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BDS Market Development
A Training Presented by the SEEP Network and the International Labour Organization’s SEED
Program
BDS Market Development
COURSE GOAL
To help enterprise development specialists understand commercially-oriented business development services (BDS) initiatives and to improve the outreach, cost-effectiveness,
sustainability, and impact of their BDS offerings to micro, small, and medium-sized
enterprises (SEs).
BDS Market Development
AGENDA
Overview
5 Guiding Principles
Practitioner Presentation
Risks & Rewards
Closing & Evaluation
BDS Market Development
LEARNING APPROACHTrainers...
• Facilitate learning;• Draw on participant experience;• Use a variety of learning methods—role plays,
case studies, lectures, games;• Supply reading material; and• Provide practical lessons.
BDS Market Development
OBJECTIVES1. Define / describe general principles of Market
Development Approach to BDS;2. List broad categories of BDS w/ examples;3. Describe key financial sustainability strategies;4. List BDS organizations / appropriate roles;5. Describe BDS market development principles /
strategies; and6. Describe main risks / rewards of BDS market
development strategies.
BDS Market Development
THE MARKET DEVELOPMENT APPROACH
Basic Principles:
1. Impact-centered programs;2. Specific, focused, tailored services;3. Demand-driven services;4. Sustainable Service delivery; and5. Development of competitive, vibrant BDS
markets.
BDS Market Development
Principle 1: Impact-Centered Programs
The focus of BDS programming is to create a POSITIVE IMPACT.
The delivery of business services and the development of service markets are means
toward that goal.
Impact-Centered Programs
What kind of impact does your program seek to achieve?
Sustainability
Out
reac
h
Cost-Effectiveness
Impact-Centered Programs
IMPACT
Impact-Centered Programs
Who does the program serve?
Impact-Centered Programs
SEs...Micro, small and medium-
sized firms, and
small-scale farmers
Success Story
Microenterprise: Ms. Jemima Gyamfi, Caterer and wholesale egg distributor
Country: Ghana
Organization: ILO FIT and Kapital Radio
BDS: SE Radio Programme
Success Story
Ms. Jemima Gyamfi, Caterer and Egg Seller, Ghana
Learned improved book-keeping practices.
“Now no matter how small the amount, I record it. I indicate the date, describe the transaction and indicate the cost. This is helping me to
protect my chop money.” (Her food money.)
Success Story
Microenterprise: Mrs. Mary Adubofour, Retailer, Poultry Equipment
Country: Ghana
Organization: ILO FIT and Kapital Radio
BDS: SE Radio Programme
Success Story
Mrs. Mary Adubofour. Retailer Poultry Equipment
Learned about the importance of BDS and increased her participation in BDS.
“At first I wasn’t used to participating or attending workshops or meetings, but this program has encouraged me. I attend any workshop or meeting that has any bearing
on my business.”
BDS Market Development
Principle 2: Specific, Focused, Tailored Services
Business Development Services must:• Address specific SE wants and needs;• Focus on high-priority issues; and • Be tailored to add high value to SEs.
Specific, Focused, Tailored Services
What are
Business Development Services?
Business Development Services
They Are More Than...
Technical Assistance
FinanceTraining
Business Development Services
Market Access
Technology
Inputs & Infrastructure
Product Development
SE White Paper: Proposals to Improve SE Policy in South Africa
Advocacy
They Are Also...
Specific, Tailored, Focused Services
INSOTEC: Ecuador
Sector: Jeans manufacturing
Strategy: Help MEs improve quality
Services: Buttonholing, embroidery, input and equipment supply.
Outreach: 4,450 in 2000
Sustainability: Break-even in 2000
Principle 3: Demand-Driven Services
Respond to SE wants and needs; Are paid for by SE or commercial
actors with vested interest; Put immediate financial pressure on
supplier to provide relevant services.
BDS Market Development
Demand-Driven Services
SEs pay fees for services
or
SEs acquire services such as advice from buyers or
suppliers as part of a business deal.
Charging Fees
Veterinary Services in Nepal
• CECI/MARD trains entrepreneurs to supply veterinary services to farmers;
• Veterinarians sell services to farmers;
• 40 village veterinarians selling;
• Vets earn profits of 40 - 50%.
Services Through Business Deals
PROARTE, a Nicaraguan handicraft company initiated by MEDA
• Markets traditional handicrafts;• Buys from about 100 rural artisans;• Supplies inputs, product designs, &
training;• Earns 15% profits in 1997.
Mutually Beneficial Services…FIT Business Connect Magazine
• Publishes free business-to-business magazine – circulation 10,000 – in Zimbabwe;
• Financed by advertising revenue from small and large firms with...
• Large firms buying big ads, paying more;• Small firms buying small ads, paying less; and• Micro firms benefiting for free.
Other Financing Strategies
BDS Market Development
Principle 4: Sustainable Services
BDS should be made available to SEs over the long run through financially sustainable
delivery mechanisms, institutions, and markets –
In sum, through the PRIVATE SECTOR.
Sustainable Services
Sustainability depends on:
1) Private sector financing (demand-driven services);
2) Cost-structure in-line with SE and market ability to pay; and
3) Independent, financially viable institutions and delivery mechanisms.
Criteria for Viable BDS Suppliers
• Capacity to deliver services;• Close to SEs in culture, operating environment,
geography;• Low cost structure;• Commercial focus, business culture, accounting
and management systems;• Organizational independence, especially from
donor funds;• Organizational stability; and• Focus on services, SEs, or BDS.
Institutional sustainability more likely when subsidized and commercial
activities are separated.
• Supplier or provider delivers (commercial) services directly to SEs; or
• Facilitator supports the (commercial) supply of BDS by other (sustainable) institutions.
Sustainable Services
Principle 5: Develop Vibrant, Competitive, BDS Markets
Success is: A vibrant, competitive BDS market in
which a range of SEs are accessing a wide selection of BDS supplied by
numerous commercial suppliers that SEs choose to patronize.
BDS Market Development
Donor Service Provider
MSME
Subsidized Program Model
BDS Market Development
Subsidized Program Model
• Donors support 1 or a few providers• NGOs provide free or highly subsidized
services• Small number of SEs gain access to
services designed by Donor/NGO• Program lasts as long as funding is
available.
BDS Market Development
BDS Market Development Model
BDSFacilitator
BDSProvider
BDSProvider
BDSProvider
SE
SE
SE
SE
SE
SE
SE
SE
SE
Commercial OrientationDevelopment Agenda
Donor
BDS Market Development
• Donor or facilitator supports numerous suppliers with TA rather than grants;
• Suppliers are commercially oriented and competing to serve SEs;
• Suppliers provide services SEs want;• Suppliers service numerous SEs;• Suppliers earn profits and provide services
over the long term.
BDS Market Development
BDS Market Development is new, Many questions remain…
3. Who does?
Research and development …Product development
… Delivery of services …Information coordination …
Skills enhancement … Regulation… Advocacy
State
Private sector
(for-profit)Not-for-profit
sector
Business membership organisations
Business networks
4. Who pays?
2. Key supply-side players
1. Market functions
Start with understanding theEXISTING
PRIVATE SECTOR MARKET
for services.
BDS Market Development
BDS Market Consists of…
Supply DemandTransactions
BDS Market Development
BDS Market
Geogr
aphy
Target SEs
BDS Type
BDS Markets are Bounded by …
BDS MARKET ASSESMENT
Why assess markets? What do we do with this information?
Understand current supply and demand; Pinpoint specific constraints / opportunities
SEs face in accessing desired services; and Investigate sustainable service delivery
strategies.
BDS Market Development
Select Appropriate Interventions
MATCH
Constraints to Interventions
Weak Supply
Weak Demand
Few Transactions
Product Development, Capacity Building
Promotions, financing, discounts
Linkage & information services
Vouchers
NetworksBiz.
Links
Product Dev.
Information
Venture Cap.
TATraining
Seven BDS Market Development Strategies
Voucher Programs Training Services in Paraguay
Between 1995 and 1999:
•Provided 30,000 vouchers to •13,700 microenterprises purchasers•Over 40 private sector suppliers.
50% off!
BDS Market Development
Information ServicesFIT ILO SE Radio Program
Since 1999: Reaching over 300,000 SEs; Changing policies, helping SEs improve
business practices and reach new markets; Broadcasting commercially viable programs; Costing under $100,000 (total program).
BDS Market Development
SE Cluster and Network Development UNIDO
• Helps groups of firms access services in Honduras, Nicaragua, Mexico, Jamaica, and India.
• Knitwear producers in India approached ITC training to adapt course to their needs – 500 firms reached.
• Membership fees sustain the groups.
BDS Market Development
Business Linkages
Manicaland Business Linkage Project
• Facilitates sub-contracting from large to small firms
• 1996-2000: 110 linkages, 1,000 jobs
• Large firms mentor small firms.
BDS Market Development
Technical Assistance to Suppliers ACDI/VOCA Training and Technical
Assistance to Polish Business Support Organizations (BSOs)
Project strengthened supply and demand for Business management training and consulting services;
Project trained 38 BSOs, 131 consultants, 223 SEs in
Trainers and consultants served more than 30,000 clients on a commercial basis.
BDS Market Development
Product Development and Commercialization
IDE – Irrigation Technology: Treadle Pumps
• IDE designs pumps & trains manufacturers and distributors;
• Bangladesh in 2000: 65 manufacturers, 700 dealers, 5,000 installers sold more than 1 million pumps.
BDS Market Development
Social Venture Capital: MEDA & PROARTE in Nicaragua
• MEDA & individuals invested venture capital in PROARTE,
• PROARTE marketed traditional Nicaraguan crafts for 100 producers in 1997.
• MEDA plans to disinvest over time.
BDS Market Development
BDS Market Development
From this experience, and applying basic market thinking, a set of
guiding principles has emerged.
Although not all examples represent all principles,
these are the principles to strive for!
GUIDING PRINCIPLES
Focus:
Target interventions to address BDS market constraints.
GUIDING PRINCIPLES
Tread Lightly:
Minimize interventions to avoid BDS market distortions.
GUIDING PRINCIPLES
Supply DemandTransactions
Inte
rven
e he
re!
NO
T h
ere!
Inte
rven
e he
re!
Provide market assessment, training, TA – not direct services.
GUIDING PRINCIPLES
Promote Competition.
Develop a range of suppliers and service products in the same market – offer SEs choice.
GUIDING PRINCIPLES
Develop business relationships with suppliers,
mutually beneficial contracts, not grants for direct services to SEs.
GUIDING PRINCIPLES
Remain Flexible to Rapid Change,
in SE markets and in BDS markets.
GUIDING PRINCIPLES
Coordinate with other BDS Stakeholders.
Suppliers offering subsidized services undermine efforts to develop BDS
markets.
GUIDING PRINCIPLES
Develop a clear exit strategy.
Plan to leave behind a vibrant, competitive, BDS market.
Do the programs presented use the guiding principles?
BDS Market Development
BDS Market Development
PRACTITIONER PRESENTATION
Risks & Rewards of BDS Market Development
BDS Market Development
Risks & Rewards of BDS Market Development
BDS Market Development
BDS Market Development
OBJECTIVES
1. Define / describe general principles of Market Development Approach to BDS;
2. List broad categories of BDS w/ examples;3. Describe key financial sustainability strategies;4. List BDS organizations / appropriate roles;5. Describe BDS market development principles /
strategies; and6. Describe main risks / rewards of BDS market
development strategies.
BDS Market DevelopmentTHE MARKET DEVELOPMENT
APPROACH
Basic Principles:
1. Impact-centered programs;2. Specific, focused, tailored services;3. Demand-driven services;4. Sustainable service delivery; and5. Development of competitive, vibrant BDS
markets.
Resources• www.seepnetwork.org/bdsguide.html
• http://www.ilo.org/public/english/employment/ent/sed/bds/seminar/index.htm
• http://www.ilo.org/public/english/employment/ent/sed/bds/donor/index.htm
BDS Market Development
BDS Market Development
A Training Presented by:
The SEEP Network
and
The International Labour Organization’s SEED Program