India Development Solutions

If finance is the lifeline of Micro, Small and Medium Enterprises (MSMEs), then information is the balanced diet for their growth. As supply of oxygen alone cannot ensure a healthy growth of a human body without the blanched diet, no MSME can survive and grow without information.  Just by administering doses of finance, one cannot ensure the growth of an enterprise if it lacks access to right type of information at right time. In fact, an enterprise needs information at all stages of evolution: from ‘concept’ to a well-established and fully-grown one, each stage requiring different kind of information. Unfortunately, there is tendency among all, including enterprises themselves, to ignore the importance of information, often detrimental to their survival and growth. 

Information is the key element in the success of an enterprise, so much so that in the present highly charged competitive environment, ability to quickly obtain information has emerged as an important component of ‘competitive strength’ of MSMEs. Other factors that determine the competitive strength include: (a) ability to innovate; (b) access markets & technology; (c) obtain finance at economical rates and (d) availability of varied types of inputs.  Since ‘life cycle’ of a product got shortened due to innovations and technological developments, the enterprises necessarily need to get hold of required information on such developments, if they have to remain in the economic activity. 

The recent past technological and international developments, viz. the rapid strides in information and communication technologies (ICT) and the establishment of World Trade Organization (WTO), have only made role of  ‘information’ greater than before in the life of an enterprise.    Rapid strides in the ICT in the past about two decades have completely transformed the entire business operations, including strategies.  Assuming that a user is connected to internet, a wealth of information is just a click away.  The World economy today is driven more by ‘knowledge’ than materials, adding new value to business processes. 

 In such a world, the ‘time’ has become the essence of all businesses.  Revolution in ICT also has increased expectations of a consumer since he/she is today exposed to different varieties of a product, different qualities, makes, and channels of obtaining a product (e.g.  tele marketing, through net, and mail order) etc. This is putting additional pressure on enterprises to gear up to consumers’ expectations. Only such enterprises can survive and grow in the present information age that can access the desired information and use the same to address a business problem.  

 

Coming in to existence of World Trade Organization (WTO) in January 1995, mandating member-countries to liberalise and relax their trade and investment regimes to facilitate free flow of goods and services has only exposed enterprises to hitherto unheard of competition from international players. At the same time, WTO mechanism provides for protection to domestic industry in case of any unfair trade practices such as dumping. The WTO mandates’ also opened up new opportunities to discerning enterprises to tap the world market, subject to their competitive abilities and strengths. WTO, unfortunately, does not differentiate enterprises by size and expect them all to operate as per new rules of business game, calling for extra efforts on the part of MSMEs to become competitive. 

It is well-known and recognised fact that MSMEs in an economy - be it developed or developing – account for over 90 per cent of enterprise populations, a significant share in domestic output, exports, innovations, contribute substantially to employment generation, etc. In several of poverty ridden and high unemployment countries, many of MSMEs have come up due to poverty eradication programmes.  Their potential to generate employment opportunities raises some hope in addressing one of the eight United Nation’s Millennium Development Goals relating to reduction of poverty and unemployment. 

 

MSME sector is, thus, an indispensable and dominant segment of any economy in the world. However, it is apparently being marginalised due to their very size and other inherent limitations in the new competitive economic environment, dominated by ICT.  It, therefore, becomes imperative to support such an important economic player in their efforts to become competitive in the new globalised and liberalised environment.

Nevertheless, the question that arises is whether the national governments and other stakeholders have empowered MSMEs enough to come up to these expectations. Do they have a reach to varied types of information needed to remain in business in a competitive manner?  

 

In the present globalised world, MSMEs need to quickly, and on continuous basis, access information on aspects such as:

 

Making available the most update information MSMEs, therefore, would not only help solve a business problem but would also offer prospects for new business developments. In addition, enterprises need not go around scouting for information, resulting in saving of time for both the existing enterprises and start-ups.  Therefore, it has become crucial for the government authorities and other stakeholders to ensure that MSMEs can quickly and easily acquire the required type of information.  

Governments around the world have taken up the primary responsibility to steer the growth and development of their MSMEs through various programmes and support institutions. The availability of an effective support system to meet information needs of MSMEs in the U.S and European has been a great boon to them. The U.S Small Business Administration meets the information needs of SMEs through Small Business Development Centers (SBDCs).    “The 950 SBDC offices around the country provided counseling to 600,665 businesses last year” . One would find a similar set up in Israel and Canada.  An interesting aspect that needs to be noted is that the U.S SBDCs are joint programme of the SBA, universities, enterprises, donors, etc . 

Nearly 300 Euro Info Centers provide the much-need support to SMEs in European countries.   They also work in the reverse direction of conveying concerns of small enterprises to authorities, which helps them in framing appropriate legislation and policies.  Millions enterprises have benefited from their services across the Europe. 

 

All these agencies have always had ‘making available the required information to small enterprises on top of their agenda’ since they long ago recognised the importance of timely availability of information in the management and operation of a small enterprise and. In addition to these channels, one would find a well-established BDS (business development service) providers’ market, providing information at a fee. 

 

However, the situation in developing countries is somewhat different. Until recently, most governments in developing countries took up the sole responsibility of navigating the growth and development of their MSMEs through various programmes and support institutions. Information required by MSMEs was also - and still in many countries is – made available by government institutions/agencies, often in a much-dispersed manner.   Just to give some examples: apart from the Office of Development Commissioner for MSMEs, a host government-sponsored export promotion councils, commodity boards, Khadi and Village industries Commission and District Industries Centers are supposed to provide information to MSME sector in India. 

 

Malaysian SMEs are supported by their Small and Medium Industries Development Corporation (recently rechristened as SME Corporation), while  Bureau of Small & Medium Business Development (BSMBD), an agency of  the Department of Trade & Industry (DTI) is tasked with the responsibility of  promoting and developing SMEs in Philippines  by addressing their all concerns. Pakistan’s Small Medium Enterprise Development Agency, through its Information Resource Centre, caters to the information needs of SMEs . The Bangladesh Small and Cottage Industries Corporation (BSCIC) under the Ministry of Industry, is the nodal agency meeting all requirements of MSMEs in that Country.  

 

MSMEs in most African countries, on the other hand, were bereft of any effective support mechanism until recently. United States African Development Foundation (USADF) observed that “lack of information on better production methods and markets” as part  “of the common constraints faced by SMEs in Africa” among others such as “inadequate fixed or working capital” .  It is only recently they are having some support mechanism when the International Finance Corporation (IFC) established SME Solutions Centers as its programme to support SMEs in the region. These “centers provide various information products and services on a commercial basis. These include access to reliable market information, broadband internet access, training facilities, database management, temporary office services, meeting rooms, and research facilities. The centers also operate fully-fledged incubation centers that enable small and medium sized businesses to pool and share resources under one roof.” 

The importance of information to the success of an enterprise needs no emphasis. Both enterprises and the governments stand to benefit from this.  Enterprises stand to gain in terms of (a) improved productivity, (b) taking informed business decisions, (c) becoming a part of the supply chain and (c) opportunities to expand business, amongst others, while the Governments gain from (i) the increased revenues, (ii) lesser social tensions due increased employment opportunities, and (iii) productive utilization of resources.   Lack desired access to information will not only ruin an enterprise but will also result in losses to governments since funds spent on enterprise development programmes would not yield expected results.  

 

An idea about how inadequate access to information can adversely affect an enterprise can be had from the experience of India – a country with over 10.5 million MSMEs overseen by the Ministry of Micro, Small and Medium Enterprises.  According to the most recent Census of MSMEs, a bulk of them indicated “lack of demand” and “marketing problems” as major reasons for their “incipient sickness”, which is also a reflection of their inability to adjust their operations to changing market conditions due to lack of advance information. Similarly, ignorance about the need for registration, has kept over 53 per cent of total enterprises outside the registered industrial sector , depriving them not only benefits of promotional programmes but also keeping them away from mainstream economy. 

It is in the interest of Governments to put in place such mechanism that meet the information requirements of small enterprises to build a strong and viable MSME sector given that they substantially contribute to overall social and economic growth. 

 

However, the post-1991 developments have restrained SME promotional organisations in developing countries from continuing with earlier polices and programmes owing to budgetary constraints. These developments also have brought to fore the limitations of the available institutional support system in feeding MSMEs with the required information that can help address a business issue. MSMEs problems are further acerbated by the absence of BDS (business development service) providers and general inability of trade and industry associations to meet all needs of MSMEs.  These channels are, in fact, in the evolving stages in most developing countries and need to be strengthened in terms of their capacities.  Such a situation is only causing additional anxiety to MSMEs since  they are now required to  be on their own without fully knowing - as well as means to - how to go about. 

In the market-economy world, government cannot be in the business of providing information but can facilitate the same for the growth and development of MSMEs by collaborating with private sector. Governments need to put in place ‘MSME Information Centers’, easily accessible to enterprises. Such Centers will have to be operated on commercial lines and managed by a board consisting of representatives from public and private sectors, besides knowledgeable persons from academic circle and other stakeholders, including MSME-specific NGOs.  Governments also need to institute effective support policies to enable trade and industry associations and NGOs, involved in the MSME sector,  to become ‘information storehouses’, besides encouraging development of BDS market.   

 

Enterprises themselves have a very large role to play in improving the overall reach to required information.  They can profitably and effectively employ new aids and tools that became available due ICT. It is a common knowledge that one can source a variety of information through internet. Here, Governments need to encourage them to make use of ICT for business solutions by ensuring efficient connectivity system. Enterprises also need to maintain certain minimal information on their own for comparison and analysis purpose to help take an informed decision.

Recognising the limitations of developing countries in strengthening their enterprises via facilitating their access to desired information, agencies in U.N system such as United Nations Industrial Development Organisation (UNIDO), International Trade centre (ITC) and other multi-national Organisation have instituted specific programmes to help national governments and, thus, MSME sector.

 

Some of the examples of international efforts to help address the problem of inadequate access to information by MSMEs include: UNIDO’s programme of “Capacity-building for Business Information networking; ITC’s Market Analysis Tools and Market development Programmes; and IFC’s South Asia Enterprise Development Facility and SME Solutions Centers as part of its s support for small and medium sized enterprises in Africa. As these would take some time to yield results, the systemic deficiencies in the existing mechanism needs to be addressed in the meantime by the concerned government.

To conclude, information is the key to the survival and sustained growth of MSMEs in the long term. Availability of relevant information would help them surmount challenges and harness opportunities unleashed by WTO agreements by enabling them to develop appropriate business strategies. Although different stakeholders have a role in ensuring the required information, enterprises themselves have a very important say in addressing the issue. An effective mechanism meeting MSMEs’ information needs would benefit all. 

 

Reproduced from July-august 2008 issue of WASME Magazine, World SME News. 

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