BDS Market Development

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BDS Market Development

• A Training Presented by the SEEP Network and the
  International Labour Organizations SEED Program

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BDS Market Development

• COURSE GOAL
• To help enterprise development specialists
  understand commercially-oriented business
  development services (BDS) initiatives and to
  improve the outreach, cost-effectiveness,
  sustainability, and impact of their BDS offerings
  to micro, small, and medium-sized enterprises
  (SEs).

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BDS Market Development

• AGENDA
• Overview
• 5 Guiding Principles
• Practitioner Presentation
• Risks Rewards
• Closing Evaluation

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BDS Market Development

• LEARNING APPROACH
• Trainers...
• Facilitate learning
• Draw on participant experience
• Use a variety of learning methodsrole plays,
  case studies, lectures, games
• Supply reading material and
• Provide practical lessons.

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BDS Market Development

• OBJECTIVES
• Define / describe general principles of Market
  Development Approach to BDS
• List broad categories of BDS w/ examples
• Describe key financial sustainability strategies
• List BDS organizations / appropriate roles
• Describe BDS market development principles /
  strategies and
• Describe main risks / rewards of BDS market
  development strategies.

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BDS Market Development

• THE MARKET DEVELOPMENT APPROACH
• Basic Principles
• Impact-centered programs
• Specific, focused, tailored services
• Demand-driven services
• Sustainable Service delivery and
• Development of competitive, vibrant BDS markets.

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BDS Market Development
Principle 1 Impact-Centered Programs The focus
of BDS programming is to create a POSITIVE
IMPACT. The delivery of business services and the
development of service markets are means toward
that goal.
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Impact-Centered Programs
What kind of impact does your program seek to
achieve?
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Impact-Centered Programs
Outreach
IMPACT
Sustainability
Cost-Effectiveness
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Impact-Centered Programs
Who does the program serve?
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Impact-Centered Programs
SEs... Micro, small and medium- sized firms,
and small-scale farmers
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Success Story
Microenterprise Ms. Jemima Gyamfi, Caterer
and wholesale egg distributor Country
Ghana Organization ILO FIT and Kapital Radio
BDS SE Radio Programme
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Success Story

• Ms. Jemima Gyamfi, Caterer and Egg Seller, Ghana
• Learned improved book-keeping practices.
• Now no matter how small the amount, I record it.
  I indicate the date, describe the transaction and
  indicate the cost. This is helping me to protect
  my chop money.
• (Her food money.)

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Success Story
Microenterprise Mrs. Mary Adubofour,
Retailer, Poultry Equipment Country
Ghana Organization ILO FIT and Kapital Radio
BDS SE Radio Programme
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Success Story

• Mrs. Mary Adubofour. Retailer Poultry Equipment
• Learned about the importance of BDS and increased
  her participation in BDS.
• At first I wasnt used to participating or
  attending workshops or meetings, but this program
  has encouraged me. I attend any workshop or
  meeting that has any bearing on my business.

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BDS Market Development

• Principle 2 Specific, Focused, Tailored Services
  
• Business Development Services must
• Address specific SE wants and needs
• Focus on high-priority issues and
• Be tailored to add high value to SEs.

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Specific, Focused, Tailored Services

• What are
• Business Development Services?

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Business Development Services
They Are More Than...
Finance
Training
Technical Assistance
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Business Development Services
They Are Also...
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Specific, Tailored, Focused Services

• INSOTEC Ecuador
• Sector Jeans manufacturing
• Strategy Help MEs improve quality
• Services Buttonholing, embroidery, input
  and equipment supply.
• Outreach 4,450 in 2000
• Sustainability Break-even in 2000

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BDS Market Development

• Principle 3 Demand-Driven Services
• Respond to SE wants and needs
• Are paid for by SE or commercial actors with
  vested interest
• Put immediate financial pressure on supplier to
  provide relevant services.

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Demand-Driven Services

• SEs pay fees for services
• or
• SEs acquire services such as advice from
  buyers or suppliers as part of a business deal.

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Charging Fees

• Veterinary Services in Nepal
• CECI/MARD trains entrepreneurs to supply
  veterinary services to farmers
• Veterinarians sell services to farmers
• 40 village veterinarians selling
• Vets earn profits of 40 - 50.

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Services Through Business Deals

• PROARTE, a Nicaraguan handicraft company
  initiated by MEDA
• Markets traditional handicrafts
• Buys from about 100 rural artisans
• Supplies inputs, product designs, training
• Earns 15 profits in 1997.

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Other Financing Strategies

• Mutually Beneficial Services
• FIT Business Connect Magazine
• Publishes free business-to-business magazine
  circulation 10,000 in Zimbabwe
• Financed by advertising revenue from small and
  large firms with...
• Large firms buying big ads, paying more
• Small firms buying small ads, paying less and
• Micro firms benefiting for free.

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BDS Market Development
Principle 4 Sustainable Services BDS should be
made available to SEs over the long run through
financially sustainable delivery mechanisms,
institutions, and markets In sum, through the
PRIVATE SECTOR.
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Sustainable Services

• Sustainability depends on
• Private sector financing (demand-driven
  services)
• Cost-structure in-line with SE and market ability
  to pay and
• Independent, financially viable institutions and
  delivery mechanisms.

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Criteria for Viable BDS Suppliers

• Capacity to deliver services
• Close to SEs in culture, operating environment,
  geography
• Low cost structure
• Commercial focus, business culture, accounting
  and management systems
• Organizational independence, especially from
  donor funds
• Organizational stability and
• Focus on services, SEs, or BDS.

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Sustainable Services

• Institutional sustainability more likely when
  subsidized and commercial activities are
  separated.
• Supplier or provider delivers (commercial)
  services directly to SEs or
• Facilitator supports the (commercial) supply of
  BDS by other (sustainable) institutions.

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BDS Market Development

• Principle 5 Develop Vibrant, Competitive, BDS
  Markets
• Success is
• A vibrant, competitive BDS market in which a
  range of SEs are accessing
• a wide selection of BDS supplied by
• numerous commercial suppliers that
• SEs choose to patronize.

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BDS Market Development
Subsidized Program Model
MSME
Donor
Service Provider
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BDS Market Development

• Subsidized Program Model
• Donors support 1 or a few providers
• NGOs provide free or highly subsidized services
• Small number of SEs gain access to services
  designed by Donor/NGO
• Program lasts as long as funding is available.

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BDS Market Development Model
Donor
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BDS Market Development

• Donor or facilitator supports numerous suppliers
  with TA rather than grants
• Suppliers are commercially oriented and competing
  to serve SEs
• Suppliers provide services SEs want
• Suppliers service numerous SEs
• Suppliers earn profits and provide services over
  the long term.

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BDS Market Development

• BDS Market Development is new, Many questions
  remain

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1. Market functions
Research and development Product development
Delivery of services Information
coordination Skills enhancement
Regulation Advocacy
3. Who does?
4. Who pays?
Private sector (for-profit)
Business membership organisations
Business networks  
  State
Not-for-profit sector
2. Key supply-side players
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BDS Market Development

• Start with understanding the
• EXISTING
• PRIVATE SECTOR
• MARKET
• for services.

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BDS Market Consists of
BDS Market Development
Supply
Demand
Transactions
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BDS Markets are Bounded by
Target SEs
Geography
BDS Market
BDS Type
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BDS Market Development

• BDS MARKET ASSESMENT
• Why assess markets?
• What do we do with this information?
• Understand current supply and demand
• Pinpoint specific constraints / opportunities SEs
  face in accessing desired services and
• Investigate sustainable service delivery
  strategies.

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Select Appropriate Interventions

• MATCH
• Constraints to Interventions

Weak Supply
Product Development, Capacity Building
Weak Demand
Promotions, financing, discounts
Few Transactions
Linkage information services
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Vouchers
Networks
Biz.
Seven BDS Market Development Strategies
Links
Product Dev.
Training
TA
Information
Venture Cap.
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BDS Market Development

• Voucher Programs
• Training Services in Paraguay
•  
•  Between 1995 and 1999
• Provided 30,000 vouchers to
• 13,700 microenterprises purchasers
• Over 40 private sector suppliers.

50 off!
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BDS Market Development

• Information Services
• FIT ILO SE Radio Program
• Since 1999
• Reaching over 300,000 SEs
• Changing policies, helping SEs improve business
  practices and reach new markets
• Broadcasting commercially viable programs
• Costing under 100,000 (total program).

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BDS Market Development

• SE Cluster and Network Development UNIDO
• Helps groups of firms access services in
  Honduras, Nicaragua, Mexico, Jamaica, and India.
• Knitwear producers in India approached ITC
  training to adapt course to their needs 500
  firms reached.
• Membership fees sustain the groups.

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BDS Market Development

• Business Linkages
• Manicaland Business Linkage Project
• Facilitates sub-contracting from large to small
  firms
• 1996-2000 110 linkages, 1,000 jobs
• Large firms mentor small firms.

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BDS Market Development

• Technical Assistance to Suppliers
• ACDI/VOCA Training and Technical
  Assistance to Polish Business Support
  Organizations (BSOs)
• Project strengthened supply and demand for
  Business management training and consulting
  services
• Project trained 38 BSOs, 131 consultants, 223 SEs
  in
• Trainers and consultants served more than 30,000
  clients on a commercial basis.

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BDS Market Development

• Product Development and Commercialization
• IDE Irrigation Technology Treadle Pumps
• IDE designs pumps trains manufacturers and
  distributors
• Bangladesh in 2000 65 manufacturers, 700
  dealers, 5,000 installers sold more than 1
  million pumps.

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BDS Market Development

• Social Venture Capital
• MEDA PROARTE in Nicaragua
• MEDA individuals invested venture capital in
  PROARTE,
• PROARTE marketed traditional Nicaraguan crafts
  for 100 producers in 1997.
• MEDA plans to disinvest over time.

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BDS Market Development

• From this experience, and applying basic market
  thinking, a set of guiding principles has
  emerged.
• Although not all examples represent all
  principles,
• these are the principles to strive for!

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GUIDING PRINCIPLES

• Focus
• Target interventions to address BDS market
  constraints.

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GUIDING PRINCIPLES

• Tread Lightly
• Minimize interventions to avoid BDS market
  distortions.

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GUIDING PRINCIPLES
Provide market assessment, training, TA not
direct services.
Demand
Supply
Transactions
Intervene here!
NOT here!
Intervene here!
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GUIDING PRINCIPLES

• Promote Competition.
• Develop a range of suppliers and service products
  in the same market offer SEs choice.

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GUIDING PRINCIPLES

• Develop business relationships with suppliers,
• mutually beneficial contracts, not grants for
  direct services to SEs.

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GUIDING PRINCIPLES
Remain Flexible to Rapid Change, in SE markets
and in BDS markets.
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GUIDING PRINCIPLES
Coordinate with other BDS Stakeholders. Supplier
s offering subsidized services undermine efforts
to develop BDS markets.
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GUIDING PRINCIPLES
Develop a clear exit strategy. Plan to leave
behind a vibrant, competitive, BDS market.
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BDS Market Development

• Do the programs presented use the guiding
  principles?

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BDS Market Development

• PRACTITIONER PRESENTATION

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BDS Market Development

• Risks Rewards of BDS Market Development

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BDS Market Development

• Risks Rewards of BDS Market Development

63
BDS Market Development

• OBJECTIVES
• Define / describe general principles of Market
  Development Approach to BDS
• List broad categories of BDS w/ examples
• Describe key financial sustainability strategies
• List BDS organizations / appropriate roles
• Describe BDS market development principles /
  strategies and
• Describe main risks / rewards of BDS market
  development strategies.

64
BDS Market Development

• THE MARKET DEVELOPMENT APPROACH
• Basic Principles
• Impact-centered programs
• Specific, focused, tailored services
• Demand-driven services
• Sustainable service delivery and
• Development of competitive, vibrant BDS markets.

65
BDS Market Development

• Resources
• www.seepnetwork.org/bdsguide.html
• http//www.ilo.org/public/english/employment/ent/s
  ed/bds/seminar/index.htm
• http//www.ilo.org/public/english/employment/ent/s
  ed/bds/donor/index.htm

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BDS Market Development

• A Training Presented by
• The SEEP Network
• and
• The International Labour Organizations SEED
  Program