The world experimented Capitalism as advocated by
Adam Smith. Later as a reaction to it Communism and Socialism were
introduced. These could not even last upto one century. Now mixed
economy featured with P3 (Public Private partnership) is the talk of
the day and is being implemented with free enterprise spirit. One
wonders whether this will achieve success or not.
Development and promotion of SMEs is the crying
need of today. There is an urgent requirement for planners and all
stakeholders to have a fresh look at the scope and spectrum of
services to be provided to SMEs. This will revitalize the economy of
various countries including developing countries. This piece looks at
the current world socio-economic systems, presents rationale for
services to be provided to SMEs, shares three categories of
experiences relating to services for SMEs in one selected corporate
sector, nine countries/areas and the World Bank and finally urges
South Asian Federation of Accountants (SAFA-Apex body of SAARC) to
take the initiative of embarking up a research in this area to develop
a model for SAARC countries.
WORLD SOCIO-ECONOMIC SYSTEM
Despite various slogans struggling to drive the
economies of the world, poverty alleviation, if not elimination,
continues as a serious agenda. The public in the world is not happy
with the obtaining conditions. There is a search for high quality of
life and equitable distribution of wealth. Everyone is desirous of
participation in the socio-economic development in the world with
sharing the fruits of development in a fair and equitable manner.
Mike Moore, former Director General of WTO, also
expressed his view about the failures of global institutions. An
excerpt from his speech is as under:
"The WTO seems to be coping the abuse for the
failures of every other institution in the world and for everything
that goes wrong".
[Source: The Financial Times, October 11, 1999]
VENUE OF PROTEST
40,000 rallied against the WTO.
At the World Economic Forum, a McDonald's
Washington DC, USA
A blockage delayed talks at the Work Bank
A clash involving 12,000 at the World Bank-IMF
Melbourne, Australia delegates to WEF
Disruption of a European Union Summit.
The WEF was locked down, Zurich got trashed
Quebec City, Canada
At the Summit of the Americas, tear gas and
water cannons were used.
World Bank cancelled Conference; activists
40,000 held a peaceful march. A core of
masked anarchists wielding cobblestones created bloody mayhem
at the EU Summit in the Swedish dry port.
15,000 police poured onto the streets
armed with tear gas and water cannons. One was killed.
(Excerpted from TIME,
July 23, 2001, PP 25-28).
Subsequent to above, demonstrations have been
continuing throughout the world till now. This is a manifestation of
the terrible problems which the world faces today exhibiting
dissatisfaction of existing socio-economic system.
In the foregoing background, there is a need to
strengthen frontiers of services to SMEs so that situation eases,
employment is generated, new era of prosperity for the teeming
millions may usher in.
INDEX OF SME DEVELOPMENT
The above index is available on the Internet (unece.org/indust/ece-sme.htm).
It contains information relating to policies, services and programs.
Policies section includes SME policy, legislation, case studies and
papers. Services includes guides, conference room papers, opinions and
views of entrepreneurs, information and Internet links. Details under
programmes are: Regional advisory services programmes, workshops,
projects, programmes of EU and NGOs, statistics and women
RATIONALE FOR SERVICES TO SMES
Under WTO influence, most countries are undergoing
reforms that are opening their economies to greater international
competition. SMEs need to be provided greater services to ensure
successful adaptation to this changing scenario. Larger firms have
capacity to absorb costs or quickly restructure their business
operations, while SMEs are not placed in such circumstances.
Consequently, SMEs deserve special attention to receive services to
enable them to face the challenges and stay competitive. Besides, SMEs
are labour-intensive than larger firms. These have lower capital costs
and create jobs. They play a vital role in fostering income,
stability, growth and employment. These need micro finance so that
these can see the flourish and may play a positive role in poverty
alleviation and accelerating socio-economic development.
The article has been divided into the following
Corporate Sector Experience
Selected Countries/areas Experiences
World Bank Experience
CORPORATE SECTOR EXPERIENCE
WESTBIC Services has a talent pool. It conducts
training programmes in an interactive manner. It shares experiences of
successful entrepreneurs. Its training programmes are industry
specific and also relating to various disciplines namely, marketing,
finance, business planning, etc. Provision of financial engineering
support and sourcing private and public enterprise capital, including
Irish BICS Seed Capital Fund Ltd.
Services are provided to an ISO-9002 Accredited
Standard and are delivered by a multi-in-house team, augmented by a
National and International Network and Talent Pool with a strong
private sector input. Scope of services includes enterprise support
and technical support. Enterprise support covers start ups (a
hand-holding for innovative enterprises through the initial stages
from concept to commercialization and into early growth, focusing on
product development, marketing, human resources, IT and finance) and
established businesses which cover providing tailored support through
a multi-skilled team and talent pool of experts to assist developing
businesses to reach targeted growth objective including new product
development, international markets and raising capital for expansion.
Technical support covers specialized support to public and private
organizations including project management or regional, national and
international basis, appraisal and evaluation of projects, feasibility
studies, R&D, business planning and monitoring and mentoring SMEs.
Besides offering tailored business training and mentoring programmes
with support organizations, entrepreneurial skills development
programme is offered as per following components.
ENTREPRENEURIAL SKILLS DEVELOPMENT PROGRAMME
1. PERSONAL DEVELOPMENT
2. BUSINESS DEVELOPMENT
out the Critical Path
Managing the Process
3. MARKETING PRINCIPLES
Calculating start-up needs
Evaluating sources of capital
Managing money and taxation
5. TECHNOLOGY AND QUALITY
Introduction to E-Business
IT for start-ups
Environment/Health and Safely
Source: Extracted from: www.webtic.i.e/services.hotmail
SELECTED COUNTRIES/AREAS EXPERIENCES
Experiences of service for SMEs together with micro
finance aspects are now shared in respect of the following
On the net, Directory of Resources
for Small, Medium, and Micro Enterprises in the Americas is available.
Information for services in Guatemala, Nicaragua and Honduras for SMEs
has been provided. Types of organizations extending services to SMEs
include, NGOs, financial institutions, government agency and private
business. Services provided include developing activities relating to
production, industrial commercialization and coffee exports, offering
financial solutions for progress, growth and strengthening of people
and businesses with emphasis towards the micro, small and medium
enterprises, integrating the informal sector entrepreneurs in the
economic and social development through collaboration with the public
sector, international organizations, NGOs and banks, promoting the
enterprise development of their affiliates, establishing systems to
elevate integrated productivity of different processes of production,
improving the development of the small and medium enterprises through
representation and the provision of management services, contributing
to the economic and social development of the country with emphasis on
incorporating the women in the nation's development, elevating the
income level of the entrepreneurs, generate jobs, improve the
productivity through administrative training, financial lending for
production of goods and services, promoting social development in the
informal sector support productive activities through financial
assistance and training, promoting the economic and social development
in specific under developed areas and providing key services lines
of credit, management training, enterprise consulting and others to
those sectors of the population economically active with lower income.
The E-Commerce BC. Net project was
contracted by the British Columbia Chamber of Commerce (BCCC) to
derive from an Electronic Business Network for its membership under
the credibility of the BC Chamber logo. Three core e-commerce services
for both BCCC members and other SMEs include: firstly, commerce-link,
an online, searchable membership database where members list their
businesses with descriptive information, company logo and contact
information, secondly, Commerce Mall, where the BCCC lays out benefits
and discounts and the new E-Market place where e-commerce net members
can offer their goods and services with optional secure credit card
processes, thirdly, commerce-talk, a communication server in a secure
128 bit environment with online conferencing capabilities for members.
Besides, the BCC Electronic Business Network Project also offers news,
business resource links and productivity tips as well as in-house
editorials produced by two columnists for SME-specific topics.
Moreover, there are continuous online surveys regarding BC's business
climate and economic outlook.
Traffic expanded by over 80% per month between
September 1998 and March 1999. This upward trend is continuing till
now. This has been a leading e-commerce initiative in Western Canada
to build e-commerce SME awareness.
Iris Braun, Robert Hess, Alexandar
Schill, Chair for Computer network, Dresden University of Technology,
Dresden, Germany contributed a paper entitled "Teleworking
Support for Small and Medium-Sized Enterprises." The paper
describes scenarios and support facilities for teleworking in SMEs. It
states that solutions can be used in the fields of all businesses
using information and communication technology for performing working
tasks. The following section will enjoy value-added services:
engineering and communications.
Commercial services for businesses.
Consult-engineering, industrial design.
Graphical design, publishing, media.
Financial services accounting, debt collection.
Shared secretarial services, translation.
IMPORTANCE OF SMES
IN JAPANESE ECONOMY
1. Number of enterprises
99.7% (4,690 thousands)
2. Number of employees
70.2% (29,960 thousands)
3. Sales amount
42.5% (366.819 billion yen)
4. Value of shipment in manufacturing
51.1% (137,800 billion yen)
Source: Computed and
downloaded on December 11, 2004 from http://www.chusho.meti.go.jp/sme-english/contents/07/01.html
Recognising SMEs as source of vitality for Japanese
economy and realizing three basic problems facing SMEs namely,
capital, technical capability and ability to gather information, Japan
Small and Medium Enterprise Corporation (JASMEC) was established in
1980 by Japan Small Business Corporation Law. Its focus has been to
enable SMEs to adapt to recent rapid changes in business environment,
ensure continued management with a potential for growth and modernize
and improve structure of SMEs.
Broad-based activities can essentially be divided
into five categories namely, guidance and training for upgrading
projects, personnel training at the institute to small Business
Management and Technology, information service, technical upgrading
and support for internationalization for SMEs, the Mutual Relief
System for Small-Scale enterprises and the Mutual Relief System for
the prevention of Bankruptcies in SMEs, besides, JASMEC provides the
following services for SMEs:
Diagnostic consultation services: Assisting in upgrading project by
offering the small business management diagnosis and in all phases
from planning to implementation of upgrading projects and by
suggesting remedies for management problems.
advisors: Experts advise retailers and other small scale entrepreneurs
for facilitating their upgrading projects or helping to promote
revitalize local shopping districts.
system: JASMEC works with prefectural governments to provide special
loans to cooperative associations of SMEs formed for the purpose of
business upgrading. Funds are made available on very favorable terms
to enable them to acquire the necessary land, building, equipments,
investment: It provides third-sector companies with the necessary
funds through capital investment for project that support SMEs in
their efforts, make structural improvement or adapt to environmental
change e.g. establishing the foundation for the creation of regional
for creative SMEs: It fosters the development of 'Creative SMEs' which
are thrilled with entrepreneurial spirit and are engaged in creatives
e.g. development of new products and services. As an institutional
measure Venture Plaza is sponsored. It is place where creative SMEs
can meet investors to finalize the deals e.g. providing support for
direct financing. There are nine training institutes located
The following two institutions provide lot of services to SMEs:
a) Hong Kong
Chamber of Small and Medium Business: It is a non-profit private
organization which represents and protects the interests of SMEs. Site
includes its profile, activities, member directory, etc.
b) Hong Kong
Small and Medium Enterprise Association: This is the voice of many
SMEs in Hong Kong. Sites includes its news, events calendar, a
directory of member companies and products, plus industry information.
SME Net made its debut in April 1997 and was
collaboratively developed, managed and operated by CMA and Hong Kong
productivity Council. SME Net of the Chinese Manufacturers'
Association of Hong Kong (CMA) is primarily aimed to provide necessary
business information and related services to facilitate smooth daily
operations and promising business development of industrial and
commercial enterprises particularly SMEs, both in Hong Kong and
The SMEs development in South Korea
has been triggered by a guiding principle i.e. in order to make Korea
"a good country in which to do business, it is necessary to
change old business norms and practices to confirm to international
standards and to remove unnecessary controls and regulations".
The Women-owned Business Promotion Act was drafted
for legislation with the objective of giving priority to women
proprietors in SME support programmes and helping business women start
of improve their own businesses.
A monitoring system is in effect to collect
opinions and suggestions at SME job sites for reflection in policies
aimed at assisting SMEs which do not have sufficient computerization
and information capabilities. Conditions for obtaining loans are being
made easier and the scope of unsecured loans is being expanded for
SMEs in financial difficulty. Besides, due measures are taken to
relieve manpower shortage at SMEs and to expand the market for their
products by means of improving distribution systems and otherwise.
Services in this respect include financial assistance, credit
guarantees for SMEs, support for manpower development, support for
marketing, support for informatization and improvement in distribution
Business Bank Inc. started its operations on February 12, 1997 as
total savings bank. It primarily targets business clients (SMEs and
large companies) with strong logistics, it is helping enterprises to
succeed in their endeavors through high quality, professional and
responsive banking services at par with global standards. Its focus is
to build a broad economic base by helping SMEs to succeed in their
business and making banking services accessible to them.
Services provided to SMEs after the 1997 Asian Crisis included:
a) Fund for
venture capital investment in SMEs toward management and financing
capability of SMEs.
Guarantee Schemes to encourage lending sufficient collateral.
c) The 8th
National Economic and Social Development establishment of industrial
estates and export pollution establishment of research industrial
Legislative reforms were introduced to complement reforms including
revisions of Acts of Parliament, encourage capital inflows, business
developments realization of pledged assets.
e) The World
Bank directed US$ 300 million for unemployed, expand training for the
unemployment insurance schemes.
UNITED KINGDOM: Small
Business Service was launched in April 2000 in UK to provide single
organization in government dedicated to helping small firms and
representing them within government. Its mission is to build an
enterprise in which small of all kinds thrive and achieve their
Services provided are:
a) Help all
small businesses realize their potential
world class business support services to enhance the performance of
small businesses with growth potential.
enterprise across society and particularly in under-represented and
d) It is
responsible for the network of business links which provide
information, advice and access to experts on all issues relating to
running ones own business.
national services to help small firms such as the benchmarking
service, the small firms loan guarantee scheme, the high technology
fund and smart grants for technology transfer.
Statistical services: Small Business Service is an
agency within the Government and Champions small businesses. It sprung
into prominence by publishing headline statistics for the year 2000 in
respect of SMEs in UK. Three principles guided the performance of the
above service are, quality assurance reviews were ensured. Secondly,
customer needs were carefully considered. Thirdly, statistics in
respect of SMEs were produced free from any political interference.
Statistics were released in respect of the
Breakdown of number of businesses in UK relating to small traders with
no employees to 500 or more employees.
b) EMPLOYMENT SECTORS:
Contribution to employment and turnover of different sizes: Data in
respect of all industries with share of employment in various
industries such as agriculture & fishing, mining, utilities,
manufacturing, wholesale, retail, hotels, restaurants, transport,
finance, business services, education, health and other services. The
top six ranks included:
Agriculture & Fishing; ii)
Business Services; v)
Hotels and Restaurants and vi) Wholesale & Retail
A research based profile in respect of number of SMEs based on size
was also included. The size was defined to consider less than 50
employees belonging to small size, 50 to 249 employees classified as
medium size and 250 and above employees categorized as large size. The
total number of SMEs for 2004 was 4.69 million.
Total number of persons employed in SMEs was 29.96 million.
e) VALUE OF SHIPMENT IN MANUFACTURING:
Value of shipment in manufacturing in SMEs in 2002 was 52%. The
remaining 48% related to large enterprises.
UNITED STATES OF AMERICA:
On April 23, 2001, Alvaro Ramirez contributed guidelines for good
practice relating to business development services for micro, small
and medium scale enterprises. Four areas of services were identified
improving the business environment through institutional and
regulatory strengthening (improve judicial system and regulatory
providing business development services through strengthening
competitive advantage of SMEs (improve quality of offered services,
productive chains improvement, training and technical assistance, (iii)
financial services (instruments that improve access to long-term
financing and cost reductions for SMEs) and (iv)
Strategy Development (advising governments on political topics, policy
debates and national strategies for enterprise development.
The Small and Medium Enterprises Department is a
joint operational group of the World Bank and IFC. It delivers
business solutions that create better business opportunities for SMEs
throughout the world. The above Department can extend service in
expanding access to capital for SMEs, in building capacity (specially
locally-based institutions that support SMEs), in improving access to
information and technology to SMEs and in improving the business
enabling environment. Project facilities which exist for offering
regional facilities to help entrepreneurs promote and set up viable
SMEs, addressing the needs for capacity building, information and
technology, access to capital and strengthening of the business
Programmes are available to assist entrepreneurs in developing
business proposals and in raising financing for projects. The
programmes catalyze funds from local and foreign banks, private
investors and investment funds.
Complimentary financing mechanisms are also available for seed capital
For Africa, South pacific, Mekong and South East
Europe institutional support is available with the following:
PROJECT DEVELOPMENT FACILITY OFFICES (APDF): Offices exist in
Cameroon, Cote d'lvore, Ghana, Kenya, South Africa and Zimbabwe.
MANAGEMENT SERVICES COMPANY (AMSCO): Offices exist in Ghana, Kenya and
Zimbabwe. It assists African companies to become more competitive by
seconding managers and training services. SMEs are typical clients
which look for professional management and capacity building.
3. ENTERPRISE SUPPORT SERVICES FOR AFRICA (ESSA):
Its office exists is Ghana. It also caters to South Pacific covering
Fiji, Kirbati, Marshall lslands, Federated States of Micronesia,
Palau, Papua New Guinea, Samoa, Solomon lslands, Tonga and Vanuatu.
Offices exist in Australia and Papua New Guinea for the above support.
It assists SMEs in developing their potential for achieving success by
helping businessmen and women to better manage their businesses by
providing managerial and technical assistance.
Mekong (Vietnam, Cambodia and LoaPDR) offices exist in the above
also exist for South Europe in Albania, Bosnia and Herzegovina, Kosovo.
FYR Macedonia. Institutional support is available through South East
Europe Enterprise Development (SEED).
Through a logistical support, IFC, through its SMS
Department, offers the facility of providing funding for innovative
approaches to strengthening small businesses throughout the developing
world. the above department brings together advice, programs, policies
and best practice standards through strategic partnerships with other
organizations involved SMS support.
The World Bank has set up Consultative Group to
Assist the poorest (CGAP). This is a consortium of 27 bilateral and
multilateral donor agencies which support micro finance. Its mission
is to improve the capacity of micro finance institutions to deliver
flexible, high quality services to the very poor on a sustainable
basis. Technical assistance and strategic advice is provided by
developing and disseminating technical guides and services by
delivering training and by performing field research on innovations.
The CGAP Secretariat which is housed in the World Bank is responsible
for implementing the group's mandate.
John A. Daly prepared a Draft entitled
"Improving Technology Performance in SMEs" for World Bank in
1997. This identifies nine topics as a set of facets through which one
can examine the issues of technological improvements in SMEs. These
include the following:
1. THE BASIS FOR ACTION:
Interventions to strengthen technological performance on SMEs are
based on theory and on a body of evidence. How adequate is the
evidence on the which to base programmes?
2. THE POLICY FRAMEWORK:
What host country macro-policies are conducive to or antithetical to
good SME technological performance? What is the minimum level of
policy support needed to justify donor intervention? What policy
advice should be suggested to the host governments?
3. STRENGTHENING TECHNOLOGY SERVICES AND TECHNOLOGY
INFORMATION SERVICES: What
interventions to strengthen these service organizations (specifically
to improve SME technological performance in host countries) should be
4. FINANCIAL, EDUCATIONAL AND INFRASTRUCTURE
SERVICES TO IMPROVE SME TECHNOLOGY PERFORMANCE:
A set of institutions are identified which provide financial service,
human resource development services, and sites and services to SMEs
for the purpose of improving their technological performance. This
article should focus on the lessons learned in the previous programmes
with such service organizations.
5. STRENGTHENING MARKETS AND ASSOCIATIONS IN ORDER
TO IMPROVE SME TECHNOLOGY PERFORMANCE
6. NEW AND EMERGING TECHNOLOGIES AND INDUSTRIES:
Strengthening SME performance in "critical" technologies,
specially in the areas of information and communications technology,
electronics, biotechnology, and new and emerging materials
technologies is important in developing new industries and assuring
that the benefits of these technologies will be available in existing
7. ENHANCING CLEAN TECHNOLOGY PERFORMANCE BY SMEs:
This topic includes the development of industries in the region to
supply the needs for environment-friendly technologies of SMEs, and
the improvement of technology performance in terms of environmental
impact of the overall SME community in the region.
8. ASSURING THAT WOMEN AND DISADVANTAGED GROUPS
PARTICIPATE: How programmes to
enhance technological performance in SMEs be most equitable, given
historical difficulties faced by women and other groups in equitable
access to technology.
9. SME TECHNOLOGY APPROACHES FOR MIDDLE VERSUS LOW
INCOME COUNTRIES: How should
donors differentially address technology in SMEs in countries
according to income level?
ABOUT THE CAPACITY BUILDING FACILITY
Established in July 2000, the SME Department's
Capacity Building Facility (CBF) provides a flexible vehicle for the
expansion of IFC support to small and medium enterprises. CBF
capitalizes on the internal expertise of both World Bank and IFC while
leveraging the dynamic SME work of outside organizations through
broad-ranging partnerships, thus enhancing IFC's understanding of how
best to help SMEs.
In general, CBF funds projects designed to expand
the capabilities of intermediaries that deliver sustainable products
and services to SMEs. In this way, the funding has a multiplier
effect, helping to build the capacity of many small businesses through
a single grant. In its first two years, CBF approved $13.5 million for
65 projects. The funding supports a diverse range of projects from
a trade facilitation platform for poor craftswomen in India to a
network of SME investment funds that combine financing with business
and technical assistance to small business owners around the world.
All projects share the common goal of supporting the development of
SMEs, while fulfilling the following objectives:
Sustainability of products, and institutions,
with a particular focus on improving revenue generation for direct
service providers (private and NGOs) in the local community.
Scalability through project replication or
expansion, either by the partner organization or by IFC. CBF pilot
projects focus on one-time initiatives and CBF partnerships focus on
replication of best practice initiatives.
Selectivity favoring projects where IFC plays a
meaningful role, through potential for existing investments, or
through IFC service providers such as the field-based IFC-managed SME
facilities (also known as project Development Facilities, or PDFs)
Most often, projects are aligned with other work
undertaken by the WBG. For example, CBF has funded technical
assistance for a number of financial institutions (FIs) in which IFC
has or is considering an investment. CBF also supports projects in
collaboration with Project Development Facility work. Here are some
general guidelines about CBF funding:
CBF only funds innovative projects that will
impact many SMEs.
CBF does not fund individual small businesses
or commercial projects unless the business supports the SME sector.
For example, Africa Online, a small company that designs Internet
software for small businesses, received CBF funding because the
company's products will help develop sustainable SMEs.
CBF funding is often leveraged by WBG work.
CBF funding inquiries often are referred first
to the regional PDF. For the PDF nearest you, and the types of
projects they support.
CBF considers applications from WBG investment
and regional departments as the sponsoring departments, PDFs and from
Based on one corporate experience, nine
countries/areas experiences and the World Bank experience in respect
of services to SMEs, it would be appropriate for SAARC countries to
initiate a research by SAFA to develop a suggested model highlighting
model services to be provided in the above region. Every SAARC country
has many services for SMEs which at present are being rendered.
Institutional arrangements also exist. However, a revitalized model
could possibly be developed as a result of initiative to be unleashed
by SAFA. The earlier this is done the better. New vistas of prosperity
will be identified. A high quality of life will emerge for the
In this respect joint research by various
universities will be a welcome step. Micro finance should be
institutionalized on a wider scale and logistically these are well
equipped to achieve the goal of enabling financial support for
Association of Management Development Institutions of South
British Columbia Chamber of Commerce
Capacity Building Facility
Chinese Manufacturer's Association
Institute of Business Administration
International Federation of Accountants
International Finance Corporation
International Monetary Fund
International Standards Organization
Project Development Facility
Research & Development
South Asian Association for Regional Cooperation
South Asian Federation of Accountants
Small and Medium Enterprise
World Bank Group
World Economic Forum
World Trade Organization