Commercialising BDSinSurvival Economies

Lessons Learntof theCEFE Business Training Networkin Malawi

MSMEPMicro, Small and Medium EnterprisePromotion

BEEDBusiness Expansion andEntrepreneurship Development Pvt.Ltd.

Deutsche Gesellschaft fürTechnische Zusammenarbeit - GTZ

Eberhard Bärenz, Norbert Rösch

Blantyre/Cologne, November/December 2003

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Table of Contents

Acronyms and Abbreviations 3

Summary 4

A. LESSONS LEARNT IN BRIEF 5

1. Malawi as a Typical Challenge 5

2. Project Description in Brief 6

3. Conclusions and Lessons Learnt for BDS Projects 8

B. COMMERCIALISING BUSINESS TRAINING IN SURVIVALECONOMIES 13

1. Introduction: What can be Learnt from a Private Commercial ProjectApproach 13

2. The Challenge of a Subsistence Economy and the Project Design as anAnswer 142.1. New York – New York: when you can do it here you can do it everywhere........ 14

2.1.1. Some Basic Figures about Economic and Social Background ............... 142.1.2. MSE Importance for Survival ................................................................. 162.1.3. Who Could Buy BDS?............................................................................ 17

2.2. Project Design as a Continuous Task................................................................ 182.2.1. Start-up Phase: the Franchise Model..................................................... 192.2.2. Redesign: the Clearing House ............................................................... 22

3. What Came Out? Achievement and Impact on Different Levels 243.1. Results and Output............................................................................................ 24

3.1.1. Course Output ....................................................................................... 243.1.2. BDS-Capacity ........................................................................................ 253.1.3. Product Development ............................................................................ 253.1.4. Commercial CEFE Trainer Independence.............................................. 263.1.5. Development of BEED as a BDS-Structure............................................ 27

3.2. Impact ............................................................................................................... 274. A Commercial Service Program in Survival Economies – Lessons Learnt 29

4.1. Commercial Service Network: Franchise Organisation...................................... 294.2. Commercial Service Network: Clearing House Function.................................... 314.3. CEFE as a BDS Tool......................................................................................... 334.4. Market Development: Promotion Campaign ...................................................... 354.5. Sustainability at Facilitator and Provider Level .................................................. 364.6. Cost Recovery – a BDS Principle in Practice..................................................... 384.7. Conflict between Project and Facilitator............................................................. 404.8. Project Management Experiences..................................................................... 41

4.8.1. Project Management Dilemma............................................................... 424.8.2. Manager / Owner as Crucial Constraint ................................................. 434.8.3. Private Limited instead of Cooperation Project....................................... 44

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4.8.4. Private Consulting Company as Project Implementing Agent................. 454.9. Evaluation and Conclusions of the Providers..................................................... 47

C. ANNEXES: BACKGROUND MATERIAL & PAPERS 49

1. Terms of Reference: Lessons Learnt BEED Malawi 50

2. Impact Assessment Survey 51

3. CEFE Training, Accreditation Report 62

4. CEFE Trainers’ Directory 2003 71

5. Franchise Licence Agreement 76

6. Evaluation of BEED by Trainers – Questionnaire 82

7. Marketing Client Contact Memo 83

8. Service Offer (and Contracts) for Institutional Clients (Sample) 87

9. Memorandum of Understanding MSMEP and BEED (Sample) 89

Acronyms and AbbreviationsBDS Business Development ServicesBEED Business Expansion and Entrepreneur DevelopmentBMZ Bundesministerium für ZusammenarbeitCDG/Inwent Carl-Duisberg-Gesellschaft / Internationale Weiterbildung und Entwicklung

gGmbH (Capacity Building International)CEFE Competency based Economies through Formation of EnterprisesDED Deutscher Entwicklungsdienst/German Voluntary ServiceDFID Department for International DevelopmentGDP Gross domestic productGTZ Deutsche Gesellschaft für technische Zusammenarbeit (German Society

for Technical Cooperation)HDI Human Development IndexLH License-holdersLLDC Least Development CountryMFI Micro finance institutionsMK Malawian Kwacha (Malawian currency)MSE Micro and Small Enterprises(s)MSMEP Micro, small and medium enterprise projectNGO Non-Government OrganizationODA Official development assistancePROCESS Promotion of Consultancy of Entrepreneurs in Southern African StatesSME Small and medium enterprise(s)TA Technical AssistanceToT Training of TrainersUSD US-Dollar (exchange rate in 2003: approx. 100 MK = 1 USD)WiRAM Wirtschaftsreform und Aufbau der Marktwirtschaft

Web-Page: www.cefemalawi.com

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Summary

This document summarizes the experiences gained by a project in Malawi, which couldserve for the design of new and the further improvement of ongoing technical cooperationprogrammes. The project aimed at the introduction of business training for Micro, Small andMedium Enterprises under BDS principles.

Several special features make the lecture highly interesting:

Ø starting in early 2000 and terminated end of 2003 it can be seen as one of the earliestventures that used the – at that time - new BDS ideas;

Ø facing rather difficult framework conditions, the experiences can be taken as quiterepresentative for business development efforts in LLDCs like Malawi;

Ø the project followed a quite radical commercial approach in its entire lay-out andimplementation;

Ø the structure shows very promising prospects regarding outreach and sustainability of aqualified provider network and even the facilitator organisation.

The document provides three different levels of information for the reader:

Chapter A: a condensed presentation of the lessons learnt as an introduction and for thequick reader;

Chapter B: comprehensive and detailed information about all important aspects, withsome characteristics of a project evaluation;

Chapter C: project documents in the annex, supporting the previous chapters, whichmight serve as orientation for other projects.

When reading the paper, it may be helpful to “surf” from chapter A to the other chapterswhenever more information is required. B can be read in parts only, which sometimes resultsin a certain level of repetition throughout different sections.

The authors would highly appreciate the use of the lessons learnt in other programs.Questions will always be welcome: e@baerenz.net or nroesch@gmx.net.

BEED can be contacted and visited under www.cefemalawi.com.

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A. LESSONS LEARNT IN BRIEF

1. Malawi as a Typical Challenge

Promoting more dynamic entrepreneurship is a particular challenge in subsistenceeconomies, where framework conditions are unfavourable for business promotion. The taskbecomes even more interesting when the approach shall be based on BDS-principles1.

Characteristics of the country situation, a typical survival economy:

Hard Facts:

Ø 11 million people with a GDP of 166 USD per capita, with 65% living below poverty lineof 0,33 USD / day

Ø 85% of the population live from subsistence agriculture, industrial and service sectorsare very weak;

Ø Malawi ranks on place 163 of 173 countries in the HDI;

Ø MSEs generate daily net earnings of below 1 USD, with only 16% of them havingpotential savings and reinvesting in business.

Soft facts:

Ø economy and society still suffer from the “Banda impact”, a long lasting and radicaldictatorship until 1994, which discouraged all private economic initiative and education;

Ø culture is not entrepreneurial and most people show a very strong preference foremployment, in particular with government;

Ø services, in particular business training, receive low appreciation, and

Ø training is expected as a cost-free service, financed by government, projects or NGOs.

Malawi neither has an enabling environment for SME nor an enterprising society. In almostall cases, running a business is considered as survival strategy to be given up as soon asother income opportunities arise.

With these circumstances Malawi should not be considered as a special case but rather atypical situation which many cooperation programs encounter and which sets the frame forproject strategizing. Lessons learnt in the project can be considered as relevant for manysimilar programs in survival economies.

1 http://www.ilo.org/public/english/employment/ent/sed/bds/seminar/present/trah/index.htm

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2. Project Description in Brief

The project (MSMEP) started in early 2000 with a scheduled duration of 6 years. Theobjective was to enable BS-providers to offer improved training programmes for SMEs. Theproject was planned in a traditional way but the approach for implementation then was basedon the ideas of BDS that, at this time, had just finished to prepare the guiding principles(“Blue Book”).

The strategy was for MSMEP to act as representative of a German entity (not asdevelopment project), in this case CEFE International, which was interested to launch abusiness training concept – CEFE – on the national market and under commercialconditions. To implement this, a private limited company was created and registered underthe name BEED2.

Under BDS aspects, BEED was to become the facilitator and a network of predominantlyprivate training providers established. In a first move, a fully commercial Franchise Systemwas established but later on replaced by a so-called Clearing House. The steps throughoutthe project were:

1. start of the project MSMEP and registration of BEED as private limited company, whichrequired approval by the Government,

2. institutionalisation of a Board - rather under technical cooperation than businessaspects,

3. copy right registration of the core product CEFE,

4. assignment of a national BEED manager,

5. structuring and technically strengthening BEED, introducing the Franchise System,

6. simultaneously starting a extensive commercial promotion campaign for CEFE,

7. building up the network of license holders, including training of trainers,

8. field operations, CEFE training courses, mainly initiated by BEED to get things runningand for on the job qualification of trainers,

9. political redefinition of the bilateral development strategy Germany-Malawi andreduction of the project duration to 3 years (+ 1 follow-up year),

10. change to Clearing House, new marketing concept,

11. decision of complete privatisation of BEED and looking for a future owner–manager,

12. assignment of owner-manager and stepwise transfer of responsibilities,

13. transfer of property titles to new owner-manager and advise to him,

14. termination of project (MSMEP) and continuation of BEED as private serviceorganisation.

Two important milestones marked the project and its development strategy:

2 BEED – Business Expansion and Entrepreneurship Development Pvt. Ltd.

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A. The franchise system was not applicable, mainly because a commercial marketdemand of SME for business training cannot be created in a survival economy likeMalawi. To ensure outreach and sustainability the Clearing House function wasintroduced for the facilitator BEED.

B. The project duration was reduced which lead to an earlier complete privatisation ofBEED and transfer to a Malawian owner-manager.

The output and impact achieved are impressing, taking into consideration the condensedproject life time and the adverse framework conditions. Some key figures:

Ø over 100 courses executed with more than 2,000 participants trained;

Ø training courses resulting mainly in increased profits of participants / SMEs, improvedadvertising, introduction of basic book keeping, introduction of cost control and cashmanagement;

Ø 64 people trained as business trainers with a nationwide coverage, of whom 45 wereaccredited and 25 are still active;

Ø independent capacity for future ToTs built up;

Ø wide range of training product development done, including the domestic competencefor future product development;

Ø training providers generate a remarkable income from business training;

Ø more than 50% of all courses are initiated and sold by trainers themselves, with agrowing tendency;

Ø BEED completely privatised as commercial service company and as facilitator,generating its revenues from handling of service contracts;

Ø provider network and facilitator continuing commercially after project termination.

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3. Conclusions and Lessons Learnt for BDS Projects

The project has chosen a clearly commercial approach which differs from most SME-promotion programs, where typically a NGO-type organisation is used for the facilitator. Thegeneral differences are:

Traditional Organizational Focus Commercial and Market Focus

Services Design

mainly during project preparation based on market survey and response

Project / Business Approach needed

developmental, social profile for expatriateproject manager

entrepreneurial profile for TA/business manager

budget allocation to partner organization paid for services to facilitator

staff recruitment according to budget,operational plan

SME-like staff policy

Administrative Focus

target group understanding marketing competence and tools

project administration and effective allocationof resources

business management and financial managementcompetence

Management and Ownership Function

ownership = involvement, participation ownership = proprietorship, entrepreneurship

project manager runs the program clear distinction between project and facilitator inall aspects

international TA as public relation tool completely hide the donor face

privatization of assets and know-how notdesired

stimulate earliest possible privatization

pre-select counterpart, support consensus stimulate competition among candidates tobecome owner

stakeholder part of policy owner assignment highest priority

Services Access and Protection

open access trademark introduction

free rider position accepted accreditation Process

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Crucial Lessons Learnt and Recommendations for Similar Projects

A. Viability of a commercial approach

Even under very critical conditions like those in Malawi both, facilitator and provider,can be developed in a viable and sustainable way by applying a commercial approach.The business attitude of project and facilitator actually enables a sustained systemafter project termination with good cost-benefit relation, considerable output anddevelopment impact. Trainers develop own business skills and attain attractive incomewhich stimulates them to enhance their own sales efforts. The facilitator can be broughtinto a position where revenues retained from service contracts are sufficient forfinancial viability.

Some rules need to be observed:

Ø catch the market where the money is, if you want to continue servicing MSE,

Ø make a clear distinction between project and facilitator and don’t act as a project,

Ø radically reduce costs of the facilitator and run it as real business,

Ø after start-up investments support the facilitator only by paid-for services, refrainfrom budget allocations.

B. Franchise System as transaction mechanism Facilitator – Provider

Franchise is not suitable for disseminating business training in survival economies for agood number of reasons:

Ø providers face enormous difficulties in pro-active marketing efforts unless theygot introduced into market segments,

Ø a fully commercial franchise system needs conducive environment,

Ø the target market SME has little ability to pay for training services,

Ø willingness to pay for training is absent due to various cost-free alternatives and atraining adverse culture,

Ø franchise is too complex to be operated, in particular with regard to the need forlaw enforcement,

Ø the social and development agenda (servicing SME) conflicts with commerciallyviable market (medium and large businesses).

C. Marketing campaign to develop training service demand

Training service demand is almost absent among SME. If money would be available,the priority would be given to other needs. To shift this attitude means a culturalchange which a marketing campaign cannot induce. All what can be achieved are theintroduction of the brand name and the dissemination of the facilitator in public.

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D. Clearing House Function as transaction mechanism Facilitator – Provider

Clearing House means that the facilitator becomes the broker of service contractsbetween those potential clients who look for training services for SME and theproviders who could execute them. A gap exists between clients and providers: the firstdo not want to deal with a multitude of different small entities and the latter don’t havethe skill, track record and / or approach to catch contracts.

The Clearing House closes this gap byoffering attractive advantages to bothsides: capacity of a network, differentspecialisation, regional coverage, qualityassurance, product development, attractiveproposals, professional reporting, servicecontracts, business opportunities, trainerqualification and accreditation.

The Clearing House service can generate sufficient income in order to sustain thefacilitator, to finance typical functions like product development, trainer qualification andmarketing, and to keep the provider network running. In the mean time thedevelopmental target group SME can receive services which contribute to businessdevelopment, income generation and job creation.

E. CEFE as BDS tool

CEFE has proven to be a suitable training package. Unlike business training in generalit offers a set of advantages which contribute to a successful implementation:

Ø as a comprehensive, elaborated and documented training program it can betrade marked,

Ø CEFE offers a wide range of possible applications and is highly adaptable,

Ø trainers can be qualified comparatively easy,

Ø CEFE is absolutely appreciated by trainees, which generates client satisfactionand follow-on business.

F. Project – Facilitator relationship

In a commercial approach and also under BDS aspects, the project shall not appear ascooperation program. Nevertheless it exists and has an incremental importance for theimplementation. In the beginning, the facilitator has to be built up – or at leaststrengthened if existing. But within the business community possible candidates to runthe facilitator are neither convinced that such a structure offers a viable businessopportunity, nor would they know how to develop it.

Foreign assistance is required, including financial support for the initial investment andstart-up phase. The problem is to overcome the habituation that the foreign partnertakes care of all problems and ensures ongoing existence. The management functionhas to be transferred as well as the ownership. In the case of a commercial approachthis means that the property of the structure including equipment and good will be

Provider Client

BEED

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possessed by an entrepreneur. It is decisive that the project manager then refrainsfrom management interference, even if wrong decisions may be taken. This requires alarge deal of courage and willingness to change roles. Also in the case of BEED, thechange process involved enormous efforts.

To make the difference between the two actors (project and facilitator) clear, all mainfunctions need to be separated, i.e.: ToR, office room, equipment, supporting staff likeaccountant and secretary, communication.

G. BDS principle of cost recovery in survival economies

Direct cost recovery from the beneficiary of the service is an important BDS principle.This mainly leads to a focus of the service provider on the demand of the real client. Inthe situation of BEED this would have meant: course participants need to pay - directlyor indirectly – for the training courses they participate in. But practice in a survivaleconomy like Malawi shows that less than 20 % of SME would be potentially able toaccumulate money for such purposes. Still the amount then available (not more than 1USD per day) would be not sufficient to recover costs of at least 5 USD / day). Thefunctions of demand and offer simply don’t cross.

In such a situation the project has different options:

Option D offers a solution to a complex dilemma. But it also must be seen that theproviders will redirect their focus on the facilitator and the direct beneficiary is not goingto pay (completely) for the training. However, this solution was preferred because clearpriority was given to the aspect of not excluding micro and small businesses. Thecontinued experience moreover showed that the trainers, once started, are gettingmore and more involved in direct marketing of their services – again, mainly toinstitutional clients or rather large enterprises.

Crowding out or critical dependence on uncertain clients could not be observed.Business training providers were not existent for SME in Malawi and up-market

Option Consequences

a. stay with the target group and directmarketing (column A)

- lowest outreach

- no sustainability

b. neglect training and move intoprofitable services

- potential crowding out

- low business development impact

c. change to viable commercial clientsand stay with direct marketing(column B)

- neglect of the development target group

- small market

- probable cost recovery and sustainability

d. change to Clearing House andexplore institutional clients

- only few direct transactions with SME

- large output with and for SME by indirecttransactions

- sustainability

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providers have been invited to participate in the BEED network. The system is open fornewcomers at any time. But the sustainable national training capacity built up in Malawinow competes with foreign consultants and starts replacing them.

The potential market of institutional clients is large and their demand exceeds by farBEED’s capacity. Even the cessation of some clients would not endanger the systemsince sufficient alternatives are available. It is much more professional management ofa client portfolio with an adequate level of diversification that reduces the risk ofbusiness dependence.

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B. COMMERCIALISING BUSINESS TRAINING INSURVIVAL ECONOMIES

1. Introduction: What can be Learnt from a PrivateCommercial Project Approach

This main part of the report presents the experiences gained in a business developmentproject which was financed within the bilateral German-Malawian cooperation andimplemented by GTZ (through a subcontracted consulting company). The intention is tofacilitate the transfer of know-how within GTZ and the technical cooperation with thefollowing objectives:

Ø further development of this project type;

Ø contribution to the conceptual development of programme areas like WiRAM;

Ø a critical discussion of BDS and its possibility for implementation;

Ø product development of business training.

The report helps to avoid that approaches for project design and implementation are re-invented again and again. It contributes with lessons learnt which can be utilized in newprojects or projects under implementation. Chapter B provides more comprehensiveinformation about all important aspects, negative and positive experiences and conclusionsarising from them. It firstly explains under which framework conditions the project was bornand how it grew up. The project found itself in a learning process, where quite a number ofideas, in particular those related to BDS, have been tested, observed, redesigned andreplaced. Results and impact are presented to show the potential cost-benefit of suchinterventions. This includes a brief explanation of the steps taken for project monitoring andimpact measurement. Thereafter, the BDS experiences are discussed with special emphasison the constraints that were encountered and the conclusions drawn from different projectcomponents. Finally, general project management experiences are outlined which shallsupport the dissemination of rather radical commercial approaches.

The author of the report is an independent development consultant. He was extensivelyinvolved in the project preparation and design, its start up, the implementation, thequalification of local human resources and the management strategy development. In thiscapacity he visited Malawi various times from the very beginning until the end of project. Hewas extensively supported by the last project manager who succeeded to transform BEEDinto a feasible, domestically managed private service facilitator.

This lessons learnt report is important because of the specific nature of the project. Unlikemost other similar business development programs, the project (MSMEP) remained informal

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and invisible, and created a private commercial facilitator organisation (BEED) whichconstituted the public part and main actor.

Although MSMEP had a political counterpart organisation (the Ministry of Commerce andIndustry), it was implemented as a private venture. BEED as the project executing body wascreated, registered and managed as a private limited company, independent fromGovernment authority and not appearing as an NGO. Right from the beginning this causedthe necessity for a different type of implementation: the project acted as a commercialrepresentative of an international training system (CEFE International) with BEED as theaffiliate company in the country. It tried to avoid any similarity with typical developmentprojects. It did not call itself a project, but a private business investment. The relationshipwith domestic service providers was based on commercial transactions and businesscontracts. The project registered the copyright of CEFE in Malawi for BEED and BEED soldthe rights to use the method under licence agreements.

The approach was based on the ideas of BDS, as defined in the blue book3 in a very earlystage of the BDS development. Consequently, many of the ideas generated and tested wereexperimental, trying to transform the BDS principles into feasible practice.

2. The Challenge of a Subsistence Economy and theProject Design as an Answer

2.1. New York New York: when you can do it here you can doit everywhere

If experiences gained under specific framework conditions shall be transferred to a differentsituation, the question must be raised whether they are relevant and applicable in general.Like any other country Malawi is a special case, but nevertheless the lessons learnt can beapplied under similar circumstances. Malawi belongs to a certain type of countries whichshow a similar social and economic background, proposed to be called subsistenceeconomies. In such countries conclusions from this report can be applied although they mayneed slight adaptation in each case. The following background information shall enable thereader to compare the Malawian context with his/her4 own situation.

2.1.1. Some Basic Figures about Economic and Social Background

The Republic of Malawi is a multiparty democracy. It suffered from a long lasting and radicaldictatorship until 1994 which constituted among others a dramatic decline in independent

3 http://www.ilo.org/public/english/employment/ent/sed/bds/seminar/present/trah/index.htm

4 later on, the explicit differentiation him/her will not be continued. This shall not express a disregardof the gender issue by the author.

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economic initiative and social welfare. Malawi is still recovering from the heritage of thesedark decades and the impact continues to be relevant.

Malawi is an extremely poor country with the vast majority of its population engaged insubsistence agriculture. Basic infrastructure, public services and the level of economicactivities outside of the main urban centres remain very week. The wide constraints tobusiness development like limited access to markets, electricity, telecommunication, physicalinfrastructure prevent people from successfully exploring business opportunities. Theadverse circumstances are aggravated by social and human constraints like widespreadilliteracy or low education level, a multitude of different local languages, and the increasingimpact of AIDS/HIV. Some figures5 shall illustrate the situation:

Area: 118,480 sq km (of which 24,400 sq km Lake Malawi);

Population: 11.6 million;

Annual population growth: 3.1 % (1975 – 2001);

Rural population (as percent of total): >85 % (2001);

Life expectancy at birth: 38,5 years (2001); dramatically declining (47 years in 1987);

Adult literacy (as percent of total): 61 % (2001), low but improving (42% in 1987)

HIV/AIDS prevalence rate: 15 % (2001);

GDP per capita: 166 USD (2001);

GDP annual growth rate: 0.2 % per capita (1975 – 2001);

GDP composition: agriculture 36.5 %, industry 14.8 %, services 45.7 %;

The GINI-coefficient6 raised from 0,73 to 0,89 (1991 versus 1998), i.e. poverty is spreadingand prosperity concentrating.

The country is split into different ethnic groups: Chewa 25 %, Nyanja 25 %, Lomwe 15 %,Yao 13 %, others 22 %. English is the primary language in business, but spoken only by aminority of the population. Chichewa is a major national but not official language. Otherlanguages exist which cannot be easily understood throughout the population.

In total, Malawi counts to the group of least developed countries, highly dependant onexternal aid and with a stagnant or deteriorating development trend.

5 Sources: Human Development Report 2003, World Bank / Malawi, National Human DevelopmentReport, UNDP, Dec. 2001 / Poverty Analysis of the Integrated Malawi Household Survey 1997 –1998 / Malawi Gemini MSE Survey 2000, DFID February 2001

6 GINI demonstrates concentration of income: the closer to 1,0 to more unequally income isdistributed.

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2.1.2. MSE Importance for Survival

Business activities are scarce and mainly exist on a subsistence level. Some figures aboutMicro and Small Enterprises (MSE7) in Malawi:

Ø MSE’s contribute income to about 25 % of the Malawian households and 15.6 % toGDP;

MSEs employ over 1.7 million people (about 38 % of the economically active population of4.5 million); percent of GDP: 23 % (2001).

Ø Within the HDI, Malawi ranks on place 163 out of 173 countries, with a value of 0.400(average of countries with low Human Development Index: 0.416). Although thecountry’s HDI is improving (0,321 in 1993) the position of the country is declining (157in 1993). On average, 65 % of Malawi’s people live below a poverty line of about 0.33USD/d. The income distribution is aggravating;

Ø 60 % of people employed by MSE are working owners and 30 % are unpaid workers(usually family members); average earning per hour is 0.25 USD;

Ø MSEs’ consist of 747.000 income earning businesses of which 83 % are located inrural areas and 17 % concentrated in 4 cities only;

Ø over 80 % of MSE operate in proximity to the home or are typical home basedactivities.

According to the HIS-Data one person in Malawi needs about 0.33 USD/d to meet basicneeds. 65 % of the people live below this poverty line. Consequently any small contributionto income is important for survival. People owning MSEs or working in it make an averagedaily earning of 1.67 USD, but this income is concentrated among few firms. Only 27 % ofthe MSEs earn more than 333 USD/year, which represents about 1 USD of net earnings perday or 0.18 USD per household member per day. Consequently, the ability for businesspeople to reinvest part of their earnings is extremely low if not absent. According to theGemini survey, merely 16 % of the businesses reinvest their surplus in business. This onlyleaves a small margin of enterprises as potential commercial clients for business services.

It is not surprising that financial problems rank very high among the constraints of the MSEs(35 % of start ups / 26 % of operating businesses), followed by market problems(14.5 % / 25.2 %) and input problems (7.4 % / 28.1 %).

During the past five years, the numbers of new firms grew although economy in general wasdeclining. Previously, the creation of enterprises was lower within a growing economy. Themain reason is that most businesses in fact represent survival strategies, which are given upimmediately when employment opportunities occur on the labour market and vice versa.Under such circumstances, the entrepreneur does not follow a long term business strategy,including an investment into skills development.

7 MSE defined as all businesses that employ 50 or less employees including unpaid workers andworking owners. Business is considered as an activity that sells at least 50 % of its goods orservices.

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Around 10 % of MSEs have closed within the past 5 years (commerce trade and hotels 67%, manufacturing 27 %). Apart from financial and input constraints as main reasons given byowners, HIV/AIDS seems to have a significant impact, especially among micro-businesses,even though this reason still seems to be denied by most people.

2.1.3. Who Could Buy BDS?

Due to various factors a market for business development services is almost inexistent oronly appears in limited areas of the economy. The financial situation of MSEs illustrates thatthere is only a very limited capacity for investment into business, in particular into businesssupport services. Only 23 % of MSEs reported having received training service, half of whichwas free training for family members and one quarter for apprenticeship andvocational/technical training. This leaves only about 5 % of MSE owners who have gonethrough a general business training.

In addition, there is an increased utilisation of training among larger MSE (above 5employees), which are considered small, not micro-business in Malawi. According to amarket survey8 carried out by the project in Blantyre, the country’s largest city and maineconomic centre, MSE spent a total of 54 million MK (about 900.000 USD) forentrepreneurship training in 2000. Public providers dominate the market with 87.1% of allsales made, whereas private providers only capture 12.6% of the market share. NGOs,although representing nearly one fourth of all providers in numbers, gain only 0.3% (!) of thewhole market income.

In total, various reasons limit the demand for business services, especially training:

Ø very limited surplus among potential business clients which is required for familysurvival;

Ø limited number of businesses who have been exposed to training before;

Ø highly traditional orientation of businesses, not favourable for acquiring training andother services;

Ø existing market potential rather to be found in larger SMEs which do not represent themain target group of the development intervention.

Apart from these constraints, the service market for business is heavily influenced byactivities financed by donor organisations or the Government. The two main studies availableabout business training service in Malawi9 (Gemini and Roesch) do not reveal quantitativedata about the level of subsidized training service in the Malawian market. From the generalproject experience it can be summarized that a large proportion, certainly the majority, of alltraining offers are mainly or totally financed by third parties. Consequently, potential clientshave a choice between cost-free or subsidized offers and services that request commercialprices. Firstly within a tight financial situation, micro-enterprises tend to prefer the cheaperoption. Secondly, rather medium size or the few large size enterprises are willing to pay full

8 Source: Entrepreneurship Training and Business Consultancy in Blantyre Malawi, Norbert Roeschet al, Blantyre September, 2001.

9 Malawi Gemini MSE Survey 2000, DFID February 2001 / Roesch: see above

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prices. Thirdly, the quality aspect is regarded as not decisive for the choice of the trainingoffer, since it is difficult to prove the benefit of a better training service. In general it can bestated that the potential market demand for BDS is not congruent with the target group of aMSE development project.

2.2. Project Design as a Continuous Task

The problematic framework conditions in Malawi made it clear that starting a MSE-promotionproject would be a great challenge. The technical cooperation in general was planned andagreed upon between 1996 and 1999. It was defined to intervene in the area of businesstraining and consulting, but it was obvious that a typical job-creation-income-generationapproach would not yield satisfying results. In this situation, the just recently published BDSprinciples promised better alternatives.

The project objective was defined as:

BDS-provider offer improved training programmes for SMEs and assure thecoordination of other SME support measures.

By this, the project was expected to contribute to the overall development goal:

Potential and existing entrepreneurs in the micro, small and medium enterprise sectormake better use of their economic opportunities.

The primary objective was to ensure that an improved business training package (CEFE10) isintroduced into Malawi in a sustainable way. In order to do so, the project followed right fromthe beginning the principles of BDS best practice. Launched in February 2000, MSMEP wasone of the first projects which aimed at translating the BDS-concept into a practice. Itemphasized the following BDS-principles:

Ø A fundamental belief in the principles of a market economy, where the State has arole in providing an enabling environment, in correcting and compensating for marketfailures, and in the provision of public goods, but not in the direct provision of privategoods that can be more efficiently provided by the market;

Ø The assumption that the majority of BDS are private goods and are thus similar innature to any other service, so market rules apply; and

Ø The expectation that with the appropriate product design, delivery and paymentmechanisms, BDS can be provided on a commercial basis even for the lowest-income segment of the entrepreneurial SE sector.”11

10 CEFE is a comprehensive set of training instruments using an action oriented approach andexperiential learning methods to develop and enhance the business management andentrepreneurial competencies of existing businesses and start ups. It has been developed by GTZand successfully disseminated to over 100 countries since 1985.

11 Business Development Services for Small Enterprises: Guiding Principles for Donor Intervention,2001 Edition; World Bank Group, SME Dept., Washington Feb. 2001

19

Yet, it was not clear how to structure and implement such a new idea, since successfulexamples were not (yet) at hand. The offer which won the project tender proposed acompletely commercial way. Several components of the operational plan had not been testedbefore, especially not under the conditions of a country like Malawi, and the experimentalcharacter of the plan requested a good deal of open processes, including close observationand frequent reaction to the results achieved in the field.

In contrast to a typical development cooperation, MSMEP was launched as a private venture.The political host was the Ministry of Commerce and Industry, and MSMEP introduced itselfas a representative of a private organisation in Germany (GTZ and CEFE International)holding the international copyrights of specific and internationally proven training andconsulting concepts (CEFE and PROCESS12). In order to do so, the project manager openedand registered BEED Malawi (Pvt) Ltd. as a private limited company. Right from thebeginning, the expatriate consultant had the double function of a project manager of MSMEPand managing director of BEED.

In order to prevent potential Malawian business partners and training clients from looking atthe intervention as a usual development project, MSMEP and GTZ did not appear in thepresentation of the initiative nor in its publications or promotion campaign. It was intended tostrengthen the aspect of a commercial business and corresponding commercial transactions.In compliance with BDS principles it was also tried not to create the usual expectations vis-à-vis a development project. Consequently, typical technical terms like project manager, donoror development cooperation, target group, development goal were strictly avoided. For thepublic in Malawi, BEED was the affiliate of a private investor from Germany who wanted todisseminate a certain service method and to sell it through licences.

2.2.1. Start-up Phase: the Franchise ModelSince other tools to develop the service market like e.g. Voucher Scheme or Matching Grantwere not available, the project opted for a Franchise Model as transmission mechanismbetween the facilitator the service providers and the SME.

The relationship between the facilitator BEED and the different service providers was basedon a commercial idea and the expectation that the capacity to offer training services couldbecome a profitable market for licence holders. To structure this in a commercial way, afranchise system was prepared with BEED as franchisor and the providers as franchisees.

Franchising is an arrangement whereby the sole distributor of a service or a product givesexclusive rights of local distribution to independent trainers and consulting companies inreturn for their payment of franchise fees and conformance to standardized operatingprocedures. Well-known worldwide commercial examples are e.g. McDonalds and BodyShop.

The franchise arrangement had the following conditions:

12 PROCESS is a full latched method for the creation of national business consulting capacities,developed by CDG/Invent. This instrument was later on not disseminated due to a shortenedproject period.

20

a) acceptance by and registration with BEED,

b) successful staff participation in a qualification program (see below),

c) purchase of a license from BEED (500 USD / year),

d) payment of variable fees (1 USD per trainee/day).

This would entitle all license holders to:

o independently sell CEFE and CEFE-based services,

o use the quality mark “CEFE-License-Holder”,

o get a genuine CEFE certificate per trainee,

o benefit from CEFE promotion, product development and further training.

The structure was a as follows:

Capacity Building

Nationwide Network ofCEFE Trainers

Establishing a Commercial Network:The Franchising System

MSMEP

BEEDProductDevelopment

Generic CEFEPromotion

$$$

Hiding DonorBy setting up

Medium Small Micro

$$$$

$$$$

The idea was that BEED would generate sufficient revenue to cover its operating andoverhead costs and would even be able to re-invest in generic promotion of CEFE, capacitybuilding and research and development activities.

21

To make the Franchise Arrangement become attractive and feasible, several simultaneoussteps had to be undertaken:

Ø Copyright and trademark:

After its former registration BEED applied for a national copyright and trademark ofCEFE in Malawi. This was necessary in order to protect the method, to create the basisfor a licence system and to make the acquisition of a licence attractive for potentialservice providers.

Ø Business partner selection:

Following the principle BDS idea, BEED took over the role of a facilitator. It was notmeant to render any kind of services directly to the business community. Instead ofthis, a national provider capacity was built up. On the basis of a market survey aboutthe BDS market in Malawi various potential provider companies, NGOs, Governmentorganisations and freelancers were identified and invited for a workshop in June 2000where the following was presented, discussed and negotiated: training method,qualification process, marketing campaign, business opportunities and prospects,licence agreement within a franchise system, and the terms of contract. The ratherunusual way, in which the workshop was disseminated and BEED appeared, resultedin an interest of more than 15 predominantly private service companies to enter intobusiness relations.

Ø Promotion campaign

Right from the beginning it was clear that the demand on the national market for suchservices as business training and for a trade mark like CEFE would have to be created.Demand for similar services on a commercial basis is very limited in terms of volumeand sectors in Malawi. To foster the market demand and in the absence of VoucherScheme or Matching Grant, MSMEP opted for an extensive promotion campaign. Thiswas prepared under commercial aspects as if a private company would try to introducea new product into a market. A national marketing company was assigned forassistance in preparing the campaign and finally advertisements were placed indifferent media with quite modern elements and based on a previous survey on how tobest reach the target market. Over a time span of almost one year, a total budget ofabout 50.000 € was spent which under Malawian circumstances was a veryconsiderable investment.

Ø Capacity building

The potential licence-holders were not capable in the beginning to deliver the trainingcourses as required by BEED and CEFE. Part of the licence agreement was to qualifyexperts of the LHs in rendering such services. Of the interested companies and free-lancers, 16 participated in a two weeks ToT in Januray / Februray 2001, of which 13were rated as qualified.

The capacity building was planned to be complemented by an extensive coachingprogramme, where a regional expert was assigned to accompany the trainees astrainers in seminars for business people and potential business creators which wereorganised by BEED. The first TOT was a rather open seminar aiming at a full

22

competence of the participants including also the capacity to adapt and developtraining programmes.

2.2.2. Redesign: the Clearing House

For various reasons the Franchise Model with its different elements turned out not to beapplicable in framework conditions similar to Malawi, mainly because:

Ø the market demand could not be developed as expected by the promotion campaignnor by the initiative of the license holders;

Ø the open qualification as trainers was demanding too much from the trainees;

Ø the operation of the franchising system was too complex.

Additionally, the project duration was reduced from planned 6 years to only 3 years + 1follow-up year (details about these experiences are presented under Chapter 4 LessonsLearnt).

A strategy development mission revealed that under the existing economic and socialcircumstances in Malawi it was not realistic to expect that business training services could besold on a financially sustainable basis to the business community. Three options for strategyadaptation were at hand:

Option main disadvantages

a. to focus on the provision of servicestowards target markets which dispose of thenecessary purchasing power

- small number of customers

- neglect of the target group SME

b. to make the services accessible for SMEsthrough financial support by the project

- no sustainability

- no sufficient funding

c. to attend market segments interested inservices for SMEs and capable in financingit on the basis of commercial transactions

- service providers not capable tocatch such contracts

- service providers not in a positionto develop tailor-made services

- conflict with BDS principle ofprovider-client relationship

As a result of the assessment the system was transformed into a Clearing Houseorganisation with trainers as service providers and network partners. The objective was toassure a maximum of sustainability for both, the provision of services by providers and thefacilitator function of BEED. The latter took over the responsibility to acquire contracts fromboth markets, private and institutional, and forward these to the network of service providers.In the same time, the accredited providers were encouraged to sell training services on theirown initiative and without any further licence or franchise obligation.

The new structure looked as follows:

23

Clearing House SystemBEED Malawi

(PVT) LTD

LH LH. LH. LH. LH. LH. LH.

CEFESales

Brokerage Services

Institutional clients, corporate businesses, MSMEs

$$$

CapacityBuilding

$$

$

ProductDevelopment

CEFEPromotion

CEFE-Trainers

NetworkManagement

BEED

Under no circumstances BEED did aim at replacing the German financial contribution withinthe cooperation project by another donor organisation. Instead it developed businessrelations to various institutional clients (corporate businesses, Government organisations,donor organisations). BEED finally was restructured in order to become sustainable on thebasis of a handling fee taken from the assignments that it acquired and which were carriedout by the network of trainers.

This move basically required the following steps:

Ø copyright and trademark, network management

Copyright and trademark were maintained in order to protect the CEFE training fromfree-riders. But it was opened to utilisation by accredited trainers without license fees.The franchise system was replaced by a network management which involved trainingof new trainers, accreditation, and product development.

Ø service promotion

The previous promotion campaign aiming at a wide range of advertisement for ananonymous market now was substituted by a targeted marketing for individual clients,which included a new marketing strategy, organisation and procedures, and specificcustomized products.

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Ø product development

Standardized training products had been developed before to serve the anonymousmarket of SMEs. The new clientele required training with specific adaptation to theirneeds: subject, focus, target groups, duration and, last but not least, costs. BEED hadto enable the Clearing House system to satisfy such volatile demand and it was thetask of the project to build up the competence.

Ø capacity building

The new concept also made it necessary to increase the number of trainers. The focuswas now on free lancers, covering all regions of the country and interested in the newClearing House system. The training included a ToT and the coached performance astrainers in seminars organised by BEED. This led to a “star-ranking” which grouped theproviders into three different competence groups (see later or in the annex).

3. What Came Out?Achievement and Impact on Different Levels

This chapter offers information about the achievements of MSMEP and, finally, BEED. Itshall demonstrate to which degree the strategy resulted in relevant output and impact –beyond the theoretic discussion and presentation of strategies for project implementation.

Looking at the performance of the project it must be remarked that (a) it cannot be clearlystated whether MSMEP succeeded to bequeath a sustainable structure. This could only bedone after another 2 or 3 years; (b) the monitoring system was not yet mature enough toreveal the necessary information for a reliable impact assessment. However, varioussources13 form the basis for the following observations.

3.1. Results and Output

Under the prevailing circumstances the results achieved by MSMEP/BEED are impressing:

3.1.1. Course Output

Altogether, the BEED-network delivered more than 100 business seminars in which over2,000 people participated between spring 2001 and December 2003 (roughly 30 months).The number of training courses clearly shows a growing trend.

13 project reporting system, interviews with BEED-members and providers, results of an evaluationworkshop (November 8th – 9th, 2003), review of BEED-Malawi by the Springfield Centre forBusiness Development (February 2001), impact evaluation of the training programme in theboarder zone development project (November 2003)

25

The courses were executed in all regions throughout country with a certain concentration inurban centres or in the area of rural projects which were clients of BEED.

Under BDS aspects and looking at sustainability it is specifically interesting that anincreasing proportion of courses is delivered by the trainers without any BEED involvementat all. This share exceeded 50% in 2003 (based on an assessment during an evaluationworkshop with the – present – trainers).

The number of unreported cases, in particular of about 30 former trainers, who do not belongany longer to the active network of BEED, is hard to guess, since no means were available toconduct an extensive follow-up survey. However, by word-of-mouth it is known that they also– although to a minor extent -- delivered some trainings.

3.1.2. BDS-Capacity

The BDS-capacity in Malawi in the area of business trading has been considerablydeveloped on a countrywide level. 64 professionals have been trained as CEFA-trainers ofwhich about 65 % can be considered as qualified business trainers and moderators. In fact,BEED introduced a rating system with three different levels:

Ø Level a (3 stars): trainers who are ready to work independently with a sophisticatedtarget group up to a higher level; sufficient to assume leadership and administrativefunctions in any training;

Ø Level b (2 stars): trainers who are ready to work independently with a lesssophisticated target group – potential MSEs;

Ø Level c (1 star): trainers who should work with a more experienced facilitator to gainfurther experience and independence.

Some of the trainers are not playing an active role in the context of BEED for differentreasons. Most of the first TOT participants left the network due to an insufficient turn overfrom training courses in the beginning of the project. Some trainers have chosen new anddifferent job opportunities.

The BEED-network, consisting of 45 accredited and 25 active trainers, is available in allregions of the country and dominates all major languages spoken by the different targetgroups.

Apart from the qualification within and for the BEED-network, BEED carried out various otherToTs for project staff and target groups of others programs, with a specific training focus ineach assignment.

BEED has acquired the competence to conduct future training courses for trainers on itsown, i.e. without involvement of expatriate experts.

3.1.3. Product Development

The CEFE training method has been adapted to the Malawian context and training materialis translated into the two main local languages. The traditional and full CEFE training course

26

with the duration of 3 – 4 weeks was transformed into three modules, with a simplifiedcontent and shorter duration aiming at: entrepreneurship career (2 days), entrepreneurialplan (5 days) and entrepreneurial action (2 days).

The standardization of the courses was then gradually replaced by more and morecustomized training programs, developed for clients under the Clearing House system. Mainaspects of the training product development were:

Ø segmentation of the CEFE compendium of exercises into thematic units with very shortduration, done upon specific request of clients;

Ø reduction of training time in order to reduce costs and make courses more accessible;

Ø servicing non-entrepreneurial such as organisational or social development.

The project had the key role to build up the competence within BEED to react creatively andprofessionally to new challenges within a short period of time in order to prepare attractiveoffers to clients.

Examples for such tailor-made training development are:

Ø training for credit appraisal offers,

Ø entrepreneurial awareness for students in vocational training centres,

Ø professionalisation of business people in rural areas,

Ø introduction of CEFE into the secondary schools programme.

Furthermore, many trainers are independently providing training to various private clientswith a considerable level of product adaptation and development, without reporting details.

3.1.4. Commercial CEFE Trainer Independence

Within the short period of less than two years (starting from the second TOT) the trainershave developed a considerable own initiative to market training courses. Almost 60 % of alltraining events had been acquired or initiated and realized by the trainers themselves withoutdirect BEED-involvement. 40 % have been organized by BEED and referred to the CEFE-Trainers.

It is very promising that the average income gained per course is 34,000 MK (equivalent to425 USD in November 2003). This corresponds to an average cost per participant of 2,300MK. Seeing the average income of the Malawian MSEs of below 1 USD/d this means acomparatively comfortable earning. Also the trainers confirmed that the income generatedfrom training is attractive to them. Furthermore, it seems that the income from training withinthe BEED-system is lower than what trainers can earn from other clients, so that enoughincentives exist for them to sell their services independently.

The information does not clearly reveal which portion of the total income of 3.4 million KW(42.500 USD) generated from training courses originates from direct clients. But it can beassumed that by far the largest part is paid by institutional clients. Again it can be observed

27

that the number of self initiated courses is increasing. This leads to the expectation that thetrainers will continue to render training services on a sustained basis.

3.1.5. Development of BEED as a BDS-Structure

BEED as a facilitator is remarkably far developed. It is registered as independent privatelimited company and started operating as a completely independent and commercialbusiness. BEED is recognised by a large number of potential clients (corporate firms andinstitutions) as a professional service organisation with a diversified capacity which canadequately respond to requests in terms of quality, quantity and time.

A former manager of BEED had shown his interest to take over the company and continuewith it as owner and entrepreneur. He is committed to turn his engagement into a businesssuccess and make it become profitable. A draft business plan of the privatised BEED showsgood prospects for success.

The project introduced certain control mechanisms in order to prevent the new owner fromsimply selling the assets of BEED and closing the company down (an agreement was signedwith the Ministry - formal owner of the assets - the new owner and the expatriate advisor thatany asset transferred to the private BEED can only be sold without written approval after 6months, a time that seems sufficient to verify the profitability of BEED without projectinvolvement).

The provider network is well established and diversified with 44 participating and 25 activetrainers. The interest of the trainers in the network as well as in the cooperation with BEED ishigh. 37 trainers of the network participated in an evaluation workshop in November 2003. Itis worth under the usual conditions of Malawi remarking that they did not receive any kind offee or sitting allowance for this participation. So it can be assumed that they attended theworkshop because of their continuing interest in training as a service and in BEED.

3.2. Impact

One proper impact assessment14 was realized in the framework of one specific trainingprogramme which was implemented by BEED and associated trainers within the area of arural development programme. The target group encountered here consisted of persons withvery low educational level and working in predominantly traditional business activities.Altogether six entrepreneurship training courses, each split into three modules and of aduration of nine days were carried out with a total number of 88 participants, out of which 29trainees had been extensively interviewed with a predefined open questionnaire. Thefindings do not permit a generalization for all Malawian MSE or other training courses run byBEED / LHs but they give an interesting insight into the outcome of the training. On the basisof these interviews the following impact of the training courses was assessed:

Rather strong impact with regard to:

14 prepared by two independent German ASA students

28

Ø more than 50 % indicated increased profits after the training. The figure cannot bequantified. However, all interviewees mentioned that they did not know anything abouttheir profit and loss position before the training;

Ø most of the participants started advertising which was induced by the training. Themethods of approaching potential customers are noticeable;

Ø the training enabled a significant numbers of interviewees to determine the costs on arelatively advanced level;

Ø about half of the business people now base their prices on a cost calculation and startavoiding losses due to the training;

Ø a majority of 2/3 of the interviewees keep records for their business activities. TheCEFE-impact on the book-keeping seems to be striking;

Rather weak impact with regard to:

Ø the impact on increased labour employment is rather incidental than systematic, e.g.one carpenter dismissed three of his four employees as a result of the profit calculationlearnt during the CEFE-training; other businesses started employing people;

Ø market knowledge and marketing competence did not increase significantly. Mostinterviewees still showed a rather rudimentary knowledge of the target group.

Ø the efficiency of production organisation measured by raw material utilization,improvement of production techniques and stock-keeping did not change after thetraining;

Ø although being decisive point in entrepreneurial competence, information-seeking didnot change;

Ø also the general capacity for systematic business planning has not improved;

Ø the training contributed to trainees’ developing a more proactive approach towards theirbusiness environment and general problem-solving, but it did not induce a major shiftwith regard to opportunity-seeking;

In general, the training resulted in a strong impact on specific technical businesscompetencies but clearly less on entrepreneurial attitudes. Obviously, the latter require amuch more profound change in the trainees’ mind-set up which suggests that a single nine-day-training can only be the first step when attempting to change a person’s behaviour on ageneral level. Overall, the course participants were highly satisfied by the training skillsreceived which indicates indirectly that they benefited from it. The study also clearly showsthe difficulty of quantifying impact – e.g. in terms of additional turnover profits or employment– in particular in the framework of businesses which do not provide quantified data and whichhave not been used to do so before the training. So that comparative figures – before andafter training situation – are simply not available.

It can be summarized that the training is contributing to a better performance of businessesand subsequently an improvement of living conditions for the people. The data do not enablethe calculation of cost-benefits. However, the training for altogether 88 people in business

29

who are generally living below poverty line did only cost a total amount of 11.000 USD or 125USD per participant (14 USD per trainee per day).

4. A Commercial Service Program in SurvivalEconomies – Lessons Learnt

BEED was implemented as a very early and pioneering BDS-experience. The intention wasto gain field experience about putting the BDS-ideas into practice. Malawi belongs to thegroup of least developed countries and the BEED-experience can be seen as a prototype fortraining services under similar framework conditions. The conclusions drawn for BDS-realisation show positive but also rather critical aspects. The lessons learnt may contribute toan awareness of the difficulties encountered and a clearer, perhaps more realistic view at thepotential use of the BDS-method in the field.

Furthermore, the management of a project with advanced private and commercialcharacteristics within Technical Assistance resulted in a number of experiments andexperiences which might be helpful for the development of such a project approach ingeneral as well as the implementation of similar projects in the future.

4.1. Commercial Service Network: Franchise Organisation

The basic principle of BDS is the relationship between the facilitator and the serviceproviders. In order to introduce high quality business training in a sustainable manner into theMalawian market, a domestic capacity had to be built up. This was not meant to be done bycreating an institution with in house-resources that would deliver the services. In accordancewith BDS, the project was only to play the role of a facilitator and to refrain from directlyrendering services to the target market.

In most other programmes the project executing agency would limit itself to the qualificationof service providers and then leave their transactions with the target market on their own. InMalawi the sustained link from the facilitator over the providers to the SMEs was aimed at.The rational for applying a franchise system was to give the project an explicitly businesslikestructure and image, ensuring that potential licence-holders and their clients regard BEED asbusiness and not as a subsidized SME-promotion project. The role of BEED as a franchisorwas compatible with the one as facilitator. It included to:

Ø provide licence-holders with the CEFE-product;

Ø build up the training competence among licence-holders;

Ø develop and manage the CEFE-brand on a national level;

Ø promote the market demand for the franchise-product;

Ø assume quality control;

30

Ø carry out product adaptation and development;

Ø provide further training in utilising the product.

BEED behaved like typical franchisors: it offered franchisees the exclusive views of arecognised brand, provided a start up-package for selling and delivering the product, definedthe range of product-utilisation and introduced quality-assurance. But there is an inherentconflict between development and business objectives: a normal franchisor would aim atcontrolling the market standardising the product and somehow monopolising its utilisation. Inthe case of BDS, a programme tries to promote product-diversification and to encouragenewcomers to enter the service-market. BEED as a franchisor and the licence-holders werelooking at a rather closed-shop whereas the cooperation project MSMEP under BDS-aspectswas interested in innovation and broad dissemination. Furthermore, other constraintscomplicated the implementation of the franchise-idea:

Ø franchise-systems are based on continuous and sufficient revenues from the utilisationof the product. This was not possible to create under such circumstances as in Malawi;

Ø the protection of the brand against unlicensed free-riders would have been almostimpossible within the judicial system of Malawi (because of a weak law enforcementstructure);

Ø the interest of licence-holders to continue paying franchise-fees would be bound tocontinued benefits originating from the franchisor. Once the CEFE-qualification isgained, the franchisees’ interest and willingness to pay would become remote;

Ø the assessment basis for the franchise-fee was difficult to establish and almostimpossible to supervise. The franchisees were expected to pay a considerable flatannual flee (500 USD) and on top a contribution for each CEFE-course participant (1USD per day), based on official CEFE-certificates. It was easy for service-providers tosubstitute the certificates and avoid payment. Consequently, the basis for revenues tosustain the facilitator was weak.

Lessons learnt with regard to Franchise as a transaction mechanism are:

a. commercial appearance: high

Franchise clearly supports the effort not to be mistaken as just another developmentproject. Potential business partners are interested under market aspects and see abusiness opportunity. The question is whether the expectation can be justified.

b. manageability and enforcement: difficult if not impossible

The system is based on franchise fees, the cashing of which would require a verydemanding monitoring system. Moreover law enforcement raises exorbitant costs andthe success is rather doubtful. Franchise fees can easily be avoided by fanchisees,once they receive the key qualification.

c. compatibility franchise – local providers: not satisfactory

Franchise basically entitles the franchisee to sell a specific product. On one hand, thisrequires a successful introduction of the product into the market (see below marketing

31

campaign) but also the sales initiative of the franchisees. The independent trainers andconsultancy companies, supposed to be the engine of the system, were not very activein marketing. They rather expected BEED to take initiative and to supply them withbusiness (spoon feeding). In fact, only very few courses were sold.

d. market feasibility: very problematic in survival economies

The targeted micro and small enterprise sector in Malawi is too small and weak to fuelthe franchising system. It consists mainly of survival businesses (>96%), whose profitsare less than 1 US-$ per day, too little to allow them to invest in rather expensive andlong-term oriented training. High donor dependency and subsidies for training has ledto the distortion of the training market. People often expect training to be free or evento be paid a sitting allowance, reducing their willingness to pay for it. Under suchcircumstances franchise does not pay back for commercial service companies.

In general, a franchise-system turned out to be an unviable mechanism to organise thecommercial relationship between facilitator and provider.

4.2. Commercial Service Network: Clearing House Function

After the initial trial period the system was replaced by a Clearing House-arrangement. Firstlybecause of the difficulties with the franchise-system and, more important even, secondlybecause it became clear that a new market strategy had to be adopted. By far the largestpurchasing power and demand for business training services lies in the hand of institutionalclients. It would have been a strategic mistake under commercial and developmentalperspectives not to serve this market. In order still to attain sustainability for the BEED-network, the project management decision was taken to redirect project-efforts to institutionalclients, focussing on corporate, non-governmental and Government organisations, includingdonor agencies and other projects. Supported by the network of trainers, BEED took over therole of a Clearing House which included:

Ø to develop the service offer on the institutional market to negotiate and acquireassignments,

Ø to offer (subcontract or tender) these contracts to the associated CEFE-Trainer networkfor execution, under competition-like conditions based on service quality and best offer,

Ø to customise the product to this specific clientele;

Ø to continue to build up and strengthen the service capacity (further training andadditional ToTs);

Ø to provide necessary training equipment (on a rental basis or for sale), which individualproviders were not able to purchase elsewhere.

The Clearing House structure shows distinct strengths and weaknesses:

+ It explores a more substantial market with better chances for sustainability.

+ It facilitates the service delivery due to a limited number of clients.

32

+ It creates a solid basis for the transaction between facilitator and provider.

+ It professionalizes the provider in a market segment they don’t have access to andgradually allows them to enter into it independently.

+ It enables a feedback mechanism from fieldwork with SMEs to the facilitator who is in aprofessionally accepted position to discuss with institutional clients.

- But on the other side, it also leads to a higher dependence of the providers from thefacilitator.

- It clearly does not comply with the BDS-request for directly transacting with the privatemarket.

- It also directs the attention of the providers away from the SME to the facilitator or,eventually, the institutional client, which can result in a less market oriented servicedelivery if not sufficiently supervised by the facilitator.

Main lessons learnt of the Clearing House System in comparison to the FranchiseOrganisation are:

Ø commercial appearance: high but differentiated

Institutional clients fully understand the commercial intention of an organisation likeBEED but they also suspect a development project or NGO behind it. In some casesthis lead to e certain reserve to assign contracts or the expectation of subsidizedservices. Hence, BEED benefited from the competence safeguarded by the project inthe background but gained more commercial acceptance among clients once theproject faded out. The balance between both aspects is very difficult to make ingeneral. However it is still recommended to hide the donor face as much as possible.

Ø manageability and enforcement: easy and productive but difficult to get started

The Clearing House approach created the basis for an easily manageable businessrelation between facilitator and provider. The facilitator organises the service contractsand can control that the delivery is only done by accredited, suitable members. Theassignment providers for service delivery was planned to be based on internalcompetition and tenders (in the case of larger contracts). In reality, the assignmentswere handed out by rather personal motives which resulted in disputes betweenlicence-holders and with BEED. Only at a later stage, the transactions became morerational.

Yet another and crucial problem is the assignment of a competent owner/managerwhich will be discussed under point 4.8.2.

Ø compatibility Clearing House – local providers: clearly positive

Most providers easily caught the technical aspect of the CEFE training but failed todevelop own sales initiatives. Three aspects are decisive here: (a) private SME clientsare difficult to explore and market demand development lies far beyond capacity ofsmall providers. (b) institutional clients prefer not to deal with various smallsubcontractors. Doors are difficult to open. (c) Trainers and consultants are much more

33

technicians than salesmen. Their ability to initiate contracts only grows slowly and bydoing. A Clearing House facilitator matches ideally the gap between existing demandand potential service competence with considerable benefits for all parties involved.

Ø market feasibility: very problematic in survival economies

Purchasing power and actual demand of institutional clients for qualified SME servicesis abundant – not only in the area of business training. The market is diversified andoffers a wide range of client relationships. It is completely unrealistic to expect that thismarket would collapse in total. As long as the business relations of the facilitator arenot sufficiently diversified, a withdrawal of one client would not cause any harm to theservice business as such. Similar rules apply as with consulting or training firms inindustrialized countries.

The key success factor for the Clearing House and the network lies with the generationof a track record and reputation in the market. Here, the project in the backgroundplays an incremental role: it opens doors for first assignments and shows methods ofcontract acquisition and client relationship management.

Ø BDS – compatibility: high but not pure

The Clearing House approach is market oriented and commercial. It proved to achieveconsiderable output and sustainability, even on facilitator level and under criticaleconomic conditions.

Crowding out does not apply: members of the network are providers in the market, theClearing House is open for new applicants, and other private providers do not exist in asurvival economy like Malawi. Only foreign consultants may suffer from the generateddomestic service capacity.

Dependency does not exist: the market potential by far exceeds the capacity of aClearing House. The question is professional management of a service organisation,also with regard to client diversification and portfolio management. The providersthemselves stepwise develop independence and proved that they can catch marketshares which quickly exceed the segments arranged by the Clearing House itself.

Client focus is the only BDS-sin. The facilitator is oriented towards institutional clientsand the providers towards the facilitator. But as far as SME-expectations areconcerned monitoring data reveals that the target group is highly satisfied by theservices received.

In general, it can be stated that the Clearing House approach is more adequate for servicinglimited markets in survival economies and should be regarded as a powerful tool for SMEdevelopment, also under BDS considerations.

4.3. CEFE as a BDS Tool

For various reasons the project did not start with a general openness in which, first of all,most suitable BDS-tools would have been identified on the basis of a market survey. Trainingwas the task given by the bilateral agreement between Malawi and Germany. CEFE hadbeen chosen due to significant comparative advantages:

34

Ø use of modern methods of adult training;

Ø a proven high rate of business created with a very good portion of businesses survivingthe first three years;

Ø the easiness of dissemination through training of trainers seminars;

Ø the potentially low costs for training per participant enabling, at least in theory, a costrecovery by course fees.

The results achieved by CEFE-training show that it is an appropriate training tool for SME-development under circumstances similar to the ones in Malawi. The evaluation made bymost course participants reveals a high appreciation of method and content. The feedbackgiven by service providers at the end of the project shows the best results for the questions:“CEFE as training approach for adult training”, “Appreciation of CEFE by participants” and“Quality of training of trainers-courses”.

The question is not whether CEFE is a suitable training instrument, but whether:

Ø training is the best choice when thinking of potentially vital business services;

Ø the market segments chosen under developmental aspects are compatible with therequest for financial sustainability;

Ø government or donor organisations, representing the highest purchasing power anddemand, should be excluded from servicing due to BDS-considerations.

Specific lessons learnt with regard to the application of CEFE are:

a) Transfer of CEFE-qualification: easy and successful

ToTs were done within 3 – 4 weeks. Coaching was completed by a competent regionaltrainer (similar experts can be identified through CEFE International in most areasworldwide). The capacity building resulted in 64 trainers of which 45 were accreditedand 25 are active. The capacity to run CEFE ToTs without foreign guidance wasachieved after 3 years.

b) CEFE adaptation: wide range of development done and possible

CEFE was easily adapted with regard to complexity, content, course durations,modules and target groups. Thus, a set of attractive training products has beendeveloped. Until the end of the project the service providers continue to face clearlimitations with regard to an independent product development and the acquisition ofservice contracts. The role of BEED as a facilitator goes on to be a necessarycomponent for the service market.

c) CEFE as brand and commercial product: suitable but with commercial limits

A copyright can be established but will be difficult to enforce legally. GTZ head officefaces difficulties in admitting the right of registering the trade mark and transferring thelegal rights to a private company. Commercialising is confronted with rather highproduction costs (trainers and material).

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d) CEFE appreciation by clients: very positive

Private and institutional clients appreciate the CEFE method. Consequently it has goodcomparative advantages against other business training methods. The problem israther to bring them into a first practical contact with the CEFE experience.

In general, CEFE can be strongly recommended as a training tool for SME-development,once a decision is taken to enter the area of training.

4.4. Market Development: Promotion Campaign

A challenge for BDS-projects in least developed countries typically is the inexistence ofdemand for business services, in particular for training. The development of the supply sideis a rather simple task in comparison to the promotion of demand. In Malawi no supportingtools, like Matching Grant or Voucher Scheme, were at hand nor was it possible to includethem into the project concept. In a very commercial and experimental effort the project chosea strategy like a private commercial company that wants to promote a new product andintroduce his brand on a market. BEED undertook an extensive promotion campaign over aperiod of one year and with a total investment of 50,000 €. A national advertising agency wascontracted to assist BEED in the design of an appropriate national strategy including thepreparation of the campaign, the preparation of the promotion material, the selection ofmedia and, finally, the realisation of the campaign.

Although initially the strategy including all its components seemed to be well adapted to theMalawian market and although it used a substantial amount of resources for the localcircumstances the outcome was far below expectation. As a matter of fact, hardly any privateSME contacted BEED for enrolling in business courses. It was found out that the campaignsucceeded fairly well in disseminating the brand of “CEFE”, but this did not translate into amarket demand. It cannot be assessed whether a continuation of the promotion over a longerperiod of three to four years would have finally resulted in such a demand. But firstly cost-benefit considerations and secondly the lack of finance prevented BEED from doing so.Finally, an ex-post evaluation of the campaign revealed a good number of weaknesses:insufficient market survey beforehand, lack of targeting, unsatisfactory strategy.

The general lesson learnt is:

Ø development of market demand for business training by advertisement: unsuitable

Although Malawi’s market is of a manageable size, the conclusion is that simple mediapromotion is not sufficient to change the basic attitude of traditional SME aboutservices that they do not consider as necessary. The change of attitude lies far beyondthe reach of a marketing campaign and cannot be compared with the “simple”introduction of a tangible product.

In total, it can be concluded that a media campaign is not suitable or sufficient to develop thedemand side for BDS in countries like Malawi.

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4.5. Sustainability at Facilitator and Provider Level

The question of sustainability is always a striking discussion. It can be analysed at fourdifferent levels:

a) SME level: assumed that training induces positive impulses for SMEs, the changeachieved at this level will be sustainable. Ongoing profitability of SMEs is not asustainability aspect for training services since many factors influence the success ofan enterprise which are not tackled by training.

b) Trainer level: here, sustainability is linked with the trainer’s ability to promote his ownservices and to develop his capacity and the products. The experience in Malawi hasshown that by far most of the providers are weak, especially with regard to these twopoints. It can be expected that some of them will develop independence in productdevelopment and marketing over the next years, but a period of one to two years wasnot sufficient for them to do so. Consequently, they need a facilitator that offers thiskind of service to them. As long as other companies are not offering such services –which is the case in Malawi – BEED could continue with his role without distorting themarket. And it would be for the benefit of the sustainability of the providers.

c) Network level: the trainer network came into existence because of the businessrelations created by the facilitator. Until the end of the project the network was notformalised by its members. BEED did not force the providers into an association orsimilar constructions. The reason was not the threat of a potentially competingorganisation but the firm believe that such a step had to be done by the networkmembers themselves. During the final workshop this point was strongly debated butfinally abandoned (at least for the time being), because the trainers did not see asufficient reason for associating. As long as a facilitator like BEED continues itsactivities, this is acceptable. In the very end and if the closure of the facilitatinginstitution would be decided, it seems to be advisable to finally encourage the providersto formalise the network.

d) Facilitator level: even within the BDS-concept it is not expected that a facilitator cansurvive without financial resources from sponsors. The very difference made in Malawiis the attempt to base the sustainability on business transactions and service deliveryand not on a continued budget sponsoring by third parties, i.e. replacing Germanbilateral assistance by other donor money. The intention is to structure the facilitator ina way that it understands itself as a market player who has to have the businesscompetence to survive on the basis of real services and not on donations.

In the case of BEED this process is well advanced. Obviously enough, a substantialinvestment is needed in order to establish the facilitator and to build up the capacity ofthe provider network. But once functioning, the cooperation can withdraw or limit itselfto pure technical assistance (advice but not financial budget contributions). To do so,several prerequisites have to be incorporated in the project strategy:

Ø clear ownership which motivates national entrepreneurs to engage oneself asbusiness manager;

Ø the awareness and competence of this person to manage the facilitator as aprivate business;

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Ø a feasible business plan which the owner can implement with his own resources;

It is not regarded as a problem to hand over the physical assets of the project to the privateowned facilitator as long as it can be assured that they will not be simply sold or misused andthen the business closed immediately. Anyhow, the value of the business does not lie somuch in the equipment, but rather in the know-how and the reputation of the company, thecopyright of an internationally acknowledged trademark and the availability of and access toa well-trained network of CEFE-Trainers.

Still the question that can be asked is why a facilitator should become sustainable andwhether a project could not go “a bridge to far in seeking to make BEED sustainable”15. Theexperience in Malawi gives a number of good reasons to do so:

Ø the providers are not (yet) capable in marketing their own services and / or developingproducts and preparing service proposals;

Ø the institutional market is not interested in negotiating small single contracts with alarge number of individuals or no-name micro service companies;

Ø approaching institutional clients requires a specific knowledge and the establishment ofa market name which would exceed the competence of most small service suppliers;

Ø product development, contract acquisition and handling, and network managemententails a real market value for both sides, the service providers and the clients;

Ø the facilitator plays a real and commercial linking function without which demand andsupply could not match.

Crowding out always constitutes of a possible threat when a facilitator benefits from donorassistance. Within the framework conditions of countries like Malawi this danger can behandled, as long as certain “rules of the game” are observed:

1. The relationship with institutional clients is to be based on business transactions andnot donations. That means that revenues are only gained for executed services.

2. The project is not allowed to subsidize the service contracts in order to increase thecompetitiveness of the service of the network or to succeed in gaining contracts.

3. The network of trainers must be open for newcomers, at least by offering qualificationprogrammes from time to time.

4. It must be surveyed beforehand that a local market for such services is not availableand that the demand of institutional clients cannot be served by domestic capacities.

BEED tried to come as close as possible to this prerequisites and succeeded to establish anetwork with professional capacity in terms of quality and quantity which is attractive for

15 Rob Hitchins, Springfield Centre for Business in Development, Durham, BEED-review missionreport 2001

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institutional clients and seems to be sustainable for the time being (this of course wouldrequire another verification after one or two years).

4.6. Cost Recovery a BDS Principle in Practice

Data available in Malawi does unfortunately not allow to quantify the following conclusion.But monitoring and extensive communication with SMEand trainers support the hypothesis:

Within a direct business transaction between SME aspotential clients and training providers the market reactsaccording to the well-known graph (left side).

But purchasing power of a typical SME in a survivaleconomy like Malawi for items that are not necessary forsurvival is almost zero. Assumed that purchasing powerwould start to be available above poverty line (i.e.earning more than 0,33 USD per household member and

day) more than 80% of all SME would have to be excluded from the service: only 27% of allSME earn more than 0,18 USD per household member and day, still below poverty line (seeabove 2.1.3).

The average stated training cost is between 5 and 12 USD per participant/day. Even if aninterested SME would aggregate and use savings it is unrealistic to assume that he couldand would spend between 25 and 60 USD for a five day course, which would represent onemonth net total earning of his business. And even if an extremely beneficial training couldresult in an increase of earnings of 100% (unrealistic to expect from a five day training

course), the small entrepreneur would still not be in aposition to invest this amount. Nor would he considercredit as an option for financing training.

It is equally unrealistic to expect that training cost couldbe reduced to, say, 1 USD per participant/day, or by 80to 90%.

Business promotion by training simply finds itself in thetrap that demand and offer do not meet, as shown in thenext graph. And believing in BDS as a theory does notclose the gap in practice!

price

quantity

offer

demand

price

quantity

offer

demand

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The situation of the service provision as found in Malawi can also be demonstrated by thefollowing table:

TARGET MARKETS

A B C

Training Market Optionsin a Survival Economy

(BEED – Malawi)pre-defined targetmarket: SME

commercialclients: medium tolarge businesses

partial payment ofservices by thirdparties:institutional clients

1 Pre-definedservices

not cost recovering,not viable undermarket conditions

standard CEFEtraining

contributionmargins attainable

economy of scales

targeted CEFEtraining

attractivecontribution margins

profitability possible

targeted CEFE training

2 Additionalstandardisedservices

contribution marginsattainable

improvedattractiveness ofservices

ex.: Best Game

profitability

establishment of aspecialisedreputation on themarket

ex.: Credit AppraisalTraining

profitability by„double selling“

ex.: ToT or CreditAppraisal Training co-financed by CDG

TYPE

OF

SER

VIC

ES

3 tailor-madespecial offers

contribution marginsattainable but highdevelopment costs

ex.: shortest term,most demandedthematic courses withCEFE

good profitability

attractive for flexibleand competentproviders

ex.: Accountancycourse for XYcompany

high profitability

attractive for flexibleand competentproviders

ex.: credit customerawareness training forIFC

We have different market segments (columns A, B, C) and types of services (lines 1, 2, 3).The project intention is to serve A (SME) with a predefined product (CEFE training). This isthe area most unlikely to attain cost recovery or commercial sustainability. Even if trainingwould be developed only into the areas of highest demand and lowest costs, cost recoveryremained wishful thinking. Only in column B and, in particular, in column C sustainablebusiness transactions can be developed.

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In fact, a BEED had the choices:

Option Consequences

a. stay with the target group and directmarketing (column A)

- lowest outreach

- no sustainability

b. neglect training and move intoprofitable services

- potential crowding out

- low business development impact

c. change to viable commercial clientsand stay with direct marketing(column B)

- neglect of the development target group

- small market

- probable cost recovery and sustainability

d. change to Clearing House andexplore institutional clients

- only few direct transactions with SME

- large output with and for SME by indirecttransactions

- sustainability

Under the assumption that business training yields a positive cost-benefit ratio in SMEdevelopment option d is a productive choice in survival economies with outreach, impact andsustainability.

4.7. Conflict between Project and Facilitator

In the beginning of the project it was a burning issue to decide whether a facilitating agencyshould be established by strengthening an existing organisation or creating a new venture.Finally, the latter had been preferred: there was a choice between Governmentorganisations, NGOs and private businesses to cooperate with, but none of them seemed tobe adequate for implementing the idea of a commercial and market oriented system.

With Government organisations and NGOs the project would have never succeeded toestablish a business-like image and to differ from a great number of development projects inthe country. A private company would have tried to monopolise the service products andrather acted as a provider than a facilitator. Consequently, the option was chosen to createBEED as a private limited company. However, a conflict of interests always existed betweenthe project (MSMEP) and the facilitator (BEED). Additionally, the project manager also wasthe general manager of BEED which leaded to a confusion of roles and a lack oftransparency of the responsibilities. As a matter of fact, it was neither clear inside BEED noroutside (at least not for those who knew that there was a project) which decisions were madein the context of which responsibility. It can be assumed that even for the project managerhimself in this situation it was not easy to clearly differentiate.

This situation resulted in clear difficulties:

Ø The project overshadowed BEED. With most of the resources in its hand the projectfinally made the decisions based on its own development agenda. Certainly there wasa high level of compatibility between commercial and development intentions, butespecially in the case of critical decisions the project side dominated;

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Ø The project support refrained BEED too often from tackling obstacles seriously enough;

Ø The BEED-manager who had been assigned quite at the beginning of BEED did notdevelop a necessary level of ownership. He rather relied on the project andconsequently did not develop into an energetic decision-maker and entrepreneur in thisfunction;

Ø Finally, the desired level of strict commercial approach was not achieved because ofthe project interferences. Even at the later stage, too many contributions were madesimilar to typical development projects instead of real business ventures.

It has to be accepted for the start-up period of the programme that a project and a facilitatorexist simultaneously, even with the same person managing both. In particular, the difficulty tofind a local entrepreneur, complying with the demanding profile for the general managementfunction, made this unavoidable. The lessons learnt imply the following conclusions:

1. The identification of a suitable entrepreneur as the manager of the facilitator must bethe highest priority in the beginning.

2. Once assigned this person must be entitled to take decisions even in conflict with theproject or accepting the risks of failures.

3. Although the facilitator may not be privatised in an early stage, its operations must bebased on a commercial business plan.

4. Since revenues are not yet sufficient for sustaining the structure, financial contributionsare necessary, but they have to be based on services which the facilitator renders forthe project and not on general budget financing. The fees for the services must alsoinclude sufficient margins for overheads and even profits.

5. The composition of the Board (legal requirement for companies) is important andshould consist of business-minded people as well as at least one developmentalrepresentative (the project manager).

In the case of BEED, the earlier termination of the project resulted in the need of transferringthe duties earlier than scheduled. Despite all negative impact arising from the earlytermination, this aspect contributed to a positive strategy change. Today it can besummarized that this step should have been taken much earlier even within a longer lastingproject.

In total, it can be concluded that an even more radical approach towards commercialstructuring would have been for the benefit of the project.

4.8. Project Management Experiences

The project management differed from typical project situations in so far that the strategychosen for implementation was highly commercial and market-oriented. The partner-organisation, in this case BEED, was established as a private limited company. This impliedconsequences for the management in general and property rights in particular. Apart fromthis, several specific experiences have been gained within the project which might be ofinterest for similar programmes.

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4.8.1. Project Management Dilemma

An important lesson was learnt in the context of the double management function for theproject and BEED. The process suffered from a conflict of interests between divergingagendas: the institutional / manpower development process, and the output / impactchallenge. This has two facets:

a) The creation of the domestic management capacity is seen as a high priority of theproject. This would require a careful and rather slowly developing process which wouldallow identifying the right persons, structuring the entity well and developing it incompliance with the absorption capacity of the local colleagues. But on the other hand,output and impact for the target group are expected. The project has to producesomething tangible and visible for the different stakeholders and after all its success israther measured in terms of people trained or business turnover increased thanfacilitator structure under progress. In this situation the project-manager tends to focuson visible results rather than intangible processes.

b) This quickly leads to a dominant role of the manager which is even reinforced by theresources that he commands. It is so much easier for him than for the slowly growinglocal partners to produce benefits. Easily, a mutual silent agreement is concludedwhich increases the power and importance of the expatriate management instead ofthe domestic one. At the end, the system runs successfully but would not survive thetermination of the cooperation.

In the case of MSMEP and BEED this also happened: in the first phase of three years theproject planned to structure BEED and show results in the field. A BEED manager wasassigned, but in practice, the expatriate project manager took control of almost all importantdecisions and initiatives which resulted in an accumulation of functions on the project sideand an insufficient empowerment of BEED as an indigenous structure. The prematuretermination of the bilateral cooperation forced the project – after about 2½ years - to radicallychange roles: domestic management had to be assigned and international management towithdraw gradually from key functions. This change process required another 1 ½ yearsbecause, firstly, it was not easy for all parties involved to give up introduced and well runningprocedures and, secondly, the identification, introduction and qualification on the job of anational manager was a difficult route (also refer to next chapter).

A key question nevertheless remains unanswered: should such project start with the processof structuring and empowerment or with producing relevant results for SME?

Although the process seems to be more crucial it would not work out without results. InMalawi, and probably in most similar countries, a candidate for owning and managing aprivate structure like BEED cannot be found just by presenting the concept and withoutproving how it looks like in reality. Measurable results instead of expectations and promisesare a precondition for finding the right person. Consequently the project manager startsmanaging the local structure. The difficulty is to hand over – not only on paper but in reality.This is not a part of the exit strategy but of the entire cooperation.

The local partners and service providers raised this point as their firmest criticism during thefinal evaluation workshop: “real ownership question was too late tackled, BEED too longmanaged by the project, project overshadowed BEED”. It may look simple, but in acommercial approach the solution is much more complicated than in a “traditional” one. It is

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related to the person who could become manager and owner, a difficult task to fulfil as thenext chapter presents.

4.8.2. Manager / Owner as Crucial Constraint

The process of assigning the manager – and finally owner - of the private facilitator BEEDhad various steps.

1. Start of the project and registration of BEED as private limited company

2. Institutionalisation of a Board - rather under technical cooperation than businessaspects

3. Assignment of a BEED manager with promising profile: successful owner-manager ofa private college in Malawi

4. Structuring and technically strengthening BEED; Franchise System

5. Simultaneously starting the promotion campaign and building up the network with noclear distinction between MSMEP and BEED

6. Field operations, training courses, mainly initiated by BEED to get things running andfor on the job qualification of trainers

7. Change to Clearing House, new marketing concept

8. Decision of complete privatisation of BEED and looking for a future owner–manager

9. Assignment of owner-manager and stepwise transfer of responsibilities

10. Transfer of property titles to new owner-manager; advise to him

11. Termination of project (MSMEP) and continuation of BEED as private serviceorganisation.

Steps one to seven were de facto managed by the expatriate project manager, whichresulted in a growing dependency on the external initiative. The first national manager did nottake over the function due to the project management dilemma. But he finally was moreinterested in owning than in operating BEED with full responsibility.

To find the local manager for this private and commercial facilitator became the key successfactor for the project. Unfortunately, the profile for such a person is complex and seems to beunrealistic for the context: entrepreneurial competence and experience, business-mindedness, independent decision-making, analytical skills, good reputation in the market,conducive behaviour, professional leadership, good understanding of business, finance andmarketing, self-initiative.

Such a person has the best chances to either become a successful entrepreneur or a well-paid officer in donor financed projects. His interest to run a facilitator organisation with aconsiderable risk of failure conflicts with amazing alternatives. In fact, the crowding outphenomena is not so crucial with regard to service providers under typical circumstances of

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least developed countries but with regard to attractive job-offers made by other donororganisations to executive staff in BDS organisations (who regularly look for projectmanagers in Malawian newspapers).

The project had three options:

a. to offer him equivalent income opportunities, as other donors do: But this wouldjeopardise the sustainability of the facilitator, because the project would pay him and hewould regard himself as employee.

b. to wait for the improbable chance of finding a miracle.

c. to significantly reduce the profile to a more realistic level. In practice, the third option isthe most advisable one, but it implies a high level of qualification of the person by theproject, and of risk, because the person in question may finally not achieve the requiredlevel or he might be enticed away by other organisations.

The project finally handed BEED over to a former staff member who showed interest in theopportunity and willingness to run the risk and even contributed with own capital. With only 6months of completely independent operations it cannot be finally concluded whether theassigned manager and owner will be capable to run the facilitator organisation as a privatebusiness. However, first cash flow statements and service contracts and delivery seem to bevery promising.

Lessons learnt and suggestions from the management experiences are:

Ø start looking for a real manager-owner right from the beginning;

Ø don’t wait for his assignment and empowerment until the phasing-out period;

Ø accept risk of failures even with risks of failure,

Ø formulate quantitative output indicators for the start up-phase only very cautiously. Thesuccess of the project could rather be assessed by the level of independence andmanagement competence which local partners develop and attain;

Ø make the distinction between project and facilitator crystal clear; even to the level thatthe secretary, accountant or fax does not work for both,

Ø launch a competition between network members for the position of the owner-managerof the facilitator.

4.8.3. Private Limited instead of Cooperation Project

The creation of a facilitator organisation as private business is not only fascinating andchallenging. It also raises some points that usual development projects are not familiar todeal with. In most cases and countries development projects benefit from considerableprivileges. These create an extraordinary room to move but also reduce chances forsustainability, once the umbrella function of the cooperation agreement has come to an end.

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BEED had been set up quite early as a private limited company. But for the first two yearsand with the project in the background it did not fully comply with all obligations and legalissues that occur. The reasons are all understandable, mainly: financial and administrative.

Main points to consider are (of course they may differ from country to country):

Ø A formal Board has to be established with at least one Board meeting per year and/or ageneral assembly of share holders if applicable. The meeting has to be prepared anddocument according to national law.

Ø The Board only has a formal and legal function. Consequently, its composition is adelicate issue: different to general cooperation practice the Board is not a stakeholderorgan. It shall not interfere in the business management.

Ø The shareholder question has to be clarified. In Malawi, one single shareholder (plusone nominee shareholder) and owner was chosen. Multiple shares can be consideredbut would probably aggravate decision making and weaken the entrepreneurialcharacter of the venture.

Ø The company has to be registered at the Registrar of Companies. This may even be ahighly impressing experience with regard to business creation and later trainingcourses.

Ø The company has to pay income, corporate and value added taxes, i.e. it has to maketax declarations and possibly to hire/subcontract an external public accountant.

Ø In the case of Malawi it has to organise and pay the withholding tax for the assignmentof national consultants.

Ø The company is required to prepare company audits and balance sheets.

These tasks seem to be additional burden for project execution. They are just what all otherbusinesses have to do as well. So the project should refrain from creating an exceptionalspace, which would probably collapse after the project end. Even if it seems so attractive toavoid taxes, to motivate local experts with net salaries, to forget about auditing, balancesheets and the like.

4.8.4. Private Consulting Company as Project Implementing Agent

GTZ was assigned by BMZ to implement the project. GTZ itself decided to subcontract aninternational consulting company after a public tender.16 The procedure of subcontracting iscommon within GTZ, in particular in SME-promotion programmes. The question is whether acommercially oriented project with a private limited company as local executing organisationbenefits from being implemented by a consulting company.

a. Property rights and ownership

16 the contract was won by Luso Management Consult, later on, after a merger, by GFA-ManagementGmbH in cooperation with ifo-institute

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It was feared that GTZ could lose control over privatized property rights and ownership.In theory, the registration of CEFE, a product mainly developed by GTZ, as atrademark on the national market by a consulting company could be abused by thetrademark owner. But the property rights do not constitute an attractive opportunity foran international consultant, at least not on a very limited market like in the case ofMalawi. The profit margins are far below what an international consultant would requireto maintain his own structure. And just monopolising a market by excluding others fromusing a certain product would not make sense for him. The risk of damage in hisrelationship with the contractor (here GTZ) would by far exceed the minimal potentialadvantages.

The best strategy for the consulting company is to implement a successful project witha new strategy which then would form a very interesting reference for new projectopportunities. Consequently, the consulting company is interested to gain professionalexperiences and to structure the strategy in a way that it can be multiplied insubsequent contracts. This way also was chosen by the consulting company inquestion.

The ownership question concerning the equipment procured by the project and used bya private company (BEED) caused some doubts. But as usual, the equipmentremained property of GTZ until the end of the cooperation project when it was handedover to the political partner organisation, in this case, the Ministry of Commerce andIndustry. This situation is transparent, also due to the project accountancy whichincluded an ongoing inventory.

b. Access to a qualified local trainer and consultant network

The investment in building up a qualified local trainer and consulting network could beused by the international consultant for own purposes. The trainer network, of course,forms a potential basis for the consultant to headhunt local human resources. Theconsultant would have comparative advantages, but this would only be restricted toprojects in the country itself. And usually the score that can be gained for thepresentation of local resources is not decisive for winning large tenders. Thus the fringebenefits for the international consulting company remain negligible, in particular whenlooking at the international portfolio of such a firm.

c. Flexibility of project management

For the implementation process the flexibility of a consultant is limited by the outline ofthe technical and financial offer which he submitted during the tender process andwhich forms the basis of a binding service contract. Minor changes certainly can becarried out without problems, perhaps only requiring more administrative clearance, buta more fundamental change in the project implementation would need a timeconsuming discussion with the contractor, in the worst case renegotiation of thecontract. During the project this was not necessary, because the project design wasopen enough for the experimental character of the programme, which represents anessential requirement for similar projects in the future.

d. Contract supervision and coordination

GTZ submitted a binding offer to BMZ for the implementation of the project, but did notattain the same level of supervision and coordination because the contract then was

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implemented by a consulting company. This is a general restriction, and in the case ofMSMEP/BEED the experimental character of the project made the point moresensitive. Both parts are obliged to address more attention to a comprehensiveinformation flow which increases administrative burden. The shortcut between projectmanagement of the consulting company and the person responsible for thecommission (GTZ) is limited. It turned out to be a pragmatic benefit that the projectmanager himself was a GTZ-employee, who was seconded for the projectimplementation. This also created a higher level of confidence between theimplementing parties.

e. Interface with local trainers and consultants

The natural proximity of a private consulting company with the project concept, inparticular the idea of creating a private limited company as project executing agent is aclear advantage. The consulting company is familiar with questions like marketdevelopment and penetration, needs and limitations of service providers and theadaptation of the products for specific clients. International and local consultants speakalmost the same language, whereas GTZ would probably be understood as adevelopment organisation which, also due to its size, would have a larger distance tothe service providers.

f. Tender procedure

The tender-procedure causes delays and additional administrative efforts and costs forGTZ. But it also raises interesting benefits for the contractor: firstly, different projectconcepts can be appraised and the most suitable one chosen. Secondly, thecompeting consulting companies are encouraged to introduce new ideas andinstruments like, for instance, the training programme for business consultants(PROCESS). Thirdly, the financial offer can be very economic. In the case of theMalawian project the offer for the first phase constituted only 2/3 of the total projectbudget which among others enabled the extension of the project by a fourth yearwithout raising additional funds of GTZ. On the other hand, winning a tender alsomeans less flexibility by being restricted to the offer in technical and financial terms: it isextremely difficult or even impossible to change the strategic set-up of the project or tore-allocate financial resources from one budget line to another.

In total, the experiences from BEED Malawi do not show a clear cut position. Variousadvantages arise from the assignment of a consulting company but also disadvantagesoccur. Without arithmetically balancing it seems that benefits prevail drawbacks.

4.9. Evaluation and Conclusions of the Providers

As one of the final activities the project invited all providers of the service network to a finalworkshop with the objectives to evaluate the past and plan the future. The comments madeby the participants in independent group-works focus on the following points which givesome hints for an improvement of project implementation processes in the future. It shouldbe well understood that the statements represent the vested interest of the trainers which arenot completely informed about all points to be considered when building up a BDS system.

Ø the distinction between BEED and project management was criticised;

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Ø the Clearing House function is highly appreciated and seen as a practical support toolfor developing the own business and enabling services for the target group;

Ø the BDS-idea in general is appreciated, but understood to be limited to rather mediumand large enterprises. No crowding out is expected from an organisation like BEED;

Ø CEFE is highly appreciated as a successful and appropriate business training tool. Butthe project focused relatively too much on technical issues and not enough onmarketing;

Ø the major market for the kind of services the network offers is seen with institutionalclients. BEED is confirmed to be necessary for the exploration of this market;

Ø the franchise model is assessed as unviable for training services, even when a brandname is established on the market.

Ø the training of service providers must go in hand with follow up services which wouldenable the providers to gain practical experiences and to start or to enhance this kindof service business;

Ø the network of providers is important and requires a central actor to sustain it, at leastfor the time being.

Ø the communication between facilitator and provider must be highly transparent, basedon regular information. The facilitator must be open for suggestions from the providers.The transparency can be kept internal, it is not a matter of public information;

Ø the selection and accreditation of trainers must follow defined rules so that all personsinvolved can understand the decisions;

Ø the personal development originated by the project is highly appreciated. The providersfeel themselves competent enough to render services, the only weakness remainingthe selling of training courses;

Ø follow up short term events, eventually financed by the German technical assistance,would be highly appreciated, in particular with regard to: advanced ToTs and productdevelopment;

Ø many providers already earn a significant income from CEFE-training courses with agrowing tendency. A good part of the courses is self-initiated.

The participants attended the workshop without sitting allowances or similar paymentsalthough these are quite common in the context of Malawi. They spent up to five days tomake their participation possible. This shows their professional and business engagement intraining services and in the existing network. Despite quite critical discussions betweenBEED and the providers the future role of BEED as a private company under one singleowner was accepted and the continuation of the cooperation confirmed (evaluationquestionnaire see in annex 7).

49

C: ANNEXES: BACKGROUND MATERIAL & PAPERS

50

1. Terms of Reference: Lessons Learnt BEED Malawi

Ziel des Auftrages:

Die umfangreichen Erfahrungen von BEED-Malawi sind zum Abschluss des Projekteserfasst, ausgewertet, systematisiert und dargestellt.

Damit wird ein Beitrag für die Anbahnung und Weiterentwicklung von TZ-Projekten derWirtschafts- und Beschäftigungsförderung geleistet.

Leistungsumfang des Einsatzes

Ø Vorbereitung des Auslandseinsatzes, Studium elektronisch verfügbarer Dokumente

Ø Vorbereitung: Abstimmung mit der GTZ-Zentrale

Ø Besprechung des Konzepts und Berichtsabstimmung mit Projektleitung BEED undBüroleitung GTZ-Malawi

Ø laufende Abstimmung der Vorgehensweise mit dem AV des Projektes

Ø Analyse der Monitoring-Informationen des Projektes

Ø Stichprobenumfrage bei Unternehmen zu BEED und BEED-Dienstleistern*

Ø qualitative Interviews mit Kunden von BEED und BEED-Dienstleistern

Ø Besprechung mit ausgewählten institutionellen Auftraggebern

Ø Vorbereitung und Moderation eines Workshops (ca. 2 (2?!) Tage) mit BEED-Dienstleistern: Auswertung der Zusammenarbeit und Strategieentwicklung zur weiterenDienstleistungsvermarktung

Ø Debriefing vor Ausreise

Ø Erstellung des Berichts

Ø ggf. Bearbeitung des Projekt beurteilungsbogens Wirkungsbeobachtung

Anmerkung: die mit * gekennzeichneten Erhebungen werden in Abstimmung mit demGutachter von BEED durchgeführt. Die Ergebnisse sollen bei Missionsbeginn vorliegen.

Einsatztermin in Malawi

ca. 03.11. – 14.11.2003

51

2. Impact Assessment Survey

Final Version

ImpactAssessment

of 6 CEFETraining Courses

for BZDPMzuzu, October 2003

Office of the District CommissionRumphiMalawi

52

Acknowledgements

We would like to thank Norbert Roesch for his professional support and insight into theworkings of Business Development Services and BEED. Moreover, he guided us through theconsiderable amounts of literature as well as through the world of development projects inMalawi.

We also want to thank Dr. Weyl and the staff of the Border Zone Development Project fortheir very active support.

We are grateful to Saulus Kaunda, CEFE trainer for introducing us to our interviewees.

Finally, Malumbo Chilongo turned out not only to be an interpreter and but also a brilliantanalyst of all nonverbal communication. He has significantly contributed to our understandingof the cultural issues that needed to be considered.

Stephan Knobloch and Birthe Pater

October 2003

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Executive summary

This report evaluates the impact of six CEFE training courses delivered by BEED Ltd. underthe auspices of the SME component of the GTZ Border Zone Development Project (BZDP) inthe Northern Region of Malawi.

The SME component of the Border Zone Development Project experienced two phases.After a review of the first project phase in the end of 2001, the SME component strategy wasaltered. It was decided to phase out its maize mill component and to concentrate activities ontechnical assistance provided by BEED. This provider of business development servicesdelivered a series of six CEFE courses between July 2002 and June 2003. The CEFEcourses aimed at two levels: 1.) enhancing the trainees’ personal entrepreneurialcompetencies and 2.) transferring basic business management skills.

The present study assesses the validity of the following hypothesis: By means ofstrengthening the trainees business management skills and by enhancing theirentrepreneurial attitude the CEFE training courses have improved their businesssituation as well as the employment situation in their enterprises.

To this end 29 qualitative interviews of an approximate length of 90 minutes were conductedwith a sample of participants of all six courses. On the basis of these interviews the followingimpacts of the CEFE training courses could be found:

Results:

§ CEFE training had a positive impact on the business situation of the trainees. Avast majority of CEFE trainees managed to establish their businesses as secondsource of livelihood in addition to farming activities. Half of the businesspersonsinterviewed indicated an increased profit due to the CEFE training.

§ The business management competencies of the participants were significantlyenhanced. The concepts of marketing and profitability were successfully conveyedand have become part of the regular business activities of around half of the training’sparticipants. Many of them have improved their way of approaching customers andfall back on seeking business advice from fellow businessmen.

§ CEFE impacted mainly amongst manufacture businesses like carpenters andtinsmiths and had least effect amongst horticulturists.

§ CEFEs impact on the trainees’ entrepreneurial competency was rather modest.Although trainees became more proactive in their search for new customers, therewas no measurable effect in other strategic areas like problem solving and goalsetting.

Conclusions and Recommendations:

• The current CEFE 1,2,3 module is biased towards manufacture and has tobe redesigned for other target groups

• Changes in entrepreneurial attitude come slowly and will have to befollowed-up

• The market for wood-saving stoves has to be further developed• The continued support for participants should be well-balanced to avoid

dependency on aid

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Table of contents

1 Background 55

2 Project Purpose 552.1 Purpose of the CEFE Training Intervention.......................................................... 552.2 Changes to the Intervention Purpose during Implementation ............................... 562.3 Achievement of the Intervention Purpose............................................................. 56

3 Concept and Design of the Project 563.1 Comparison of Planned and Actual Activities ....................................................... 563.2 Changes In Intervention Concept During Implementation .................................... 573.3 Assessment of the Intervention ............................................................................ 573.4 Continuation after funding .................................................................................... 57

4 Institutional Structure And Target Group Selection 57

5 Methodology of the Impact Assessment 57

6 Impact of the CEFE Training 586.1 Economic Impact ................................................................................................. 586.2 Impact on Business Management Competencies................................................. 586.3 Impact on Entrepreneurial Attitudes ..................................................................... 596.4 Gender................................................................................................................. 596.5 Impact on Different Types of Businesses ............................................................. 59

7 Conclusions & Recommendations 60

Abbreviations

BDS Business Development ServicesBEED Business Expansion and Entrepreneurship Development, Malawian

Private CompanyBZDP Border Zone Development ProjectCEFE Creation of Enterprises through Formation of EntrepreneursGTZ German Technical CooperationMSMEP Micro Small and Medium Enterprise Promotion, GTZ projectSME Small and Micro Enterprises

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Background

The goal of the Border Zone Development Project (BZDP) is to improve living conditions ofthe rural displaced and resettled communities of the border zone around the Nyika & Vwazaprotected areas. This is to be achieved through sustainable utilization of the economical andecological potential of the border zone area.

BZDP follows a multi-sectoral approach, with the Small and Micro-Enterprise (SME)component being a key part of it. The SME component intended to stimulate increased localdemand and better access to SME services by strengthening the capacities of supportinstitutions. In particular, it concentrated on the promotion of sustainable off-farm micro andsmall processing, manufacturing and trading enterprises.

The SME component went through two strategic phases. Initially, the project activities weremostly focused on micro-credit. However, in 2001 Kadale Consultants evaluated the SMEcomponent and revealed a mixed performance. Five different options for the future were setout including the option of closing down the SME component, which at that point had focusedheavily on loans for maize mills.

Ultimately, it was decided to close down the facilitation of loans for maize mills according toan appropriate exit strategy. In addition, the newly planned exit strategy foresaw theprovision of technical assistance by a Business Development Service provider. The revisedcontribution of the SME component to the overall goal of the BZDP was set out in the newproject result:

Entrepreneurs within selected projects and components in the border zonesupported with MSE training and monitoring services.

This impact assessment report concentrates on the impact of Micro and Small Enterprisetraining intervention provided by BEED using the CEFE methodology.

CEFE is an internationally recognized entrepreneurship development methodology that hasbeen developed and promoted across the developing world by GTZ. The traininginterventions were facilitated by BEED in the form of a nine-day CEFE-course to six differentgroups over the period July 2002 to May 2003 with 89 participants, 33 (37%) of them femaleand 56 (63%) male. The training covers technical business management skills andentrepreneurial attitudes, but uses a set of adult learning methodologies that are highlyparticipatory and applicable to Micro and Small Enterprises.

To integrate the intervention with other components of BDZP, the training focused on existingand potential entrepreneurs in the areas of: Infrastructure Building, Water and Sanitation,Biomass Energy Conservation and Fish Farming/Horticulture.

Project Purpose

Purpose of the CEFE Training Intervention

Entrepreneurs are seen as the driving force behind small business development, defined as:

innovative and goal-orientated opportunity seekers willing to work in networks.

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However, the vast majority of small businesses owners can more accurately becharacterized as possessing survivalist attitudes, rather than entrepreneurial ones. Mostsmall business owners have a technical skill, but lack the necessary personal andentrepreneurial skills to market and enhance their businesses. CEFE is an entrepreneurshiptraining package that has been designed to stimulate entrepreneurial thinking and actionalongside appropriate management skills. It has been adapted to the Malawian context byBEED and is delivered in the local vernacular Chi-Tumbuka.

The purpose of this training intervention has been:

to enhance the participants personal competencies and to equip them with the basictechnical management skills that will enable them to improve and enhance their businessesin a sustainable manner.

Changes to the Intervention Purpose during Implementation

There were no changes to the intervention purpose during the period of intervention.

Achievement of the Intervention Purpose

The findings of this impact assessment reveal that the participants of the six CEFE trainingcourses have experienced a major improvement in their basic technical management skills,notably in marketing and profit calculation. However, there has been lesser change in theirpersonal competencies, with improvements mainly in networking and their way ofapproaching customers. Taken together, the improvements in business management skillsand improved personal competencies has resulted in improved business performance,particularly increased profits. In this respect, the intervention purpose has been achieved.

Concept and Design of the Project

Comparison of Planned and Actual Activities

During 2002 and 2003, BZDP contracted seven CEFE courses: during the first phase in 2002three and during the second phase in 2003 four courses. All courses of 2002 were delivered,however, in 2003 only three out of the four courses were delivered. This reduction was dueto the intake of additional services, such as follow-up visits, that had been included alongsidethe training intervention, and it was agreed to offset the additional costs against the forthcourse.

The 9-day CEFE 1,2,3 package consists of three modules:

1. Level 1 enhances the trainees’ personal entrepreneurial competencies (2 days),2. Level 2 transfers/deepens basic business management skills (5 days),3. Level 3 asks the participant to develop a business plan to expand the business (2 days).Successful attendants are awarded a Certificate in SME Management , whilst failedparticipants are given a Certificate of Attendance . Of the 88 participating trainees, 81 (91%)developed a business plan and 77 (87%) were awarded the SME certificate.

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In order to assist the trainees when putting into practice what they had learned during CEFE,follow-up visits to the trainees of the first three courses were planned. Unfortunately, the timeallowed for this exceeded the available time and in the end only the trainees of the first twocourses were finally visited. Such a follow-up was not part of the second contract.

Changes in Intervention Concept During Implementation

There were no major technical changes in the intervention concept during implementation.

Assessment of the Intervention

CEFE 1, 2, 3 has proven to be useful also in the Malawian context, in particular for the BZDPtarget group of existing and potential entrepreneurs, for whom it had originally beendesigned. Its experiential learning methodology is based on the recognition that people learnbetter by doing than being told what to do. It is therefore very appropriate for non-/semi-literate target groups with limited formal education.

There were no major changes to the methodology once the training commenced. The firstand last groups received the same programme. As with any existing training programme,good practice requires it to be adapted to the particular group of participants through atraining needs assessment conducted before the training commences.

The one area where there is a major issue to be addressed is the importance of follow up toensure that participants are able to apply what they have learnt to their individual businesses.This is a value adding activity, but is also costly. The benefits have to be weighed againstthe costs, though some creativity in thinking could also consider more cost effective, locallybased followed or follow up that is integrated into other ongoing BZDP activities.

Continuation after funding

There is no continuation planned for the training following the exit of the Germancontribution.

Institutional Structure And Target Group Selection

BEED is a Malawian training company which had been set up with the support of the GTZ-MSMEP project in Blantyre. The objective of BEED is to sustainably deliver entrepreneurshiptraining based on the CEFE methodology. BEED has a nationwide network of 35 activeCEFE trainers who are associated with BEED, but who also work as independent freelancercontractors.

The target group for the CEFE programme was defined by BZDP and the trainees for the firstthree courses were selected directly by BZDP based on individuals that BZDP had beenworking with. The trainees of the remaining three courses were selected by BEED throughmeetings with potential trainees, which had been organized by BZDP.

Methodology of the Impact Assessment

The purpose of the research was to analyze the impact of the CEFE 1, 2, 3 trainingprogramme within the Border Zone Area. In total, 29 trainees were interviewed, stratifiedaccording to three dimensions: firstly, to ensure the representation of participants from each

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of the courses run; and secondly in relation to gender to ensure an appropriate balance;finally it was tried to balance the different types of businesses.

A questionnaire was designed to examine the competencies that CEFE aims to improve.This was tested and implemented by the team through a local interpreter in chi-tumbuka.These were in-depth interviews that lasted 60-120 minutes providing considerable scope togo into the key issues in detail. This was supplemented by the research team’s ownobservations.

Impact of the CEFE Training

The impact assessment focused on three major levels:

1. Economic Impact2. Impact on Business Management Competencies3. Impact on Entrepreneurial Attitudes

The detailed data is found in appendix 4.

Economic Impact

• Half of the businesspersons interviewed stated that they increased their profit dueto the CEFE training (see Appendix 4). Although only a minority of thesebusinessmen was able to validate their statements with further explanations, thisresult indicates that the CEFE intervention conducted in the Border Zone area hascertainly improved the business situation of its participants.

• There has been a positive effect on employment, although the vast majority of theparticipants still run their businesses without hiring full-time employees. They ratherfall back on family members, ganyu (casual workers) or part-time employees tocontrol costs. After the CEFE training the number of full-time employees increasedfrom 6 to 7 people whereas four more people were involved than before the training.All in all, the vast majority of CEFE trainees managed to establish their businesses assecond – yet rarely predominant – source of livelihood in addition to farming activities.

Impact on Business Management Competencies

The data (see Appendix 4) reveals that the CEFE project has significantly impacted on thetrainee’s capacity to run and improve their business. 50% of them enhanced their marketingand profit calculation skills.

• As a result of the CEFE training more than 50% of the participants has increased orstarted its marketing activities. The majority of the interviewees stated that afterthe training they improved their advertising e.g. by signposts and/or they went over tocontact potential customers personally to get orders.

• 45% of the trainees demonstrated awareness of profit and cost calculation andattributed these skills directly to the CEFE training.

• 62% linked their awareness of different cost categories to the CEFE course.• Twelve out of 25 interviewees (44%) said that they started record-keeping because of

CEFE (but only six of them were actually able to show the books).

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Impact on Entrepreneurial Attitudes

The 29 interviews conducted reveal that the CEFE training courses contribute to thedevelopment of the trainee’s entrepreneurial competencies. It is however a rather modestchange that is mainly concentrated in two areas.

• CEFE helped the trainees to enlarge their information network. Through CEFEaround one third of the interviewees has sought business advice from fellowbusinessmen to solve business problems.

• Again, around one third of all trainees has adopted a more proactive attitude whenapproaching and acquiring customers.

• Concerning the entrepreneurial characteristics systematic planning, goal setting andproduct development the impact found is rather subtle.

Gender

Out of 89 trainees, 33 (37%) were female and mainly self-employed by their own microenterprise, the majority of them involved in stove production and some in horticulture. Thesewomen were mainly trained during the 4th and 5th CEFE course. At first glance, comparingthe impact of CEFE on men and women seems to reveal substantial gender differences. Formen it appears that the level of impact is generally higher. However, it must be said that notso much gender alone but the assignment of a gender type to a certain type of business isresponsible for these differences. Carpenters, tinsmiths, builders, thatchers are all men whilestove-makers and horticulturists are mostly women. Additionally, the former occupations hadbeen supported much longer than the stove production.

Impact on Different Types of Businesses

One of the surprising findings of this assessment is that the impact of CEFE differs betweenthe four groups of business types examined. A positive impact was found in the followingorder

1. Carpenters and Tinsmiths2. Builders and Thatchers3. Stove Producers and Sun-plat makers4. Horticulturists

which is due to the following aspects:

Costing: The calculation of costs turned out to be easier for carpenters with their definedamounts of wood, nails and glue etc. Horticulturists, however, found it more difficult to applythe concept of direct and indirect costs to their products, aggravated by higher productionfluctuations and the need for long term planning.

Market knowledge: Four of nine stove-makers (44%), two of five (40%) builders and threeof five (60%) carpenters were able to segment the market they serve. On the other hand,only one farmer out of seven (17%) was able to do so. When it comes to the ability ofdescribing their competitive advantages the carpenters clearly stood out with three of fivebeing able to do so. This kind of awareness was found in the other groups too, but on arather incidental basis.

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Sales competency: Here the stove producers turned out to be a positive example forCEFE’s impact on its participants’ efforts to market themselves. Seven of nine stoveproducers (77%) and three out of four builders (75%) do proactive marketing, mainly by“going out to where the customer is”. Two third of them stated that CEFE had motivated themto do so. On the other hand, only one out of four (25%) horticulturists does so.

Production capacity: Significant product innovation or improvement was only foundamongst the carpenters and tinsmiths. Three adaptations in production technology werecounted related to the CEFE training. One carpenter for example analyzed his competitors’sofas and subsequently started to build this type of furniture on his own. A tinsmith startedimitating big metal trunks from Zambia and has now developed different models of differentsizes and colors. The other areas seem to be more characterized through standardizedproducts or production techniques.

Conclusions & Recommendations

Manufacture Bias

Technically, the current module CEFE 1,2,3 has demonstrated to be an effective tool toenhance the participants’ business managements skills. However, the course stronglyfocuses on the promotion of small scale production entities in the manufacture sector, inparticular when it comes to costing and pricing. Participants from other sectors likehorticulture however have to face production and sales patterns that differ from this standardtype of business and/or have to deal with longer production cycles. They often do notnecessarily dispose of the capacity to transfer and adapt the acquired CEFE knowledge totheir own business.

Recommendation:

In order to meet the specific training needs of the different trainees; it isrecommended for future trainings only to create groups of the same sector orbusiness type. The appropriateness of the CEFE module should be reviewed for eachgroup and if necessary, adapted. This applies to quality and quantity (length oftraining).

Entrepreneurial Follow-up

CEFE’s impact on business management skills has been higher than on entrepreneurialcompetencies. Apparently, changes on the personal level are more difficult to achieve thanthe adaptation of rather technical knowledge. A single training is not sufficient to perpetuallyachieve behavior change.

Recommendation

Follow-up visits and occasional meetings will be necessary to support the participants ontheir way to apply what they learned during the courses, in particular strategic issues likesystematic planning, goal setting, etc.

Continuing Support for Stove-Makers

However, the manufacture bias does not explain the relatively weak impact of CEEFE onstove and sun-plate producers, as these businesses also belong to the category of small-

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scale manufacturers. Here, it has to be taken into account that this sector is not traditional,had been recently developed and leads back to an intervention by external developmentagencies, who want to promote bio energy saving in the BZ area. Originally trained as stovepromoters, the stove-makers are now required also to commercialize and sell the stoves.Although CEFE contributed significantly to this change, it must be acknowledged that thetime and training given to them has not been sufficient.

Recommendation:

A further follow-up of the stove-makers is important to support them incommercializing their stoves. As before the CEFE training most of them did notseriously consider stove making as a business, the market needs to be furtherdeveloped. This is in particular important as it is an external intervention, which has tobe accompanied for a certain period. One important step will be to further increaseBZ population s acceptance for wood-saving stoves and their willingness to pay for it.

Continuing Balanced Support

Being CEFE’s objective to enhance self-initiative, sustainability and independency amongstits target groups, there is also the risk that intensive care and continuous co-operationdiminish the incentives for autonomous and proactive behavior.

Recommendation:

To balance well the level of support given to the different target groups. This could bedone by defining their level of commitment and the milestones that have to be achievedwithin a certain period. To increase their ownership and in line with common BDSthinking, it is recommended to charge for such services, although not necessarily on acost-recovering basis.

Last but not least and looking back to the beginning of the SME component at BZDP, it canbe stated that the review of the first phase of this component was necessary and that thecriticism was justified. It should also be said that the decision not to shut down thecomponent but to continue supporting the MSEs in the BZ area was also right. This decisionhad been taken before GTZ defined its focal area strategy, under which it was decided toclose down the BZDP prematurely. This is to regret, as the survey has revealed that CEFEhas kick-started a change in business management behaviour amongst its trainees, butwould still need a continuing and targeted follow-up support.

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3. CEFE Training, Accreditation Report

CEFE Training Report:

Accreditation and ProgressReport

forToT 3 CEFE Trainers 2003, Malawi

15 September to 1 October 2003

Prepared bySifiso J. Buhlungu (CEFE Consultant)6 October 2003, Blantyre, Malawi

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Contents

1. INTRODUCTION ........................................................................................1.1. Objective...................................................................................................1.2. Background...............................................................................................1.3. Accreditation Programme..........................................................................

2. METHOD OF ASSESSMENT ....................................................................

3. ACCREDITATION RESULTS ....................................................................3.1. General Observations ...............................................................................3.2. Summary of Trainers’ Performance...........................................................

4. CONCLUSIONS .........................................................................................

5. RECOMMENDATIONS ..............................................................................

LIST OF ANNEXURES .....................................................................................Annexure A: Overall Assessment Criteria for CEFE Trainers .............................Annexure B: Criteria for Trainers’ Facilitation Assessments ...............................Annexure C: Detailed Individual Facilitation Assessment Results:......................

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1. INTRODUCTION

1.1. Objective

The objectives of this exercise were the following:§ To assess the NEW CEFE Trainers according to the standard Accreditation criteria§ To provide training supervision, coaching, and feedback to Trainers on their performance

and areas which needs improvement.§ To advise BEED on the suitability of different Trainers to present specific courses.§ To suggest further capacity building activities where needed.

1.2. Background

After running its Third CEFE ToT in July, BEED realised the need to quickly assess andaccredit the new Trainers in order for them to be ready to take up any training assignmentsBEED expect to get in the near future.The Accreditation process was aimed at ranking the Trainers through the standardised“STAR” Rating. It was also a platform for capacity building and preparing the new Trainersfor more challenging training assignments.

1.3. Accreditation Programme

The Accreditation Programme was run for real paid courses and was planned for all the 30new Trainers covering the whole country. The following is the profile of the coursesobserved:Area Client No. of

Participants

Language used Name of Course

Mwanza NABW 15 Chichewa CEFE Basic BusinessManagement

Chitipa WorldVision

520 Chitumbuka Micro-BusinessManagement Course.

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2. METHOD OF ASSESSMENT

2.1. Facilitation Skills (100%)

Participants were assessed on their facilitation skills. To make the observation of participantsmore methodical, as well as to ensure that the consultant was using the same method ofassessment, a form with a rating scale was used for each of the individuals (Annexure ..).The form listed areas of facilitation competencies for evaluation according to the standardsexpected in the running of any CEFE SLE.

2.2. Knowledge of Learning Content(100%)

The Consultant rated Trainers on their knowledge of the Learning Content and Business andEntrepreneurship Knowledge. The Trainers should demonstrate satisfactory knowledge inthe above areas before one can be given a rate as accredited trainers.

2.3. Personality and Leadership Skills (100%)

The rating is all-inclusive and personality and leadership skills need to be assessed beforeone is given a rating as an accredited trainer.

The ‘star rating’ system indicates the following:

Stars MarkRange

Meaning

(3 stars) 80 –100%

Ready to work independently with a sophisticated targetgroup – up to corporate level. He/ She should be able totake a leadership and administrative role in any training.

(2 stars) 60 – 79% Ready to work independently with a less sophisticatedtarget group – potential entrepreneurs.

(1 star) 50 – 59% Should work with a more experienced facilitator to gainfurther experience.

(0 star) 0 – 49% He/ She is not fit to be a CEFE Trainers

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3. ACCREDITATION RESULTS3.1. General Observations

Trainers were distributed as follows:NABW: Mwanza Training World Vision-FISTE: Chitipa TrainingSouthern ToT-3 Trainers Central and Northern ToT-3 Trainers

NABW: Mwanza:The Trainers were well selected for the Training of Trainers such that most have higherqualifications and are generally above average, as such, their performance was reflectedduring this accreditation process. There was a drastic improvement in their capabilities fromthe time they were last observed during the Training of Trainers course. Most Trainersthoroughly prepared for their sessions and delivered the training using the standard CEFEMethodology. They generally showed a lot of creativity and innovation as they facilitated wellin local languages as they translated a predominantly English course into Chichewa orChitumbuka.

World Vision-FISTE: Chitipa Training:This was one of the most challenging training BEED ever had as it involved an abnormallylarge number of participants. Trainers worked hard to handle large groups of participants in arural set up where they were improvising most learning activities to match the lower literacylevel, the difficult environment and very limited resources at their disposal. Most of thetrainers showed good facilitation skills, innovation and creativity to make this training asuccess.

However, there were other Trainers who need more practice before they can run a CEFEcourse on their own. Others were disadvantaged by their personality, which is not easilycompatible with CEFE Training.

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3.2. Summary of Trainers’ Performance

The following is a consolidated summary of Trainers’ performance:

Key to the Table belowF / S Facilitation SkillsD of K Depth of KnowledgeP and L Personality and Leadership Skills

Facilitator F/S D of K P & L Total outof 300

StarRating

1. 88 92 85 265 «««2. 85 90 88 263 «««3. 85 80 90 255 «««4. 85 78 90 253 «««5. 85 79 88 252 «««6. 86 77 88 251 «««7. 81 90 79 250 «««

8. 82 70 88 240 ««9. 79 80 75 234 ««10. 79 75 77 231 ««11. 80 75 70 225 ««12. 81 70 72 223 ««13. 73 75 69 217 ««14. 76 75 65 216 ««15. 76 52 78 206 ««16. 80 50 74 204 ««

17. 69 61 68 198 «18. 71 54 70 195 «19. 75 60 55 190 «

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4. CONCLUSIONS

The Accreditation of CEFE Trainers from the Third CEFE ToT was generally successful asthe assessments and courses lined up went on as scheduled. Trainers generally performedwell and showed a lot of creativity and innovative skills in their facilitation since both coursesscheduled involved challenging rural target groups.

Though many trainers managed to get two star rating, they still need more exposure in orderto reinforce the CEFE Experiential Learning Cycle and also get used to the demands ofparticipatory facilitation. The three star trainers can not run a CEFE course on their own astheir knowledge of the CEFE Methodology and their personality is still lower than expected.

Trainers were assessed under unequal conditions as two different courses were used foraccreditation. In the first course in Mwanza, thirteen Blantyre-based trainers were paired andgiven one day per pair to facilitate and be accredited. They had more recourse and werehandling fourteen participants, a manageable number.On the other hand, six Lilongwe and Mzuzu-based trainers had completely differentconditions for assessment as they ran the course in Chitipa under a rural environment, withlimited recourses and handling thirty to six participants each, an abnormally big number.This disparity however did not affect the Consultant’s assessment as he considered theenvironment the trainers were operating under.

There were ten trainers from Lilongwe and Mzuzu who did not make it for accreditation asplanned.

5. RECOMMENDATIONS

For future accreditation, all trainers need to be given an equal playing field for assessment soas to dismiss any conditional influences.

Most trainers, especially those with three and two star rating, still need more exposure forthem to master the CEFE Participatory Training Approach.

BEED can still use the three star trainers only as co-trainers

There is still need for BEED to invest in Capacity-Building of Trainers in the following areas:§ Application of The CEFE Experiential Learning Cycle§ Facilitation of Financial SLEs covering all financial topics§ Skills development in SLE Adaptation§ Skills development in SLE Development (only for three (3) star Trainers)§ Code of Conduct and Professionalism

BEED need to organise another training soon in order for the remaining ten trainers to beassessed and subsequently accredited.

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LIST OF ANNEXURES

Annexure A: Overall Assessment Criteria for CEFE TrainersAnnexure B: Criteria for Trainers Facilitation AssessmentsAnnexure C: Detailed Individual Facilitation Assessment Results

Annexure A: Overall Assessment Criteria for CEFE TrainersCriteria Details Marks

AwardedFacilitation Skills These are skills needed to run a CEFE

SLE and an assessment form shown in:Annexure B: below

100%

Depth of Knowledge This is the degree to which the Trainerdemonstrates knowledge inEntrepreneurship and BusinessManagement. The consultant also gavecredit to Trainers with higher BusinessQualifications.

100%

Personality andLeadership Skills

This is the way the Trainer presents him/herself and demonstrated administrativeand leadership skills. This assessment wasentirely based on the consultant’sjudgement.

100%

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Annexure B: Criteria for Trainers’ Facilitation Assessments

CEFE Trainers Accreditation - Assessment Form:Explanation of categories

Facilitator Name:

Criteria Considerations for EvaluationPreparation:Materials Available, organised, set out at start of SLEPrepared ZOPPs & Headings For introduction to topics, generalisation,Questions for processing Thought given to questions and written downSLE review (Knowing SLE) Knowing sequence, giving correct instructionsAdult Learning Theory:Understanding of Adult Learning Theory Shown through interaction with participantsApplying Action/L Cycle Going through all the steps of the cycleCourse Organisation:Matching course outline to level of targetgroup

Kind of exercises and level suitable to targetgroup

Preparation: Room, Materials Seating, audio visual equipment, layout etc.Programme management Is the facilitator achieving the learning and

programme objectives?Time Management Within SLEs, as well as regarding programme

outlineAdaptability / Changing schedule to fitprogress & situation

Reviewing the programme according tofeedback on participants’ needs and level ofunderstanding.

Training CompetenciesCommunication Suitable level; fluency; clear languageListening skills Response to questions and understandingVisualisation Using visual aids to emphasise pointsVoice projection Clear enough with energyUsing suitable training methods; varyingmethods

Use of different methods, Keeping theprogramme interesting and varied

Group control Communicating instructions to whole group,drawing back attention, keeping group focused

Keeping energy and enthusiasm Level of interest and interactionDealing with diversity; different levelsparticipants

Skill at managing interests and level ofunderstanding in a varied group

Conflict management Avoiding conflict by diffusing situation. Notgetting involved in personal (one-way)discussions.

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4. CEFE Trainers’ Directory 2003

(Last Updated 1st October 2003)

Name of Participant Contact Addresses1. Derrick M. Mkandawire BEED MW (Pvt) Ltd.

P. Bag 52BlantyreTel: 01621031/ 01624084Fax: 01621031Cell: 08326274Email: beed-marketing@africa-on-line.net

2. Mtendere Mphatso P.o. Box 605LilongweCell: 09953 674Email: mtendere@sdnp.org.mw

godfreymphatso@hotmail.com3. Hanneck Henry Mdoka P. Bag 526

LimbeCell: 08311722Email: hmdoka@mail.com

4. Matchona Kajobola Phiri P. O. Box 59LilongweTel: 01726520Cell: 09510080/ 09950773Email: mucho1978@hotmail.com

5. Fitina Patience Msiska P. O. Box 1026ZombaTel: 01524154Email: auntnati2000@yahoo.com

6. Andrew Offen Asayile Kalambo Africa Center for AdvancementBox 1203BlantyreCell: 08310065Email: aca_africa@yahoo.com

acamwanaco@hotmail.com7. Malisawo Firestone Raphael P. O. Box 30048

Chichiri, Blantyre 3Cell: 08894683/ 09952642Email: firestonemalisawo@yahoo.com

8. Henry E. Dzinkambani P. O. Box 640BlantyreTel: 01634335Cell: 09944408Email: henry_dzinkambani@yahoo.com

9. Aaron Andrew Gwedeza Blantyre Urban ADPP. O. Box 51496LimbeCell: 08896888/ 08324566Email: agwedeza@hotmail.com

10. Shupikire Kelly Ndala C/O: Mr. E. Mponda

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Banja la MtsogoloP. O. Box 3008BlantyreTel: 08 315 960Email: shupie2005@yahoo.com

11. Jephter Calckins Mwanza MODA ConsultantsP.O. Box 30950Lilongwe 3Tel: 08858666/ 08874344Email: jephter@hotmail.com

12. Wellington M. Nkhoma P. O. Box 30421Capital CityLilongwe 3Cell: 08332413Email: wellington_nkhoma@yahoo.co.uk

13. Bonface Lipato MBK Enterprises & ConsultancyP. O. Box 431 NamiteteLilongweTel: 011274428Email: blipato2000@yahoo.com

14. Grace Mkandawire C/O P. O. Box 1905BlantyreCell: 08841030Email: gracemkandawire@yahoo.co.uk

15. Gabriel B. Kamanga P. Bag 31487, ChichiriBlantyre 3Tel: 01641636Cell: 09917719Email: kmpgo3@yahoo.com

16. Innocent Thomson-Milanzi CLO Blantyre Sec. SchoolP. Bag 10BlantyreCell: 08894881/ 0887758408306595Email: innomil2000@yahoo.com

17. Elijah Kalagho C/O Mrs. C.P. KalaghoNational Bank of MalawiP. O. Box 20MzuzuTel: 01332500Email: elijahedith@yahoo.co.uk

18. Patrick Weston Kaira C/O P. O. Box 108MzuzuTel: 01342265/ 01333937Cell: 08304145Email: patrickkaira@yahoo.co.uk

19. Gift Kambukani Mwale C/O Mr. Wandya MalangeNational Bank of MalawiP. O. Box 945BlantyreTel: 01620622/ 01621649Cell: 08854498Email: kumbukanimwale@yahoo.co.uk

20. Antony Chaulaula Nkhoma P. O. Box 9MzokotoTel: 01330194

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Email:21. Charles W. M. Kadyamaliro Namitete Technical College

P. Bag 5, NamiteteLilongweTel: 01274243/330Fax: 01274330Cell: 08329734Email:

22. Joyce Kambiri Magombo Chitedze L.E.A. SchoolP. O. Box 158LilongweTel: 01795276Cell: 08829268Email: vkamera@hotmail.com

23. Annie Nankhuni Kachigamba C/O Mr. C. KachigambaChipiku Store HeadofficeP. O. Box 296LilongweCell: 09926804Email:

24. George Moogs Kampango Makamo ConsultancyP. O. Box 31302 Capital CityLilongwe 3Tel: 01716586Email: kampangogeo@yahoo.com

25. Malumbo G. Mkandawire Lilongwe City AssemblyPlanning & DevelopmentP. O. Box 30396LilongweTel: 01773144Cell: 08852688Email: malumbomkandawire@yahoo.co.uk

26. Dishon Oliver Mwagomba P. O. Box 379MzuzuCell: 08306800/ 08338547Email: dmwangomba@yahoo.com

27. Linda L. Chilongo P. Bag 52BlantyreEmail: lindachilongo@yahoo.com

28. Isaac Laughter Chibaka Katawa TownshipP.O. Box 1016MzuzuTel: 01334456Cell: 08322273Email:

29. Irene C. Kawonga C/O Mr. G. H. MyolaMzuzu UniversityP. Bag 201Mzuzu 2Tel: 01333575/722Cell: 09204946Email: irenekawonga@yahoo.co.uk

30. Weston Happy Msowoya C/O Mr. C. M. MtawaliNational Roads AuthorityP. Bag B346Lilongwe 3

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Tel: 01752133Cell: 08843908Email: whkmsowoya@yahoo.co.uk

31. Gerald Ngosi Trancon ServicesP. O. Box 2878BlantyreTel: 01622464Cell: 08841823Email: grngosi@yahoo.com

32. Eva Zulu-Joaquim NAHIBAP. O. Box 60544, NdirandeBlantyre 3Cell: 09945315Email: nazuluq@yahoo.com

33. Ethel Chavula Shine Intergrated Pvt. SchoolP. O. Box 51834LimbeTel: 01655995Cell: 08870325/ 09910950 09950309Email:

34. Bonny Zamadunga Wallstreet ConsultP. Bag 357BlantyreTel: 01636287Cell: 08860757Email: hightones@sdnp.org.mw

36. Christina Manyowa C/o Shareworld Open UniversityP.O. Box 2518BlantyreTel: 01 670 150 08 331 305Email: shareworld@shareworld.mw.com

37. Luke Mtambo Tel: 01 641 747 09 232 179

38. Saulos Kaunda Gil Enterprise ConsultantsP.O. Box 355MzuzuTel: 01 331 474 08 306 804

39. Ndindase Kumwenda DEMATP.O. Box 239MzuzuTel: 01 332 423 08 866 752

40. Dorothy Kanongodza DEMATP.O. Box 555LilongweTel: 01 756 376 08 835 319

41. Dorica Lusungu Mkandawire Chithuli InvestmentsP. O. Box 408MzuzuTel: 01333454/ 01334019Cell: 08868422Email: doricachithuli@yahoo.co.uk

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42. Oliva Chawinga DEMATP. O. Box 555LilongweTel: 01756376Email:

43. Mac Kholomana BEED Malawi Pvt. Ltd.P/Bag 52BlantyreTel: 01622 847/ 01621 031/01624 084Email: beed-training@africa-online.net

44. Sifiso J. Buhlungu Global Business ConsultancyP. O. Box 2612MutareZIMBABWECell: 00 263 23 894 518Cell: 00 263 91 903 626Email: sifiso2005@yahoo.co.uk

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5. Franchise Licence Agreement

LICENSING AGREEMENT

THIS AGREEMENT is made on the .. between BUSINESSEXPANSION & ENTREPRENEURSHIP DEVELOPMENT, a Companyregistered under the Laws of Malawi (hereinafter called the Grantor) and

.. another Company registered under the Laws of Malawi (hereinaftercalled the User) witnesseth as follows:-

DURATIONThis Licensing Agreement will be renewable on a yearly basis and shall be re-negotiated each year thereafter.

DEFINITIONFor purposes of this Agreement:-

1.1 The Trademark mean the Grantor s logo as registered under theTrademarks Act.

1.2 The Goods mean the whole Business Training Package which is thesubject matter of the Agreement.

1.3 Commencement Date mean the date on which the Agreement will besigned by both parties.

COMMENCEMENT TERM2.1 This Agreement shall commence on the Grantor and the User appending

their signatures to the contract and is subject to the right of terminationcontained in it.

PERMISSION TO USE3.1 The Grantor grants to Users who have duly signed the Licensing

Agreements an exclusive right during the term of this Agreement to use itsGoods in accordance with the provisions of this Agreement.

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RECOGNITION OF OWNERSHIP AND CONDITIONS OF USE4.1 The User recognises that the Grantor is the owner of the Goods and the

goodwill attaching to the business in the product and services in respect ofwhich they are used and agrees that the Goods and the Grantor s registeredTrademark being the logo shall remain vested in the Grantor s both duringthe term of the Agreement and afterwards.

4.2 The User agrees that it shall give to the Grantor any information as to theUser s use of the Goods which information the Grantor requires.

4.3 Not to use it in its business any other Trademark so resembling theGrantor s Trademark as to be likely to cause confusion and deception.

4.4 Promptly report to the Grantor particulars on any use by any person of theGrantor s Trademark or set up of any goods or services or mode ofadvertising which can amount to infringement of the Grantor s Trademarkor to unfair competition or passing off or any claim by any third party thatthe Trademark is invalid or infringe the rights of any person or are open toany form of attack and provide all necessary information and assistance ifthe Grantor decides that proceedings should be commenced or defended.

4.5 Indemnify the Grantor from and against any cost claim action or demandincurred or suffered by the Grantor as a result of or arising out of the User suse of the Grantor s Trademark unless and except to the extent that anysuch cost claim action or demand arises solely as a result of any act ordefault on the part of the Grantor and;

4.6 At no cost to the User do all such acts and sign all such documents as theGrantor requires for obtaining registration establishing or formalising theUser as a User under this Agreement and where applicable registering thepermitted use on the Trademark registered and on any termination of therights granted by the Agreement cancelling the registration of the permitteduse.

4.7 Not to Apply to the Goods any name of Trademark other than theGrantors Trademark.

4.8 Be involved in the development of promotional campaign conform tospecified quality standards.

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4.9 Provide on a regular basis specified data to the Grantor.

4.10 Pay a licensing fee deferred to 2001 and thereafter payable as follows:-

n corporate fee (trainer) - US$500.00 (1st year)n individuals - US$175.00

4.11 Purchase all products related to the goods as per the Agreement.

4.12 Be involved in development and adaptation of product.

4.13 Accept support programme offered.

4.14 Prepare a provisional business plan.

4.15 Participate in training.

4.16 Buy CEFE Certificates at the following initial rates:-

n Short course (5 - 15 hours) - US$1.00(Fees for short courses for bottom market segment to be revised)n Medium (15 - 40 hours) - US$2.00n Long courses (40 hours) - US$4.00

4.17 The terms and conditions of the Licensing Agreement will be revised inconsultation with License Holders each year. A new licensing document willbe issued in accordance with the amendments made.

THE GRANTOR S UNDERTAKINGS5.1 The Grantor undertakes to promote the Goods through advertising in the

media production of promotional material brokerage services andalignment of other downstream services.

5.2 The Grantor further undertakes license management through networkingand information exchange provision of the Goods logo market protectionand quality control.

5.3 The Grantor further undertakes to engage in product development.

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5.4 The Grantor further undertakes to engage in capacity building throughmarket research organisation development and support for businessplanning and operational planning.

5.5 The Grantor further undertakes to ensure qualification in entreprenuershiptraining entreprenuership consultancy and others.

5.6 The Grantor s undertakings shall not in any way make him liable to theUser.

CONSEQUENCES OF TERMINATION6.1 In the event of termination of this Agreement the User shall immediately

withdraw and deliver up to the Grantor all advertising materials and otherdocumentation relating to the Trademark and the Goods at no cost to theGrantor.

6.2 As promptly as reasonable practicable and in any event within three (3)months of the date of the termination remove the Trademark from allGoods.

6.3 Not afterwards in its business use any trading style trading namecorporate name Trademark or set up so resembling the Trademark and tobe likely to cause confusion or deception.

WAIVER AND VARIATION7.1 The waiver by the Grantor of any breach of any term of this Agreement

shall not prevent the subsequent enforcement of that term and shall not bedeemed a waiver of any subsequent breach.

7.2 No variation or amendment of this agreement or oral promise orcommitment related to it shall be valid unless committed to writing andsigned by or on behalf of all parties.

LAW & JURISDICTION8.1 The Agreement shall be governed by Malawi law and the User consents to

the exclusive jurisdiction of the Malawi Court in all matters regarding theAgreement except to the extent that the Company invokes the jurisdiction ofthe Courts of any other country.

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NOTICES9.1 Any notice to be given under the Agreement shall be in writing and telexed

sent by facsimile or e-mail transmission or forwarded by first class pre-paidregistered or recorded delivered letter post to the receiving part at itsbusiness address as last notified in writing to the other party and shall bedeemed to have been given on the date of the telex facsimile or e-mailtransmission on the day following that on which the notice was posted.

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IN WITNESS WHEREOF the parties hereto have set their respective handsthe day and year first above written.

THE COMMON SEAL of BUSINESS )EXPANSION & ENTREPRENEURSHIP ) DEVELOPMENT was hereunto affixed in )the presence of:- )

.. DIRECTOR

.. SECRETARY

THE COMMON SEAL of _____________ )______________________ was hereunto)affixed in the presence of:- )

.. DIRECTOR

.. SECRETARY

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6. Evaluation of BEED by Trainers – Questionnaire

ASSESSMENT OF BEED AND CEFENovember 2003, by trainers of ToT 1,2 and 3

Score No-3 -2 -1 0 1 2 3

BEED1 BEED management and its capacity to run the CEFE Program 2 4 1 2 9 15 5 39 382 BEED's resources and the manner of use in the program 0 4 0 3 11 12 7 48 373 Marketing coverage done (Areas and range of clients) 1 2 4 2 12 11 3 32 354 Marketing approaches made 3 1 1 2 9 17 3 40 365 The CEFE franchise/ network model used by BEED 1 1 3 4 12 14 3 41 386 Dissemination (public awareness) of CEFE to the public 2 7 5 8 10 4 4 5 407 Volume of assignments BEED generated for trainers 2 4 2 7 8 9 3 19 358 The relationship between BEED and trainers 5 6 2 4 10 9 1 2 379 The selection of trainers (since known, i.e July 2003) 3 4 1 3 9 8 5 22 33

10 The retention of trainers (since known, i.e July 2003) 4 4 2 9 6 6 1 -1 3211 The quality of Training of Trainers courses 2 0 1 0 4 12 18 75 3712 Capacity-building / after ToT support given to trainers 5 2 6 4 6 9 4 11 3613 Reaction by BEED to specific requests from trainers 5 4 2 9 9 4 1 -5 3414 Fees for training services 6 2 5 6 12 4 0 -7 35

Aspect of Evaluation Range of Evaluation Ratings

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7. Marketing Client Contact Memo

Business Expansion and Entrepreneurship DevelopmentVictoria Avenue, Kanabar House, 1st Floor, P/Bag 52, Blantyre, MALAWI

Tel/Fax: (++265) 01-621031, E-Mail: beed@africa-online.net

Client Contact Sheet / Pre-Contract Negotiation

NAME OF CLIENT:__________________________ DATE:_________

Contact Details:

Phone Number Box Email Fax

Location of Meeting:

Time of Meeting:

Meeting Attendants:

Name (Organization and Post)

1.)

2.)

3.)

4.)

5.)

6.)

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SECTION A: Training Objectives

NO. ITEM

1. Overall trainingobjectives

2. Specific areas ofinterest for training

SECTION B: Services

3. Type of Service

4. Trainer(s)

5. Training Material

a.) Heavy Equipment(Softboards,Flipcharts )

b.) Light Equipment(scissors, calculators..)

c.) SLE Equipment(dart boards, )

d.) Consumables

e.) Training Manuals

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SECTION C: Trainee Information

Occupation/ Background

Sex

Age

Education

Language

Religion

6. Type of trainees

Other

7. Training Language

8. Number of trainees

9. Number of courses

10. Selection of Trainees

SECTION D: Training Features

Feature BEED sResponsibility

Client sResponsibility

11. Venue(Provision andpreparation)

12. Duration

13. Training starting day

14. Training days

15. Starting time,finishing

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SECTION E: Logistics

Item BEED sResponsibility

Client sResponsibility

16. Trainersaccommodation

17. Trainers food

18. Trainers transport

19. Traineesaccommodation

20. Trainees food

21. Trainees transport

22. Tea Break andRefreshments

SECTION F: Other Services

Feature BEED sResponsibility

Client sResponsibility

23. Certificates

24. Report

25. Follow-up Services

SECTION G: AOB

BEED recommends that the institutional client charges a contribution fee of the traineeaccording to its ability to pay (minimum is the equivalent of food supplied during thetraining). This is important to test the trainee s serious interest in the training (BDS BestPractice approach).

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8. Service Offer (and Contracts) for InstitutionalClients (Sample)

Business Expansion and Entrepreneurship DevelopmentVictoria Avenue, Kanabar House, 1st Floor, P/Bag 52, Blantyre, MALAWI

Tel/Fax: (++265) 01-621031, E-Mail: beed@africa-online.net

Service OfferBlantyre, 20th March, 2003

Based on the meeting on [Date of Meeting] between BEED, represented by [Name(s)], and

[Client], represented by [Name(s)], BEED presents the following offer.

A.) Service Features

Type of Service Entrepreneurship Training package CEFE 1,2,3

Trainers 2 accredited CEFE-Trainers, one Lead-Trainer (minimum 2 stars) and one Co-Trainer(minimum 1 star)

Training Language English

Product Development

Days of Preparation

Length of Training 9 days

Date of Training The training will be either given consecutively (within two weeks) or on a week-by-week basis (one or two days per week). The exact training schedule must be agreedon before contract signing. The client gives at least 3 weeks notice of course dates toBEED.

Time of Training 8.00 to 12.00, 13.00 to 17.00 including tea breaks.

Training Equipment All necessary training equipment (e.g. softboards, flipcharts, consumables, etc.)including transport to and from the venue will be provided by BEED.

Training Manual A about 50 page training manual in English will be handed out during the traning.

Certificates BEED will hand over to successful participants a certificate in “Small and MediumEnterprise Management”. Failed participants will get a simple attendance certificate.

Training Report Within 1 week after completion of the training a standardized CEFE report will besubmitted to the client.

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submitted to the client.

B.) Trainees

Number of Trainees 30

Selection of Trainees Organized by the client.

Type of Trainees Post secondary students, between 17-24 old, all are able to communicate in English.

Number of Courses 2 (15 in each class)

C.) Venue and Other Logistics

Venue The client assumes organization and cost of training.

Trainees’Accommodation

If applicable, provided by the client

Trainees’ Food If applicable, provided by the client

Trainees’ Transport If applicable, provided by the client

Trainers’Accommodation

If overnight stay is necessary, organisation and costs are to be assumed by the client.

Trainers’ Food If overnight stay is necessary, the organization and costs of breakfast, lunch andsupper has to be assumed by the client.

Trainers’ Transport Organized and provided by BEED

Tea and/orRefreshments

There will be two breaks during the course, one in the morning and one in theafternoon. The organization and costs have to be assumed by the client.

D.) Price and Mode of Payment

Price 170,000.- (one hundred and seventy thousand Kwacha)

Mode of Payment 50% up-front payment 2 weeks before the course starts, final payment (50%) within 5days after completion of the course and submission of the report.

Other follow-up services like training needs assessment, monitoring, impact assessment, etc. aresubject to further negotiations.

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9. Memorandum of Understanding MSMEP and BEED(Sample)

MEMORANDUM OF UNDERSTANDING

This MEMORANDUM OF UNDERSTANDING is made this _______________ day of 2003,between GTZ (represented by Name XXXXXX, address) of the first part, and NameYYYYYY in respect of BEED LIMITED (hereafter referred to as BEED).

Whereas YYYYYYY is the principal shareholder of BEED, a private company limited by shares incorporated tothe Republic of Malawi on 18th August 2000 with public funds and pursuant to a co-operation agreement betweenGTZ of the Republic of Germany of the one part and the Government of the Republic of Malawi represented bythe Ministry of Commerce and Industry of the other part under the Micro-Small-Medium-Enterprise-Project(hereafter referred to as MSMEP).

Now it is hereby agreed between the parties hereto as follows:

1. That upon compliance with the provisions of the Articles of Association of BEED regarding the transferof the shares, all BEED issued shares shall be transferred to YYYYY.

2. That in order to comply with the provision of the Companies Act, YYYYY will nominate a secondnominee shareholder of BEED Limited immediately on receipt of the shares.

3. That MSMEP and BEED continue to work together and co-operate until the end of the projectperiod being dd/mm/yyyy

4. That the MSMEP supports BEED according to what the MSMEP considers as appropriate and that thissupport is likely to be reduced progressively until the end of the project.

5. That YYYYY shall present a viable business plan to GTZ not later than dd/mm/yyyy with a clearbusiness strategy for BEED. It is solely up to GTZ to judge the business plan as satisfactory andsufficient and based on the business plan GTZ will decide whether and how to invest its projectresources to support BEED.

6. That if YYYYY provides a viable business plan for BEED for the period after GTZ has phases outcompletely and if GTZ acceptes the business plan, the remaining unissued shares shall be allottedaccording to the amount of capital that is to be invested into BEED by interested parties, includingYYYYY.

7. A Board of Directors is to be formed and that a representative of GTZ is made a permanent member ofthe Board until the end of the MSMEP project. Two other nominations for competent Board Membersshould be made and a Chairman, Secretary and Public Officer appointed.

8. That all the assets procured by the MSMEP are at the un-restricted disposal of the MSMEP andthat the MSMEP shall decide upon the existence and extent of BEED right to use them.

9. That no dividends on any income of BEED shall be declared until the end of the MSMEP whenall project support for BEED shall have been withdrawn.

10. That all income of BEED shall, during the existence of MSMEP, be re-invested in such activities ofBEED as its Board of Directors may agree upon.

11. That BEED will be liable to pay all taxes and duties that may apply to its status. Anyobligations in this regard should be fulfilled in a timely manner.

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12. That GTZ shall retain its priority rights on the use of the CEFE logo and, thereby, the right towithdraw permission of its use, or to negotiate the terms and conditions of its continued use.

13. That the activities of BEED be guided by its business plan and that this be adjusted inresponse to changing conditions, and in agreement with the Board.

14. That YYYYY continues to be actively involved in BEED to the satisfaction of GTZ and MSMEP.15. That if YYYYY were to be assessed not to be actively engaged in operating BEED, that he would

transfer the shares in accordance with the written instruction of GTZ to a party to be determined, within14 days of such a request.

16. That if by the end of the MSMEP YYYYY decided not to continue BEED or a successor organization ORthe MSMEP comes to the conclusion that YYYYY won t be able to run BEED or its successororganization viably after the MSMEP s phasing out, the MSMEP reserves the right to demand that allequipment that BEED will have acquired by then with the support of MSMEP might have to be liquidatedand to be re-invested into Capacity Building activities of CEFE-Trainers.

Place and Date:

Signature of GTZ-representative XXXXXX:

Place and Date:

Signature of YYYYY: