One of the most enduring programming approaches to poverty reduction is small and micro enterprise (SME) development. Throughout the 1990s the international community, inspired largely by the success of initiatives such as the Grameen Bank and ACCION, promoted micro lending as a critical tool to enable people living in poverty to create sustainable livelihood opportunities.
Effective SME
development and credit programs create the conditions that expand opportunities
for individuals, families and communities. The core principle of SME programming
is that by supporting entrepreneurship, development agents can reduce poverty
by expanding employment and income generation opportunities. Yet, like all
development approaches, SME programming contains a number of risks. Approaches
that emphasise micro-credit without considering the needs and challenges faced
by borrowers risk expanding indebtedness among those least able to repay loans.
Similarly, encouraging new businesses without an understanding of the local
context and community issues can result in the development of privileged classes
among the poor, breaking down social cohesion and community. Because income
is just one measure of poverty, it is a mistake to assume that raising income
levels alone will result in sustainable human development.
FIT has been involved in SME programming for over 15 years. During this time we have developed a number of strategies aimed at ensuring that the benefits of enterprise development reach entire communities. Our approach emphasises the role of mediating agencies and institutionalizing systems to ensure that SME development activities are integrated with the needs of the local community. Through projects such as the Small and Micro Development Project for Upper Egypt (SMEDUP), FIT has developed institutional frameworks for SME development designed to improve people’s lives. The focus of SMEDUP is to develop the capacities of local organisations capable of delivering comprehensive business development services, including training, counselling and advisory services to first-time entrepreneurs; lending; and ongoing technical and training support to business owners. Through SMEDUP, three autonomous Community Development Agencies (CDAs) have been developed to deliver these services and extend opportunities to low-income families who would otherwise not have access to credit or support services. As Egyptian organisations directed and managed by local people, the CDAs have been able to quickly develop connections with their communities and emerge as valued local resources.
While SMEDUP’s success in terms of business start-ups and job creation
are impressive, even more important are the initiatives of the CDAs to harness
SME development as a means to have a positive impact on people’s quality
of life. Each year the CDAs conduct Worker Surveys that look beyond the number
of jobs created by SMEDUP client enterprises to explore the quality of these
jobs and identify opportunities for SMEDUP to facilitate improvements in working
standards and conditions. As a result, CDA staff are integrating issues such
as expanding employment opportunities for women, workplace health and safety
and social insurance into their business advisory services. By not taking
the advantages of job creation for granted, the CDAs have become proactive
in making a direct connection between economic development and improving the
human condition.
