tagaytay bds conference report

8/9/2019 Tagaytay BDS Conference Report

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PinoyME in cooperat ion with

Mini st e ri o d e A su nt o s E xt e ri or e s y d e C oo pe r a c i o n

AECID

and

F un da c i o n C OD E S P A

Buildin g th e C ap a c i ti e s of

Growth- Oriented Microentrepre ne ur s

Executive Summary

PHINMA Training Center, Tagaytay City,

21-22 May 2009

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CONFERENCEBACKGROUND

Under PinoyMEs (Filipino Enterprise) lead, microfinance institutions (MFIs), non-

government and other social development organizations academe as well as the

various institutions providing marketing, consolidation and distribution gathered once

again to see how to help microentrepreneurs go to the next level and become part ofthe mainstream economy.

This conference with the theme Building the Capacities of Microentrepreneurs was

the second business development services (BDS) WorkshoporganizedbyPinoyMEs

business development services (BDS) working group incooperation with theAgenciaEspaola de Cooperacin Internacional(AECID) under Spains Ministry of ForeignAffairs, andFundacin CODESPA, a Spanish non-government organization.

Strengthening the business fabric through [supporting] microentrepreneurs is of vital

importance, said Mr. Jesus Molina, Coordinator General of AECID. In fact, Mr.

Molina pointed out, sustainable and inclusive economic growth constitutes one of theobjectives to which the Spanish Cooperation has committed itself. Economic growth,

which is aimed at reducing poverty, entails allowing the poor to participate in income

generation, gain access to employment and to the markets of goods and services, he

added.

For Fundacin CODESPA, the theme of this years BDS Conference fell in line with

its own advocacy of strengthening the economic and entrepreneurial fabric of the

Philippines in cooperation with other organizations, explained Ms. Esther Santos,

Philippine Delegate of Fundacin CODESPA. Thus, the collaborative effort of

PinoyME, AECID and CODESPA to stage this BDS conference was a convergence

of minds.

CONFERENCEOBJECTIVES

Boosting the numbers of micro entrepreneurs who can grow their enterprises to

become small or medium sized businesses is the huge challenge facing the whole

industry, explained Mr. Danilo Songco, President/CEO PinoyME Foundation. How

various institutions engaged in BDS and social entrepreneurship for the poor can

work together with successful entrepreneurs to achieve that is the main goal of the

conference. Specifically, the conference aims to:

Review the lay of the land in BDS programs, highlight models that work and

how these may be expanded/replicated Highlight the lessons in BDS delivery and how this can be made more

effective in the long term

Design specific projects that would promote collaboration in expanding andscaling up effective strategies in delivering BDS to microenterprises

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CONFERENCE OVERVIEW

Despite the fact that there is a growing interest in this area, a continuous exchange on

lessons learned and strategic steps toward making BDS more effective was still

lacking. Hence, this conference builds on previous efforts and discussions on BDS.

The conference had three parts. The first part aimed to provide the participants with apanorama of the available BDS programs in the country, who or what organizations

were providing BDS and a range of the BDS models that work and how these may be

expanded or replicated.

The second part centered on the effective delivery of BDS, focusing in particular on

deepening the participants understanding of the value chain and presenting various

programs that show scaling up strategies such as how to sell to the high end market.

Meanwhile, the third part highlighted the successful models in BDS and offered

participants various opportunities to probe the presenters experiences through

business clinics. A new feature in this years conference was the trade fair of products

made by organizations that were being assisted by certain BDS providers.

KEYNOTE MESSAGES

BDS: A powerful tool in poverty eradication

During the keynote address, Dr. Aristotle Alip, Founder and Managing Director of the

Center for Agriculture and Rural Development Mutually Reinforcing Institutions

(CARD-MRI) and Convenor of PinoyMEs BDS Working Group, drew attention to

two key lessons that the industry can learn from three decades of microfinance. First,

business development services or BDS is another powerful tool in poverty eradication

alongside microfinance. Through the financial services that MFIs provide,

microentrepreneurs---also called the missing middle--- are helped to go to the

small, medium enterprise (SME) level. Second, microentrepreneurs can be significant

value chain players and should be supported so they can be integrated into the

mainstream economy like in our neighboring Asian countries, Dr. Alip said.

Through BDS, MFIs, social organizations can assist the microentrepreneurs in

grooming their businesses, stabilizing their income and in generating employment,

Dr. Alip affirmed. Based on CARDs experience and research, about 3-5% of their

members that numbered one million as of June 2009 have the capacity to grow big.

The microentrepreneurs who managed to become SMEs generate an average of 8-15

jobs in their small companies. Hence, BDS should be seen as next to microfinancewhen it comes to eliminating poverty.

Sustaining BDS

Many institutions, however, are afraid to offer BDS over concerns of sustainability. In

CARDs experience, if MFIs are innovative, they would find ways to respond to

clients needs that would contribute in the long term to covering the organizations

costs in providing BDS. Growing microentrepreneurs need access to financial

instruments and management systems. MFIs can take advantage of these opportunities

to offer checking accounts, import-export lines, working capital, and short-term loans

to meet their clients growing business requirements. They can also partner with other

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organizations to deepen its clients access to markets, technology, and modern

management techniques.

Dr. Alip stressed that MFIs should be ready to adapt to these changing new

environments and to the financial requirements of growing entrepreneurs. MFIs

should welcome these developments since growing entrepreneurs require larger loans.Big loans translate to bigger interest earnings, which in turn translate to the MFIs

sustainability.

In response to these developments in BDS, CARD is establishing the CARD-SME

bank. The bank is envisioned to have a different culture, a different psychology of

doing things for what is called the missing middle, that is, those who are neither

MEs nor SMEs.

MEs as significant value chain player

Dr. Alip pointed out that the Philippines neighboring Asian countries like Taiwan,

South Korea, and Malaysia were economically successful because they developedtheir SMEs.

Integrating microentrepreneurs into the mainstream economy by making them

significant value chain players is what we should try to achieve, explained Dr. Alip.

We want to see microentrepreneurs become major suppliers of the big department

stores or construction companies (e.g. hardware, handicraft). In the food industry,

CARD is working to connect the different farmers so that they can bring their produce

to the supermarkets.

A great number of opportunities would unfold even if only 1% to 5% of the estimated

10 to 20% of microentrepreneurs with potentials to move to the next level gradually

evolve to become SMEs. One of one million clients is equal to about 10,000 clients

while 5% is equivalent to about 50,000 clients. In terms of loan amounts, this number

of clients would need an estimated Php250,000 to Php1million pesos, Dr. Alip added.

RPs entire microfinance industrys current outreach stands at 1.7 million. One

percent of this figure corresponds to an estimated 30,000 microentrepreneurs who---if

they grow to become SMEs---can generate thousands of jobs. Dr. Alip explained that

this is how MFIs can make a big difference to the country: Creating a new middle

class through a strong SME sector.

Active collaboration among BDS players

Nonetheless, making BDS effective requires more than a token cooperation among

the various players in the industry namely, the MFIs, the NGOs, the academe, the

business sector, and donors.

The MFIs are crucial in bringing the microentrepreneurs to become SMEs through the

provision of BDS. Donors also play an important part in encouraging and supporting

BDS initiatives since very few funding agencies take innovative risks. NGOs, with

their know-how in governance and management can help MFIs work more efficiently

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and move towards sustainability in their BDS operations sooner. The academe could

contribute by undertaking more research that is adjusted and made more relevant to

the needs of the microfinance industry. Very few MFIs are allocating funds for

research even though the cutting edge in innovation and development is found in

research, Dr. Alip pointed out. The business sectors, on the other hand, have the direct

links to the multinational corporations (MNCs) and therefore, can show the way forthe actual integration of the microentrepreneurs into the mainstream economy.

Active collaboration among these various players is essential in order to review

strategies, share lessons, and collaborate their varying ideas to bring the

microentrepreneurs to the next level.

Building Growth-Oriented Enterprises through an Advocacy

Following Dr. Alips address, Mr. Rommel T. Juan, president ofBinalotFiesta Foods,Inc. then recounted how his company started, grew and developed to become a native

fast food chain. In his account, Mr. Juan also related how Binalots history became a

journey of its advocacy to provide sustainable, value-added livelihood to thecommunity that supplies banana leaves1 to the company. Binalots advocacy resulted

in the setting up ofDangal at Hanapbuhay sa Nayon (DAHON2) Foundation.

Setting up an advocacy

The pioneering example of Binalot showed a novel way of helpingmicroentrepreneurs grow. Should SMEs decide to venture on this path, Mr. Juan gave

several pointers to help them succeed in setting up their own advocacy. Four essential

elements, he said, are needed: (a) the originator who should have his heart for the

whole endeavor, (b) the organizer, (c) the operator and (d) the passion for self-

sustenance.

In choosing an advocacy, SMEs should select a cause they personally believe in. If

possible, it would be more worthwhile if that cause were firmly aligned with their

companys vision since advocacy is a full time job. The meaning and value of the

advocacy must be communicated internally to the whole company, that is, from top to

bottom and to the target recipients. Moreover, the advocacy must offer true

sustainable benefits to the company and to the target recipients. In reality, embarking

on an advocacy is a leap of faith. It requires patience since takes time to bear fruit.

Monetary results do not come instantly. There is no economic value until some

economies of scale has been reached.

For Mr. Juan, the DAHON advocacy was close to the companys vision and it was

close to their heart. The idea germinated in 2006 at the Asian Forum for Corporate

Social Responsibility (CSR) and became a reality in 2007. It provided a win-win

solution for both Binalotand the Nagcarlan community. Binalot was assured of asteady and good supply of banana leaves while the families in Nagcarlan Community,

DAHONs beneficiaries had a ready market for their products, Mr. Juan said.Binalotwas above all a business with an advocacy for Filipino culture and values. The

BinalotDAHON Advocacy really was for Mr. Juan, a leaf of faith.

1Binalotuses banana leaves to package the food products sold in its stores2 Leaf in english

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OPEN FORUM

When one goes into a business, it is always important that one has a passion for

doing business. One needs to enjoy what one is doing. That is the key success factor,

Mr. Juan explained in response to a question from the audience. During Binalots

beginnings, he did not receive a salary. He was fortunate enough to be working for hisfather, who gave him a regular source of income.

Binalotpaid the workers in the DAHON program a premium for their value-addedservices. There were varying arrangements in the workers relations with the

landowners of the land where they sourced the banana leaves. Some families either

paid a small entrance fee or simply had an informal arrangement with the landlord.

There was no danger of over harvesting since the farmers could only get 1-2 leaves

per tree. Every two weeks there was a new sprout to replace the leaves that were cut.

The company planned to replicate the program in communities in the north to avoid

over harvesting in the southern areas.

The best type or variety of banana leaves used by Binalotis what is called Butuan.

This variety of banana has lots of seeds in its fruits that people do not want to eat it.

For this reason, farmers usually harvest theButuan, which has the thickest leaves that

smells good. The company also uses the saba variety.

Apprenticeship is said to be one of the best ways to enhance entrepreneurship. Mr.

Juan, who represented the Association of Filipino Franchisers Inc. (AFFI), assured

everyone that the network or group made up of about 72 SMEs has a strong advocacy

for entrepreneurship in place and welcomed the offer from the Cavite State University

(CSU) to accept its business and management students for on-the-job-training. A

representative from CSU volunteered to help propagate theButuan variety of banana.

KEYNOTEREFLECTIONS

Donors, corporate foundations, wholesale microfinance institutions and non-

government organizations, made up of consultants and providers of enterprise

development services, could learn from the experience of CARD-MRI and BinalotFoods from three perspectives:

The Entrepreneur/Social Entrepreneur (What can be learned from their

experience?)

The Enterprise/Social Enterprise (What can be learned from the enterprise

that they have put up?) The Enterprise/Business Model(What can be learned from their business

model?)

One could become the entrepreneur or one could develop the entrepreneur or learn to

adapt the business models to ones enterprise or institution. One could also network

with the entrepreneur/institution in order to build the distribution of goods to the

markets as key building blocks as in the example ofBinalotoutlets or in the case of

CARD and Smart-Hapinoy stores.

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PLENARY PRESENTATIONS

BDS: The Lay of the Land3

Peace & Equity Foundations Executive Director Ms. Veronica Villavicencio

provided the background of this years BDS conference by expounding on the topics

covered in the previous conference. In 2008, the Bacolod BDS conference tried toanswer four key questions:

o What organizations are offering BDS for Filipino micro enterprises? What

type of BDS de these organizations provide?

o What BDS models work and what needs more work?

o What lessons were learned from these models?

o What are the key opportunities for collaboration?

The Bacolod BDS Conference was an opportunity for various groups or organizations

to present different methods in providing BDS. Some of these provided various

services along the value chain but operated only in specific geographic areas. Others

offered a greater variety of services using volunteer consultants to assist several

microentrepreneurs who only charged out-of-pocket expenses.

Among the BDS providers that specialized in delivery mechanisms like training,

coaching, and mentoring as well as research and consulting were the Philippine

Business for Social Progress (PBSP), Notre Dame Business Resource Center

(NBRC),and the University of the Philippines Institute of Small Scale Industries (UP-

ISSI). The Strategic Development Corporation-Asia (SDC-Asia), along with Taytaysa Kauswagan Inc. (TSKI), the Phil. Amalgamated Supermarkets Association(PAGASA), Uplift Marketing Foundation Inc. (UMFI), and the Catholic Relief

Services (CRS) assisted SMEs in product development, marketing and consolidationand distribution. Pinoydelikasi and Hapinoy Stores presented innovative businessmodels.

BDS continues to evolve. Among the various points of intervention in the value chain

that still needed improvements include how to segment the clients, how to shorten the

lag time between intervention and application given the swift change in the markets

and how to make BDS services sustainable.

Growing MEs: The Secrets of Success4

The Bacolod BDS conference also served to highlight some industry realizations: Providing credit to the microentrepreneurs was not enough

BDS was not a one size fits all solution

BDS was necessary but expensive

Given the costs of providing BDS, Prof. Sibayan underlined the need to offer BDS to

those who will really use it to grow their business or businesses. This requires

selecting the microentrepreneurs who are growth-oriented from among those that are

engaged in livelihood enterprises. These growth-oriented microentrepreneurs make up

3 Presented by Ms. Veronica Villavicencio, Executive Director, Peace & Equity Foundation4 Presented by Prof. Dado Sibayan, University Extension Specialist, UP-ISSI

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about one to five percent of the clients of MFIs.

What characterize these growth-oriented entrepreneurs? They are concentrated on a

particular business, are engaged in the production of value-added goods and use their

business earnings to expand their enterprise. Increasing loan amounts availed of,

growth in savings, asset acquisition, and indications of deferred gratification anddesires for continuous learning are just some of the indicators that set apart the

growth-oriented microentrepreneurs from those engaged in livelihood enterprises,

Prof. Sibayan added.

Models for the Design, Delivery and Monitoring of BDS5

Establishing priorities and making choices in terms of the specific BDS methodology

to use, sustaining the BDS program and monitoring the impact of BDS are just a few

of the challenges facing BDS providers, Mr. Jiji Rodrigquez pointed out.

Aside from those challenges, BDS providers also face other issues: organizationalcapacity, presence competition from other providers offering similar services, and

sustainability. A microfinance institution may be very good in microfinance but

providing BDS requires a different set of competencies and the MFI must examine

whether it has those competencies. It should also consider how it fares in comparison

with other BDS service providers and lastly, especially for NGOs and non-profit

organizations, how to sustain BDS provision.

In the past, organizations have used various type of program which include:

a) Sub-sector led choose sub sectors that show promise of high micro and

small enterprise growth or that generate significant levels of employment

b) Demand led demand for specific services determine the programs

c) Target population led program is focused on a target population

d) Services led replication of services already provided successfully

e) Supplier led direct providers determine what services will be provided

f) Broad economic development driven by cross-sector situations

Many organizations are also beginning to favor the systems approaches and the value

of partnering and networking are also increasing, Mr. Rodriguez stated. There is a

need for market research to find out who needs what, who will buy/pay, and who

already provides BDS. It is also a critical need for BDS providers to know their

clients/beneficiaries (what their needs are, where they are headed, how they can behelped) and how to improve performance monitoring and evaluation.

OPEN FORUMDuring the open forum that followed the first plenary presentations that explained the

past initiatives in BDS, participants requested for further clarification on the meaning

of value chain, systems approaches and business incubation. Simply put, value chain

is the whole link between enterprise and players from the end market and all the way

to the inputs suppliers seen not only from the perspective of one particular enterprise

but even from an industry angle, Prof. Ronald Chua explained.

5 Presented by Mr. Jiji Rodriguez, Former Head, TSPI Business Development Program

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Value chain

The value chain approach is an example of a systems approach viewed holistically or

in an integrated fashion, according to Mr. Rodriguez. One can look at the possible

impacts of the business or a specific business then one can also see what specific set

of interventions were really needed as opposed to other possible interventions that

may or may not work because of the existence of other gaps. A good example of anorganization implementing a value chain approach is the Philippine Business for

Social Progress (PBSP) that has been working on the organic farming of rice,

muscovado sugar and seaweeds. PBSP taught organic farming to a group of farmersonly to realize that giving them farming technology was not enough. Two other

interventions were needed: access to the markets and farm to market roads. Beyond

these two, PBSP also realized that it was essential to look at the farmers need for

information and communication technology, and to examine the whole business

environment, the policy environment as well as the role of the industry and farmers

associations.

Business incubationMs. Villavicencio explained that the concept of business incubation was not discussed

in detail in the previous BDS workshops. However, the Department of Trade and

Industry (DTI) and the Department of Science and Technology (DOST) had a

program where they provided entrepreneurs with assistance in terms of the technical

aspects of production. A franchise association also provided business incubation

support to entrepreneurs who were introducing a new product into the market. The

group offered market research, packaging support in order to help entrepreneurs

introduce new business ideas such as selling balut or duck embryos in 21 different

flavors. The business incubation concept is simply about helping businessmen

introduce new business models or ideas, which means, there are no existing templates

for success.

Business training for women entrepreneurs

Ms. Ellen Soriano from the University of Asia & the Pacific (UA&P) announced that

the Goldman Sachs Group, Inc. in partnership with UA&P has launched a project

called the 10,000 Women initiative, which seeks to provide 10,000 women

entrepreneurs all over the world with business and management know-how. In the

Philippines, some 450 women with businesses of high growth potentials are targeted

to benefit during the five-year program, Ms. Soriano explained.

PartnershipsMs. Maybelle Santos, senior manager in charge of Microfinance and Rural Bank at

Smart Communications, Inc. explained that Smart works with several partners and it

has carried out several business incubations, which they refer to as product

development. Transparency and trust, she underlined were critical in their

partnerships with organizations. She explained that Smart tries to understand the core

business of the client. By leveraging on the core business of its partners Smart is able

to facilitate transparency in its relationships.

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PLENARY PRESENTATIONS: UNDERSTANDINGTHE VALUE CHAIN

o Promoting Pro-Poor Growth Through Value Chain Development6

o SMFIs Integrated Agro-Industrial Zone7

o Understanding the Value Chain: The Mango Industry Perspective8

Open ForumMr. Eduardo Aller of San Miguel Food Inc.s (SMFI) Agribusiness and

Development Operations Group was asked if cassava could be cultivated in wet and

dry climates. SMFI had taught cassava production to farmers with very small lots in

areas that were often affected by the typhoons. Cassava is a root crop that needs good

weather in order to grow, Mr. Aller explained.

A representative from an NGO engaged in running family farm schools that teaches

alternative methods of farming technology to its students asked if his school could

solicit SDC-Asias services to improve its bottled fish products, the schools source of

income for its operations. SDC-Asias interventions, however, are directed at the

industry level, Ms. Nobleza replied. Thus, it could not help the NGO in product

development but she was willing to help the NGO on a personal level to help improve

its production.

Ms. Rowena Zulueta from Iloilo inquired if her organization could be a consolidator

of Guimaras mangoes, acclaimed to be the sweetest in the world and the only type of

mango that is allowed in Australia and the US. She also asked in which type of soil

cassava thrives and what were the possibilities of setting up a partnership with SMC

in order to develop a cassava plantation. Mr. Aller explained that cassava should be

planted in friable soil. He also repeated SMCs need for more consolidators in orderto boost the industry. Assemblers were very welcome to enroll in SMC. Sweet potato

and cassava are really the same. SMC still requires 500,000 tons of cassava, which

can be augmented using sweet potato. Sweet potato is a good crop and it can be

harvested 30 times. The problem lies in the availability of seedlings. It is better, Mr.

Aller said, to plant the tissue culture to avoid deterioration or infecting the crop with a

virus.

Ms. Zulueta related that a number of her organizations members are faced with

production difficulties with the implementation of the Comprehensive Agrarian

Reform Program (CARP). The supply of mangoes or the volume produced locally

could not meet the local and international demands. Mr. Cruz explained that the realproblem faced by the industry is volume. Thus, it would be best if the farmers can go

through a consolidation process. If they are banded together, they can achieve volume

and the exporters or the processors would be amenable to negotiate with them. Engr.

Ambao shared TSKIs experience in micro agriculture in Iloilo and affirmed the

importance of consolidating the farmers.

6 Presented by Ms. Chin Nobleza, Project Officer SDC-Asia7 Mr. Eduardo Aller, Manager, Hectarage Development, San Miguel Food Inc. Agribusiness andDevelopment Operations Group8 Mr. Roger Cruz, President, Philippine Mango Seedling Corp.

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In answer to the question on the cost of production and distribution of sweet potato,

Mr. Aller explained that the cost of sweet potato production depends on the area and

the cost of the tissue culture. Sweet potato has the advantage of being a short-term

crop. It can be harvested after four months compared to cassava that could only be

harvested after 10 months. SMC has the same buying price for cassava and sweet

potato.

He then discussed value price, which is dictated by the end consumers. SMC usually

looks at the price from the processors, from the exporters and the wet markets before

it starts buying from the different farms. SMC buys by lot including the small ones.

SMC, Mr. Aller further explained, deals with all the players, from the growers, the

processors, the traders and the exporters in order to monitor the price. It also studies

the market, the technology; the price movement of the different products related to

production and more importantly, it evaluates the costs of production of the farmers.

Mr. Aller shared that a technique has been developed to delay the ripening of

mangoes.

Someone asked where the cassava planting materials come from. Mr. Aller said that

the golden varieties are the ones commonly used for planting. SMC has a joint

activity with the Department of Agriculture (DA) to develop industrial varieties. In

Luzon, the joint program between SMC and DA has generated 3,000 hectares of land

planted with the industrial variety. SMC hopes to increase the areas to 5,000 hectares.

With regard to organic cassava production, Mr. Aller stated that organic farming of

cassava is effective. In the Philippines, the cost of inputs is very low on a per hectare

basis. In terms of technology, SMC is still in the process of looking for the best

option. It is ready to test that alternative. The cost is still under evaluation.

A participant shared her organizations experience in shipping bananas from Misamis

Oriental such as paying for costs of going through various checkpoints along the way.

It may be a sad reality but these challenges form part of the costs of doing business,

Mr. Cruz pointed out.

DAY 1 RECAP

The plenary presentations presented different models of helping microentrepreneurs

or small shareholders earn more and be better integrated into the mainstream market.

There were several tools or approaches or models that were reviewed. Ms.Villavicencio gave a recap of what were presented in the first BDS workshop. Prof.

Sibayan presented questions that could be asked in order to identify the

microentrepreneurs who have potentials for growth. He also enumerated the

individual traits that characterized these growth-oriented entrepreneurs. Mr.

Rodriguez then provided a synopsis of the various BDS models in use.

In the afternoon, an overview of the Value Chain approach was discussed. There were

various sharing of experiences on using the value chain perspective as a player in the

system, on business incubation and use of technologies, and as consolidators or

processors.

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From the presentations and exchanges during the open forum, the situation of

suppliers also became apparent. Microentrepreneurs specially small holders in

agriculture as well as the small sari-sari stores were fragmented, lacked information

on the markets and technology, were low-skilled and constrained financially.

These microenterprises can be helped in different ways: on an individual basis or atthe firm, sector or industry level. The presentations also showed how BDS providers

could play various roles: as an industry player, industry facilitator, marketing agent

and suport services provider. In terms of markets or product type, the presentations so

far had covered the local and export markets, food, animal feeds and financial

services.

The industries in the meantime were linked to the global markets from the value chain

perspective. Due to globalization, no industry or sector was immune to competition

from the international markets thus, benchmarking enterprises in the same sector in

the global industry was also important.

Key insightsIn summary, microentrepreneurs need two things: access to markets and scale. BDS

service providers, on the other hand, need strategies for dealing with small

holders/microenterprises as well as incentives for the diferent organizations to pursue

BDS provision.

BDS PROGRAMSAND SERVICES: SELLINGTOTHE HIGH-END MARKET

o Specialty Markets: A Creative Way to Reach High-end Customers with

Various Products9

o Bridging the Market Divide: The Advocate of Philippine Fair Trade Inc.

Experience10

In this session, two models on how firms could grow were presented. One approach is

for organizations to aim at helping their clients grow. The other approach is by

partnering with other organizations or working through a network. PinoyME was

cited as an example of an organization that uses the network approach. The panorama

of trading with 36 million clients and establishing a relationship with 1,000 producers

doing the same product with the same quality in the same industry would be

overwhelming.

Ms. Chit Juan, Marketing Head of Echo Store and Mr. Vic Roaring, Executive

Director of APFTI talked about their organizations experience in catering to the high

end markets.

Echo Store

One of the models presented was catering to the specialty or niche markets. Products

sold to these markets were usually bought on perceived value, that is to say, on the

background of the product and not necessarily based on its function. Selling to these

9 Presented by Ms. Chit Juan, Marketing Head, Echo Store10 Mr. Vic Roaring, Executive Director, APFTI

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types of markets require showcasing the products in various ways. Moreover, the

specialty market encompasses not only the Philippines but also the niche markets in

other parts of the world such as Europe where the demand for organic, environment-

friendly product had been there for a long time, Ms. Juan explained.

To help micro and small entrepreneurs cater to the specialty markets, Echo Storesintervenes through what it calls echoteach. Its staff goes around the provinces in

the country to share its experience in marketing, operations, as well as in graphic,

visual, and industrial design. Echo Store also offers product design, product

development and packaging services. It studies the fit of the product with the

market. Does the product satisfy a need? Is the product aligned with trends? Does the

product have the quality that it promised to the customers?

APFTI

The second model presented was the networking approached used by the Advocate of

Philippine Fair Trade Inc. (APFTI), which started as an association of fair trade

practitioners in the country. It has assisted small and medium enterprises (SMEs) atvarious stages of their growth and development.

APFTI assists enterprises using an integrated approach starting from raw materials to

sourcing, product development and design. APFTI helps SMEs build their capabilities

through empowerment trainings and bridging markets through trade linkages and

facilitation. It provides technical assistance that includes Product Development and

Design, Booth Design and Visual Merchandising, Producer-Buyer Matching and

Market Information, Technical Research and Publications and Web-Design and

Desktop Publishing. It also offers empowerment trainingsand capability building

such as Product Development Courses Food and Crafts, Marketing Courses,

Productivity and Quality Management Courses, Enterprise Development Courses, and

Technical Skills Trainings. Market and trade fair facilitation such as Market

Awareness Tours, Trade Fair Participation, and Market Information is also part of

APFTIs services as well as advocacy and networking through Colloquia and

Conferences, E-Bulletin and Fair Trade Audits in addition to business consultancy.

UPSCALING BDS: DEVELOPING GROWTH-ORIENTED MICROENTREPRENEURS

o The TSKI Experience11

o CARD BDS Foundation Inc. (CARD-BDSFI)12

This session looked at the organizations that work with the suppliers. The discussion

focused on how one can set up a BDS program, the challenges, difficulties and areas

of improvement in the current BDS programs.

Engr. Rey Ambao, Director of TSKIs Microfinance Success Institute-Business

Development Services (MSI-BDS) Division and Mr. Julius Alip, Operations Manager

of CARD BDS Foundation Inc. represent two of the biggest MFIs in the country.

11 Engr. Reynaldo T. Ambao, Director, TSKI MSI_BDS Division12 Mr. Julius Alip, Operations Manager, CARD-BDSFI

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Among the key messages of the two speakers with regard to establishing BDS

services were as follows:

a) Top managements decision to establish BDS in the organization should be

strong;

b) There should be deliberate advocacy to get the buy-in among staff and

clients;c) Staff employed in the BDS unit should be competent;

d) BDS service provision should be focused on helping micro entrepreneurs

grow;

e) The organization should foster strong linkages with other institutions

f) The organization should be prepared to overcome the difficulties in integrating

BDS with microfinance operations

Nevertheless, the myriad challenges to BDS provision still remain. These include (a)

sustainability, (b) how to replicate BDS provision to other areas of the organizations

operations, (c) how to included BDS in microfinance performance indicators and (d)

developing new loan products for growing microentrepreneurs.

OPENFORUM

The first question from the audience was, how should one consider BDS: as an

investment or an expense center? How many years will it take before it could become

an income-generating unit? Engr. Ambao gave this advice: Organizations should not

think of BDS as an expense. It is an investment. How long it will take to become an

income-generating unit depends on the direction of the organization and the array of

services it is prepared to offer. More resources should be put in to make the BDS unit

earn in a shorter time.

Mr. Alip added that once the organization has decided on the direction it will take, it

may take at least three (3) years for the unit to develop its capacity to earn and

presuming there is capital to hire a consultant. A donor cannot fund all the

organizations, Mr. Songco declared. It may be possible for the organization to finance

its BDS establishment if it would study its finances. He affirmed that there is a real

return if the organization invests in establishing a small BDS unit. It could even add

value to the MFIs products.

Mr. Jojo Malolos of Smart Communications shared that one of the companys

strategy is to strengthen its linkages with the development sectors. If development

partners understand the organizations vision and mission, he explained, they would

support the institutions goals and programs.

One of the questions centered on how CARD BDSFI treats the income from its BDS

provision given that it is a foundation. Mr. Alip explained that income from the

foundation is ploughed back into the organizations operations. There is no dividend

sharing.

A community organizer asked which set up---a microfinance or a cooperative---will

work better for marginal producers with only Php5,000 capitalization at most in order

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to gain access to capital? Mr. Alip pointed out that microfinance could be one of the

services offered by the cooperative. Another alternative was for the cooperative to tie

up with a microfinance institution. The Center for Community Transformation (CCT),

for instance, provide microfinance to its members whom they call partners. A

cooperative, moreover, enjoys certain tax breaks as provided by the law.

Someone asked where would CARD take its BDS services next given its current BDS

programs? Mr. Alip shared that CARD BDSFI is focused on growing its Hapinoy

program with MicroVentures Inc. and Smart Communications Inc. It would also like

to take its BDS to the industry level by helping its clients in terms of product

development such as packaging, labeling, and other laboratory services.

Ms. Nobleza from SDC Asia related that her institution is running a component of the

BDS as a business. Since SDC Asia is a developmental organization, it starts with

selecting a sub sector of the industry and studies the constraints of that sectors

growth. Afterwards, it looks for the most potential market and where there is a

demand for providers. SDC Asia examines both the demand and supply side of thebusiness. It prepares a business plan to ensure that the service they will provide is

really marketable.

Mr. Songco also pointed out that some of the service providers in the conference are

willing to provide services initially for free. The organizations offer can be a

substitute for donor funding but those availing of such free services should look at the

relationship as a legal business.

PLENARY SESSION: THE NEW MIDDLEMEN. CONSOLIDATING MICROENTREPRENEURS

PRODUCTSTO ACHIEVE SCALE

o The Story of the Association of Negros Producers (ANP)13

o The Hapinoy Ecosystem14

OPENFORUMIn response to a question on how close was the network of Hapinoy stores and

whether it was confined to certain municipalities, Mr. Bam Aquino clarified that only

the number of community stores per area was regulated. He explained that the

maximum is two per town. In Calamba, for instance, there are two (2) community

stores. The community stores are connected to the small sari-sari stores and act as

wholesalers for the smaller stores whether these were Hapinoy stores or not. In termsof asset size, the biggest Hapinoy community store were worth between Php300,000

to Php400,000, Mr. Aquino declared.

Another query for Mr. Aquino was on whether Hapinoy stores could be owned by a

cooperative or an association. He explained that the Hapinoy sari-sari stores ran by

CARD clients were individually owned but other stores were owned by a cooperative

or by an association. Hapinoys regular consumers using a wholesale approach were

the sari-sari storeowners.

13 Ms. Maryann Colmenares, President, ANP14 Mr. Bam Aquino, President, MicroVentures Inc.

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To the question on competing in the international market, Ms. Colmenares of ANP

replied that the global market is big. What Filipino entrepreneurs need to do is to find

their niche and produce the right product for the right market. She pointed out that the

Philippines supplies only two percent of the handicrafts demand in the world. She

urged the conference participants not to think of local competition but about the

competition posed by China and by other Asian countries. Moreover, Filipinohandicrafts manufacturers should focus on collaborating with other local producers in

the country to improve their market share in the global market. Local businesses

should be competitive. Product sales should be market driven, she added.

DAY 2 RECAPWhat are the key messages of the past presentations? Prof. Chua summed it up into

three elements. Knowing the market is the first basic step. Each market has different

requirements. The perspective required for a market for consumer products would be

very distinct from the viewpoint if one were looking at a market that is addressing

institutional or industrial consumers. Understanding the sector is also essential. Echo

store, for instance is all about positioning the products. The Hapinoy program, on theother hand, caters to the mass-market sari-sari store. Finally, to help the

microentrepreneurs increase their income and improve their quality of life; it is also

essential to know them.

There are various ways the institutions can help microentrepreneurs. It can help them

gain access to the markets. The other option is to help the microentrepreneurs

distribute their products and services not only to the local community but also to the

sari-sari stores, stakeholders and the challenge is, helping them get better terms,

similar to what Hapinoy is trying to do.

The main challenge for BDS providers is how to achieve scale in order to make a

bigger impact. One way that BDS providers could try to achieve this is to reach one to

two million clients. On the other hand, BDS providers that are helping firms or

individual entities would be to be more creative in coming out with new ways of

transactions to make the relationships efficient and productive by structuring the

incentives for microentrepreneurs. Are they appropriately motivated? It is essential

for entrepreneurs to know their markets through the markets, their target groups and

their industry sector.

After the various presentations, participants were invited to join the business

clinics or close consultations with the different BDS providers on the followingtopics:

o Product Development15

o Value Chain Development16

o Marketing and Merchandising ME Products17

o Becoming Part of a Sari Sari Store Chain18

15 Mss. Reena Francisco and Jeannnie Javelosa16 Mr. Jonah Nobleza, Enterprise Development Specialist, SDC Asia17 Mr. Steve Cua, President, Phil. Amalgamated Supermarkets Association18 Mr. Mark Ruiz, Hapinoy

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o Value Chain Financing19

CLOSING SESSION: SUMMING UP

To help the participants reflect on the variety of presentations during the two-day

conference, the facilitator provided some reflection-action questions to guide them.

o What new learning/insights did I get from this mornings sessions?

o How can I apply the learning/insights to my work?

o How and who can I collaborate/network with to improve my microenterprise

development?

o What do I want to learn more/know more about /need clarification on/

suggestions/comments?

Among the insights that participants to the conference could take away were the

following key ideas: access to markets; scale and the various ways of scaling up;incentives; knowing the organizations buyer markets and target microenterprises.

Another important lesson for participants was the need to know ones industry sector,

the strategies for dealing with small holders/or microentrepreneurs, the organization

and most importantly, the need to have business sense. How can BDS providers earn?

The key message of the presentations all pointed to the need for understanding the

market as a basic step followed by the need to understand the players in the sectors

then finally, the microenterprises. It is essential to help the microentrepreneurs obtain

better access to the markets starting from the village then helping them reach the

provinces and so on while helping them face the challenges that go with each step.

SUMMARYOF SHARINGDURINGTHE PLENARY SESSIONOF BDS CONFERENCE

I. What Learnings/Insights did participants get from the conference?

Validated the relevance of BDS

o Range (markets) of BDS work

o Existence of various forms/new business BDS models (Hapinoy,

MBS/EDS) that other organizations can replicate/shorten the learning

curve or that can be potential partners

How to improve plan in providing BDS

o Need to choose BDS based on core competence

o Need to partner with other institutions/compliment

o Basics of knowing your target clients/ markets

o Customizing business services

Benchmarking with other organizations

Product development & the need for product consolidation at the local level

Value chain

o Basic concepts, relationship, development, use;

19Mr. Larry Nanagas, Finance Committee Head, PinoyME Foundation & Mr. Danilo Songco,President/CEO, PinoyME Foundation

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o Value pricing for markets

Market familiarity: need to distinguish or differentiate business from personal

relationships

Broadened experience-agri; mfi-agri loan inputs from SMC

Realized the gaps in present engagement of training microentrepreneurs

Many players can integrate/network toward poverty alleviation

The BIGGER you are, the SHORTER the chain (SMC).

II. With whom can institutions collaborate?

Providers of services

o Set up public-private interface e.g.

DOST - Echo Store

TESDA - ANP

DTI - Hapinoy

TLRC - Smart

CLSU - Private universities Communication/Collaboration with various networks

Business opportunities partnerships

Formulate & replicate strategies (TSKI and CARD)

With PCFC/ wholesalers

- More defined indicators

- Access to ground test installation support through variable financing

III. What do participants want or need to know more or be clarified about?

Help in looking for solutions integrated way putting together

More on marketing on how to move products

Management of business, how to avail of services for producers

What scaling up means; the implications, criteria for scaling up

Conference emphasized mainstream markets like supermarkets. Why not

public markets/bazaars (tiangges) for small producers in more small groupdiscussions in subsequent workshops?

More on interventions (alternative/options) that will aid ME/subsistence

livelihood in expanding, diversifying, venturing into enterprises that will be

more sustainable taking that leap ideas that will bring them out of the box

Need more service providers for BDS

Need tried and tested BDS toolso MFIs SDC Asia, SEDPI, UPLIFT, JVOFI

o Wholesalers PCFC

o Regional networks Bicol Microfinance Council, Mindanao

Microfinance Council

Need to strengthen the core competencies of the staff who will handle BDS

Know how certain MFIs grew/lessons learned over time

Packaging product/ physical services in the current trend

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IV. Next Steps

At the national level, participants suggested the following:

Repeat the conference in the regions (e.g. Regional

conferences/seminar or BDS conference in Mindanao)

Look for the marginal producers expand the network Facilitate continued interaction by Workshop participants

o By providing a directory

o By setting up a Facebook account to facilitate continuous

networking/ web-based interaction, distance communication learning

and to strengthen the partnerships

At the individual/organizational level, the workshop participants thought that their

next steps should be:

To work on their organizations staff development

To continue networking To revive ka-entrepreneur

To disseminate information

To put up own BDS or refine organizations BDS

To analyze & watch the trends & use the trend/evolve with the

market (enterprise, entrepreneur) and enable own environment

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tagaytay bds conference report

Documents