Business Development and SME Support Services in Brazil: the role of SEBRAE

Vinicius LagesVinicius Lages

Business Development and SME Support Services in Brazil: the role of SEBRAE

Vinicius LagesVinicius Lages

Third Tri-nations Summit for Small Business Development New Delhi, November 18-22, 2008

Institutional Framework and Major Programmes for SME Development in South Africa, Brazil and India

Presentation Plan

Challenges in designing institutional and police framework for SMEs support

SMEs support in Brazil: institutional framework

SEBRAE´s role in SMEs support

Q&A

Major challenges

Recognizing the importance of SMEs The concept: defining SMEs Defining appropriate policies, programs and

instruments Establishing a sustainable police and institutional

framework Designing a police and institutional system Facilitating access to business development services Advocacy planning – ‘voicing the voiceless‘

The importance of SMEs

• There is an established yet growing recognition of the importance of small, and micro enterprises (SMEs) in sustained national economic growth.

• In Latin America, SMEs comprise around 70 million units and are considered one of the most significant sources of employment and income across the region. In most countries the private sector is almost entirely comprised of micro and small enterprises.

• Given their importance, however, there exists little systematic research in the area of SMEs and the programs and policies to support them. As a result, scale-based enterprise promotion is often driven by social and political considerations rather than by comprehensive economic analysis.

The concept: defining SMEs• Why it is so important? Policies designing and evaluation

• To understand the SME sector and create policies accordingly, countries must implement regular data collection schedules.

• Our Tri-nations Program initiatives should include:

• An inventory of data currently collected in the 3 countries• Creation of comparable SME definitions (where possible,

standardized definitions) • Regular data analysis vis-à-vis the dynamics of our economies

Most common SMEs definition are based on the:

Number of employees

Growth revenues (annual)

productive assets (capital assets)

according to gross annual revenue

In our case…

criteria for SME’s classification

According to General Law of SME’s (14/12/2006):

• Micro: up to R$ 240 mil per year - U$ 110.000,

• Small: from R$ 240 mil up to R$ 2,4 million per year - U$ 1.1 million

Classification according to the number of employees

But some institutions use other criteria for SME’s classification

Size Sectores

Industry Commerce and Services

Micro Up to 19 employees Up to 09 employees

Small From 20 to 99 employees From 10 to 49 emplyees

Medium From 100 to 499 employees From 50 to 99 employees

Big More than 500 employees More than 100 emplyees

Brazil

•Population: 191,6 millions

•GDP (current US$) 1,2 billions

•Agriculture (value added) - 5% GDP

•Industry (value added) - 31% GDP

•Services (value added) - 64% GDP

Context of SMEs in Brazil

5 million of formal enterprises (99%) and 10 million of informal enterprises

56,1% of the formal urban labor force

26% of the aggregate wage/salaries

20% of Brazilian Gross Domestic Product

13% of government supply

2,4 % of Brazilian exports

A land of entrepreneurs

GEM 2007 – Global Entrepreneurship Monitor

Brazil ranked 9th position Growing entrepreneurship based in

opportunity evaluation (less by need or lack of alternative)

Growing entrepreneurship among women

Until recent, favorable economic conditions

Reached the investment grade – less risk Low inflation rate US$ 206 billion - foreign currency reserves Economic growth rate of 5,7 % (2007) Economic and social programs dedicated to

poverty alleviation and promotion of equity Growing income of BoP (base of pyramid) Foreign direct investments US$ 30 billion in

2007 Public and private investments- PAC Program

But, challenges ahead

Credit crunch – increase the rigour of risk analysis – raise the need for collaterals

economic growth – real economy and its market impacts

Slow down of private and public investment Consumption Protectionism

Development of SMEs Designing a enabling environment for business

SEBRAE supports

Formalization of SMEsFair competition

Low cost of formalization

Longevity of SMEs

Higher competitiviness

Opportunity driven entrepreteurship

Policy Integration

Brazilian Micro and Small Business Support Service

Mission

To promote competitiveness and sustainable development of micro and small enterprises and

foster enterpreneurship

• SEBRAE was originally a governmental institution, created in 1972 linked to Planning Secretary of Republic’s Presidency with the name of CEBRAE. Afterwards, it was transferred to Ministry of Industry and Commerce

• In 1990, it was transformed into SEBRAE, a private non profit autonomous social service, with a funding originated from a tax contribution of 0,3% over enterprises payroll.

27 units in all Brazilian states and Federal District (Brasília)

Budget 2008: US$ 1,2 billion

788 service centers (of which 452 in partnership with other institutions)

4.457 direct employees and 9.283 external consultants

4.462 partners from public and private sectors, NGO’s, and international ones involved in projects supported by SEBRAE

Presence in more than 2000 municipalities

Around 200 clusters supported by long term projetcs

377 Enterprise Incubators

Around 11 millions of consulting services delivered - 2007

252.000 participants in distance learning courses - 2007

Portfolio of more than 2 thousand projects of entrepreneurial development – for 1 real (R$) invested, 2,6 reais are mobilized;

Governing Board

National Council13 members

MDIC- Ministry of Development, Industry and Trade ABDE- Brazilian Association of Financial Institutions for Development CNI- National Industry Confederation CNA- National Agriculture Confederation CNC – National Commerce Confederation CACB- Commerce and Enterpreneurial Associations Confederation of Brasil. ANPROTEC- National Assoc of Support Institutions for High Tech

Enterprises ANPEI - National Assoc for Research and Engineering of Innovative

Enterprises BB – Bank of Brasil CEF- Caixa Economica Federal ABASE – Brazilian Assoc of State SEBRAE’s FINEP- Funding Agency for Studies and Projects BNDES - Economic and Social Development National Bank

Implements activities in areas such as:

training programs (management) encouraging a more dynamic start-up market; encouraging business development in disadvantaged communities and under- represented groups. facilitating market access, fostering entrepreneurship facilitating access to technology, innovation support, facilitating access to financial services;

Acts in building of a more favorable business environment

fostering better regulation and policies; i.e. General Law of SME’s, Innovation Law, government procurement scheme, credit guarantee societies

Modes of Assistance Individual - centers of assistance, mobile

assistance, web, radio, TV, call centers, videos, CDs, DVD, etc.

Group - projects dedicated to group assistance regarding over 2.000 municipalities, 200 clusters, over 2.000 municipalities, 200 clusters, and 370 business incubators.and 370 business incubators.

These approaches consider sectors, clusters and territories as the contexts in which SMEs are involved

Key- factors: governance among clusters,

coordination, intangible actives (culture, history, reputation, trade marks), infrastructure, logistics, services, knowledge, sharing of best practices, commercial and productive integration).

Segmentation

Individual Assistance - life cycle

Potential entrepreneurs Start-ups and companies: 0 to 2 years Companies: over 2 years

Segmentation

Group Assistance Clusters Groups of companies Associations Cooperatives Networks Franchisees Suppliers Trade associations

Result oriented strategy

SIGEOR

Integrated Intervention Strategy

Technology and

Innovation

Market

Access

Access to financial Services

Individual and group assistance

Business Organization

Business

Management

Cooperation Culture

ResultsResults

http://www.sigeor.sebrae.com.br

conclusion

SME concept Policy framework Institution framework – network Instruments – business services Voicing the voiceless