues raised by the literature and empirical research in Africa, regarding micro-finance and small business support, and to develop a model for sustainable support for enterprise development within a particular cultural and economic context. Micro-finance has become big business with a range of models - from those that operate on a strictly business basis to those that come from a philanthropic base. The models used grow from a range of philosophical and cultural perspectives. Entrepreneurship training is provided around the world. Success is often measured by the number involved and the repayment rates - which are very high, largely because of the lending models used. This paper will explore the range of options available and propose a model that can be implemented and evaluated in rapidly changing developing economies. Methodology/Key Propositions The research draws on entrepreneurial and micro-finance literature and empirical research undertaken in Mozambique, which lies along the Indian ocean sea border of Southern Africa. As a result of war and natural disasters over a prolonged period, there is little industry, primary industries are primitive and there is virtually no infrastructure. Mozambique is ranked as one of the poorest countries in the world. The conditions in Mozambique, though not identical, reflect conditions in many other parts of Africa. A numebr of key elements in the development of enterprises in poor countries are explored including: Impact of micro-finance Sustainable models of micro-finance Education and training Capacity building Support mechanisms Impact on poverty, families and the local economy Survival entrepreneurship versus growth entrepreneurship Transitions to the formal sector. Results and Implications The result of this study is the development of a model for providing intellectual and financial resources to micro-entrepreneurs in poor developing countries in a sustainable way. The model provides a base for ongoing research into the process of entrepreneurial growth in African developing economies. The research raises a numeber of issues regarding sustainability including the nature of the donor/recipient relationship, access to affordable resources, the impact of individual entrepreneurial activity on the local economny and the need for ongoing research to understand the whole process and its impact, intended and unintended.

Entrepreneurial becoming : an educational pathway out of poverty

This paper reports a longitudinal analysis of 20 necessity driven micro-entrepreneurs operating in Beira, Central Mozambique, who received funding and training from the same NGO to establish or grow their business activities and reports the development of these entrepreneurs in terms of their acquired entrepreneurial potential for long-term success. The results indicate there is a process of entrepreneurial becoming that is not just about access to finance but especially learning and, when successful, this process supports the transformation of survival micro-enterprises into entrepreneurial micro-businesses. The concept of ‘becoming’ contains an implicit temporal dimension. Becoming suggests a transformation over time: a change from what one is already. In this study, we witness a significant change in understanding how a business needs to operate, in recognizing opportunities, thinking more creatively, and building self-confidence.

Management issues in developing a sustainable model for supporting entrepreneurs in Africa

Small and micro-enterprises play a significant part in economic growth and poverty alleviation in developing African countries. There are, however, a range of management issues that arise when looking at the support required for local enterprise development, the role and management style of the local support agency and the role and style of the, usually Western, funding body. This paper explores the management philosophy required to establish and resource micro-enterprise development and compares the local management processes with those expected by a Western funding body.

Teaching and Learning Entrepreneurship for Micro and Small Businesses in the Cultural Industries Sector

Reports on an ESRC-funded, in-depth qualitative research project into 50 micro and small enterprises (MSEs) in the cultural industries. Our evidence sheds light on the extent to which the teaching and learning strategies adopted by higher education, further education and other VET providers are effective in providing entrepreneurship education and training for this innovative, high skill sector. Our findings suggest that entrepreneurs in this sector learn best by being able to experiment with ideas, by “doing” and networking with others and by working with more experienced mentors in their sector. The article concludes by suggesting a more “naturalistic” approach to teaching and learning entrepreneurship for micro and small businesses in the cultural industries sector.

Towards a model of understanding strategic decision-making in micro-firms : exploring the Australian information technology sector

This study explores strategic decision-making (SDM) in micro-firms, an economically significant business subsector. As extant large- and small-firm literature currently proffers an incomplete characterization of SDM in very small enterprises, a multiple-case methodology was used to investigate how these firms make strategic decisions. Eleven Australian Information Technology service micro-firms participated in the study. Using an information-processing lens, the study uncovered patterns of SDM in micro-firms and derived a theoretical micro-firm SDM model. This research also identifies several implications for micro-firm management and directions for future research, contributing to the understanding of micro-firm SDM in both theory and practice.

Micro-family-owned business : transitory survival mechanism or long term wealth creator?

Principal Topic: Entrepreneurship is key to employment, innovation and growth (Acs & Mueller, 2008), and as such, has been the subject of tremendous research in both the economic and management literatures since Solow (1957), Schumpeter (1934, 1943), and Penrose (1959). The presence of entrepreneurs in the economy is a key factor in the success or failure of countries to grow (Audretsch and Thurik, 2001; Dejardin, 2001). Further studies focus on the conditions of existence of entrepreneurship, influential factors invoked are historical, cultural, social, institutional, or purely economic (North, 1997; Thurik 1996 & 1999). Of particular interest, beyond the reasons behind the existence of entrepreneurship, are entrepreneurial survival and good ''performance'' factors. Using cross-country firm data analysis, La Porta & Schleifer (2008) confirm that informal micro-businesses provide on average half of all economic activity in developing countries. They find that these are utterly unproductive compared to formal firms, and conclude that the informal sector serves as a social security net ''keep[ing] millions of people alive, but disappearing over time'' (abstract). Robison (1986), Hill (1996, 1997) posit that the Indonesian government under Suharto always pointed to the lack of indigenous entrepreneurship , thereby motivating the nationalisation of all industries. Furthermore, the same literature also points to the fact that small businesses were mostly left out of development programmes because they were supposed less productive and having less productivity potential than larger ones. Vial (2008) challenges this view and shows that small firms represent about 70% of firms, 12% of total output, but contribute to 25% of total factor productivity growth on average over the period 1975-94 in the industrial sector (Table 10, p.316). ---------- Methodology/Key Propositions: A review of the empirical literature points at several under-researched questions. Firstly, we assess whether there is, evidence of small family-business entrepreneurship in Indonesia. Secondly, we examine and present the characteristics of these enterprises, along with the size of the sector, and its dynamics. Thirdly, we study whether these enterprises underperform compared to the larger scale industrial sector, as it is suggested in the literature. We reconsider performance measurements for micro-family owned businesses. We suggest that, beside productivity measures, performance could be appraised by both the survival probability of the firm, and by the amount of household assets formation. We compare micro-family-owned and larger industrial firms' survival probabilities after the 1997 crisis, their capital productivity, then compare household assets of families involved in business with those who do not. Finally, we examine human and social capital as moderators of enterprises' performance. In particular, we assess whether a higher level of education and community participation have an effect on the likelihood of running a family business, and whether it has an impact on households' assets level. We use the IFLS database compiled and published by RAND Corporation. The data is a rich community, households, and individuals panel dataset in four waves: 1993, 1997, 2000, 2007. We now focus on the waves 1997 and 2000 in order to investigate entrepreneurship behaviours in turbulent times, i.e. the 1997 Asian crisis. We use aggregate individual data, and focus on households data in order to study micro-family-owned businesses. IFLS data covers roughly 7,600 households in 1997 and over 10,000 households in 2000, with about 95% of 1997 households re-interviewed in 2000. Households were interviewed in 13 of the 27 provinces as defined before 2001. Those 13 provinces were targeted because accounting for 83% of the population. A full description of the data is provided in Frankenberg and Thomas (2000), and Strauss et alii (2004). We deflate all monetary values in Rupiah with the World Development Indicators Consumer Price Index base 100 in 2000. ---------- Results and Implications: We find that in Indonesia, entrepreneurship is widespread and two thirds of households hold one or several family businesses. In rural areas, in 2000, 75% of households run one or several businesses. The proportion of households holding both a farm and a non farm business is higher in rural areas, underlining the reliance of rural households on self-employment, especially after the crisis. Those businesses come in various sizes from very small to larger ones. The median business production value represents less than the annual national minimum wage. Figures show that at least 75% of farm businesses produce less than the annual minimum wage, with non farm businesses being more numerous to produce the minimum wage. However, this is only one part of the story, as production is not the only ''output'' or effect of the business. We show that the survival rate of those businesses ranks between 70 and 82% after the 1997 crisis, which contrasts with the 67% survival rate for the formal industrial sector (Ter Wengel & Rodriguez, 2006). Micro Family Owned Businesses might be relatively small in terms of production, they also provide stability in times of crisis. For those businesses that provide business assets figures, we show that capital productivity is fairly high, with rates that are ten times higher for non farm businesses. Results show that households running a business have larger family assets, and households are better off in urban areas. We run a panel logit model in order to test the effect of human and social capital on the existence of businesses among households. We find that non farm businesses are more likely to appear in households with higher human and social capital situated in urban areas. Farm businesses are more likely to appear in lower human capital and rural contexts, while still being supported by community participation. The estimation of our panel data model confirm that households are more likely to have higher family assets if situated in urban area, the higher the education level, the larger the assets, and running a business increase the likelihood of having larger assets. This is especially true for non farm businesses that have a clearly larger and more significant effect on assets than farm businesses. Finally, social capital in the form of community participation also has a positive effect on assets. Those results confirm the existence of a strong entrepreneurship culture among Indonesian households. Investigating survival rates also shows that those businesses are quite stable, even in the face of a violent crisis such as the 1997 one, and as a result, can provide a safety net. Finally, considering household assets - the returns of business to the household, rather than profit or productivity - the returns of business to itself, shows that households running a business are better off. While we demonstrate that uman and social capital are key to business existence, survival and performance, those results open avenues for further research regarding the factors that could hamper growth of those businesses in terms of output and employment.

Micro, small and medium enterprise in insolvency: An international perspective

UNCITRAL Working Group I is presently developing a legal framework dealing with the entire lifecycle of Micro, Small and Medium Enterprises. The central focus of this work is to guide MSMEs in developing countries out of the grey economy and into the regulated, tax-paying space where these business will also have greater access to legitimate finance. Insolvency is an important, perhaps inevitable aspect of the life cycle of these enterprises. The question that is yet to be considered is a simplified insolvency regime for MSMEs. While the Working Group I is focused on the development of a model for developing economies, MSMEs in robust, highly developed economies also face particular challenges when faced with a solvency crisis. The present one-fits-all approach to insolvency requires a rethink.