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GB.273/ESP/4/2
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Committee on Employment and Social Policy |
ESP |
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FOURTH ITEM ON THE AGENDA
Job creation programmes in the ILO
(b) Job creation through enterprise and cooperative development
Contents
I. Job creation, enterprise development and the ILO
II. Key issues in enterprise and cooperative development
Challenges posed by the changing global context
The cultural climate
The policy and regulatory environment
An effective service infrastructure
III. ILO strategy to promote enterprise-based job creation
IV. Review of project examples and their impact
Key challenges for enterprise-based job creation programmes
Promoting an enterprise culture
Programmes to create an enabling business environment
Programmes to develop effective business services
Involvement of employers' and workers' organizations
Sectoral approaches
Women entrepreneurs
Workers' protection
V. Building on the ILO's comparative advantage
Appendix: Impact of ILO technical assistance projects concerning
enterprise-based job creation
The vast majority of productive jobs are in enterprises, including cooperatives. Job creation policies and programmes therefore need to place strong emphasis on the factors that influence the creation and development of enterprises, particularly smaller enterprises, which account for most existing and new jobs. Key factors which directly and indirectly influence the ability of enterprises to be competitive and create jobs (see section II) include cultural attitudes towards entrepreneurship, the impact of the policy and regulatory environment on enterprise performance, and the existence of an effective service infrastructure. The ILO's Enterprise Development Programme adopts an integrated approach which addresses the issue of enterprise-based job creation at these three levels, while paying particular attention to the quality of the jobs which are created. An important guide for the ILO's work in this area is the recently adopted Job Creation in Small and Medium-Sized Enterprises Recommendation, 1998 (No. 189).
The ILO's strategy for enterprise-based job creation is outlined in section III and has two major components. First, the Office seeks to shape global approaches to enterprise promotion by providing leadership in identifying and disseminating best practice in this area. This has been achieved through participation in a range of international forums and the dissemination of good practice in publications and training materials. Secondly, the Office implements an internationally recognized, integrated programme of advisory services and technical assistance projects on enterprise-based job creation. In 1997, some 238 advisory missions were fielded by ILO headquarters alone (in addition to large numbers of missions by the multidisciplinary advisory teams -- MDTs) and a global technical assistance programme totalling US$25 million was implemented. To achieve high levels of cost-effectiveness, impact and sustainability, most technical assistance projects work with local intermediaries, whose capacity to provide enterprise development services is enhanced as an integral part of the project. Particular emphasis is given to involving, and reinforcing the capacities of, employers' and workers' organizations. To improve the integration of the various components of the Enterprise-based Job Creation Programme, the ILO recently launched the International Small Enterprise Programme (ISEP), which is implemented by the MDTs at the field level and coordinated by the Enterprise and Cooperative Development Department, drawing on the expertise of a wide range of technical departments at headquarters.
The monitoring and evaluation of enterprise development projects and programmes has been the subject of much recent work by the ILO. Please refer to the appendix for an overview of recent analysis which indicates that ILO projects have been able to build the capacity to create large numbers of enterprise-based jobs at a cost ranging from US$42 to $848 per job.
The report provides a comprehensive review (section IV) of the various types of technical assistance projects that have been or are being implemented, with special emphasis on their outreach, impact, cost-effectiveness and sustainability. Projects are described in the three areas of the promotion of an enterprise culture; the creation of an enabling business environment; and programmes to develop effective business services.
In conclusion (section V), the report summarizes the main comparative advantages that have been developed by the ILO in the area of enterprise-based job creation in relation to other programmes and organizations active in the field.
I. Job creation, enterprise development and the ILO
1. The main purpose of this report is to review the ILO's strategy to help constituents create jobs through the development of enterprises, including cooperatives. The report emphasizes the crucial importance of private enterprises for employment, identifies the key issues faced by constituents in enterprise development and then takes a closer look at several ILO-supported activities to promote enterprise-based job creation. Finally, it identifies the comparative advantage developed to date in this area of the ILO's work.
The importance of enterprises for employment
2. The vast majority of productive jobs are in enterprises, including cooperatives. The last decade in particular has seen increased recognition of the important role played by small and medium-sized enterprises (SMEs) in creating jobs and promoting economic growth. Recent statistics from OECD countries show that, in many cases, small enterprises account for over 80 per cent of new jobs. The indications are that SMEs are at least as important in terms of employment in developing and transition countries. In addition, SMEs are the major source of existing jobs. In most OECD countries, 50 per cent or more of the workforce are employed in SMEs. In developing countries, the figures often reach 60 to 80 per cent.
3. Cooperatives also play an important role in economic growth and employment promotion, both as production enterprises in which their members develop their own self-employment, and as providers of services to members. In the developing world, approximately 460 million persons are members of at least one type of cooperative enterprise, while the figure is approximately 180 million in the developed market economies. The main activities of cooperatives include agricultural marketing and supply, savings and credit, wholesaling and retailing, health care and insurance.
4. As employment has risen to the top of the agenda in countries at all levels of development, interest in policies and programmes which encourage the development of enterprises, including self-employment, has grown rapidly.
5. Within the ILO the key role of enterprises in development and job creation led to the establishment in 1991 of the Enterprise and Cooperative Development Department. The crucial importance of enterprise development in general, and of small enterprise development in particular, has also been reflected in a range of ILO instruments, including the recently adopted Job Creation in Small and Medium-Sized Enterprises Recommendation, 1998 (No. 189). It has also been widely recognized by the international community, for example at the Social Summit (Copenhagen, 1995).
6. With the growing focus on jobs in small enterprises, an issue of increasing concern to the ILO is the mixed performance of many SMEs in terms of efficiency, working conditions, social protection and other aspects of job quality. Many SMEs are profitable, productive and provide good working conditions and wages. However, particularly in some developing countries, the productivity, efficiency, wage levels and social standards of SMEs are often unacceptably low. Furthermore, there is a high incidence of child labour in small enterprises. Measures and programmes to promote jobs, particularly in small enterprises, therefore have to take into account both the qualitative and the quantitative aspects of the jobs that are created.
7. Moreover, the Asian financial crisis is an illustration of the impact that market developments can have under certain circumstances on employment, job creation and enterprise performance. In this context, the ILO High-level Tripartite Meeting on Social Responses to the Financial Crisis in East and South-East Asian Countries (Bangkok, April 1998) noted that "job creation, which is the most vital strategy for recovery, depends on competitive and successful enterprises (...) the substantial job losses that have occurred in the wake of the crisis served to highlight the importance of paying attention to the sustainability of jobs that are created, as jobs created in enterprises that are fully competitive are most likely to remain durable".(1)
II. Key issues in enterprise and cooperative development
8. The capacity of enterprises in general, and of small enterprises in particular, to grow and generate jobs depends on a wide range of factors. Some of the most important of these are outlined below.
Challenges posed by the changing global context
9. Concerns over job creation have come to the fore in a context of profound changes in the global economy, which are transforming the environment in which enterprises of all sizes operate and compete. In these circumstances, a suitable policy and institutional infrastructure, combined with new managerial and entrepreneurial competences, are increasingly essential to counter the threat of marginalization in the global economy. If enterprises are to be able to take advantage of the growth opportunities created by globalization and survive in increasingly competitive conditions, even on the domestic market, they have to add new dimensions, such as quality, image, speed, flexibility, design, customization and continuous innovation, aimed at both cutting costs and improving products and services. There is need for continuous upgrading of managerial and technical capacities and knowledge to attract and retain jobs and investments. Good human resource management and development practices are therefore becoming crucial to the continued viability of enterprises.
10. In many countries these pressures have led to a fundamental reappraisal of the current policy environment of SMEs and a search for effective ways of promoting job creation through a range of enterprise development policies and programmes. In this context, it is important that the processes of restructuring and upgrading enterprises are carried out in such a way that the social costs are minimized.
11. The development of SMEs is often limited by the existence of an institutional and social bias towards employment in large state or private organizations. For example, in many African educational and social systems, preferential status is accorded to careers in the public bureaucracy. A career in small business is widely perceived as coming second best, or as being merely a stepping stone to employment in a larger organization. A recent survey in Indonesia indicated that only 5 per cent of business graduates considered the development of small enterprises as a career option. In contrast, in certain countries with strong small enterprise cultures, the necessary supporting values and beliefs are widely shared by the community.
12. One of the most effective ways of developing a culture favourable to enterprises in the long term is through education and training systems. Many countries have therefore recently started introducing entrepreneurial components at all levels of their training and education systems.
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Recommendation No. 189, Paragraph 5 5. In order to create an environment conducive to the growth and development of small and medium-sized enterprises, Members should:
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The policy and regulatory environment
13. Another crucial factor for the success of enterprises in general, and SMEs in particular, is the existence of a policy and regulatory environment which favours their development, rather than obstruct it. The regulatory regime has to promote the achievement of social objectives without undermining enterprise competitiveness. The importance of a conducive policy and regulatory environment is emphasized in Recommendation No. 189.
14. However, regulations adopted in one set of economic or social circumstances can become outdated. It is therefore necessary to continue monitoring the application of policies, rules, procedures and their consequences and to adapt them as required. It is particularly necessary to review cooperative legislation, which is outdated in many countries, particularly in the developing world. In this context, there is a pressing need to reduce the role of the State in cooperative development and to focus instead on measures that can enhance the competitiveness of cooperatives.
15. Effective policies and programmes to develop national human resources are also recognized as being crucial to the creation of high-quality jobs in the long term. Furthermore, as the current financial crisis in many regions of the world has shown, competitiveness policies that ensure transparency are critical to the sustained development and expansion of the economy.
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Recommendation No. 189, Paragraphs 12 to 14 12. As far as possible, the support services referred to in Paragraph 11 should be designed and provided to ensure optimum relevance and efficiency through such means as:
13. Services should be designed to include productivity-enhancing and other approaches which promote efficiency and help small and medium-sized enterprises to sustain competitiveness in domestic and international markets, while at the same time improving labour practices and working conditions. 14. Members should facilitate access of small and medium-sized enterprises to finance and credit under satisfactory conditions. In this connection:
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An effective service infrastructure
16. Unlike larger enterprises, smaller units rarely incorporate or control the upstream and downstream functions that are necessary to create and sell their products and services. Because of their small scale, lack of resources and their tendency to specialize, small enterprises are therefore very sensitive to the calibre of the public and private services available. Services, institutions and programmes are therefore needed which facilitate the growth of small firms, expand employment and help meet social needs. This applies equally to cooperatives, which in many countries are under strong pressure to upgrade their productivity, efficiency and innovation in an increasingly competitive market place, at a time when governments are removing their protected status.
17. Enterprises in some countries already benefit from plentiful support programmes. Elsewhere, service institutions are often ill-adapted to the needs of small firms, especially in the context of current global changes. Moreover, in many developing and transition countries, the markets have so far failed to create an adequate infrastructure of business services.
18. The types of services that are particularly important include:
- training and development for managers and technical staff;
- finance and credit;
- information on markets, technology and regulations;
- advisory services on productivity, quality and related issues.
19. In a world in which government subsidies are being rapidly curtailed, an increasingly critical issue is the sustainability of these services or, in other words, the extent to which clients cover all or part of their cost. Recommendation No. 189 provides an overview of current best practice in this important area.
III. ILO strategy to promote enterprise-based job creation
20. As recognition has grown over recent decades of the central importance of enterprises to job creation and economic growth, the search has intensified for effective enterprise promotion strategies, particularly for small enterprises. Initially, this led to the creation of large numbers of government institutions providing a range of services to businesses, especially in the area of technology. Over time, the limitations of these government-driven approaches have become clearer. The importance of the direct participation of private-sector clients and their representatives in the design, delivery and evaluation of a much wider range of services has been increasingly recognized, leading to the emergence of a very broad range of programmes. More recently, understanding has also developed of the crucial importance of the policy and legal environment and the need for an entrepreneurial culture.
21. Nevertheless, efforts up to now have been seriously limited by a lack of comparative international data on the impact and effectiveness of the various policies and programmes, particularly in terms of job creation and quality. There is a shortage of data on best practices and of international benchmarks to assess programme performance. All of these factors have led to a rapid increase in requests from ILO constituents, not least in developing countries, for support in the design and implementation of enterprise-based job creation policies and programmes. This has in turn led to the development of a substantial programme by the ILO of applied research, advisory services and capacity-building activities in the field of enterprise development. This programme of activities has followed a dual strategy.
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ILO participation in international forums
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Strategic component No. 1:
Shaping the global debate through the ILO's
leadership in identifying and disseminating
best practice in enterprise-based job creation
22. The ILO has given high priority to developing a reputation as a global centre of excellence capable of shaping enterprise-based job creation strategies in ways that reflect ILO concerns and principles. This involves maximizing the outreach, impact, cost-effectiveness and sustainability of programmes which are concerned with both the quantity and the quality of employment. Recent years have therefore seen the ILO playing a leading role in a number of international forums. An increasing number of ILO activities have also focused on the formulation and dissemination of best practice guidelines for use by constituents and others involved in designing and implementing enterprise-based job creation programmes.
23. Good measures of the degree to which the ILO has so far been successful in establishing a leadership position may be difficult to find, but the following indirect measures are worth noting:
- the enterprise development programme continues to attract substantial amounts of extra-budgetary funding (some $25 million a year);
- the number of requests for ILO contributions to global, regional and national forums continues to increase;
- several publications on enterprise development issues have consistently topped the list of ILO best sellers, including some titles which have sold between 150,000 and 200,000 copies (see box);
- the ENTREPRISE Web page received 12-14,000 visitors a month during the summer of 1998, placing it among the most visited ILO sites, immediately below the Public Information Department and the Library.
24. Another mechanism for promoting ILO leadership in this field is the series of ILO Enterprise Fora. The first Enterprise Forum was held in November 1996 and brought together some 600 participants from 100 countries. Its overall theme was Enterprise competitiveness and social progress in a globalized world. The second ILO Enterprise Forum will take place on 5-6 November 1999. It will include a major session on Tapping the employment potential of small enterprises.
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Good practice publications produced by the ILO or with its support
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Strategic component No. 2:
An integrated programme of advisory services and
technical assistance projects on enterprise-based job creation
25. As a result of the increased importance attached by member States to job creation through the promotion of private enterprises, and particularly small enterprises, the demand for ILO advisory services and technical cooperation continues to increase. The ILO has endeavoured to meet this demand by providing short-term advisory services and by mobilizing extra-budgetary resources for longer term technical cooperation activities.
26. Advisory services, mainly funded from the regular budget, are provided by headquarters, the multidisciplinary advisory teams and short-term international consultants. During 1997, some 238 such advisory missions were fielded to assist constituents in the development of national and sectoral strategies and the design and implementation of capacity-building programmes, many of which have had a major impact on the countries concerned, including the creation of large numbers of jobs (see section IV below).
27. Although most extra-budgetary technical cooperation programmes still include some provision for resident or short-term international expertise, they increasingly rely on national expertise. In terms of geographical coverage, the ILO is actively involved in the promotion of job creation through enterprise and cooperative development in some 65 developing and transition countries worldwide.
28. As a result of the decline in available resources from UNDP and in multi-bilateral resources, as well as the increased use of national execution and national expertise, expenditure on ILO enterprise and cooperative development technical cooperation activities has stabilized at around $25 million a year. Almost half of the expenditure is in Africa. In terms of donor support, UNDP provides about half the resources, with the rest coming from a wide range of multi-bilateral donors, including Austria, Belgium, DANIDA, the European Union, France, Germany, Italy, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom.
29. The ILO cannot sustain a leadership position in the area of enterprise-based job creation without maintaining a selective portfolio of technical assistance projects. These provide an important opportunity for technical specialists to remain in contact with the situation at the national level and to develop and refine methodologies and approaches. They are therefore essential for the continuous upgrading of the ILO's expertise and the maintenance of its credibility as a centre of excellence in a rapidly changing field. The field-based projects, supplemented by applied research activities, form the basis for the advice provided to ILO constituents and other clients.
30. Emphasis is therefore placed on pilot projects that can be used to develop and test methodologies and which are likely to have a significant demonstration effect and potential for replication. To ensure that they are cost-effective, almost all projects are aimed at capacity-building. They are implemented with local intermediaries, whose capacity to provide enterprise development services is enhanced as an integral part of the project. In this respect, priority is also given to reinforcing the capacities of employers' and workers' organizations.
International Small Enterprise Programme (ISEP)
31. Experience has shown that an integrated approach is essential to ensure programme impact and adequate coordination between components such as policy and regulatory support, business training, development activities and access to credit and finance. This concern for coherence and coordination led the ILO to launch a global programme, the International Small Enterprise Programme (ISEP) in 1998, which is implemented by the multidisciplinary advisory teams at the field level, coordinated by the Enterprise and Cooperative Development Department, and draws on the expertise of a wide range of technical departments at headquarters. ISEP is designed as the main vehicle to assist constituents in the implementation of Recommendation No. 189. In the area of cooperative development, a number of interrelated thematic programmes have been developed to address key aspects of cooperative development. Similarly, the ILO provides services to alleviate credit and financial constraints to job creation in enterprises. The major categories of services provided by the ILO are summarized in the following table.
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Level of intervention |
Major types of intervention to support enterprise-based job creation |
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Business environment
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Service delivery capacity
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Business development services
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Others |
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IV. Review of project examples and their impact
32. In this section, a range of projects are examined which have been or are being implemented by the ILO in the area of enterprise-based job creation. The objective is to provide an overview of the practical activities in which the ILO is involved in this area, as well as to offer an assessment of their impact and effectiveness.
Key challenges for enterprise-based job creation programmes
33. In this context, it is important to identify some of the main criteria by which programme performance can be evaluated. These include:
- the outreach of an intervention in terms of the number of individuals, enterprises and organizations reached;
- its impact in such areas as increased enterprise performance, number of businesses started, new jobs created, improved working conditions and social protection;
- its cost-effectiveness in terms of cost per beneficiary, enterprises reached and jobs created;
- its sustainability in terms of the extent to which the service capacity developed can be sustained after the intervention. This is particularly important, since most ILO programmes are designed to build local capacity to provide a range of services to enterprises. Unless this capacity can be sustained beyond the life of the intervention, performance under the first three criteria is likely to be unacceptably low.
34. While the above criteria provide a comprehensive framework for evaluating enterprise development programmes, it has to be recognized that evaluation is rarely simple. External factors influencing the target groups and their businesses can be difficult or impossible to isolate. Data are often hard to obtain and the sustainability of benefits is often difficult to quantify and predict. To overcome these challenges, the ILO has taken the lead in recent years in developing methodologies to assess the impact of enterprise development projects through its work with a wide range of donor agencies and in a number of applied research activities. The results of these efforts are reflected in the impact assessment provided in the following sections and in the summary table in the appendix. High priority will be given to further refining and consolidating these methodologies in the years ahead. In this respect, one of the key challenges is to develop and incorporate cost-effective systems of data collection into programmes and projects.
Promoting an enterprise culture
35. ILO programmes to promote an enterprise culture have mainly been aimed at education and training systems, by ensuring that their curricula contain components to sensitize trainees as to the career options of self-employment and work in small enterprises. One example is the entrepreneurship education programme in Kenya, which has been very successful in introducing entrepreneurship components into the national training and education system. In Bulgaria, a smaller programme is being implemented in collaboration with UNESCO and UNIDO to carry out similar activities.
36. To support the work in this area, the ILO has developed a special training package, Know About Business, for use by vocational and technical training institutions which are committed to introducing an entrepreneurship component into their curricula for the purpose of raising awareness of the opportunities and challenges posed by a career in a small enterprise or in self-employment.
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Promoting entrepreneurship education in Kenya Entrepreneurship education has been introduced in technical training institutions and small business centres established to promote an enterprise culture and encourage students to aspire towards success in business through self-employment as a long-term career prospect. Through activities to institutionalize entrepreneurship education:
A countrywide network of over 15 small business centres has also been established to support the teaching of entrepreneurship in training institutions and provide follow-up support for trainees, as well as extension services to the community. The introduction of entrepreneurship education in technical training institutes as a compulsory course requirement has meant that over 20,000 young people a year receive the message that there are opportunities for self-employment and are taught the rudiments of how to identify, start up and manage a small enterprise, with follow-up support from the small business centres. |
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Promoting enterprise culture with the ILO's Know About Business package The ILO's International Training Centre in Turin and the Entrepreneurship and Management Development Branch have together developed the Know About Business (KAB) training package. KAB is a set of training materials for entrepreneurship education which seeks to promote an enterprise culture. It helps develop entrepreneurial skills and prepares students to establish their own business at some point in the future. KAB pays particular attention to the issues of productivity and working conditions in SMEs. KAB aims to create awareness among young people of the option to choose entrepreneurship or self-employment as a career. Although obviously not all students will start a business or become self-employed, KAB provides them with awareness and practical examples of the opportunities, challenges, procedures, characteristics, attitudes and skills involved in being a successful entrepreneur. KAB is designed for use by vocational education and training institutions in a variety of classroom settings. The package can easily be used by trainers and teachers in vocational and technical training institutions and can be adapted for use in both industrialized and developing countries, as well as in other educational settings. The package has been in strong demand from a number of countries including Ghana, Senegal and Zambia, where it is already in use. There are requests to introduce the programme in Nigeria and Côte d'Ivoire, and several Asian countries, including China and the Pacific, as well as Central and Eastern Europe. |
Programmes to create an enabling business environment
37. The creation of a policy and regulatory environment which favours the development of businesses is one of the most significant interventions that can be made to promote enterprise growth and job creation. Interventions at this level, when properly designed, can have a positive influence on the development of large numbers of enterprises. Recommendation No. 189 places strong emphasis on providing guidance to member States in this area. Moreover, the High-level Meeting on the Social Impact of the Asian Financial Crisis (Bangkok, 1998) reaffirmed the importance of creating "a business environment that promotes investment, including foreign direct investment, and enterprise activity. Such an environment would include transparency in economic management, stable macroeconomic policy, open markets, investment in human resource development, avoidance of excessive regulation, responsive labour markets and sound industrial relations".(2) In view of their importance, the ILO is developing a number of products and approaches in support of its advisory services in this area.
38. One example of these ILO activities is the COOPREFORM programme, which is designed to improve cooperative law and policy. Cooperatives play an important role in economic and social development in almost all countries. For example, it is estimated that more than 40 per cent of all households in Africa are members of a cooperative society. Cooperatives have also created large numbers of salaried jobs and opportunities for self-employment. However, the development of cooperatives has been harmed in many countries in which they have been considered primarily as tools for the execution of specific economic or political functions on behalf of governments. The economic reforms and democratization processes now taking place are creating new opportunities for the development of genuine, self-reliant and autonomous cooperative enterprises that can make an important contribution to job creation.
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The COOPREFORM programme The COOPREFORM programme provides assistance to policy-makers for the creation of a favourable climate for cooperative enterprises by formulating legislation that encourages the development of autonomous and viable cooperatives. It also carries out capacity-building activities to strengthen the ability of national cooperative organizations to provide support services to their members. Through the establishment of an appropriate legislative, policy and institutional environment, the programme makes a major contribution to the survival and development of cooperatives, and therefore to the well-being and employment of their members. The programme has undertaken some 100 advisory missions in some 50 countries. |
39. Another example is Kenya, where ILO assistance in the development of a policy and legal framework led to the adoption by Parliament of a sessional paper on the promotion of the informal sector. In the United Republic of Tanzania, ILO support for a review and for the reformulation of important areas of legislation has improved the capacity of micro and informal sector enterprises to develop and generate jobs.
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Development of the policy and legal framework in Kenya A participatory approach was adopted in Kenya to undertake a review of all policies, laws and regulations that inhibit the development of small and micro-enterprises and to develop a small enterprise support policy package. The ILO provided technical assistance to the Government and to a special task force, composed mainly of representatives of the private sector, including ILO constituents. Based on the work of the task force, Parliament adopted Sessional Paper No. 2 of 1992, which sets out a coherent policy framework for small and micro-enterprises and enumerates the steps that the Government and the private sector should take for their development. The involvement of all the key actors in small enterprise development in Kenya reinforced their mutual understanding of the weaknesses in the approaches currently adopted, the areas in which improvements can be made and the ownership of the recommendations. |
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National policy for informal sector promotion
With ILO support, a national policy for informal sector promotion was developed and enacted by the Tanzanian Parliament in 1997 as an important component of the National Employment Policy. The policy takes into consideration the specific characteristics and needs of informal sector operators, as identified in surveys and studies. The policy was developed through broad consultations involving all the main stakeholders, including ILO constituents. Its objectives are to remove regulatory barriers to the growth of micro-enterprises and to offer the same incentives to micro-enterprises as to larger ones. An important policy consideration is the improvement of job quality in the informal sector, particularly in terms of working conditions and access to social protection. A committee has been established, including representatives of both the public and private sectors, to help implement the policy. Assistance is now being provided, for example through training seminars, to help the districts adapt and apply the national informal sector policy in line with local requirements. |
40. ILO partnerships with central banks in 15 African countries have resulted in an improvement in the policy framework for micro-finance institutions.
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Policy development for access to credit in West Africa In partnership with the Central Bank of West African States (BCEAO) in Dakar, the ILO has developed a comprehensive programme in support of micro-finance institutions (MFIs). Nearly 2,500 village banks and savings cooperatives in the subregion, with over 715,000 members/clients, have collected US$5 million in deposits from some of the poorest members of society. These village banks are the only source of financial services for most households and enterprises. While the volume of credit is still small in comparison with bank loans, the sheer volume of transactions shows that they respond to a genuine need and deserve a supportive environment from the public authorities. A major weakness of MFIs is their fragmentation and donor dependence. To address this weakness, the joint programme has helped set up a data bank on micro-finance in each of the seven member countries of the monetary union. This has allowed governments and donors to design appropriate staff training programmes and, in particular, an incentive-based regulatory framework. In addition, assistance has been provided to MFIs seeking, for example, to set up an internal auditing system. The package is now being replicated in several other African countries and shows that unusual alliances, in this case between the ILO and a central bank, can sometimes offer powerful ways of addressing key ILO concerns. |
Programmes to develop effective business services
41. The bulk of ILO programmes and projects have been concentrated in this area and have been designed to build the capacity of local intermediary organizations to deliver high-quality, cost-effective and sustainable business services to large numbers of clients, usually in small enterprises. The overall objective is to enhance their competitiveness and productivity. Recommendation No. 189 provides considerable guidance in this field, in which the ILO has carried out a good deal of work to identify best practice in small enterprise and self-employment programmes and their linkage to job creation. One example is the comparative study of credit programmes for self-employment in a number of OECD countries.
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Micro-finance and enterprise creation:
In 1998, an Action Programme was launched to review the performance and cost-effectiveness of micro-finance schemes in self-employment programmes in industrialized countries. Self-employment programmes are a cross between active labour market instruments and measures to promote the private sector. Existing programmes reach between 30,000 (Ireland) and 120,000 (Germany) individuals. Lack of capital is an important obstacle for anybody starting a business, especially the unemployed. The average capital requirement for starting self-employment is estimated at DM15,000 (US$8,940) to 20,000 (US$11,920) in Germany, I£6,500 (US$9,690) in Ireland, FF50,000 (US$8,888) in France and Hfl24,000 (US$12,690) in the Netherlands (exchange rates as at 30 September 1998). This is below the entry threshold for most banking groups. Self-employment programmes respond to this constraint by offering micro-finance facilities, either direct or through intermediaries, such as banks and financial NGOs. Substantial levels of financing are involved: the Bridging Allowance scheme in Germany cost DM944 million (US$563 million) in 1997 alone, the ACCRE programme in France involved expenditure of FF1.2 billion (US$213 million) in 1996. Seven countries are participating in the initiative (Canada, France, Germany, Ireland, the Netherlands, the United Kingdom and the United States). Steering groups have been set up at the national level, bringing together the government, banks, the social partners, micro-finance institutions and researchers. The Action Programme is co-financed by several governments and private foundations and its objective is to inform decision-makers of the merits and weaknesses of different options for self-employment programmes containing micro-finance components. A high-level international technical conference will be held in 1999 to review the outcome and lay the groundwork for further exchanges of best practice. |
42. To provide an overview of the impact and cost-effectiveness of the large number of projects implemented by the ILO in this area and to offer an indication of what can realistically be achieved in enterprise-based job creation programmes, a summary table has been prepared of 11 projects (see appendix). The table shows a range of indicators of achievement, including the number of enterprises reached, the number of jobs created, the cost per job created, and the percentage of women entrepreneurs reached, as well as indicators of the sustainability of the capacity created, including the extent to which services to enterprises have been able to continue beyond the life of the project. An indication is also given of projects that have had an important indirect impact through their replication or their demonstration effect.
43. However, it should be borne in mind that the information presented is not always fully comparable, due to differences in accounting and reporting. Where possible, such inconsistencies have been pointed out in footnotes. Moreover, projects should not be judged purely on their results during their lifespan, but on the extent to which the results are sustainable and will continue beyond the life of the project. Furthermore, many projects are of a pilot nature and serve to test and refine methodologies which are then replicated on a much wider and more cost-effective basis.
44. The data show that it is possible to design and implement enterprise development projects that can result in the reasonably cost-effective creation of jobs. The cost of creating a job in an enterprise or through self-employment ranges from $42 to $848 in the projects reviewed in the appendix. To compare this with current best practice globally, the ILO published a study in 1998(3) which indicates that the cost of creating a job in a wide range of projects varies between $25 and $5,500. While this would tend to indicate that ILO projects are very successful in terms of direct cost-effectiveness compared to the best available benchmarks, the limitations of the available data need to be borne in mind.
45. One very successful project is the small enterprise development component of the ILO's Employment Generation Programme in Cambodia. Another highly successful job creation programme (ACOPAM), which has been active in six African countries, shows how many of the most effective programmes are based on integrated strategies comprising training, skills development and financial services with a local focus, bringing the key stakeholders together to develop strategies adapted to local conditions and opportunities. Similar strategies have been applied in Mozambique and Bulgaria.
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ACOPAM The ACOPAM programme (Cooperative support for grass-roots development) , originally designed to combat the effects of the drought in the Sahel region in Africa, is one of the ILO's most successful employment and income-generation programmes. Active in Burkina Faso, Mali, Mauritania, Niger and Senegal, ACOPAM has developed a methodology based on organizing people at the grass-roots level into cooperatives and similar undertakings to improve their food security and living conditions, particularly through joint land management and irrigation schemes, cereal banks, the marketing of products and savings and credit schemes. Originally intended as a direct support activity, over the past 20 years most of the programme's work has been in the creation of local capacity to help grass-roots groups plan and implement activities and mobilize the necessary resources. This has led to the very broad replication of the approaches developed by the programme. Through its pilot activities alone, ACOPAM has enabled some 40,000 people to become self-employed, particularly through cereal banks. These are local organizations which collect, store and sell cereals, with the aim of ensuring food security for their members at a reasonable cost. The members constitute small stocks, which enable them to attenuate the potentially disastrous effects of climate changes. ACOPAM has also contributed to making existing jobs sustainable by ensuring the economic viability of local undertakings. It has had a particularly important impact on the employment of women. |
46. Special emphasis has also been placed on the development of business training materials for small enterprise managers in developing countries. Indeed, the ILO's Start and Improve Your Business (SIYB) programme has gained a global reputation. In addition, the MATCOM series is designed specifically for cooperative managers. It has been adapted and translated into more then 60 languages and is widely used by consumer and agricultural cooperatives to improve business operations.
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Start and Improve Your Business (SIYB) The SIYB programme is a system of interrelated training packages and support materials, including a dynamic SIYB business game, which provide small-scale enterprise owners and managers in developing countries with practical skills for starting, consolidating and expanding their businesses. Although the programme is essentially a training instrument, it includes components on counselling, the promotion of self-help associations, networking and linkages to financial institutions. Manuals are available in some 35 languages. National small enterprise development (SED) institutions, including employers' organizations, government and semi-government small enterprise support organizations, government departments and workers' organizations are introduced to the programme through the training of instructors, who in turn train the entrepreneurs. Some 3,500 instructors have been trained in total. Through this multiplier effect, large numbers of entrepreneurs benefit from the programme at low cost, while quality is controlled continuously by a monitoring and evaluation system, which assesses the programme's impact. The programme has been used in some 70 countries worldwide, with more than 100,000 entrepreneurs in developing countries benefiting to date. In 1993, an evaluation by SIDA concluded that the programme had a substantial impact on entrepreneurs in terms of business performance, profits, and employment generation. A recent evaluation showed that one job is created for every two participants trained at an average cost of $160. |
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The COOPNET programme COOPNET is a programme which responds to changes in the economic, social and political environment of cooperatives in developing countries by strengthening human resource development systems. COOPNET concentrates on the development of curricula, training methods and materials, as well as the strengthening of capacities to improve cooperative entrepreneurship, with emphasis on developing entrepreneurial attitudes, management consultancy, auditing and modern personnel policies. By improving the capacity of cooperative human resource development institutions and programmes to support cooperative business activities, COOPNET contributes to employment maintenance and generation. |
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Promoting local economic development in Cambodia The project has promoted local economic development in Cambodia through programmes to provide financial and non-financial assistance to micro and small enterprises. Local Economic Development Agencies (LEDAs) were established in nine provinces, which in turn set up a national NGO as the project's counterpart organization. The LEDAs have assisted some 10,000 small and micro-business clients. Employment in the small businesses concerned has increased by an average of 1.8 jobs, at a cost of $126 per job. The cost of lending $1 was about $0.61 over the entire project period, and was considerably lower towards the end of the project. A World Bank evaluation in 1996 recommended wide replication of the project concept globally. In recognition of the project's performance, a total of $11 million has been provided by a wide range of donors, of which $5 million is for loan capital. |
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The PROMICRO project in Central America Support was provided for micro-enterprises in the informal sector in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama through the PROMICRO project, with the principal objectives of strengthening associations of micro-enterprises, improving their access to information and disseminating innovative approaches to the promotion of micro-enterprises. The project worked through national micro-enterprise development programmes, national and subregional organizations of micro-enterprises (including the Central American Committee of Micro-enterprises -- COCEMI), NGOs, chambers of commerce, municipalities and local associations. As the associations of micro-enterprises in Central America became better organized, the project concentrated on improving the dissemination and sharing of information between micro-enterprises through interconnected computerized databases and the creation of a Web site (http://www.sipromicro.com). Offering a wide range of information, including major events, ongoing projects, economic data, counselling services, bibliographical references and interactive pages on thematic issues, the site has received over 1,000 requests for information each month. It also won the 1997 Latin American award for the best site on small enterprises. The project demonstrates that micro-enterprises can also make use of advanced technology to become part of the globalized economy. |
Involvement of employers' and workers' organizations
47. An important focus of the ILO's enterprise-based job creation activities is to involve employers' and workers' organizations in their design and implementation and to develop their capacity to provide effective services in the area of small business and self-employment promotion. Many of the projects described above involve constituents, directly or indirectly. Examples of direct support to the social partners include the projects covering employers' organizations in Mauritania and the Organization of African Trade Union Unity (OATUU). As part of the ILO's strategy to respond to the Asian financial crisis, a number of Asian employers' organizations are being assisted in the design, development and implementation of productivity workshops for smaller enterprises.
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Entrepreneurship and small business development
Initiated by the Organization of African Trade Union Unity (OATUU), and supported by the ILO and UNDP, the project promotes the creation of productive and sustainable quality jobs among workers who have lost their employment as a result of economic restructuring measures. It also seeks to strengthen the management of labour-owned enterprises. The ILO has developed a training package and methodology to equip business development trainers/counsellors in trade unions with the skills and materials to train and advise their members. The long-term objective is to develop a small enterprise development training component to be integrated in regular workers' education programmes. The 18-month pilot project, which will be evaluated in February 1999, supports national trade union centres in Algeria, Cameroon, Côte d'Ivoire, the Democratic Republic of Congo, Ethiopia, Ghana, Namibia, the United Republic of Tanzania, Tunisia and Zimbabwe. |
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Promotion of private enterprises through the
The project is designed to strengthen the capacity of the Mauritanian Federation of Employers to provide services to its members and to non-member enterprises, including small and micro-enterprises in the informal sector. A new department was established in the Federation, the main activities of which include:
Within the first year advice has been provided to 50 entrepreneurs, and ten market studies and 15 business plans have been developed. The training activities have included two training of trainers courses, ten training of entrepreneurs courses with 150 participants and three business creation courses with 50 participants. The sustainability of the project is secured, as the new department is fully integrated into the employers' federation. |
48. The participation of the social partners is also encouraged in productivity improvement programmes to ensure their effectiveness and sustainability at the national and enterprise levels. Tripartite approaches are being promoted through the establishment of tripartite national productivity councils and centres and through technical seminars and publications. Productivity training activities for employers' and workers' organizations have covered employers' organizations in South Asia, Central and Eastern Europe, the Caribbean and East Africa, and a workshop on productivity was held for trade union leaders in English-speaking African countries. A similar workshop is planned for French-speaking countries.
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Local economic development through
Three regional development agencies (RDAs) have been founded and developed as NGOs, which have established their own business promotion and support centres (BCs) as profit-making companies in western Bulgaria. The centres provide services to the business community and establish links between the local administration and the private sector, thereby laying the foundations of sustainable local economic development in the project area. The core activities of centres include:
The Bulgarian Business Association of Regional Development Agencies has also been created and now has ten business centres as members. Over 100 enterprises have benefited from consultancy services, leading to the creation of 280 new jobs. Good progress has been made towards programme sustainability. |
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Reintegration of demobilized soldiers in Mozambique Following the signature of the peace agreement in October 1992, Mozambique was faced with the enormous task of reintegrating 100,000 demobilized soldiers, 1.7 million refugees from neighbouring countries and 4 million internally displaced persons in an economy devastated by 16 years of civil war. Because of their importance for the consolidation of the peace process and national stability, demobilized soldiers were given priority in the reintegration process. The ILO designed a skills and entrepreneurship training project for demobilized soldiers, which was implemented by the Ministry of Labour between 1994 and 1998. It combined accelerated vocational training and the provision of tool kits and basic business skills training to facilitate the access of demobilized soldiers to employment, especially self-employment. It also included a micro-enterprise component to help demobilized soldiers with viable business ideas to start their own enterprise by assisting them in the preparation of a business plan and facilitating their access to micro-credit schemes. Through the Ministry of Labour's employment centres, a follow-up mechanism was introduced to assess the results of the training and assistance in terms of actual employment after the project intervention. The project, using both public and private training providers, trained some 10,000 demobilized soldiers, of which over 70 per cent became (self-)employed in a sector related to their training. On average, their income was considerably higher than the minimum wage. The project also assisted in the creation of some 750 micro-enterprises. It succeeded in establishing technical capacity in the Ministry of Labour to apply the project methodology on a wider scale to other target groups. |
49. It should also be noted that a number of programmes have adopted a sectoral approach to job creation. Several current ILO programmes, for example in South Africa and Palestine, are focused specifically on the development of small-scale operations in the construction sector. In some cases, similar programmes are being linked to the ILO's labour-intensive infrastructure programmes. The DECO Programme has been promoting micro and small enterprises in the building materials sector (concrete roofing tiles) in 12 countries in Africa and Asia through an integrated approach, which includes technology transfer, skills and business training, market access, the use of locally produced materials, the establishment of associations of producers and the dissemination of information. Another example is the tourism sector, where an ILO programme to promote businesses for small-scale tourism in Nepal, which was addressed exclusively at women entrepreneurs, led to the establishment of 131 businesses. Another important example of a successful sectoral programme, which has subsequently started applying a range of innovative strategies beyond the initial focus on agro-processing, is the FIT programme.
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FIT (Farm Implement and Tools):
Pioneering work has been carried out on the establishment of private sector service providers for micro- and small enterprises in Ghana, Kenya and Uganda:
The approach is being replicated in Benin, Cambodia, Gambia, the United Republic of Tanzania and Zimbabwe, with the service providers forming a network through the Internet for the exchange of experience. |
50. Activities designed specifically for women entrepreneurs have included the recently completed programmes on Women's Entrepreneurship Development (WED) and Economic Empowerment of Women (EEW). Between 1994 and 1997, the WED project was implemented to promote entrepreneurship among women in small and cottage industries in five Asian countries (India, Nepal, Philippines, Sri Lanka and Thailand). Technical assistance was provided to 15 national organizations, which in turn provided support to women entrepreneur target groups. Training programmes were organized to develop the capacities of over 100 local trainers and resource persons. Based on materials piloted during the training programmes, a manual was published on entrepreneurship development for women. Demand for the manual is such that a commercially published version is currently under preparation. Studies were also carried out on the status of women's entrepreneurship in the above five countries. The constraints and opportunities were identified and a number of policy recommendations formulated.
51. In the context of the Economic Empowerment of Women (EEW) programme, local versions of the manual on entrepreneurship development for women were produced. The programme concentrated on the following countries:
- Pakistan, where in association with the Employers' Federation of Pakistan (EFP), 25 trainers were trained and more than 100 women entrepreneurs received training in business management and were provided with guidance on how to identify business opportunities;
- Sri Lanka, where trainers were trained and 40 women entrepreneurs received business training;
- India, where local IPEC partner organizations were trained in income- generation activities and four groups of mothers of children rescued from child labour were assisted in the preparation of business ideas;
- Nepal, where the capacities of almost 30 trainers were enhanced;
- Viet Nam, where Start Your Business (SYB) materials were adapted to local conditions and piloted with a group of national trainers;
- Philippines and Indonesia, where groups of trainers and women entrepreneurs received training in small business skills.
52. The qualitative aspects of jobs created in small enterprises are often a matter of concern. An increasing number of programmes have been developed specifically to address the issues of working conditions, the elimination of child labour and the improvement of social protection. One example is a project to establish a health insurance scheme for informal sector workers in the United Republic of Tanzania. Similarly, in Asia and the Pacific, a programme has been developed to improve job quality and address social protection concerns. It also includes components to enhance the productivity and income of entrepreneurs and workers. The programme, known as Work Improvement and Development of Entrepreneurship (WIDE), has been implemented in the Philippines, Nepal and Malaysia. Based on these positive experiences, new strategies and tools are in the process of being developed to support improved social protection for workers in micro and small enterprises. These approaches will be implemented as an increasingly important component of all ILO enterprise-based job creation programmes in the years ahead.
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Micro-Enterprise Health Insurance in
Five informal sector associations in Dar es Salaam, supported by an ILO project, formed an umbrella organization for the provision of health care to their members. One thousand five hundred workers and 4,500 families are associated with the scheme, which covers primary health care services. The scheme is self-financing through fees charged to members. The mode of operation and the level of contributions vary from one association to another. In one case a capitalization fee (a fixed per capita rate in exchange for free health care from a local provider) is charged. In another, an enterprise clinic has been set up for a cooperative of 1,000 workers. The clinic has been successful in reducing work-related injuries through health education programmes. It is planned to extend the programme to the entire country. |
V. Building on the ILO's comparative advantage
53. The projects described above show the main areas of the ILO's work in the field of enterprise development. They give some idea of the impact of its work in this area and provide an indication of the strengths which may be regarded as the basis of a real comparative advantage for the ILO in relation to other actors in the same field. The main aspects of this comparative advantage are:
- Social consensus as a basis for sustainable long-term job creation through enterprise development. Experience has shown that the tripartite structure provides a solid basis for effective capacity-building activities that achieve a long-term sustainable impact. The ILO's unique structure therefore represents a distinctive comparative advantage at a time when it is increasingly being recognized by many development partners, including the Bretton Woods institutions, that major macroeconomic restructuring has to be based on a firm social consensus if it is to be sustainable and effective. In this respect, the ILO is the only United Nations agency which, through its tripartite structure, directly involves the private sector in all aspects of its work. Moreover, in terms of issues related directly to the world of work, including management, competitiveness and job creation, the ILO's ability to engage the social partners directly in dialogue, programme design and implementation lends unique credibility and operational advantage to its enterprise-based job creation programme.
- Long experience in the fields of management development, productivity and small enterprise development. The ILO's involvement in management development dates back to the 1930s, making it the first international agency to have a comprehensive programme which recognized these issues as key concerns in the world of work. Over the years, the ILO has established management development institutions in over 30 countries, and tripartite productivity centres in over 60. Many of these centres have played an important role in developing a process of tripartite dialogue in areas that have a powerful influence on enterprise competitiveness and productivity through enhanced social dialogue and labour-management cooperation. This tripartite approach is likely to become even more important in the face of the widespread enterprise restructuring required to adapt to increasingly volatile and global markets. The ILO's involvement in small enterprise development was initiated in the mid-1970s, when no other agency had yet become active in this area. The ILO has been a recognized leader in the field since then.
- The only United Nations agency to adopt a view combining issues of competitiveness, job quality and social development. The ILO is the only United Nations agency able to adopt a uniformly comprehensive approach to enterprise and employment issues which combines expertise in such areas as competitiveness, productivity, overall employment policy, job quality, worker protection, working and employment conditions and social protection. The resulting breadth of scope is important in responding to the concerns of a wide range of constituents, including governments and workers, as well as employers. It therefore provides the necessary foundation for the development of a conducive social climate, which is vital for the long-term development of enterprises in an environment unaffected by conflict and unrest, and which offers guarantees of steadily improving human resources and an expanding client base.
- Core expertise in a range of mutually complementary areas, all of which are anchored in international labour standards. Closely allied to the above areas of comparative advantage is the substantial synergy between the ILO's areas of core expertise, such as industrial relations, management, productivity and human resource development. The value of this range of expertise is greatly enhanced by its close association with the ILO's widely respected international labour standards, which have amply proven their worth over the years.
- International policy leverage through a comprehensive services approach. As a consequence of the above areas of comparative advantage, the ILO is able to offer its constituents and partners a comprehensive portfolio of services in the field of enterprise development, including applied research, advisory services and capacity-building activities. It is therefore able to provide a unique blend of broad-based guidance to a wide range of constituents and partners. This gives the ILO a competitive advantage, not only at the national level, but also at the regional and international levels.
54. It may be concluded that the ILO has had considerable success in developing and promoting enterprise-based job creation strategies and programmes and is an acknowledged authority in this field. However, it must also be recognized that enterprise promotion is a very dynamic and challenging field, in which a broad range of development partners are showing growing interest. The maintenance and enhancement of the Organization's relevance in this area therefore requires constant innovation and improvement. It is therefore vital for the strategy that is followed in the future to give ever-increasing emphasis to those aspects of the ILO's work in which it has a genuine comparative advantage.
Geneva, 12 October 1998.
1. GB.272/4.
2. GB.272/4.
3. Small enterprise development: Value for money?, Harper M. and Finnegan G.
I
mpact of ILO technical assistance projects concerning
enterprise-based job creation
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|
Project |
Country |
Project type |
Types of
|
Enterprise
|
No. of
|
Cost per job (direct $) 2 |
%
|
Sustainability 3 | |||||||
|
| |||||||||||||||
|
Promoting local
|
Cambodia |
Capacity building |
•Business training
|
4 224 |
7 600 |
126 |
71 |
Full sustainability projected by year 2000 according to World Bank evaluation. | |||||||
|
Improve Your
|
Multiple |
Capacity building |
•Business training |
100 000 |
88-160 |
60 |
A large portion of the delivery institutions continue the programme. | ||||||||
|
University-based
|
Indonesia |
Capacity building |
•Business training
|
614 |
2 030 |
116 |
21 |
Units established at universities still exist and have been replicated in 24 locations with World Bank support. | |||||||
|
NGO-based
|
Indonesia |
Capacity building |
•Business training
|
1 529 |
3 058 |
42 |
51 |
The methodology developed by project has been replicated by the Government and most original units still function. | |||||||
|
Entreprendre a
|
Madagascar |
Capacity building |
•Information
|
12 446 |
4 988 |
848 5 |
31 |
Still to be achieved. | |||||||
|
Reintegration of
|
Mozambique |
Direct support |
•Vocational training
|
639 |
12 697 |
300 |
2 |
Methodology developed by project is now to be applied in the national programme. | |||||||
|
Local economic
|
Bulgaria |
Capacity building for business support centres |
•Business training
|
110 |
280 |
178 |
n/a |
Projected to be achieved fully in 1999, currently 50% financial sustainability. Business centre concept has been replicated in 8 regions | |||||||
|
Credit and
|
Benin |
Capacity
|
•Financial services |
2 000 loans provided |
4 500 |
n/a |
50 |
70 credit associations and 3 service centres sustainable | |||||||
|
Women headed
|
Benin |
Sector
|
•Training
|
1 200 |
3 000 |
n/a |
100 |
53 fully sustainable credit unions | |||||||
|
Private sector
|
Madagascar
|
Capacity
|
•Training
|
6 500 |
12 000 |
n/a |
40 |
Madagascar sustainable, other countries expected in 2000. | |||||||
|
Employment and
|
Comoros |
Capacity
|
•Business training
|
100 |
350 |
n/a |
40 |
Sustainable credit schemes at the end of the programme. | |||||||
|
1 During the life of the project. 2 Unless otherwise specified, this includes the direct cost of the development intervention. 3 The ability to continue the delivery of services beyond the life of the ILO project. Also comments have been included here of other relevant performance indicators. 4 All numbers are preliminary estimates. 5 Includes investment cost. | |||||||||||||||