Support for SMEs

Financial Products for DFIs

Through this programme the DFRC provides support to DFIs to develop appropriate financial instruments for SME financing and the mobilizing of requisite resources.

While access to short term or trade credit may not be a serious constraint access to medium and long term credit are major constraints for start ups and those SMEs that wish to expand their operations. SMEs represent a high risk to the traditional lender because of ;

• Insufficient assets;
• Low capitalization;
• Poor accounting practices;
• Lack of financial records; and
• High transaction costs

Policy Environment

In conjunction with Policy Research the programme undertakes activities to review and advise DFIs and SADC member states on policies that encourage resource allocation to SME funding and other related support services. Legal and regulatory systems controlling SMEs require complex registration and licensing which imposes tedious reporting systems and costs on SMEs.

Empirical evidence has shown that as firms grow and become more visible their options for regulatory avoidance decrease, suggesting that there exists a breaking point in the cost of regulatory compliance. SADC governments have often overlooked such seemingly simple aspects of doing business, adopting actions which in the majority of cases penalize SMEs in favour of large businesses.

Technical Assistance

The programme focuses on the institutional capacity of DFIs, assesses adequacy of their delivery, systems and procedures and staff competencies with a view to facilitate accessing of appropriate external expertise where necessary for effective SME support. The programme uses a broad based approach which focuses on business and strategic issues to operational issues. Depending on identified weaknesses and agreed plan of action with the management of the DFI, turnaround programmes involving regional and international experts will be key to any TA provided.

Business Support for SMEs

There is general agreement that SMEs are effective creators of employment, innovation, income and economic growth. Many of the SMEs fail to realize their full potential due to lack of access to markets, finance, technology and business skills. On the international scene globalization and liberalization have compounded the problems of SMEs as production has become heavily knowledge-based and competition occurs on the basis of continuous innovation.

As a result SMEs need to master extensive knowledge of markets and technology which on their own they cannot do due to a host of reasons, chief among them is resource constraint. The DFRC in collaboration with other development partners has designed programmes that will be implemented to assist SMEs at enterprise level to raise their level of competitiveness both at the domestic market level and international.

Linkages to Big Business/PPI

The DFRC, through its research activities and in collaboration with other SME development agencies/partners, designs and develops projects to support DFIs generate business through business linkages between SMEs and big businesses. Such business opportunities can only be realized by the DFIs if there is deliberate and conscious effort in the region to promote business linkages between large businesses, both domestic and foreign-owned (multinationals) and SMEs. Fostering linkages between large businesses and small and medium businesses is key to developing a more vibrant and competitive SME sector, particularly for better export competitiveness.

Environmental Management Systems

This programme aims at raising SMEs awareness and adoption of best practice in EMS to improve SME competitiveness and profitability.

Business Support Services Providers

The DFRC through this programme develops projects that give support to DFIs in their development and delivery of appropriate extension services to SMEs.

While SME support agencies exist in the region their impact has been limited. The service providers have been criticized for;

• Their bureaucratic character;
• Inability to recruit and retain competent and motivated staff;
• Insufficient geographical spread;
• Lack of coordination;
• Concentration on start ups with little focus on the development stages of enterprises; and
• Failure to address the underlying constraints of business growth and increasing global competition.

The DFRC support programme to BSS providers with special focus on DFIs will be broad-based, encompassing the various kinds of support that need to be extended to businesses, ranging from;

• Facilitating business establishment;
• Financial accounting and management services; and
• Marketing of SME products and services.

The approach will be best practice focused. Best practice interventions include specialized support services through a multi-layered Government supported network of service providers, coordinated with specialized private sector institutions. The quality of BSS providers in the SADC region has failed to meet these standards.

Entrepreneurship and Women Business Development

The programmes undertakes projects that seek to advise SADC member states on policies that promote entrepreneurship amongst citizens and assist DFIs to develop projects that encourage citizen businesses and are gender sensitive.

SME Development should be seen as a means of promoting the growth of local entrepreneurs and hence the private sector of an economy or country. SMEs represent the broad concept of democracy and gender empowerment. As such, SME development helps to achieve a more equitable distribution of benefits of economic growth and thereby help in alleviating most of the problems associated with uneven income distribution.

Considering that the productive activities and services of most SMEs employ or are closely associated with female labour, the development of such enterprises helps to enhance the participation of women in economic activities and improve their living conditions. In the SADC countries, the need to raise the level of the majority of citizens (blacks) and women is unquestionable and also politically desirable.

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