Small and medium enterprise growth requires an integrated and practical approach, one that enhances the business environment and provides quality education and training. Yet most importantly, SME assistance must be tailored to meeting the specific needs of entrepreneurs.
A lot has been said about the potential for small and medium-sized enterprises (SMEs) to provide the thousands of jobs that are needed to lift people out of poverty. However, not everyone agrees on what is needed to realize this potential. Some experts like call for better business environments, improved access to finance, and adherence to generally accepted business standards. Others, equally distinguished, argue that these are merely facilitating preconditions and that education, training and business support are the real keys to SME development.
Both of these views make valid points. But I do not believe that it is a case of either/or. Yes, certain aspects make more sense in one setting than in another, but not all of them are equally important at any given moment. I believe that SME growth requires an integrated and practical approach. One that incorporates many of the points raised in previous contributions, but that is tailored to meeting the needs of (groups of) individual entrepreneurs. In this article, I will explain why.
Mineke Foundation's approach to entrepreneurship
The Mineke Foundation is an NGO that, among other things, encourages entrepreneurship. As founder and chair, my perspective is based on our experiences in Liberia, a country recovering from conflict and facing issues that many will find familiar: high unemployment, a large informal economy, high corruption and a young, but largely unskilled, population. The Mineke Foundation currently offers two high-quality vocational training courses in a suburban region populated by about 20,000 people. The choice of courses we offer was determined by the potential trainees, based on what they believed provided them with the best (marketable) opportunities. The trainees are mostly women and girls, of varying ages and educational backgrounds. This is due in part to the nature of the courses offered: pastry baking and soap making.
A little more on the context: After the civil war in Liberia ended, many of the refugees that had fled to the capital, Monrovia, remained. Once built as a city to hold 300,000–400,000 people, Monrovia is now home to about 1.2 million (2013 estimate based on the 2008 official census). This many people simply do not fit into the city, as is evidenced by the suburban building boom as a result of which many small and not very well-built houses compete with each other for scarce space and once outlying communities now are part of the capital – which, by the way, is now seen as a metropolis, prefixed by the word ‘Greater’.
Our working area, like the rest of the Liberia, is mostly populated by young people; the country's median age is 18, and ILO estimates that over 80% of workers aged 15+ are engaged in vulnerable employment, (i.e., with no security).About 50–75% of the country's employment is estimated to be in the agricultural sector,but work in the tropical rainforest is hard and dirty and does not really appeal to young people. Additionally, transportation and roads outside the capital are scarce, as are jobs, so many people choose to take their chances in the capital. But there are too few jobs and too few skilled people to fill them, as the educational system is of low quality. While there are many schools within a 25 km radius around the capital, very few offer quality education. Teachers are not qualified and students often get promoted to the next class after paying them, either with money or sex. The rate of teenage pregnancy in Liberia is among the highest in the world, with about 20% of those the result of rape.
Eventually, we see that most people have the following options: sit around and do nothing, try to get a government job (preferably through a friend or family member), take up prostitution, become a criminal, or try to earn some money through a micro business or by ‘hustling’ (taking on various tasks during a day to earn small amounts of money). Many business owners hardly make any money as they have had little or no formal education or business training.
It is against this background that the Mineke Foundation is working to make a difference. Our vocational courses are taught by entrepreneurs who have established themselves with small businesses that perform well. The Foundation provides the materials and ingredients needed. Trainees are encouraged to buy additional ingredients and sell their own products. The focus here lies squarely on self-reliance, developing talents and creating opportunities. Trainers, in pure entrepreneurial fashion, offer materials for purchase, thus confronting students with the realities of doing business from day one: there is no free lunch. Upon completion, trainees are tested by a panel of experts, consisting of entrepreneurs specializing in the area they have been trained in. This evaluation is centred on the quality of the products produced.
Acquired skills can, in time be, used by the trainees to start their own businesses, or to distinguish themselves on the job market. This is the purpose of our courses and is clearly communicated to the trainees from the beginning. It is a two-way street: we expect our trainees to fully commit to the training and those who sign up, agree to this. In addition, we charge a small fee and run a tight ship, to further distinguish between those who are truly motivated and those who are less so.
Business environment and business support
Our trainees face many challenges, both before and after completing the course. The business environment is tough. SMEs face difficulties, ranging from theft to harassment and social and familial expectations. Yes, a better business environment would be more conducive, but we focus less on trying to change the surroundings and more on showing people how to change the way they respond to their surroundings. What is, just is – but your actions and choices can and do influence reality.
A key role exists here for business support that is tailored to the specific needs of the entrepreneur. This point was driven home when we realized that our first graduates were failing at their businesses. Uncertainty, little or no access to advisory services and finance, and poor financial literacy were important causes. To address this, we are currently in talks with the local Business Start-Up Center to develop programmes that are tailored to our trainees' needs. In our 2015 courses, business training will be compulsory and include topics such as how to start a business, marketing and basic financial planning. In short, we want our trainees to be able to experiment with all aspects of business during the course. Thus, offering them the opportunity to practise and learn in a safe, but realistic, environment.
But it does not end there
If we want our young entrepreneurs to grow their businesses, more business support, training and advisory services are needed – as are access to finance, qualified employees and knowledge of sound business principles. Plus, given Liberia's recent history, psychological and trauma support is also needed, because the 15-year civil war effectively destroyed trust, making it very difficult for people to work together.
There has been a lot of research on the social and psychological effects of trauma, which include distrust and hostility. Witness Justice, an advocacy organization for victims of violence, says that trauma from a violent event “isn’t just part of life, it changes life as it was once known”. Research from the Boston University suggests that war “may […] fundamentally change perceptions and trust in institutions and other people”. Disturbing research into the effects of war and sexual abuse on girls in Uganda makes the extent of the trauma very clear, and is, I believe, of relevance to Liberia, where many faced similar situations.
Our experience in Liberia suggests that the level of distrust between individuals has risen sharply compared to before the war. As far as I know, there is no research focusing specifically on the effects of conflict on entrepreneurship, but lack of trust undermines basic business principles of cooperation, belief that the other will do as promised, and faith that the other's actions are not intended to harm you. At the Mineke Foundation, we have been confronted with this before and expect to be again.
Several of the issues mentioned earlier can be addressed by partnering with organizations that specialize in what we lack. However, sustainable growth is also largely dependent on intrinsic development: Better skills, better primary and secondary education, more quality vocational training, access to work placements and learning on the job, and more exposure to how things are done elsewhere to learn what works and what does not. That is why education is one of our pillars. Currently, our activities in this area are limited to renovating a primary school; but, in time, secondary education, life skills and literacy classes will help address one of the main challenges in Liberia. Learning what works and what does not work is also a key element of the Mineke Foundation's approach and will require more and better monitoring and evaluation.
Building an entrepreneurial ecosystem
Ultimately, boosting employment in SMEs is about building an entrepreneurial ecosystem that incorporates all of the above, while allowing SMEs to grow at their own pace and without burdening them with the responsibility of lifting a whole country out of poverty. Not everyone in developed countries aspires to change the world, nor does everyone in developing countries. In that, there is no difference between ‘us’ and 'them'.
Photo credit main picture: Multimedia Photography & Design - Newhouse School / via flickr