Centro de Documentos
Investing in Micro and Small Enterprises in the South
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Growing Needs of Capital and Expertise of the Micro and Small Enterprises
Cordaid has been supporting some 30 plus micro and small enterprises in Latin America, Africa and Asia during the last 5 years. While doing this, it has realised that productive micro and small enterprises have significant potential for fostering efficient economic growth in developing countries. micro and small enterprises play a critical role in the development and growth of local and regional economies by creating employment.
It is very interesting to note that micro enterprises are germinating on a wide scale, to a large extent, as a result of micro credit lending done by Micro Finance Institutions the world over, be it that most of them are in the informal sector. Besides micro enterprises, a large number of small enterprises are coming up in developing countries. These come from a very different sector than the sector of the non-governmental organizations. These are often socially aware entrepreneurs who with their own capital and that of their families and friends set up small enterprises in the formal sector. In particular, it is interesting to note that they enter into fair and transparent relationships with the small producers, both in the rural and urban areas, providing access for their products in local and, at times, even in international markets. These small enterprises have proven to develop not only the capabilities to buy and store products; they are able to add value by processing and marketing products and developing distribution networks. This they do by entering into various types of alliances with intermediaries, traders, input suppliers, wholesalers and retailers. Many of these small enterprises are slowly able to access finance also from local banks, though most of their base for financial support comes from funding organisations, from government schemes in some countries and from bilateral and multilateral institutions. Micro and small enterprises are also deeply aware of the demands made by social responsibility. A small enterprise makes it a point to get most of the products coming from the small producers certified as fair trade products and makes an effort to meet the requirements of corporate social responsibility in terms of using environmental friendly technologies and personnel policies that do not accept child labour and wish to abide by gender equality principles.
Cordaid makes a special plea in this publication to the small and medium enterprises sector in the Netherlands to consider linking themselves with the upcoming micro and small enterprises by offering their market networks, capital - either directly or indirectly through the small and medium enterprises Funds or through the Development Organisation Cordaid - and expertise in order to improve the quality of the products. The small and medium enterprises can also assist in the areas of governance, management and marketing that micro and small enterprises are looking out for in the developing countries. There is a great need for capital requirements (working capital and equity capital) in micro and small enterprises. Though investment funds are coming up in some countries, there is a concerted effort needed to link upcoming micro and small enterprises and through them the quality products and the products of hard work and joy of the small producers with the network of the small and medium enterprises in the developed countries, like the Netherlands.
Looking the other way round, the small and medium enterprises sector in the Netherlands can benefit from the upcoming small and micro enterprises in the developing countries by diversifying their products, extending their distribution networks and increasing their exposure in emerging markets. Linking with and investing in the upcoming micro and small enterprises needs to be seen from the perspective of investing in rapidly growing emerging markets. The small and medium enterprises Sector in the Netherlands can certainly seek profitable investments in these emerging markets while wanting to live up to the modern demands of Corporate Social Responsibility which are now incumbent on all entrepreneurs the world over.
Cordaid has been supporting some 30 plus micro and small enterprises in Latin America, Africa and Asia during the last 5 years. While doing this, it has realised that productive micro and small enterprises have significant potential for fostering efficient economic growth in developing countries. micro and small enterprises play a critical role in the development and growth of local and regional economies by creating employment.
It is very interesting to note that micro enterprises are germinating on a wide scale, to a large extent, as a result of micro credit lending done by Micro Finance Institutions the world over, be it that most of them are in the informal sector. Besides micro enterprises, a large number of small enterprises are coming up in developing countries. These come from a very different sector than the sector of the non-governmental organizations. These are often socially aware entrepreneurs who with their own capital and that of their families and friends set up small enterprises in the formal sector. In particular, it is interesting to note that they enter into fair and transparent relationships with the small producers, both in the rural and urban areas, providing access for their products in local and, at times, even in international markets. These small enterprises have proven to develop not only the capabilities to buy and store products; they are able to add value by processing and marketing products and developing distribution networks. This they do by entering into various types of alliances with intermediaries, traders, input suppliers, wholesalers and retailers. Many of these small enterprises are slowly able to access finance also from local banks, though most of their base for financial support comes from funding organisations, from government schemes in some countries and from bilateral and multilateral institutions. Micro and small enterprises are also deeply aware of the demands made by social responsibility. A small enterprise makes it a point to get most of the products coming from the small producers certified as fair trade products and makes an effort to meet the requirements of corporate social responsibility in terms of using environmental friendly technologies and personnel policies that do not accept child labour and wish to abide by gender equality principles.
Cordaid makes a special plea in this publication to the small and medium enterprises sector in the Netherlands to consider linking themselves with the upcoming micro and small enterprises by offering their market networks, capital - either directly or indirectly through the small and medium enterprises Funds or through the Development Organisation Cordaid - and expertise in order to improve the quality of the products. The small and medium enterprises can also assist in the areas of governance, management and marketing that micro and small enterprises are looking out for in the developing countries. There is a great need for capital requirements (working capital and equity capital) in micro and small enterprises. Though investment funds are coming up in some countries, there is a concerted effort needed to link upcoming micro and small enterprises and through them the quality products and the products of hard work and joy of the small producers with the network of the small and medium enterprises in the developed countries, like the Netherlands.
Looking the other way round, the small and medium enterprises sector in the Netherlands can benefit from the upcoming small and micro enterprises in the developing countries by diversifying their products, extending their distribution networks and increasing their exposure in emerging markets. Linking with and investing in the upcoming micro and small enterprises needs to be seen from the perspective of investing in rapidly growing emerging markets. The small and medium enterprises Sector in the Netherlands can certainly seek profitable investments in these emerging markets while wanting to live up to the modern demands of Corporate Social Responsibility which are now incumbent on all entrepreneurs the world over.