-By Development Network-
"The success of the holistic framework concept depends on how well local beneficiaries are capable to play the key role among the rest of the stakeholders. They must actively participate in the acceptance, decision, proposition, and funding phase of a development project to approve and to ensure that the chosen project is sustainable and favorable to their social, economics, public, politic, cultural environment".
Objective:
In order to propose a concrete strategy in an innovative & sustainable way through which able to achieve the solid impact on the Enterprise Development-Livelihood project in the Northern Region-Sri Lanka.
Back ground:
Due to the past decades of war in Sri Lanka, the community specially in the North and East regions poorer in terms of income, Livelihoods, infrastructure etc. Apart from the impairment of the local economy, the active human capital has also reached a critical low level etc. Due to the enormous scale of unemployment as well as poor income of the families, the needs of the sustainable livelihood of the people in the regions are very immense. The creation of jobs is vital that people start resettling.
On this moment, the rural enterprises play an important role in generating employment, creating income for a significant number of low-income workers and leveraging the scale filling the domestic demand for low –cost goods and services. So the establishment of enterprises and work for their sustainable growth is seen as one of the best option for rural economy development in the post conflict areas. The bulk of employment creation will expect in the beginning from self employment in agriculture, livestock and fisheries sector based activities. Also believed it will ensure the sustainability of the rural economy.
Further, the vulnerability of the existing micro and small scale businesses is very high and the contribution in the value addition is not much significant. The poor technology usages also are seen as one of the main reason for their inefficiency.
There is another significant factor is the women in the rural area are seen to be more active in the participation of income generation activities.
Rationale:
The people in the post conflict region are facing lot of unresolved issues which are keeping them in the most vulnerable state. Those are and not limited to:
· Lack of income/ employment opportunities
· Lack of capital/ assets to carry out sustainable livelihoods
· Lack of infrastructure facilities
· Lack of active human capital
· Vulnerability due to economy fluctuations
· Vulnerability due to market fluctuations
· Vulnerability due to seasonal disaster [ Dry season/ flood]
· Vulnerability due to sickness, disability, old age and death
· Lack of capacity of the Community Building Organizations (CBOs)
Project goals:
· Creating the employment by means of establishing growing concern rural level enterprises, as well as developing the capacity of the existing sustainable enterprises
· Developing the capacity of local Business Development Service (BDS) Providers
· Developing the capacity of relevant CBOs to lobbing for sustainable rural economy
· Developing the sustainable marketing network for rural level enterprises
· Establishing the stakeholder forums to address the rural enterprise related issues in the district level [if required address the issue in the national level]
· Improving the entrepreneurship knowledge capacity to manage the businesses effectively, sustainably, competitively and productively
· Cutting down the inefficiency and stimulate the growth of the enterprises.
Strategic approach
I. Business Process
Along the chain, the ownership is changing as well as the value also increasing of the product. The role of the support services in making the chain work. Services are normally provided by players who do not own the product. So, who invest high is getting lower share of the profit.
II. Value Chain
A string of players are working together to satisfy market demands for a particular product. Value chains can be used to analyze the total social benefit from products and services, and to clarify and refine the relationships between and among links in the chain.
Example:
The farmer receives seeds, fertilizer, pesticides, water, etc. from other entities; the product of the farm is further increased in value by many other entities
III. Value chain analysis (VCA)
The process of learning about the market chain is called Value Chain Analysis (VCA). Market development approaches are based on a comprehensive understanding of the market. Before any interventions are designed or actions taken we need to understand both the market chain and the poor and marginalized people potentially associated with it.
a) Deciding
• Deciding which market to work with
• Deciding on how to collect data
• Deciding on solutions that remove constraints on market participation for small businesses and farmers and include win–win outcomes for all chain actors.
b) Data collection and research
• The value chain analysis team collects data and information on the market chain from primary and secondary sources using a range of tools including semi-structured
Interviews.
c) Value chain mapping
• Helps to organize the data collected
• Facilitates a shared understanding of the chain (participant/actors, their functions, links and end markets)
• Helps to identify opportunities and constraints.
d) Analysis of opportunities and constraints
• Data is analyzed using the market map to reveal:
– Constraints within the chain that limit potential in the market, particularly those that contribute to exclusion of poor/disadvantaged market actors
– Opportunities for improving the chain, particularly those that could reduce exclusion of poor/disadvantaged actors.
e) Validation of findings with stakeholders and development of future actions
• The resulting analysis of opportunities and constraints should be validated with
Stakeholders
• Action and interventions developed through a participatory multi-stakeholder process.
IV. Important issues to concern when discussing these models:
The arrow between deciding and validation/action indicates the importance of validating decisions with stakeholders as the analysis proceeds to ensure accuracy of the analysis and enhance potential ownership of any future interventions by stakeholders. The whole process can be carried out together with stakeholders (this is a participatory value chain approach) or the process can be carried out by a research team with stakeholders engaged in the process of validation and strategy development
• Involving stakeholders in the research process is more participatory, but it can raise expectations among stakeholders. There needs to show the commitment with the process right through to implementation.
• Market mapping (the visualization of the market chain) and analysis of constraints and opportunities are closely linked, both being analysis activities.
V. Principles of Enterprise Development for poor
1. Mix Grant AND Investment
· Utilize and Blend both Grant and Investment Capital
[Grant Capital for purchasing machineries & equipments, relevant training and Self generated capital for covering the start-up costs [Cash/ In kind] like Land & Building acquisition, for working capital including Labour (In kind)]
2. Engage the CBOs & BDS Providers commercially
· Engage them not only in Philanthropy but also as social enterprise making interventions in commercial base
3. Think beyond Credit and utilize the Three Pillars of Enterprise, which are:
· Access to Capital;
· Business Development Services and
· An Enabling Environment
4. Aggregate Supply and Demand
· Aggregate supply to leverage the benefits of economies-of-scale for poor communities and small and micro entrepreneurs
· Aggregate demand to create economies of scale thereby providing substantial buying and consumption power for the low income earners
5. Formalize Ownership
· Formal recognition of the assets & equity through legal registration
· Legally recognized documents are transferable and can be used to secure credit lines [e.g. land title, etc].
6. Start with the Market and work backwards
· Use a demand-driven approach versus supply-led, and work backwards from the market demands in order to identify points of leverage for opportunities
7. Adhere to Business Basics…
· People respond to incentives, so Integrate management and business skills training
· Develop a business plan and use standards business benchmarks and financial statements to measure profitability
· Eventually localize for success ………
VI. Guiding Principles in Enterprise Selection
ü Systematic : Provides a methodical approach in the processes of enterprise selection
ü Focused : Clear goals and objectives on what to be attained
ü Cost-effective: Conscious of time, costs etc in relation to the needs and demands of the process
ü Consistent : Consistent in application across different situations and programs while being sensitive of different contexts.
ü Objective : Capable of demonstrating relevance in serving the needs for which it is used and applied
ü Accountable: Prove of relevance and value in its use & application
VII. General Enterprise Development Design Considerations [Holistic approach]
Ø Groups vs. Individuals: Pros and Cons
Ø Encouraging Women / Youth participation in Enterprise
Ø Is everybody an entrepreneur? [Refer: Personnel Entrepreneurial Competencies (PEC) Analysis]
Ø Perish ability of commodity and infrastructure constraints
Ø Will the poor really pay a fee for service?
Ø Explaining record keeping and business basics
Ø Forward Contracts: Securing a Market
Ø Encouraging private sector [Specially CBOs & BDS Providers] participation and building partnerships
Ø Negotiating with buyers and getting the best price
Ø The power of Aggregation
Ø The importance of Quality Control
Ø Honoring commercial obligations and commitments: Side-selling and low-balling
Ø Convergence of interests and creating 'win-win-win' solutions with other stakeholders
Ø Risk Mitigation
Ø Project exit and longer-term sustainability
VIII. Enterprise development Opportunities by broad sector classification [Examples]
| Sub-Sector | Activities and Type |
| 1. Agriculture Based | 1) Horticultural Production & Marketing 2) Post harvesting process [Milling & Grinding] 3) Seeds Packing & Marketing 4) Seed links & Nursery Plants Marketing 5) Processing Industry [Pickle etc] |
| 2. Livestock Based | 1) Poultry farm Management 2) Cattle milk marketing 3) Milk based food items preparation (Yogurt) 4) Meat Processing (Licensed) |
| 3. Fishery Based | 1) Dry Fish Industry 2) Fish based food items |
| 4. Forest and Natural Resource Based | 1) Beekeeping 2) Handicrafts making 3) Medical/ Aurvedic Plants gardening |
| 5. Leather Based | 1) Hides & Skins Marketing 2) Leather Tanning and Production |
| 6. Construction & Light Engineering Based | 1) Brick making 2) Black-smiths 3) Lime Production 4) Masonry and other construction |
| 7. Other Service Based | 1) Restaurant Management 2) Eco Tourism 3) Traditional culture 4) Service Centre/ Mechanic shops |
IX. Basic information required for an enterprise [Example]
1) Enterprise type – Milk marketing within the region/district
2) Activity description by function & marketing chain
· Initial milk sold in rural villages
· Milk supplied in the containers to collection centres, hotels, schools & hospitals etc.
· Milk transported by trucks to urban centres
· Processed milk sold directly to individual buyers
3) Market demand and enterprise data
· Consumption and /Demand for Milk within the Region/Area
· Volume of Milk Traded monthly per year and by season (Dry/Rainy)
· Number of suppliers/traders and the quantities supplied at each stage by seasons (Dry/Rainy)
· Quality of the milk and other quality control issues
· Prices earned from sell of milk by different participants at different stages
· Capital or resource requirements at each stage
· Estimated demand for milk in the region, and the percentage supply met
· Constraints analysis of milk marketing - Market access, product knowledge/level of technology, financing needs/sources, and skills levels etc
· A map of the milk marketing chain within the region
· Other sub-sector linkages and information – Other industry stakeholders companies/suppliers, market size, source, product type, etc
X. Four key perspectives for assessing possible enterprise opportunities
| 1. DEVELOPMENT AND COMMUNITY PERSPECTIVE | 2. CONSERVATION PERSPECTIVE |
| o Number of Beneficiaries o Gender o Vulnerable / Marginalized Groups o Total Income /(Net) Income per capital o Cohesion and group skills + Individual skills development o Equity/ Sustainability o Process, involvement, engagement, participation o Timeframe to benefits o Location o Conflict-sensitive | o Do no Harm o Decoupling (e.g. enterprise with similar product traders) o Coupling (e.g. Ecotourism) o Goodwill / trust / confidence towards conservation through enterprise o Alleviate acute vulnerability |
| 3. BUSINESS PERSPECTIVE | 4. PROJECT REALITIES |
| o Start-up and /or going concern o Demonstrated market o Market Characteristics: Growing (size, volumes, price) & Stable o Capital Requirement: Investment & smart grants levels o Recognize Business Development Services (BDS) and Technical Assistance(TA) requirements – now and in the future o Time to Break Even; Profitability o Ensure business plan elements are incorporated o Regional opportunities / dimensions o Encourage and promote linkages / partnerships with private sector and others o Availability / stability of human capital, raw materials, processing equipment, packaging, etc o Diversification | Some things to think about …. o Can it be done within project timeframe? o Timeframe to visible / tangible benefits? Quick wins? o Project impact zone considerations o Can it be done within the allocated resources? o Do we have the internal capacity? o Will it be time / labour intensive? o Leveraging the donors areas of expertise and previous experience and current capacity o Previous interventions in the sector / area o Mindful of the TA and BDS limitations later on |
XI. Enterprise Selection
IMPLEMENTATION PROCESS/ACTION PLAN
| Possible Selection Process | Mechanism/Tools | No of Enterprises | Time Frame |
| Opportunity Identification | · Using Guiding Principles · Brainstorming with community mobilizers | 12 | 2 Months |
| Select Enterprises/ Sector for Pre-Feasibility Selection | Sectors for Pre-Feasibility Selection (Field Visits) | 08 | 1 Month |
| Select Enterprises/ Sub sector analysis | Feasibility Study (Limited Pilot Study) | 04 | 1 Month |
| Decide on Enterprise | · Focus group discussion with Stakeholders [Refer stakeholder selection Criteria] · Using Enterprise Selection & Ranking Criteria Matrix [PRA with stakeholders] | 2-3 | 2 Months |
| Development of Concept note / Simple Investment Profile/ Business Plan | · Market Study · Personnel Entrepreneurial Competencies (PECs) Analysis · Analysis of self generated capital (Equity/ Share Capital) | 1-2 | 3 Months |
| Proceed to 'Scale' if results are positive | Feedback & Modification | 1 | 3 Months |
XII. Selecting a market for the practical research
MAIN FEATURES
Two important clarifications:
· 'A holistic view…'
Emphasise the 'whole-chain approach'. Deeply held assumptions about markets (such as those explored in the yes/no activity), personal preferences, organizational priorities, donor requirements, greed, corruption, culture and many other influences on a market can make it difficult to maintain a holistic view. But without the holistic understanding, any intervention we make is at risk of failure.
· 'The enabling environment…'
ü This is the environment in which market activity operates
ü Rules and regulations (which may be formal or official but, if absent or weak, may include informal, unofficial and perhaps even illegal realities in which market activity takes place such as corruption)
ü Services are activities that support interactions and processes within the chain but that are not within the chain itself (they don't involve ownership of the product).
XIII. A common aim of market development interventions is to improve incomes through:
o More or better access to a market
o Alternative opportunities for making a living.
o 'Bottom-up' – when working with communities, especially in reaction to market failures such as excessive power of one actor, lack of information, lack of property rights, high transaction costs, etc
o 'Middle-out' – from other actors in, or associated with, the chain.
o Sometimes the choice of market (or sub-sector) is already made (for example, where farmers/ businesses want low-risk strategies to focus on improving what they are already doing). This might make sense as a first step. However, even in this situation there may be a choice to be made about which market segment to aim for (for example, local or export, processed or fresh)
o For higher-risk strategies (such as considering new products or crops) there may be a long list of potential markets – clear process is needed for deciding which market/s to research in depth.
o Choosing between markets requires research about the potential markets and also about the target group.
o Whoever or whatever is driving change, if it is to be sustainable all market actors involved must ultimately 'own' the process and intervention and take responsibility for making it work.
A development agency working on enterprise development in rural areas, the organization's strategic focus is on economic development and the issues of rural poverty .The following selection criteria were identified and prioritized:
1. Unmet market demand - Extremely important
2. Potential increase in rural incomes- Very important
3. Potential for employment generation- Important
4. Existing socio-economic support programmes-Slightly important
XIV. Strengths and weaknesses of INGOs/ NGOs involvement in market development
SWOT ANALYSIS [INGOs/ NGOs point of view]
| Strengths | Weaknesses |
| • Organization which is giving a voice to marginalized people • Having a bigger picture view • More powerful to influence than individuals • Typically good at facilitating change and participation • Having connections with government and service providers. | · Lack for-profit experience and skills • Advocating for support to for-profit activity may be a new experience • Own profit-making activity may be undermined. |
| Opportunities | Threats |
| · Experience of working with poor and marginalized people, their activities are more likely be appropriate to beneficiary realities • Sustainability of efficient for-profit activity • Potential for identifying very specific interventions. | · Competition between other INGOs and the private sector • Challenging the existing market situation • Lack of donor support • Conflict between INGOs with different approaches • Lack of mutual understanding between INGOs and private sector. |
XV. Monitoring the Enterprise Development Programme
When tracking enterprises or businesses, combine the development (social & environmental) measures with aspects from the financial performance of a business .The goal of the enterprise is to generate value and hence M&E should focus on what is relevant to the businesses – Profitability, Services delivery, Customers and markets, etc. Hence try to balance the information need for project purpose and that which an enterprise can reasonably provide.
· Identify 3-4 key indicators that will measure what is relevant to the enterprise, and agree jointly with enterprise on which kind of indicators can be measured, and explain the reasons and information required.
· Also agree on the frequency, documentation, external / third party verification
· Finally determine how M&E will help both the enterprise and the development organization?
XVI. Measuring Impact: Developing Triple Bottom Line (Social, Economic, Environmental)
Ø Expected Outcomes Indicators of Enterprises
i) Δ /Increase in per capita income
ii) Δ /No of beneficiaries who accessing employment opportunities
iii) Δ /Growth in enabling environment (BDS) for enterprise growth
iv) Δ / Knowledge development in the community to manage enterprises
Ø Objectives to measure from a development organization's perspective
i. Impact
ii. Outreach
iii. Sustainability
iv. Cost-effectiveness
Ø Objectives to measure from an enterprise perspective
i. Profitability
ii. Increased market access and growth
iii. Increased knowledge and skills business and management
iv. Enabling business environment and services
XVII. Expecting impact on the community via this project
· Increased opportunities for growth and Income
· Greater Self-Confidence
· More assertive role in domestic sphere
· Greater respect within family
· More assertive role in children's health and education
· Reduction in domestic violence
· More active participation in community affairs
· Increased awareness, self confidence to improve family and community lives
· Gained new skills
· Better buying and selling skills
· Better prices for products
· Independent marketing
· Better agricultural, livestock, livestock and other sector practices
Annexure: 01
Enterprise Selection & Ranking Criteria Matrix (Weighting Methodology)
SELECTION CRITERIA
A. Market demand and linkage
· Local Market Demand = (Score)
· Domestic Market Demand = (Score)
· International Export Market Demand = (Score)
· Proximity to the Market = (Score)
· Competitive Advantage = (Score)
· Market Classification = (Score)
· Market Linkages [Forward & Backward economic activity links] = (Score)
Bench Mark Indicator = (Total Score)
B. Availability of raw materials
o Abundance of raw material supply = (Score)
o Seasonality of raw material supply = (Score)
o Quality of raw material = (Score)
o Organizational capacity to procure raw material supply = (Score)
o Comparative advantage of location = (Score)
o Comparative advantage of RM/Process/Service over
competeting products/services = (Score)
o Perish ability of raw material of product from value added process = (Score)
Bench Mark Indicator = (Total Score)
By adding the both total scores, the possible enterprises will be listed in descending order. And again they will be filtered by means of Ranking Criteria.
RANKING CRITERIA
a. Market linkage [ Benchmark Indicator: Average annual local production growth/ Average annual importation growth]
b. Raw material availability for value added process [Benchmark Indicator: % of Raw Material Locally Available = Cost of locally available material/ Cost of all material (Include imported material)]
c. Environmental Impact [Benchmark Indicator: Environmental Impacts =Soil+ Water+ Air+ Noise (Range of Impacts)]
d. Costal Resource Management Impacts [Benchmark Indicator: CRM Impacts =Coral reef+ Mangrove+ Fishing Intensity+ Resource Pollution(Range of Impacts)]
e. Labour Intensity [Benchmark Indicator: Labour Intensity= Total number of workers (Full/Part Time) / Est. Investment Cost (in LKR. Million)]
f. Power Intensity [Benchmark Indicator :Power Intensity=Energy cost as per percentage of total unit production cost (Direct labour+ Direct material+ Overhead+ Energy Cost)]
g. Appropriate Technology [Benchmark Indicator : Appropriate Technology= Technology+ Training Materials and/or Capacity+ Previous Technology+ Equipment (Score)]
h. Industrial Linkages [Benchmark Indicator : Number of forward and backward linkages]
Annexure: 02
PERSONAL ENTREPRENEURIAL COMPETENCIES (PECs) ANALYSIS
SELF-RATING QUESTIONNAIRE
Scoring System: [ Always = 5 Points, Usually = 4 Points, Sometimes = 3 Points, Rarely = 2 Points & Never = 1 Point]
1. I look for things that need to be done.
2 . When faced with a difficult problem I spend a lot of time trying to find a solution.
3 . I complete my work on time.
4. It bothers me when things are not done very well.
5. I prefer situations in which I can control the outcomes as much as possible.
6. I like to think about the future.
7. When starting a new task or project, I gather a great deal of information before going ahead
8. I plan a large project by breaking it down into smaller tasks.
9. I get others to support my recommendations.
10. I feel confident that I will succeed at whatever I try to do.
11. No matter whom I'm talking to, I'm a good listener.
12. I do things that need to be done before being asked to do so by other
13. I try several times to get people to do what I would like them to do
14. I keep the promise I make.
15. My own work is better than that of other people I work with.
16. I don't try something new without making sure I will succeed.
17. It's a waste of time to worry about what to do with your life.
18. I seek the advice of people who know a lot about the tasks I'm working on.
19. I think about the advantages and disadvantages or different ways of accomplishing things.
20. I do not spend much time thinking about how to influence other
21. I change my mind if others disagree strongly with me.
22. I feel resentful when I don't get my way.
23. I like challenges and new opportunities.
24. When someone gets in the way of what I'm trying to do, I keep on trying to accomplish, what I want
25. I am happy to do someone else's work if necessary to get the job done on time.
26. It bothers me when my time is wasted.
27. I weigh my chances of succeeding or failing before I decide to do something.
28. The more specific I can be about what I want out of life, the more chance I have to succeed.
29. I take action without wasting time gathering information.
30. I try to think of all the problems I may encounter and plan what to do if each problem occur
31. I get important people to help me accomplish my goals.
32. When trying something difficult or challenging, I feel confident that I will succeed.
33. In the past I have had failures.
34. I prefer activities that I know well and with which I am comfortable
35. When faced with major difficulties, I quickly go on to other things
36. When I'm doing a job for someone, I make a special effort to make sure that, the person is happy with my work
37. I'm never entirely happy with the way in which things are done, I always think, there must be a better way
38. I do things that are risky.
39. I have a very clear plan for my life.
40. When working for a project for someone, I ask many questions to be sure I understand what the person wants
41. I deal with problems as they arise rather than spend time to anticipate them.
42. In order to reach my goals, I think of solutions that benefit everyone involved in the problem
43. I do very good work.
44. There have been occasions when I have taken advantage of someone.
45. I try things that are very new and different from what I have done before.
46. I try several ways to overcome things that get in the way of reaching my goals.
47. My family and personal life are more important to me than work deadlines I set for myself.
48. I do not find ways to complete tasks faster at work and at home.
49. I go things that others consider risky.
50. I am as concerned about meeting my weekly goals as I am for my yearly goals.
51. I go to several different sources to get information to help with tasks or projects.
52. If one approach to a problem does not work, I think of another approach.
53. I am able to get people who have strong opinions to change their minds.
54. I stick with my decisions even if others disagree strongly with me.
55. When I don't know something, I don't mind admitting it.
| Rating of Statements [PEC] Categorized under the following · Opportunity Seeking · Persistence · Commitment to work contract · Demand for Quality and Efficiency · Risk Taking · Goal Setting · Information Seeking · Systematic Planning & Monitoring · Persuasion and Networking · Self Confidence |  |
Annexure: 03
STAKEHOLDER SELECTION CRITERIA
Stakeholder analysis:
It can be used in different ways at different stages of a project, but as a research tool it is most appropriate in identifying and increasing understanding of stakeholders.
| Stakeholder | Interest in the value chain (description) | Influence over the value chain (-5 to +5) | Importance to the development of the value chain (0-5) |
| | | | |
| | | | |
| | | | |
| | | | |
· Interest – what actors stand to gain/lose through the development of the value chain
· Influence – of the actor over the existing chain (both positive and negative) in terms of impact on our target group.
· Importance – of the actor's role in development of a value chain that brings a positive outcome for our target group.
Stakeholder Matrix:
· It identifies possible allies and potential partners, as well as potential constraints and risks to the process
• It indicates potential conflicts that may arise during the meeting and the need for preparatory one-to-one meetings to reduce this risk
• If stakeholders themselves use this tool, judgments about their relative importance and influence may need to be managed in a sensitive way
• A neutral facilitator who is not a stakeholder is better for this activity
• The importance of remaining objective and backing up judgments with evidence.
Annexure: 04
DIFFERENT APPROACHES IN MARKET DEVELOPMENT/ANALYSIS
| Approach- I | Approach -II | Approach- III |
| · Establish a selected production project • Identify possible markets • Organize stakeholder meetings • Finalize project | · Identify market of interest with partners • Develop and complete market assessment research in three locations • Develop concept note • Develop terms of reference for enumerators to lead the research • Step-down training with identified partners on market development | · Review programme area plan for secure livelihoods • Develop terms of reference for market research volunteers • Identify which partners to work with on market development |
