A micro finance angle


Prof. Dr. Khawaja Amjad Saeed
Feb 21 - 27, 2005



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.


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]





1999 Dec

Seatle, USA

40,000 rallied against the WTO.

2000 Feb

Davos, Switzerland

At the World Economic Forum, a McDonald's was trashed.


Washington DC, USA

A blockage delayed talks at the Work Bank and IMF.


Prague, Europe

A clash involving 12,000 at the World Bank-IMF annual meeting.


Melbourne, Australia delegates to WEF Conference.

Activists barricaded


Nice, Europe

Disruption of a European Union Summit.

2001 Jan

Davos—Zurich, Switzerland

The WEF was locked down, Zurich got trashed instead.


Quebec City, Canada

At the Summit of the Americas, tear gas and water cannons were used.


Barcelona, Spain

World Bank cancelled Conference; activists held.


Gothenburg, Sweden

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.


Genoa, Italy

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.


The above index is available on the Internet ( 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 entrepreneurship.


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 parts:

Part 1: Corporate Sector Experience
Part 11: Selected Countries/areas Experiences
Part 111: World Bank 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.



a) Goal Setting
b) Time Management
c) Team Building


a) Setting out the Critical Path
b) Managing the Process
c) Reducing Risk
d) Business Structures



a) Calculating start-up needs
b) Evaluating sources of capital
c) Managing money and taxation


a) Introduction to E-Business
b) IT for start-ups
c) Environment/Health and Safely

Source: Extracted from: www.webtic.i.e/


Experiences of service for SMEs together with micro finance aspects are now shared in respect of the following countries/areas:

THE AMERICAS: 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.

CANADA: 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.

GERMANY: 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:

a) Computer engineering and communications.
b) Commercial services for businesses.
c) Consult-engineering, industrial design.
d) Graphical design, publishing, media.
e) Financial services — accounting, debt collection.
f) Administrative sub-contracting.
g) Shared secretarial services, translation.



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

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:

a) 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.

b) Providing advisors: Experts advise retailers and other small scale entrepreneurs for facilitating their upgrading projects or helping to promote revitalize local shopping districts.

c) Loan 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, etc.

d) Capital 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 industry.

e) Support 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 throughout Japan.

HONG KONG: 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 worldwide.

SOUTH KOREA: 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 structure.

PHILIPPINES: Philippines 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.

THAILAND: 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.

b) Credit 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 products.

d) 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 potential

Services provided are:

a) Help all small businesses realize their potential

b) Provide world class business support services to enhance the performance of small businesses with growth potential.

c) Promote enterprise across society and particularly in under-represented and disadvantaged groups.

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.

e) Runs 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 following:

a) SIZES: 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:

i) Agriculture & Fishing; ii) Construction; iii) Education; iv) Business Services; v) Hotels and Restaurants and vi) Wholesale & Retail

c) ENTERPRISES: 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.

d) EMPLOYMENT: 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 namely (i) improving the business environment through institutional and regulatory strengthening (improve judicial system and regulatory frameworks), (ii) 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 services include:

1. Special 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 environment.

2. 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.

3. Complimentary financing mechanisms are also available for seed capital through IFC.

For Africa, South pacific, Mekong and South East Europe institutional support is available with the following:

1. AFRICA PROJECT DEVELOPMENT FACILITY OFFICES (APDF): Offices exist in Cameroon, Cote d'lvore, Ghana, Kenya, South Africa and Zimbabwe.

2. AFRICAN 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.

4. For Mekong (Vietnam, Cambodia and LoaPDR) offices exist in the above countries.

5. Offices 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 considered?

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.


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 industries.

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?


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 external organizations.


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 millions.

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 strengthening SMEs.




Association of Management Development Institutions of South Asia



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



Information Technology



Non-Governmental 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