Sustainability and growth in the micro business sector requires much more than perseverance

Jacquelyn Hamer

Jacquelyn Hamer is a retired Guyanese diplomat and a Director of the skills training organization Visions of Excellence.

I couldn’t disagree more with the view attributed to the Chief Executive Officer of the Institute of Private Enterprise Development (IPED) in a recent interview with another local newspaper that micro business owners lack perseverance. In fact, I am surprised that – according to that newspaper’s account of what the  IPED official said, as few as 15 per cent of the Institute’s clients “abandon their businesses within a year after they would have paid off their loans.” Given all that we know about the constraints associated with running small businesses in Guyana, It should be considered commendable that 85 per cent of the Institute’s micro business clients are able to sustain their businesses beyond their loan repayment periods. I am surprised that those numbers are not much higher.

IPED itself has done a splendid job of helping to sustain the small business sector in Guyana, its most valuable asset being its preparedness to make capital available to people who wish to start or sustain small businesses but who lack the means to do so and who, moreover, are generally thought to be the least likely to repay their loans. What the IPED experience has proven is that ordinary people, given the opportunity and the environment within which to run small businesses, are very much inclined to make a fist of it, and to work hard to repay their loans. In fact, figures contained in the Institute’s 2009 Annual Report indicate that it has been able to maintain more than 4,000 clients from the previous year. When you consider that 58 per cent of those clients are people involved in micro business, that is by no means an unsatisfactory record.

On its own, however, IPED’s efforts, are nowhere near enough to realize the creation of a strong and vibrant micro business sector. While I agree with IPED’s CEO that sustainability and growth are what we need to see in the micro business sector, I believe that in the course of arriving at the conclusion that “perseverance” is the problem, he has, perhaps, not taken sufficient account of other factors including what I would describe as the prevailing culture of the small (including micro) business sector and the hurdles and constraints that have traditionally been associated with starting up and sustaining small businesses.

What IPED wants, its CEO is quoted as saying, is to see its small business clients “go on from this generation to another.” In other words, he wants to see growth and longevity. He goes on to say that “the problem is not really on the side of what more the government or people like us can do, but what the business people can do for themselves.”

An enabling environment

I respectively wish to disagree. Here I claim an ally in one of the most respected Guyanese entrepreneurs, Mr. Yesu Persaud, IPED’s Board Chairman. The June 25 Stabroek Business story on the Chairman’s Report in IPED’s 2009 Annual Report stated that Mr. Persaud was “disappointed by the pace at which the Small Business Act is being implemented and the lack of attention and focus by the Small Business Council in adequately handling the business of the sector. Asserting that the operating environment for small business is inadequate to meet the needs of the small business sector, Dr. Persaud said that there was a need for a national policy on small, micro and medium enterprises.”

There is a clear and unmistakable implication in Dr. Persaud’s pronouncement. It seems to me that what he is saying is that if  there is to be growth and sustainability in the small business sector, then it is essential that we hasten the pace of the long-overdue activation of the Small Business Act, a piece of legislation which I have dealt with in previous columns, and which is designed to create that enabling environment in which the small business sector can grow and prosper. Here, I believe, Dr. Persaud is making the point – none too subtly – that it takes much more than perseverance to sustain a small (or micro) business. Institutional support through the mechanisms provided in the Small Business Act (I have detailed those mechanisms in a previous column) are also required.

“Sticking it out”

IPED’s CEO asserts, according to the aforementioned newspaper report, that most of the investors (I assume he means investors in the micro-business sector) are unwilling to “stick it out,” The objective conditions would seem to suggest that sticking it out is perhaps more a matter of sustenance than stamina. My own enquiries into the character of the local small business environment has led me to the following conclusions.

A high percentage of people who venture into small business pursuits – vending, small scale poultry rearing, small shops and snackettes etc – do so as a means of subsidizing existing limited incomes or as a sort of holding position until better comes.

Many micro enterprise pursuits are perceived as relatively short-term operations. While some of them grow past the micro-enterprise stage, the vast majority of them are not designed for such growth in the first place.

Since many micro-enterprise pursuits are designed specifically to put food on the table on a day to day basis, the operational focus is on making a small profit for immediate consumption rather than on significant growth and expansion beyond the micro-business stage.

Many of the operators of such ventures have little if any entrepreneurial skills and are therefore unable to grow their businesses beyond the micro business stage.

Even in cases where micro-business operators may have a vision of sustainability the size and scale of their operations and their lack of access to strong institutional support very often force them out of business. As the IPED CEO himself correctly asserts, “the majority of micro-enterprises are a last resort (I would add, a temporary resort, in many cases) for people who cannot find employment.

In the circumstances – and the IPED CEO himself concedes this – it has hardly surprising that micro enterprise pursuits are widely regarded as holding positions, temporary pursuits that await either “better employment becoming available” or the opportunity to exercise the option of migration.

Entrepreneurship as “a viable career path”

I am firmly on the side of the argument that says that more qualified people who opt for salaried employment “need to see entrepreneurship as a viable career path. Here, we are confronted with a cultural problem. Quite simply, it has become a practice over the years for most academically qualified Guyanese to seek salaried jobs (or, these days, lucrative consultancies) in various disciplines. Most of those who opt for entrepreneurship as “a career path” are influenced by a family business tradition and a ‘duty’ to inherit and sustain that tradition. These, however, are very much in the minority. For those working class Guyanese  who qualify themselves, it is logistically much easier to secure employment in the public or private sector than to acquire the start-up requirements for even the most modest micro enterprise. Additionally, it should be borne in mind that for such persons the focus is on immediate access to funds to support themselves and their families and acquiring a salaried job removes the risks and uncertainties customarily associated with small business ventures.

My argument here is simple. Of course it is desirable that more qualified Guyanese ought to see entrepreneurship as “a viable career path.” Were more Guyanese who have been formally trained in aspects of business management to turn to managing businesses of their own, that would resolve one of the key problems that we face in the small business sector, that is, people getting into business without understanding how to run a business. Here, I believe, is an ideal opportunity for the creation of an environment informed by both enabling legislation and a more liberal commercial bank lending policy, that entertains serious business proposal from “qualified” people. New opportunities in Information Technology (resulting from the ‘firing’ of the new GT&T sub-marine cable) and Agriculture, particularly, have opened up opportunities for the creation of new small and micro enterprises with potential for considerable growth. I believe that a regime of special incentives designed to encourage qualified persons (including graduates of tertiary institutions) to secure funding based on the submission to lending institutions of viable proposals can help- create a new and viable generation of small and micro business that can create the basis for a progressive small business culture.

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