BDS Market Development

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BDS Market Development

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

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BDS Market Development

• WORKSHOP GOAL
• To help enterprise development specialists
  understand commercially oriented business
  development services (BDS) initiatives.

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BDS Market Development

• Introduction
• 5 Guiding Principles
• Discussion Risks Rewards

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Success Story
Microenterprise Mrs. Jane Ondiek, small-scale
farmer Country Kenya Organization ApproTEC
BDS Access to technology
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Success Story

• Mrs. Jane Ondiek, Small-scale farmer, Kenya
• Widow since 1997
• Earned Kshs 7,000 (93) per season
• In 1999, bought an ApproTEC irrigation pump
• Started growing high-value crops
• Earned Ksh. 240,000 (3200) in 1999

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Success Story

• Mrs. Jane Ondiek, small-scale farmer, Kenya
• After the death of her husband, Janes 6 children
  almost dropped out of school due to lack of
  school fees, but with irrigation she now makes
  enough money to send them to college.
• "Im making enough money now to support my family
  fully without begging from relatives since my
  husband died!"

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BDS Market Development

• Subsidized BDS Program Approach
• An NGO receiving donor funds gave equipment to a
  womens group.
• Only women in the group had access to the
  technology.
• If it didnt work, the women did not complain
  because, after all, it was a gift.
• If they wanted it repaired or wanted additional
  machines, they needed more help from the NGO.
• Therefore, a limited number of people benefited
  and only for a short while.

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BDS Market Development

• Market Development Approach
• A donor-funded NGO designs a machine and trains
  private manufacturers and distributors to make
  and sell it.
• Customers able to afford a machine, buy it.
• If they are not satisfied, they return it for a
  full refund. Repair services are also available.
• The technology is sold by profitable businesses
  that have an incentive to reach as many people as
  possible, for as long as possible.

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BDS Market Development

• Specific Outcomes of ApproTEC Kenya Project
  (1996-1999)
• 4,050 pumps purchased by farmers.
• Each pump generated an average net annual profit
  of 69,000 Ksh (940).
• Each pump created 1.6 new jobs (for a total of
  6,561.)
• 3.8 million being pumped into the economy every
  year (in Kenya, this is enough money to keep
  13,000 students in secondary school.)

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BDS Market Development

• 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 your program serve?
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Impact-Centered Programs
SEs... Micro, Small, and Medium- Sized Firms and
Small-Scale Farmers
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BDS Market Development

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

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Specific, Focused, Tailored Services

• What are
• Business Development Services?

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Business Development Services
Are More than...
Finance
Training
Technical Assistance
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Business Development Services
They Are Also...
Market Access
Inputs Infrastructure
Advocacy
Technology
Product Development
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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 the year 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 the supplier
  to provide relevant services.

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Demand-Driven Services

• SEs pay fees for the services
• or
• 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

• Good capacity to deliver the service
• Close to SEs in culture, operating environment,
  and geography
• Low cost structures
• Commercial focus and business culture
• Commercial accounting and management systems
• Organizational independence, especially from
  donor funds
• Organizational stability and
• Sufficient 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 with...
• A range of SEs accessing...
• A wide selection of BDS supplied by...
• Numerous, commercial suppliers
• ...SEs choose to patronize.

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BDS Market Development
Subsidized Program Model
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BDS Market Development

• Subsidized Program Model
• Donors support 1 or 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 and many questions
  remain

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1. Market functions
Research and development Product development
Delivery of services Information
Co-ordination 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
Linkages information services
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BDS Market Development

• Small-Scale Water Pump Market in Kenya
• ApproTEC introduced appropriate technology

• Supply dominated by expensive complex
  mechanized pumps
• Most farmers use bucket irrigation limited area
  and season
• Big demand for irrigation during dry seasons when
  prices are high
• Farmers typically buy inputs from rural hardware
  and agro-chemical suppliers.

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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
• 30,000 vouchers provided to
• 13,700 microenterpreneurs...
• Who purchased training from...
• Over 40 private sector suppliers.

50 off!
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BDS Market Development

• Information Services
• FIT Uganda SE Radio Program
• Since 1999
• CBS broadcasts bi-weekly...
• To 90,000 listeners
• Reaping profits with sponsorship from 2 firms
  and
• Replicating program in rural Uganda and Ghana.

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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
  and 5,000 installers sold over 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 dis-invest 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

• Risks Rewards of BDS Market Development

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BDS Market Development

• What are some of the risks and rewards of a BDS
  Market Development Strategy?

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BDS Market Development

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

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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