Business Development Support Report Contents Executive summary



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Business Development Support Report


Contents

  • Executive summary

  • Introduction

  • International best practice

  • Current BDS in South Africa

  • Strategic options for BDS for microfinanciers

  • Next steps



Executive Summary

  • 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



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
    • Export support: export plans, market entry, trade missions
    • Financial access: preparation of applications
    • 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
  • Strengths:

    • Large volumes of general business information are available
    • A large amount of support is available
    • A large network of service providers is in place across the country
    • A web-based BDS initiative is being successfully run
  • Lessons learnt:

    • Require sector-specific expertise and support
    • Face-to-face approach is very successful
    • Charging for services results in more buy-in and commitment from users
    • Closer interaction with affiliates required
    • Limited resources for industry research
    • Poor client satisfaction / client impact assessment processes


Rating of SA BDS Initiatives



Enhancement of SA BDS initiatives

  • Areas for improvement:

  • Improved cohesion between various players – reduction of duplication

  • Measurement of performance of BDS initiatives and players involved

  • Electronic delivery of information



Ntsika



Ntsika



Local Service Business Centres (LSBCs)



KHULA



Business Referal and Information Network (BRAIN)



Mastermind Alliance



MEA



MLA



The Business Place



Business Beat



Contents

  • Executive summary

  • Introduction

  • International best practice

  • Current BDS in South Africa

  • Strategic Options for BDS for Microfinanciers

  • Next steps



Summary: Strategy for Micro Financier BDS in SA

  • Best practice model for BDS delivery

  • Central hub / resource centre coordinating all relevant information / support advice

    • Collate material currently available in the market, and identify additional material needs
    • Material to be very specific to micro finance, but also to contain general business material
    • A single hub, centrally managed
  • Call centre / internet access of resource centre

  • Nationally distributed field of service providers for face-to-face support

    • Ensures local expertise and content
    • Caters for mentoring and coaching initiatives
    • Caters for shared services


BDS Survey Results



BDS Delivery Media



BDS Delivery Media



BDS Delivery Solution



BDS Delivery Solution



Options for BDS Delivery Solution



Role of the BDS Centre



Roleplayers: BDS Centre



Role of the Service Providers



Roleplayers: Service Providers



Role of the Micro Financier



Challenges to Implementing BDS Model



Approach to Tiered Rollout



Approach to Tiered Rollout



Approach to Tiered Rollout



Approach to Tiered Rollout: Phase 1



Approach to Tiered Rollout: Phase 2



Approach to Tiered Rollout: Phase 3



Approach to Tiered Rollout: Phase 4



Contents

  • Executive summary

  • Introduction

  • International best practice

  • Current BDS in South Africa

  • Strategic Options for BDS for Microfinanciers

  • Next steps



Next Steps

  • Decide whether to pursue an end-to-end BDS solution

    • Define business case for BDS solution
  • Make the “pre-project decisions”

    • Who will be the sponsor of the project?
    • Who will finance the project?
    • Who will be accountable for the project?
    • Who will be the involved parties in the BDS solution?
    • Who will manage the various components of the BDS solution?
    • Will current infrastructure be utilised, or will new infrastructure be developed?
  • Existing information and providers must be identified and assessed

  • Launch project



Appendices



Appendix 1: Key Activities - BDS Design and Evaluation



Appendix 1: Key Activities - BDS Design and Evaluation



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