Sunday, May 27, 2012
SMEs - the survivalist entrepreneur. Do they really make a difference? If we assume we have 3 basic groupings of SME, the survivalist, lifestyle and high growth entrepreneur, we need to understand where the value is added to an economy. This blog will consider the survivalist. Many people perceive the survivalist to be the uneducated BOP person who is doomed to poverty. The kind of people who were targeted by Grameen bank and their subsequent followers. However, the person who has been fired or re-trenched and who is unemployed in contracting markets is every much a survivalist too. The difference is that they may be well educated and highly experienced. However, in both cases they want employment, albeit at different levels. Therefore government interventions for these two survivalist sub-groups need to be handled and processed in a different manner. Neither really wants to own a business. Neither of these are likely to directly and significantly contribute to employment and/or GDP growth, but will indirectly benefit from employment and GDP growth as and when they find employment. Therefore government needs growth from alternative sources in order to reduce the number of survivalists. The fewer survivalists, the better the economic health.
Wednesday, May 23, 2012
Government interventions are fact of life in every economy. These can be general in nature (functional interventions) or very specific (selective interventions). So what is the problem. It appears that governments the world over are seeking economic, and sometimes political, solutions through SMEs. SMEs have been around for a long time, and I have personally owned my own businesses since 1982. But the governments and the media act as though they have personally found/invented the SME. Everybody is making wild claims about the importance of SMEs in their economy, often without any research data to support their claims. Interventions are based on hearsay and urban legend, not good solid research. They then bombard the SMEs with a range of interventions that are often ill planned. ill designed and poorly implemented by inexperienced government functionaries. They try to put square pegs in round holes! They push SMEs into sectors that are not suited to SMEs, and they ignore advice. They try to force big business to do business with SMEs, ignoring the risk to big business, and this is particularly applicable to banks. Perhaps it is time for governments to step back and take a long hard look at the SME sector, their current interventions, and then assess what they should really be doing. Perhaps then greater success will be achieved.