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The clearest lesson learned about enterprise development in recent years is that all types of business are easier to establish and ultimately more successful if framework conditions are positive - that is, if there is an "enabling policy environment". It is widely accepted "that the creation of employment and incomes through the promotion of self-employment and microenterprises is foremost determined by macro policies" (Haan, 1994). Ideally, there should be positive economic incentives for enterprise and a supportive legal and regulatory environment to encourage people to take advantage of the opportunities created by positive economic incentives. There has been great improvement in recent years in the overall economic policy in most countries. In general, the trend is towards policies that are increasingly favourable for small enterprise. Somewhat paradoxically, however, the very forces that are shaping an improved overall environment for small enterprise in the long term are exacerbating the unemployment crisis and driving more and more people into self-employment in the short term. The purpose of this book is to help improve self-employment training; primarily for those struggling to accommodate the negative effects of this rapid and dramatic change, but also for those more fortunate individuals who are simply taking advantage of the improved business climate. The emphasis here is on responding effectively to current reality, rather than on attempting to shape broaden economic policy.
In all countries, rich and poor alike, policy improvement alone will not be sufficient incentive, particularly in those many cases where macroeconomic change is slow or ineffective or considerable social disadvantage need be overcome. In such cases external support is needed to compensate for the market's inevitable failings. Much has been learned in recent years about direct interventions in support of micro and small enterprise and much of the conventional wisdom remains valid. First and foremost, the evidence past and present continues to affirm that all types of enterprise development initiatives benefit greatly from close involvement with local markets and local communities, and that the local knowledge available in these communities has much to offer:
Those who are anxious to promote small enterprises should always look first at existing practices and institutions rather than attempting to create new ones (Harper, 1984b).
The most effective projects ... are responsive to the plans and desires of those they serve and reflect the level of skills and knowledge that commonly exists in the community (Farbman cited in Remenyi, 1991).
Beyond these solid basics much has been learned about micro-credit delivery and traditional apprenticeship training techniques, about the need for careful target group identification and entrepreneur selection, and about the need for follow-up, and about many other aspects of a diverse and complicated field. Taken together, the current knowledge of enterprise development is probably the single most useful contribution to the training for self-employment learning process that many agencies and institutions are going through today. A number of best practice principles have emerged to help guide the design and management of self-employment training initiatives.
Design is important. Though this simple statement invites little dispute there is a considerable gap between best practice and common practice. In all too many cases opportunities for efficiency are lost to the twin failures to accurately determine what is needed and to then provide appropriate services in timely convenient fashion. Characteristically microenterprise development programmes offer either low-level standardised packages of services, a supply-oriented approach that is inherently inefficient and "particularly prone to subsidy to encourage use" (König, 1992), or they approach enterprise creation through the careful formulation of a "business plan". Neither approach is likely to address the real needs of the prospective self-employed because neither is consistent with small enterprise realities and neither is sufficiently responsive to the transitory opportunities offered by fast changing informal sector markets.
It is characteristic of small and micro-enterprises everywhere to want and need quick, short-term, specialised services that are tailored to immediate and specific needs. Few self-employment programmes manage to respond to such needs in a businesslike way. In small and micro-enterprise development generally, and in enterprise training particularly, supply and demand are not well matched. This mismatch is the fundamental failing of self-employment training programmes everywhere, and the root cause of so many discouraging evaluation reports and discouraged entrepreneurs. All too often self-employment creation programmes remain mired in the comfort of responding to their own plans rather than face the challenge of planning to respond to the needs of their clients.
Small enterprise creation is an erratic, iterative process. Howard Aldrich describes the process as rapid, incremental, and unplanned and questions the viability of approaches based on "careful long-term planning" (Aldrich et al., 1987). Alan Gibb has long been on record with the view that business start-up "will not be one of scientific and logical progress but frequently one of trial and error" with setbacks and diversions likely as changes in the environment and the entrepreneur affect progress (Gibb and Ritchie, 1982). He stress the importance of being able to respond to needs that are unpredictable in type and pattern: because "most small business will not operate with highly formal business plans", their time horizon is short and their thinking and planning strategic in nature (Gibb, 1996). This accords with the growing evidence that the function of support interventions, is not that of predicting or "diagnosing needs, but rather of satisfying them by responding to specific requests" (Birley, 1985). "It therefore makes no sense to work out in advance a standardised action plan for all enterprises covering discrete aspects of their promotion (i.e. credit, training, technology, technical advice or market access)" (Maldondo and Sethuraman, 1993).
In spite of considerable diversity of programme design and approach, basic issues are often reasonably clear. It has been more than adequately demonstrated that it is neither efficient nor effective for individual programmes to have extensive menus of resources available in the hope of having the right combination available when opportunities arise or problems appear (McLaughlin, 1989; König, October, 1992). "The cost and complexity of 'package' based approaches make sustainability unlikely" (Boomgard, 1989). Integrated packages of services seldom work well, are prohibitively expensive, and are extremely difficult to staff and manage (Tendler, 1989). Because of these factors, approaches based on packages of services offer little hope of serving the huge and growing numbers of entrepreneurs needing assistance (McGrath et al., 1995).
Impact and efficiency tend to follow focus and specialisation. There is ample evidence that narrowly focused and specialised approaches are more effective. Carl Liedholm and Donald Mead, in an early opinion many times endorsed, found that "successful projects have typically uncovered a situation where there is only a single 'missing ingredient' ... where intervention was to provide an integrated set of multiple ingredients the results were largely failures" (Liedholm and Mead, 1987). This narrowing of focus to a few key elements is commonly referred to as "minimalism" - an understanding sometimes narrowed further in popular usage to mean "micro-credit only". Certainly it is micro-credit that has earned minimalism its good reputation. In terms of accuracy of needs assessment, efficiency of delivery and progress towards institutional sustainability, minimalist credit systems are more "developed" than all other forms of small enterprise assistance. Nonetheless, minimalism is not a concept that is limited to micro-credit alone.
Key aspects of minimalism, in both financial and non-financial services, are the degree to which it reveals the real demand for the specific service on offer - the basis for effectiveness - and its potential for low relative cost and high relative value - the basis for efficiency. In general, there is a pragmatic trend in training programmes towards a more businesslike focus on specialisation. a trend tempered by concerns that: "the question of how to reach the enterprises whose needs cannot be satisfied by the minimalist strategy remains unanswered" (Boomgard, December, 1989). The successes of minimalism offer certain evidence that a great deal has been learned about how to respond with reasonable efficiency to demands for a wide variety of business development services and - much credit due - how to design training programmes that reach the poor and disadvantaged.
To be sure, many of these success stories describe minimalist credit and poverty lending programmes. However, this should not be taken as evidence that little more than credit is needed, or that small enterprises do not want or cannot afford training and other non-financial services. The many fee-charging for-profit training agencies, consultants, and schools in evidence in every developing country all serve to question the wisdom of this all-too-common view. The market for useful training certainly exists though serving this market is a challenge that has yet to be mastered. Doing so will involve identifying effective operating approaches as well as identifying missing ingredients. There is an opportunity at hand to learn from many of the well known traditional practices that are efficiently minimalist in their approach to vocational training for self-employment.
There is a broad and eclectic endorsement of the trend in vocational training and self-employment towards increased market and community involvement at all levels, and particularly with the informal sector (King, 1996b). There is a growing recognition of the need to take into account the "dynamics of the informal sector, and to draw upon the organisation ingenuity and skills of the small producers themselves in upgrading skills (to include) training of artisans, by artisans, who are themselves involved in all stages of the process of designing and delivering training" (ILO, 1990).
Increasingly, effective self-employment programmes are developing institutional networks that include partnerships with the local business community and co-operative relationships with many types of enterprise support institutions. These new partnerships with small businesses and the informal sector are often more complex than classic "dual system" arrangements. They are characterised by a much higher degree of socio-cultural complexity, they have a different fundamental objective and they involve quite different incentives to participate (Grierson and McKenzie, 1996).
The mutual self-interest that underpins most wage employment oriented co-operative arrangements and training partnerships is not nearly so well defined in the case of self-employment. Even though industry and enterprise have clear incentives to train, and "in-company training is alive and well without benefit of public subsidy" (Economist, 6 April 1996), this willingness does not so clearly apply in the case of training for self-employment. Employers do not get long-term labour benefits from their worker-trainees when the trainees quickly become self-employed. They do, however, get many other benefits. In both modern and traditional on-the-job training, there are an array of benefits for the enterprises that participate; benefits in terms of short-term low cost labour, training fees earned, prestige, current and future business linkages, and a host of other factors (LaTowsky and Grierson, 1992). An oft-cited reason for businesses to collaborate with training programmes is to use them as consultants: to help upgrade in-house training capacity and to improve their finance, marketing and personnel systems. The fact that the enterprises that host self-employment are not training only for themselves is not an overwhelming constraint. Participating enterprises often do so because they can chose employees from amongst a known and tested group, and because they have no long-term obligations to the others. From the employees point of view it is clearly in their best interest to bear some of the costs of training - commonly by accepting an apprentice's low wage - precisely because the skills acquired are portable, and can be transferred to the trainee's future micro-enterprise. It is abundantly clear that the market offers a sufficient array of incentives for businesses to participate in enterprise-based self-employment training. The burden is clearly on training institutions and programmes to design training programmes that capture and balance these incentives.
Self-employment training programmes cannot hope to impart marketable skills without market involvement, and they cannot be effective if operating in isolation from other institutions with self-employment interests and responsibilities. Vocational training for self-employment programmes must become actively involved in local networks of enterprises, industries, institutions, agencies and banks. Indeed, learning to build effective networks of enterprise support agencies is one of the "broad issues" involved in meeting the training needs of small enterprises (Gibb, 1996).
A. The First Stage: Selection
There are no scientifically proven methods of entrepreneur selection, though there are many hundreds of systems in active and effective use and steadily improving general guidelines. In all countries selection systems that screen for enterprise potential have a positive impact on business start-up and survival rates (Wilson and Adams, 1994). Selection remains, however, an uncertain area, with much disagreement about the usefulness and fairness of various criteria. This presents a formidable challenge to the designers and managers of vocational training for self-employment programmes. Because "getting an early start" and keeping "a consistent focus on self-employment" are such important factors in training for self-employment, selection - the first stage in the training process - is both the point where programmes must get it right, and one of the easiest places to get it wrong.
All too often those who are unsuited to the rigours of self-employment will have been pre-selected. This can include the severely disadvantaged, the socially marginalised, and very young people with little or no work experience, as well as "elite" groups such as retrenched civil servants and the unemployed graduates of universities and technical colleges. Individual programmes often have little scope to identify and select those with high self-employment potential, or even to select those with apparent potential from among groups who are not in general good candidates for microenterprise. The expanding interest in self-employment as a multiple purpose social and economic development tool will undoubtedly lead to many errors of inconsistency at the selection stage.
Because of the lack of readily available and proven selection systems every programme must deal with the unavoidable issue of developing a selection system. The guiding principle should be the principle of consistency. Selection systems are the cornerstone of consistency. If the objective is self-employment, selection should seek out those with self-employment potential. It may be necessary for designers and managers to stubbornly insist to their donors and directors that "errors of inconsistency at the selection stage are difficult to correct later in the training and enterprise stages".
The process of evolving a selection system must begin with a clear understanding of the target group. Selection standards must realistically accommodate the weaknesses of the target group while focusing on areas of enterprise potential. Few programmes will be able to base their selection criteria solely on "best potential for enterprise" irrespective of other factors; many will need to reconcile political realities and equity issues with the principle of consistency.
Selection systems normally fall in one or more of the following categories:
· Automatic selection: normally based on qualifying under a designated standard or by belonging to a particular group; common examples include ax-combatants and certain categories of graduates;
· Self-selection: often on a simple first-come-first-served basis, though commonly qualified by the need to belong to a designated group or to pre-qualify self-selection by complying with other selection criteria;
· Competitive selection: using application forms; tests; interviews; tasks or assignments (e.g. carrying out a market study, developing a business idea, or identifying a source of capital); or combinations of these, and;
· Assisted selection: making information or assistance available in order to meet otherwise competitive selection criteria.
Assisted forms of selection include three basic types: 1) those that help applicants through access to credit or training8; 2) those which provide only information about available opportunities, a minimalist approach in common use; and, 3) those which alter the selection criteria for certain categories of applicants, or which reserve quotas based on modified criteria.
8 Achievement motivation training is sometimes used as a pre-qualification for selection for vocational training, perhaps the best use of this particular form of training (Hailey, 1993).
None of these forms of assisted selection are necessarily inconsistent with seeking those with self-employment potential. Indeed, many of them facilitate the consistent application of high self-employment standards. Information, for example, can be used to good effect in seeking out and including enterprising women who might otherwise be excluded (Kraus-Harper and Harper, 1992). Assisted selection often enhances consistency by helping match entrepreneurs and training opportunities.
Self-selection - that is, effectively transferring responsibility for selection to the aspiring self-employed themselves - is often used because it is both minimalist and demand responsiveness. Self-selection facilitates decentralisation of control over access, and thereby makes self-employment programmes "more appropriate" (Pyke, 1992). However, self-selection is usually more appropriate for self-employment programmes with a distinct economic focus. The parameters and the results of self-selection systems must be carefully designed and constantly monitored, to ensure that equity considerations are respected and that programme focus is not lost.
Some form of competitive selection is probably the most common, and arguably the most effective. As noted in the CYSEC case study, there is strong basis for asserting that a well managed interview procedure is probably the most effective single selection method. All selection systems use some form of selection criteria, however informal. These criteria are typically subjective and specific to individual programmes. Hence, establishing selection criteria is a task best left to individual programmes. A few of the issues likely to arise and a few of the inevitable dilemmas to be faced are discussed below.
Age appears to be under-estimated as a constraint. Young people are very often selected for self-employment training in spite of much evidence that their life experiences are an insufficient endowment for the rigours of enterprise. Both lack of experience, particularly work experience, and cultural norms make the problem of youth a difficult factor to overcome.
Conversely, work experience is a known asset and useful predictor of self-employment potential (Mead et al., 1993). Those who are familiar with business operations, particularly during their young and formative years, "are more predisposed to venture into entrepreneur ship than those lacking these experiences", business exposure gives them "esteem for entrepreneurship ... business sense ... the rudimentary knowledge of how to run a small business ... contacts ... and confidence" (Tolentino in the Introduction to Hoppers, 1994).
Though formal qualifications are often of little use for self-employment the lack of formal qualifications is frequently an insurmountable barrier for those seeking self-employment training. In all countries the level of education of those undergoing training is rising (Caillods, 1994), a situation that applies in many countries to nonformal training and traditional apprenticeships as well (Birks et al., 1992). In general, access barriers tend to rise along with rising levels of education. Precisely the opposite is often needed if selection systems are to be equitable. And at least as often, the opposite is also needed if selection systems are to relevant.
Those in need of self-employment training are seldom free of social obligations and other demands on their time. The time and timing constraints of multiple social roles and diversified economic survival strategies must be taken into account if selection systems are to be equitably structured. This is particularly important in the case of women (Kraus-Harper and Harper, 1992), though the underlying principle applies broadly.
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Box 4 - Selecting for Equity and Self-employment Potential The Don Bosco Self-Employment Training Institute (DBSETI) in Calcutta takes selection based upon enterprise potential to its logical conclusion, and does so while retaining equity as a principal value. DBSETI's standards are high. They have two basic criteria: they are seeking the unusual combination of young men with: 1) evidence of severe physical and social disadvantage, and 2) evidence of demonstrated self-employment potential. The DBSETI programme is sub-sector specific, concentrating solely on micro-scale metal machining. DBSETI gives start-up assistance to aspiring metal sector microentrepreneurs as part of their selection process. Assistance with securing a commercial loan to buy equipment is part of their lengthy "selection" procedure. If the loan is approved the future entrepreneur is automatically "selected". His microenterprise is then immediately set up in the modest residential property that DBSETI uses as its "mini-estate". The DBSETI estate includes office space for several private "jobbing brokers". These brokers identify, allocate and check the sub-contracts that comprise the bulk of the work carried out on the estate. All self-employment training takes place on-the-job in the trainees' own enterprises. The fledgling businesses leave the estate after an initial incubation period; in practice, when the start-up loan is repaid or the business fails. DBSETI provides a limited amount of very pragmatic follow-up assistance, usually in the form of technical advice and commercial sub-contracts. Source: Grierson (1992); Grierson (1989). |
Programmes that serve the disadvantaged will inevitably encounter dilemmas of equity in evolving and applying their selection criteria. It is quite common for programmes to present deliberate access barriers to some while facilitating ease of access for others. In most cases access barriers are there to generate evidence of "character", "personality", "perseverance" or other traits thought typical of entrepreneurs. In many cases they are simple bureaucratic filters; popular programmes use them to reduce the numbers of applicants to manageable levels. Overtly economic selection criteria normally seek evidence of entrepreneurial potential by requiring applicants to demonstrate that they have specific entrepreneurial abilities, networks or resources. In some cases, as described in the REDP case study, the selection criteria require that applicants provide a component of the proposed venture. Examples abound, including requiring that a market study be carried out or requiring evidence of access to credit to ensure that training can be put to good use (LaTowsky and Grierson, 1992). Among the most subjective and difficult aspects of design and management is the challenge of balancing equitable selection, efficient management and a consistent focus on self-employment.
B. The Second Stage: Training
The art of training for self-employment is in developing systems that can accurately determine real needs and provide the minimum training needed in timely, convenient fashion. Training for self-employment is a very heterogeneous product, and, hence, difficult to design, target and deliver effectively. There are five basic steps in the process:
· clear target groups designation;
· careful selection for high self-employment potential;
· using approaches that continuously identify local self-employment opportunities;
· using training techniques of suitable type, duration and level of sophistication to capture fleeting informal sector opportunities; and
· working through institutional networks to allow the specialisation and the efficiency of minimalism while providing access to broad-based follow-up support.
There are three common approaches to training for self-employment two that are typical of public sector and NGO programmes, the third found largely in the private sector. Broadly categorised, these three approaches are:
· general training in entrepreneurship, often in combination with business plan development and sometimes credit;
· NGO and project-based vocational training, again, often in conjunction with business planning and credit assistance; and
· Vocational training through on-the-job training and traditional apprenticeships; with most start-up and follow-up support provided through the enterprise networks established during training.
How do businesspeople usually acquire their skills? Productive self-employment requires hands-on practical skills, allied with personal and business skills. Few training programmes manage to provide such skills, and fewer yet offer broad-based easily accessible training. The most widespread systematic forms of skills acquisition are various forms of entrepreneur arranged enterprise-based training, including on-the-job training, and traditional apprenticeships (ILO, 1990; World Bank, 1991). The strengths of this form of training include:
· training can be specialised and responsive to individual needs;
· direct costs are low; there is little institutional rigidity;
· barriers-to-entry are minimal;
· the training process is embedded in local markets and local communities;
· skills are acquired in the markets where they will be applied, hence, training facilitates the natural social process of enterprise network formation that is critical in the early stages of enterprise start-up;
· low-cost follow-up support is available naturally, largely through enterprise networks; and
· there is a reasonable likelihood of both enterprise and institutional sustainability because of low costs, shared responsibility and benefits for all parties.
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Box 5 - Learning on-the-job "Training in the private sector - by private employers and in private training institutions - can be the most effective and efficient way to develop the skills of the workforce ... even the very small, unregulated enterprises of the rural and urban informal sectors can provide the training needed for existing technologies and production practices" Source: World Bank (1991) All "learning mechanisms" have an impact on productivity. However, on-the-job training "has relatively the largest impact on value added", in firms of all sizes including very small firms and microenterprises. Source: Biggs et al. (1995) |
Enterprise-based training, for all its advantages, has a number of weaknesses. Private-sector based training systems are often highly fragmented and difficult to co-ordinate; the strengths of diversity and flexibility combine to present a considerable management challenge. Enterprise-based training is not fundamentally oriented to self-employment employers are often reluctant to support training that does not serve their businesses directly. Enterprise-based training is typically weak on both theoretical content and on opportunities for technology transfer. Enterprise-based training tends to re-cycle the practical skills that are readily available in local markets. In general private-sector training, including enterprise-based training, tends to reinforce existing social patterns; quity considerations are often difficult to accommodate (Lauglo, 1992). Training programmes that use enterprise-based training techniques must allow for these inherent weaknesses, if they are successfully to address the issues of cost, relevance and equity.
Self-employment skills are seldom acquired through formal training. Training approaches that recognise this, and that stimulate "normal" processes of skill formation have proven both more cost-effective and more successful in creating self-employment. Marketable skills are crucial to enterprise formation. Marketable skills, and specifically technical skills, are considered by some to be "perhaps the essential ingredient" (King, 1984). Formal training has long been criticised for its remoteness from market realities and "petty production" (King, 1987) and its failure to provide the specific skills needed for self-employment (World Bank, 1991). In stark contrast, enterprise-based training, and particularly traditional apprenticeships and other traditional practices, are noted for imparting the skills needed for self-employment, including the range of management and organisational skills needed in order to negotiate with suppliers and customers, cost products, train others, and absorb the customs and ethics of each profession (Fluitman, 1992). Because training that is remote from the action and interaction of the market is "less stimulating and lacks the socio-psychological influence factors of the work environment", vocational training in general is increasingly being shifted back to the workplace to take advantage of the one environment offering "complete identity between learning and working" (Loose, 1988).
These lessons have not been lost on either employers or the self-employed and they are becoming part of the conventional wisdom of business expansion and business improvement programmes as well. "Businesses can and do learn from each other very rapidly" (Tanburn, 1996). The ILO's Farm Implement Technology (FIT) programme, in recognition of this simple truth, includes a business-to-business "exchange visit" component that has resulted in distinct benefits to participants in terms of new ideas, improved management skills; increased self-confidence; expanded business linkages, and improved specific technical skills (FIT, 1995). Enterprise-based vocational training for self-employment programmes are simply extending the application of the tried and tested formula of business-to-business assistance to include business-to-emerging-business assistance. And, as the case studies in Chapter III demonstrate, they are doing so to good effect in a wide variety of challenging circumstances.
C. The Enterprise Stage: Getting Started, Overcoming Barriers to Entry
For the aspiring entrepreneur getting started - actually initiating a small business and beginning production and trade - is probably the most difficult part of the self-employment process. The prospective self-employed face a formidable array of barriers-to-entry. Barriers-to-entry can be grouped into two broad categories: 1) economic and administrative barriers; and 2) social barriers, such as exclusion based on gender, poverty or minority status, and including restricted access to the social networks needed to start and sustain an enterprise.
Economic and administrative barriers to entry include: 1) biases against productive self-employment in incentive structures which favour large, public sector or formal sector enterprises; 2) bureaucratic and institutional barriers such as licensing and regulation; 3) limited access to capital, raw materials, equipment, and markets; and, 4) limited and inappropriate training opportunities. Self-employment training programmes can usually only hope to address the latter, to expand the range and improve the usefulness of vocational training opportunities.
Social barriers-to-entry, though less well recognised and understood, also present a formidable challenge to the prospective self-employed Many aspiring entrepreneurs, particularly women, the young, the socially disadvantaged, and those from cultures with only modest enterprise traditions, do not have ready access to the networks needed to start and sustain new enterprises (Aldrich et al., 1987). Ease of entry to self-employment is related to the ability to access or create the social networks needed to provide information about self-employment opportunities and access to the resources and skills needed to take advantage of these opportunities.
The enterprises of the self-employed, like other social processes, do not take place in a vacuum. Small enterprises are active members of local communities and local markets. Their day-to-day operations are characterised by overlapping and vibrant networks of customers, suppliers, employees, moneylenders, trainers, family and friends. These networks are one of the "most relevant factors" contributing to the success of new enterprises (Tomecko and Kolshorn, 1997). When working effectively enterprise networks provide access to the "opportunities, information, capacity and capital" that result from linkages with and between businesses of all sizes (Grierson and Mead, May 1995). Although enterprise networks are by no means unique to the informal sector they are vitally important there because: "there is a tendency for the informal economy to rely predominantly on networks, and their connection with the formal economy, through subcontracting, is also network based" (fortes et al., 1989).
Self-employment creation is fundamentally a social process. It has been argued that *the personal network of the entrepreneur should be regarded as his/her major asset" (Johannisson, 1986). An important element in determining the speed and ultimate success of enterprise formation is the degree to which enterprise supporting social networks are created and exploited (Aldrich, et al., 1987). Steven Balkin, citing Muhammed Yunus, notes that the "planner's job is to design a programme that will make constraints crumble away (and) help the poor use their full capacity' (Balkin, 1989). Effective self-employment programmes stimulate network creation, particularly during the preparatory stages of enterprise formation - the stage when network growth is most dynamic and critical. "The social networks established during [enterprise-based] training link prospective entrepreneurs with the labour, capital, customers, suppliers and counselling needed to sustain their future enterprises" (LaTowsky and Grierson, 1992).
Of all forms of training, enterprise-based training best supports the process of self-employment creation by placing the prospective entrepreneur, during the skill acquisition stage, in the ideal environment to form the networks needed to test and validate self-employment concepts, identify resources, and initiate the process of enterprise creation. Penetrating social barriers to entry and forming the personal networks needed to sustain a new enterprise are key steps in the self-employment process. Traditional apprenticeships have been performing this service world-wide for many centuries. The degree to which vocational training for self-employment programmes help aspiring microentrepreneurs penetrate barriers and establish viable networks is very much a function of the training methods they use. Enterprise-based training approaches and traditional training techniques are the most effective training methods for stimulating enterprise networks.
The needs of the nascent self-employed are best met by networks of institutions providing complementary self-employment services. A well regarded study of 57 projects in Africa, Latin America, Europe and Asia found that effective small enterprise development institutions linked training with counselling, finance, and other forms of support, "not as a bureaucratic service" but through linkages and networks (Gibb and Manu, 1990). Effective programmes complement their own specialised services by stimulating network and linkage formation, rather than by providing packages of services. Minimalism, specialisation and institutional networking are complementary characteristics found in most effective self-employment training programmes.
National level co-operation and networking among specialist institutions is increasingly the norm in Latin America, Africa and elsewhere, reflecting both the growing sophistication of self-employment practitioners and the increasing pressures for programme efficiency. Chile, has been able to greatly expand training and other support for self-employment through a national network of interrelated agencies, private institutions and enterprises (Corvalán, 1996). In Africa, the lead is often being taken by informal sector business associations. In Ghana, the Ghanaian National Association of Garages, representing thousands of informal sector motor mechanics, panel beaters and garages, has drawn together both formal and informal institutions into a network offering a broad-based programme of support (Abban and Quarshie, 1996). Effective networks of support services are a natural outgrowth of interaction among enterprise promotion agencies, local markets and local communities.
Vocational training for self-employment programmes must become network facilitators as well as vocational trainers. They need to use operational approaches and training techniques that both stimulate and use two distinct types of networks:
· Enterprise networks - made up of the trainee's own enterprises, their competitors, their suppliers, their creditors and their customers. Enterprise networks are both social and economic in character.
· Institutional networks- comprised of training programmes, complementary support institutions, banks and credit cooperatives, and the wide variety of other educational, social and economic organisations that training programmes work together with to support self-employment. Institutional networks are essentially co-operative and administrative in character.
Enterprise networks allow small enterprises to establish and sustain profitable operations. Institutional networks allow vocational training for self-employment programmes to operate efficiently and effectively while providing their clients with access to an array of specialised services. Designers and administrators of self-employment promotion programmes must have a clear operational grasp of the conceptual and practical differences between these two types of networks.
The networks needed by small enterprises are for the most part personal and informal. Enterprise networks offer, first and foremost, access to markets, and thereafter to the resources needed to sustain and expand the microenterprises of the self-employed. The success of enterprise-based training for self-employment is related to the fact that the networks formed during training provide a low-cost, enduring and flexible form of follow-up support. The success or failure of new enterprises often "depends on the networks developed and exploited by their founders" (Szarka, 1990). This natural, flexible, widely available, and inexpensive support system reduces the need for programme supplied follow-up, limits its scope, and facilitates early support programme withdrawal. The likelihood of sustainability for both enterprises and support programmes is greatly increased when the self-employment process helps create the enterprise networks that provide follow-up support to fledgling enterprises.
There are a number of implications suggested by the available evidence:
· the enterprise networks formed during enterprise-based training are for the most part sufficient to address "birth and survival" problems;
· the usefulness of support programme follow-up is closely related to the degree to which it complements the follow-up provided by enterprise networks;
· the effectiveness of an unstructured approach to follow-up may be due to its responsiveness to entrepreneur diagnosed problems; and,
· readily available assistance - a "helping hand" when needed - may be more important than the type of assistance actually provided.
Institutional networks, on the other hand, are the networks of self-employment support institutions and the institutions and agencies they cooperate with in order to provide broad-based support for self-employment They are important and necessary because they facilitate synergy and the efficient provision of specialised services (Hailey, 1991). Vocational training projects should stimulate multi-faceted linkages among institutions, assistance agencies and businesses; "what is actually important is not to develop or expand institutions, but to integrate them to form networks ... sustainability can be more easily achieved with limited, not too ambitious projects" (Hillebrand et al., 1994). Institutional networks enhance the capacity and the cost-effectiveness of microenterprise support institutions (Liedholm and Mead, March 1997).
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Box 6 - Zimbabwe's ISTARN Project: Institutional Networking in Support of the Informal Sector Zimbabwe's Informal Sector Training and Resources Network (ISTARN) is a pilot project of the Ministry of Higher Education, initiated in November 1995 and funded under the German (GTZ) sponsored National Vocational Training and Development Programme. ISTARN was designed with two principal objectives in mind: 1) to respond to Zimbabwe's unemployment crisis by drawing together a wide variety of interest groups and support institutions into an informal sector support network; and, 2) to create mechanisms that will help trainees in formal vocational training institutions use their skills to take up self-employment when they graduate. ISTARN's approach builds on existing traditional apprenticeship practices to help create the skills and provide the resources needed for successful self-employment. The network created to do this includes more than a dozen local institutions, agencies and NGOs as formal members, including a number of district level informal sector associations that the project has helped initiate. ISTARN members fall into two broad categories: service providers and membership-based organisations In addition, the project works with and through a wide variety of other enterprises, agencies and institutions. ISTARN is based at the Masvingo Technical College (MTC) in Masvingo Province in southern Zimbabwe. The MTC is the formal vocational training component of ISTARN. ISTARN's original premise was that an umbrella organisation, representing a voluntary network of institutions, could direct useful self-employment support services to trade based groupings of informal sector clients. In practice, ISTARN's leadership and participation in a broad-based informal sector networking process appears to be a more important contribution than the formal network formed by the ISTARN project. The viability of the networking approach that the ISTARN project initiated might prove to be the primary factor influencing ISTARN's success in terms of self-employment creation. If ISTARN is successful it will help revitalise and reorient the MTC, without requiring it to undergo a substantial internal restructuring. The early indications on both counts are encouraging. Sources: Nell and Manganje (December
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Specialised self-employment programmes that operate as members of dynamic institutional networks can help their clients gain access to a variety of services, and can do so without causing any single institution to risk a "crisis of cost" by assuming direct responsibility for the costs and complications of delivering multiple services (Gibb, 1993). In some cases, as Zimbabwe's ISTARN project demonstrates, vocational training institutions as well as other service providers are greatly expanding their emphasis on self-employment, largely through institutional networking, and are doing so without having to make substantial modifications to their existing structures and practices.
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