pro-poor development of bds markets for micro/small enterprise: kenya voucher program experience...
TRANSCRIPT
Pro-poor Development of BDS Markets for Micro/small Enterprise: Kenya Voucher Program Experience
Presentation to
Pro-poor Market Development Seminar SeriesSocial Capital Thematic Group
by
William F. SteelSenior Adviser, Private Sector
Africa Region, World Bank May 14, 2002
W. Steel: Pro-poor Market Devt 2
Outline
I. Demand-driven Approach to Business Development Services (BDS) for Micro/Small Enterprises (MSEs)
II. Kenya Voucher Program; Performance
III. Impact and Lessons Learned
W. Steel: Pro-poor Market Devt 3
I. Why Business Development Services (BDS) for Micro/Small Enterprise (MSE)?
MSEs play important role in: Poverty reduction and economic growth by
generating employment and incomes Empowerment of low-income workers Development of entrepreneurship & skills
BDS can raise MSE productivity by addressing key constraints:
Low skill levels Weak management, financial accounts, marketing Low level of technology Weak linkages and support systems
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Some Examples of BDS
Training Technologies
Information Consultancy
Advice Communications
Linkages Networking
Non-production inputs from external supplier:
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What Is Market Development?
“Market” refers to transactions between willing demanders and suppliers
Demand: What do targeted clients really want and are willing to pay for?
Supply: More service providers & products focused on target group
Information readily available (needs assessment, services offered, quality)
W. Steel: Pro-poor Market Devt 6
Vision for Demand-Driven Approach to Developing BDS Markets
Diverse range of services adapted to meet demands of large share of MSEs affordably
Decentralized, sustainable provision, largely by private service providers
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Old Supply-driven Approach
Provider looks to government/donor
Government/ Donor
BDS providers (public agency; donor program)
$$$
Beneficiaries
Most private providers left outPrivate BDS providers
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Shortcomings of Previous Approach to MSE Assistance
Old Supply-driven approach: Intervene with services provided or contracted
directly by donor project or government agency Train x number of people in z years
Shortcomings: Potential private providers are crowded out Services not adapted to real needs of clients No sustainability when subsidies run out
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New Demand-led Approach
Facilitation of both demand and supply
Gov’t/ Donor
Training providers
$$$
Clients (MSEs)
Facil-itator
Funds
Subsidy (voucher)
Upgrading
Information
W. Steel: Pro-poor Market Devt 10
Advantages of Demand-Driven Market Development Approach
Increased willingness to pay Better leverage for subsidies
Providers have to adapt methods & content to targeted clients Make services affordable
Services can be sustained and expanded with minimal subsidies
W. Steel: Pro-poor Market Devt 11
Why Vouchers? Demand-driven
Trainee chooses and pays with voucher Encourages private sector to respond
Fills information gap Directory of providers and services
Incentives Reduces cost to clients Reduces risks and raises profits to providers
Transparent way of delivering subsidy to jump-start market development
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II. Kenya Voucher Program for Jua Kali (MSE) Sector
Started just for training in manufacturing: Upgrade skills & productivity in existing micro-
enterprises; mainly self-employed Also: Give women technical skills to start up
Shifted to market development approach Introduced upgrading for training providers
(vouchers for training of trainers) Added vouchers for BDS (mainly small ent’s) MSEs’ own Jua Kali Associations acted as
voucher agents, received capacity-building and training to start savings & credit co-ops
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Implemented Mainly through Private & Non-gov’t Agencies
Management• Needs assessment• Standards• Prequalification/directories• Voucher issuance/redemption• Validation• Evaluation
AssociationsNGOsBusiness
consultingfirms
Privateallocation agencies• Applications• Sell vouchers to
Private trainers,
firmsCraftworkers Public training
institutions
Micro and smallenterprises
VouchersVouchers
VouchersVouchers
Training and business development
service providers
PCO
Ministry
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Kenya Training Voucher Program:Performance 1997-2001 37,606 training vouchers issued,
about 32,606 trained (60% women) [total MSE market in manufacturing estimated at 172,000]
Retarded by slow, delayed flow of budgeted funds, partly due to frequent changes of Ministry & Permanent Secretary (6 in 4 years) Severe delays paying service providers Trainers won’t offer new courses (in
program) till paid for previous ones
W. Steel: Pro-poor Market Devt 15
Demand Response, 1997-2001
Appli-cation forms
issued
Applica-tions
received
Vouchers issued
Training/services
provided
Training programme
85,835 65,000 37,606 32,606
Technology/ BDS programme
2,000 1,100 638 608
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Supply Response, 1997-2001
Allocating Agencies
Number of Applicants
Number Selected
- Training VP 1007 212
- Technology/BDS 400 77
Service Providers
- Training 3400 745
- Technology/BDS 1200 306
W. Steel: Pro-poor Market Devt 17
III. Kenya Voucher Programme:Impact Very positive for those trained Significant increases in employment,
assets and income for enterprises 80% grew their business (13% control group) 61% added business assets (21% control) 59% of women seeking to enter had started a
business Increased willingness to pay cash directly
to providers for subsequent training
W. Steel: Pro-poor Market Devt 18
Kenya Voucher Programme:Unanticipated Benefits Skilled craftworkers (themselves
Jua Kali) emerged as leading training providers: Most-demanded by voucher clients Adapted apprenticeship system to a
more convenient format Some have added training as a
business line Already conducting training outside
voucher program
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Kenya Voucher Programme:Benefits to Private Sector
Jua Kali Associations empowered Provide members with useful information &
vouchers Many have formed SACCOs to help address
financing needs from own resources MSEs recognized as market for BDS
BDS providers in program have formed National Association for Technology Transfer and Enterprise Training
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Drawbacks of Vouchers Complex, costly to set up
SME Dept. has assisted in preparing operational & training manuals for easier replication in other countries
Can distort true market by subsidizing the transactions Better to subsidize needs assessment, market
information, monitoring Subsidies can be used to jump-start market, but
need exit strategy to phase out; however: Subsidies addictive, hard to phase out
W. Steel: Pro-poor Market Devt 21
Lessons Learned Administer in private sector, not through
Government Ministry Provide training-of-trainers and other support to
upgrade TPs, especially those from SME sector Market development works, but takes time
Demonstration effect: Clients willing to pay for further training (=> need to reduce subsidies)
Need exit strategy:• Providers may become oriented toward vouchers rather
than developing better products for mass market • Slow payment in Kenya forced TPs to cater more to the
market, not subsidies