Best practice guiding principles for successful BDS initiatives
BDS services must be demand-driven
The SMME community must have a strong sense of ownership in the BDS
The BDS initiative must achieve maximum outreach
The BDS initiative must be financially sustainable
BDS services must be provided to the right clientele
There are currently many BDS initiatives in South Africa
Numerous delivery mechanisms are used e.g. internet, face-to-face, call centre
Information is provided at various levels of detail e.g. general, industry-specific
Support is provided at various levels e.g. information, advice, training, shared services
Revenue models range from donor-funded (free services) to self-sustained (charge for services)
Best practice model for BDS delivery
Central hub / resource centre coordinating all relevant information / support advice
Call centre / internet access of resource centre
Nationally distributed field of service providers for face-to-face support
Contents
Executive summary
Introduction
International best practice
Current BDS in South Africa
Strategic Options for BDS for microfinanciers
Next steps
Focus of BDS Assignment
Definitions
Small Medium and Micro Enterprises (SMME)
Businesses with a staff compliment of less than 50
Microfinancier
An organisation (private, public or Section 21) which provides loans SMMEs or individuals under the exemption notice to the Usury Act
BDS
The provision of any non-financial service – including information, knowledge, skills and advice - to a business
What is BDS?
Why is BDS Required?
Development programs generally focus on financial assistance to entrepreneurs, SMMEs and microfinanciers
After start-up, microfinanciers must acquire a variety of business skills to run their businesses. However, it is often overwhelming for a business with few employees to acquire these non-core skills
Microfinanciers require BDS support to develop the skills in-house, or to outsource to local providers
Contents
Executive summary
Introduction
International best practice
Summary
What BDS services are offered?
How is BDS offered?
Who are the players in BDS?
BDS success criteria
Barriers to BDS success
A best-practice BDS model
Current BDS in South Africa
Strategic Options for BDS for microfinanciers
Next steps
Summary: International Best Practice
Best practice for successful BDS
BDS services must be demand-driven to ensure a greater, more positive impact
The SMME community must have a strong sense of ownership in the BDS initiative to ensure commitment
The BDS center must reach a maximum portion of the target audience
BDS services must be provided to the right clientele, and who will make good use of the services
The BDS center and its service providers must achieve financial stability to be sustainable over the long term
Barriers to success
Providing all BDS services for free often results in poor commitment from the users
Private sector funding alone may not be sufficient, necessitating participation by public donors
Support services are often too generalised, thereby resulting in poor use by the target audience
Support services are sometimes not accessible by the target users, thereby resulting in poor use by the target audience
What BDS Services are Offered?
How is BDS Offered?
Stand-alone support
BDS can be delivered as part of an existing business-to-business relationship, generally as part of another transaction
e.g. training received as part of the purchase of equipment
Caters for training or support which is only required infrequently
‘once-off’
Who are the Players in BDS?
BDS Success Criteria
BDS services must be demand-driven
Ensures a greater, more positive impact, and encourages clients to pay for the services they value
BDS services must be provided to the right clientele
The main objective of a BDS is to facilitate growth, profitability and competitiveness of SMMEs. The BDS must therefore be provided to SMMEs who exhibit good entrepreneurial characteristics and can make good use of the services
The SMME community must have a strong sense of ownership in the BDS
The best business providers generally work in the environment, resulting in commitment and strong ownership
The BDS center must achieve maximum outreach
Maximum impact can be achieved by strengthening private sector service providers, creating better networks between service providers, and promoting informal systems of learning
The BDS center and its service providers must achieve financial sustainability
The institutional and financial sustainability must be achieved by controlling costs to maintain competitive and to increase profits
Barriers to BDS Success
Not charging for services often results in poor commitment from the users
There must be a balance between free and paid-for services
Relying solely on private market finance can be detrimental
Businesses may be reluctant to incur the costs of setting up BDS initiatives, as their competitors may be just as likely to benefit
Provides a rationale for donor support justified on a cost-benefit basis, rather than on the return on investment that individual businesses usually make
Support services are often too generalised
Often supply-driven and delivered in a top-down fashion, rather than from a SMME demand perspective
Training should be business-oriented, and not viewed as an extension of the basic general educational system
Support services are sometimes not accessible by the target users
Must be delivered via a suitable, convenient medium
A Best Practice BDS Model
A Best Practice BDS Model, ctd
BDS centre:
Donor funded
Liaises with all service providers and government organisations
Coordinates all material centrally
Sets national strategy and priority
Coordinates national delivery
BDS providers:
Independent corporations located across the country
May obtain funding from BDS centre
Obtain accreditation by the BDS centre, and therefore trusted in the community
Operates under the national strategy set by the centre, but can adjust ‘menu’ of services based on local requirements
BDS Case Studies
Scotland: Local enterprise companies (LECs)
CGAP: Microfinance gateway
Papua New Guinea: Microfinance competence center
Paraguay: Training voucher scheme
Kenya: Training programs
Benin: Information services programs
Overview of BDS Case Studies
Key Findings
Much emphasis is placed on promoting a culture of entreprenuership
Support and advice are delivered at as local a level as possible
Initiatives use private companies, where possible, to provide services, thereby supporting SMME development
Initiatives range from hi-tech (internet portals) to very simplistic (selling of training materials on the street)
Most initiatives are funded by a combination of public sector and private sector organisations
Initiatives promoting mentoring / coaching have seen exceptional benefits in the community
Many examples of incentivisation exist which can be used within a greater framework of BDS delivery. The training voucher scheme established in Paraguay has been particularly successful
Case Study 1: SMME Support in Scotland
Operates 13 autonomous business centers, Local Enterprise Companies (LECs)
Constituted as independent corporations
Work consistently with the national strategy set by the SE
Have discretion to adjust its ‘menu’ of activities to meet local needs and activities
Assistance provided to SMMEs include:
Management development: formal training, collaborative visits to examples of best practice
Staff development: promoting a culture of training, development of key skills
Product development: new product research and development
Advice in the adoption of e-commerce and other new business models
Case Study 1: SMME Support in Scotland
LEVEL 1:
Business Information
“Small Business Gateway”
The information provided is usually of a basic level
Network has town center locations
Most business is transacted by telephone and the internet
Trained information providers deal with callers (via a toll-free phone number)
Users can access a range of customized and proprietary databases (via telephone operator, or on-line)
More advanced enquiries are referred on to specialist sources
Case Study 2: CGAP Online Resource Center
Target audience: microfinance institutions, donors and the microfinance industry
Develop technical tools and services, deliver training, provide strategic advice and technical assistance, and action research
Case Study 2: CGAP Online Resource Center
“One stop microfinance information hub”
A forum for MFI practitioners, NGOs, Donors, etc. to learn about microfinance topics and to share their knowledge
Collection of over 12,000 documents and practical tools
Users can consult 1,300 abstracts and download 700 documents directly
Access to 20 thematic pages of selected documents and information contacts and links to 10,000 web pages
Information on microfinance training and conferences, job opportunities, capability for users to post their CVs
Users can make contributions to the site, and recommend improvements
Users can receive email bulletins for regular updates
Case Study 2: CGAP Online Resource Center
Case Study 3: Papua New Guinea
MFIs are scattered across PNG, operating in isolation and without clear perspectives. Knowledge of microfinance best practice is limited
Microfinance initiatives require support measures to ensure sustainable delivery of microfinance services
One component of the project is to establish a Microfinance Competence Center, providing:
A network of existing service providers, creating a forum for policy implementation and development of local capacity
Training in technical and organization skills
On-site counseling
Study tours to successfully operating MFIs in Asia
In-country conferences and workshops
Case Study 4: Training Voucher Scheme in Paraguay
SMMEs can purchase training vouchers from government offices at a subsidised rate
The vouchers can be used to pay for training programmes at institutions which have been approved by the government
Institutions can exchange vouchers only after programmes are completed and only if participants have attended more than 75% of the classes
Registered training institutes receive both the up-front the payment as well as the vouchers
Over 50 percent of program participants were repeat users
Empowered by the purchasing power of vouchers, entrepreneurs are exercising their choice and there are already signs that institutions are having to become more responsive to their needs
Case Study 5: Learning Initiatives in Kenya
The sub-sector that would be the focus of the programme was selected and assessed its main needs
Participating entrepreneurs were selected, taking care to ensure that they did not include direct competitors to facilitate the free exchange of information
The participants were introduced to the programme's objectives and assisted in setting personal goals and formulating a work plan for the exchange visit and later activities
Visits were mostly in groups.
Follow up one-to-one advisory services on product design, development and skills upgrading were provided
Further learning was facilitated by later joint workshops with the entrepreneurs, which also helped to assess impact.
Case Study 6: Information Services in Benin
1. Question-and-answer service
Existing networks were used to provide a question-and-answer service
The SMME pays $2 for each question submitted, and pays for the answer at a rate of five times the cost of the photocopying required
It is hoped that scaling up the service will lead to several SMMEs asking the same questions. Costs will thus stabilise, while revenue will continue to increase
127 questions were generated in 6 months
This initiative has generated revenue that has covered 30 per cent of the costs of answering the questions
Contents
Executive summary
Introduction
International best practice
Current BDS in South Africa
Strategic Options for BDS for Microfinanciers
Next steps
Summary: Current BDS in SA
Current BDS initiatives in South Africa
Numerous delivery mechanisms are used e.g. internet, face-to-face, call centre
Information is provided at various levels of detail e.g. general, industry-specific
Support is provided at various levels e.g. information, advice, training, shared services
Revenue models range from donor-funded (free services) to self-sustained (charge for services)
Areas for improvement
Improved communication and cohesion between various industry players will reduce duplication of effort
Improved management and performance measurement of BDS providers is required
Electronic media should be further leveraged for improved delivery of information
Approach
There are many providers of BDS to SMMEs in South Africa. A small sample was selected for assessment, and include BDS providers who are:
Donor-funded vs. private businesses
Operating in isolated centres vs. those who have national reach
Micro finance-specific vs. general business
SA BDS Consultation
Consultation Questionnaire
Do you provide any support/training specifically to Microlending institutions?
Training courses, information feeds, others?
If so, is the support run on a continuous basis, or is it driven through periodic programs?
What have you found to be the most effective channel for providing information / running training sessions?
In-person sessions, self-study courses (videos, CDs etc.), mentorship, web-based information dissemination, paper-based material (newsletters etc.)?
Can you provide some lessons learnt during previous programs run?
Successful programs, unsuccessful programs?
What is the revenue model for your organisation?
Charging for training courses, corporate sponsorships, others?
Where are you located geographically?
Do you offer programs for clients who are located in rural areas?
Do you have any alliances offering services in rural areas?
Do you have any alliances with other companies / training institutions?
Overview of BDS Initiatives
There are many BDS initiatives targeting SMMEs in general
Different delivery mechanisms are used
Different levels of information are provided
Different levels of support are provided
In some cases, shared services are provided
Both donor-funded and self-sustainable models are used
