Alleviating poverty by engaging in microenterprise how can INGOs in vietnam help microenterprises overcome market constraints

Keywords Demand driven, INGOs, market constraints, micro business, microenterprise, poverty, supply driven, Vietnam... In order to gain an understanding of the approaches of MEPs, to ide

MICROENTERPRISE : H OW CAN INGO S IN

Vien Thi Thanh Chu

MBus (Applied Finance) Queensland University of Technology

Supervisors:

Associate Professor Josephine Barraket

Dr Belinda Luke

Submitted in fulfilment of the requirements for the degree of

Master of Business (Research) Faculty of Business Queensland University of Technology

2011

Keywords

Demand driven, INGOs, market constraints, micro business, microenterprise, poverty, supply driven, Vietnam

Abstract

Microenterprise programs (MEPs) that aim to help poor communities engage in micro businesses have contributed significantly to poverty reduction in developing countries However, a review of the literature suggests that the current approach adopted by MEPs has mainly provided services to microenterprises (MEs) based on what MEPs can supply rather than on what MEs actually need and what the market demands Therefore, MEPs’ approaches are more likely to be supply driven Yet when there are market constraints, such as high competition or low demand, this approach has been linked to the failure of MEs in their infancy The alternative is a demand driven approach, in which MEPs provide MEs with support based on what MEs need, and what markets demand However, research examining the application of this approach is limited

In order to gain an understanding of the approaches of MEPs, to identify whether these approaches are demand or supply driven, and to discover how these approaches are used

to help MEs operate under market constraints, this study examined the operation of International Non-Government Organisations (INGOs) operating in Vietnam This exploratory study involved in-depth interviews with senior executives from 10 INGOs Thematic analysis was used to analyse data collected from the in-depth interviews The results were further verified with publicly available data from the INGOs

The findings of this research indicate that the demand driven approach is dominant in most approaches of INGOs in Vietnam, and has become a key approach in helping MEs deal with market constraints Further, rather than explaining the demand and supply driven dichotomy, the findings highlight that MEPs’ approaches can be viewed in two dimensions: a participant-demand driven approach focusing on the basic needs and capabilities of the extremely poor, irrespective of market demands; and a market-demand driven approach focusing on the capabilities of poor communities, while also accommodating market demands This research provides contemporary and practical insights into the DD and SD approaches, and a better understanding of MEPs’ approaches to MED in Vietnam  

Table of Contents

Keywords i 

Abstract ii 

Table of Contents iii 

List of Figures vii 

List of Tables viii 

List of Abbreviations ix 

Statement of Original Authorship x 

Acknowledgments xi 

CHAPTER 1: INTRODUCTION 1 

1.1  INTRODUCTION 1 

1.2  BACKGROUND 2 

1.3  CONTEXT FOR THIS STUDY 5 

1.4  PURPOSE OF THE RESEARCH AND RESEARCH QUESTIONS 7 

1.5  SIGNIFICANCE 9 

1.6  THESIS OUTLINE 10 

CHAPTER 2: LITERATURE REVIEW 11 

2.1  INTRODUCTION 11 

2.2  UNDERSTANDING POVERTY 11 

2.3  MEPs IN DEVELOPING COUNTRIES 15 

2.3.1  Microenterprise program definition 16 

2.3.2  Available evidence on the performance of MEPs 16 

2.3.3  Limitations of MEPs 18 

2.3.3.1  Alleviating poverty via self-employment 18 

2.3.3.2  Simulating economic development in impoverished areas 21 

2.3.3.3  Promoting individual self-sufficiency 24 

2.3.3.4  Providing seedbed for microentrepreneurs 24 

2.3.3.5  The effectiveness of MEPs 25 

2.4  DEMAND DRIVEN VERSUS SUPPLY DRIVEN 27 

2.4.1  Understanding of demand driven and supply driven approaches 28 

2.4.2  Demand driven versus supply driven MEP approaches in practice 30 

2.5  THE INFLUENCE OF DIFFERENT SECTORS ON MEPS 32 

2.6  MICROENTERPRISE PROGRAMS IN VIETNAM 34 

2.6.1  Background about Vietnam 34 

2.6.2  Overview of MEPs in Vietnam 36 

2.7  SUMMARY 40 

CHAPTER 3: RESEARCH DESIGN 42 

3.1  INTRODUCTION 42 

3.2  RESEARCH APPROACH 42 

3.3  THE SAMPLE 46 

3.4  PREPARING THE INTERVIEW PROTOCOL 47 

3.5  DATA COLLECTION 49 

3.5.1  Conducting in-depth interviews 49 

3.5.2  Collecting data from publicly available sources 54 

3.6  DATA ANALYSIS 54 

3.7  ETHICS 55 

3.8  VALIDITY AND RELIABILITY 56 

3.9  LIMITATIONS 57 

CHAPTER 4: FINDINGS – COMMON APPROACHES TO MED 59 

4.1  INTRODUCTION 59 

4.2  INTEGRATED APPROACHES TO POVERTY ALLEVIATION 60 

4.3  UNDERSTANDING THE LOCAL COMMUNITY 62 

4.4  FORMING GROUPS FOR WORKING OR LENDING 63 

4.4.1  Required characteristics of groups 64 

4.4.2  Generating benefits from group activities 67 

4.4.3  Forming cooperatives for wider long-term benefits 70 

4.5  MICROENTERPRISE DEVELOPMENT 71 

4.5.1  Implementing MED projects in Vietnam: opportunities and costs 72 

4.5.2  Encouraging participation in MED projects: Non-monetary support 74 

4.5.3  Step-by-step approach to MED 75 

4.5.4  Connecting MEs with supply chains via output market linkages 77 

4.5.5  Value chain development 78 

4.5.6  Challenges of MED support 82 

4.5.7  Developing non-farm MEs 84 

4.6  SUMMARY OF COMMON APPROACHES 86 

CHAPTER 5: FINDINGS – IMPLEMENTING COMMON APPROACHES TO MED 87 

5.1  INTRODUCTION 87 

5.2  BENEFICIARIES OF INGOs’ PROJECTS 88 

5.2.1  Identifying participants for projects 88 

5.2.2  Working with local authorities 92 

5.3  APPROACHES TO PROVIDING CREDIT 94 

5.3.1  Not providing credit 95 

5.3.2  Providing livestock or grants 98 

5.4  APPROACHES TO PROVIDING TRAINING 99 

5.4.1  Training approaches 99 

5.4.2  Training courses and location 100 

5.4.3  Underlying training principles 101 

5.4.4  Encouraging households to participate in training 102 

5.5  APPROACHES TO PROVIDING TECHNICAL SUPPORT 104 

5.6  APPROACHES TO PROVIDING JOB OPPORTUNITIES 106 

5.6.1  Connecting households with labour market demands 106 

5.6.2  Underlying principles in providing job opportunities 107 

5.6.3  Engaging in Social Enterprises 108 

5.7  INCOME OF INGOs 111 

5.8  THE ROLE OF GOVERNMENT IN MED 112 

5.9  CULTURAL INFLUENCE ON MED 114 

5.10  SUMMARY 115 

CHAPTER 6: DISCUSSION 116 

6.1  INTRODUCTION 116 

6.2  APPROACHES TO MED 116 

6.2.1  A comprehensive approach to poverty alleviation 117 

6.2.2  Implementing different approaches 118 

6.2.3  Building bridging social capital 118 

6.2.4  Having a strong focus on agricultural activities 124 

6.2.5  Using different income sources to fund INGOs’ operations 125 

6.2.6  Providing non-monetary support 126 

6.2.7  Developing bonding social capital 127 

6.2.8  Using pilot farmers to encourage participation 130 

6.3  DEMAND DRIVENAPPROACHES IN MED 131 

6.3.1  Demand driven approach in grouping beneficiaries 131 

6.3.2  Demand driven approach in providing non-monetary capital 132 

6.3.3  Demand driven approach in providing training 133 

6.3.4  Demand driven approach in providing technical support 134 

6.3.5  Demand driven approach in providing job opportunities 135 

6.3.6  Demand driven approach in dealing with market issues 136 

6.4  SUPPLY DRIVEN APPROACHES IN MED 139 

6.4.1  Supply driven in choosing beneficiaries 139 

6.4.2  Supply driven in providing support 140 

6.5  LEARNING TO OPERATE WITHIN MARKET CONSTRAINTS 143 

6.5.1  Approaches in dealing with market constraints 143 

6.5.2  The role of the government 146 

6.5.3  The impact of culture 147 

6.6  SUMMARY 147 

CHAPTER 7: CONCLUSIONS 149 

7.1  OVERVIEW OF THE STUDY 149 

7.2  SIGNIFICANT FINDINGS 150 

7.2.1  New perspectives on MEPs’ approaches 151 

7.2.2  Emergent findings 153 

7.3  CONTRIBUTIONS FROM THE STUDY 154 

7.3.1  Contributions to the existing literature 154 

7.3.2  Contributions to practice 156 

7.4  LIMITATIONS OF THE STUDY 157 

7.5  AREAS FOR FURTHER RESEARCH 158 

REFERENCE LIST 160 

APPENDICES 170 

APPENDIX 1: SEMI-STRUCTURED INTERVIEW PROTOCOL: MICROENTERPRISE 170 

APPENDIX 2: INFORMATION FOR PARTICIPANTS 174 

APPENDIX 3: CONSENT FORM 176 

List of Figures

Figure 5.1 INGO’s use of social enterprise funding arrangements 110 

Figure 6.1 Common approaches in ME 144 

List of Tables

Table 2.1 Dimensions of a supply driven and demand driven approach 30 

Table 3.1 Topics covered in the interview protocol 48 

Table 3.2 Participant profiles 51 

Table 4.1 Issues considered before designing projects 63 

Table 4.2 Group characteristics 67 

Table 4.3 Group activities 70 

Table 4.4 Levels of INGOs’ approaches 84 

Table 5.1 Key characteristics of INGOs’ beneficiaries 91 

Table 5.2 Key roles of stakeholders 94 

Table 5.3 Key reasons for not providing credit 98 

Table 5.4 Aspects of training under a demand driven approach 104 

Table 5.5 Technical support 106 

Table 5.6 Aspects of vocational training provided by INGOs 108 

Table 5.7 Funding arrangements of INGOs 112 

Table 6.1 Dimensions of a demand driven approach 138 

Table 6.2 Dimensions of a supply driven approach 141 

Table 6.3 Dominant approach reveal in each INGO 142 

List of Abbreviations

ADB Asian Development Bank

DD Demand Driven

FFS Farmer Field School

INGOs International Non-Government Organisations

MDG Millennium Development Goals

MED Microenterprise Development

MEPs Microenterprise programs

MEs Microenterprises

SD Supply Driven

TOT Training of Trainers

VBARD Vietnam Bank for Agriculture and Rural Development

VBSP Vietnam Bank for Social Policies

VCD Value Chain Development

Statement of Original Authorship

The work contained in this thesis has not been previously submitted to meet requirements for an award at this or any other higher education institution To the best of

my knowledge and belief, the thesis contains no material previously published or written

by another person except where due reference is made

Signature: _

Date: _

Acknowledgments

I thank my supervisors, Associate Professor Josephine Barraket and Dr Belinda Luke, who always supported me in transforming my life’s passion into this thesis, and guided me through a journey during which I have gained great knowledge and experience in undertaking research generally, and in my chosen field specifically With love I acknowledge the support of my partner Mike Bartlett, who always gave

me a hand when I felt down, and supported me throughout my research journey Also, love and thanks to my big family, in particular my sisters Luc Thi Thanh Ha and Luc Thi Kim Tuyen, who always encouraged me to follow my passion

I would like to thank the individual interviewees, who gave their time and the benefit

of their experience to this study

CHAPTER 1: INTRODUCTION

1.1 INTRODUCTION

Poverty is a growing problem and became a worldwide focus after the formulation of the Millennium Development Goals (MDGs) The goals were agreed to in 2000 by

189 world leaders to help more than 1 billion people get out of extreme poverty by

2015 (Endpoverty 2015, 2011) Amongst the different approaches adopted to achieve the MDGs, microenterprise programs (MEPs) are one type of intervention These programs provide standardised training, technical support and credit to poor communities via local agencies, and have been recognised as an efficient way to help people living in poverty engage in micro businesses (Green, Kirkpatrick, & Murinde, 2006; Vargas, 2000) This support enhances the growth of microenterprises (MEs), presenting a source of employment and income generation for poor communities and presenting a way out of poverty, particularly in developing countries (Choudhury, Hossain, & Solaiman, 2008; Kamal, 2011; Strier, 2010)

While MEPs are recognised as a valuable approach to poverty alleviation, they give rise to a number of issues One of the key concerns regarding MEPs cited in the research literature is that they are often supply driven (SD) (that is, based on what MEPs can provide), rather than demand driven (DD) (that is, based on what poor communities actually need and what the market demands) (Hoque, 2004; Moyo, 2003) This suggests that MEPs’ support is often not suitable for poor communities, and that MEs supply to markets what they have available, rather than what markets require Another concern relates to dealing with market constraints which act to

prevent MEs from surviving and growing These constraints are one of the most challenging aspects of MEs and the available research suggests that this challenge has not yet been addressed effectively by MEPs (Mead & Liedholm, 1998; Moyo, 2003; Shaw, 2004) The DD approach has been examined conceptually by researchers (Goldmark, 2001; Sinclair, 1993; Tendler & Amorim, 1996), but there has been limited empirical work done and findings are quite dated

Accordingly, this study aims to gain an understanding of the common approaches of International Non-Government Organisations (INGOs) in helping people living in poverty to engage in MEs, with a specific focus on MEPs in Vietnam The existing literature on approaches in poverty reduction via MED in developing countries, and the characteristics of DD and SD approaches were reviewed to develop a framework for analysis This framework was then used to examine the practices of NGOs focusing on MED in poverty alleviation Semi-structured in-depth interviews were conducted with senior executives of 10 NGOs The findings from interviews were verified with data collected from publicly available sources The deductive and inductive processes of comparing and reflecting on the findings of this study within the scope of its purpose and research questions uncovered findings that refine existing understandings of SD or DD The study seeks to contribute to the contemporary understanding of successful approaches of MEPs in poverty alleviation via MED, and to identify issues for further research

1.2 BACKGROUND

As noted above, MED plays a key role in poverty reduction programs in a number of regions in the world, yet challenges remain with respect to making MEs sustainable

and operating MEPs effectively MEPs claim success in stimulating income sources for poor communities via self-employment, developing the economy in poor areas, building individual self-sufficiency, and creating the conditions needed for people living in poverty to start new businesses or expand existing businesses (Green et al., 2006; Jurik, 2005; Midgley, 2008; Strier, 2010) However, researchers note that the benefits of MEPs have not yet reached the poorest of the poor (Jones et al., 2004; Midgley, 2008; Mosley & Hulme, 1998; Nawaz, 2010) Credit is mainly provided to the less poor, yet credit is not the only major constraint for poor communities (Aworuwa, 2004; Ghate, Ballon, & Manalo, 1996; Tinker, 2000) Further, training delivered by MEPs to poor communities is provided at a high cost, but is often not useful for MEs as it is not based on the poor communities’ actual needs (Servon & Bates, 1998; Sievers & Vandenberg, 2007) Importantly, as people living in poverty commonly have low skill levels and capabilities, products from MEs are often of low quality, and are produced with insufficient quantities of stock to be viable (Hoque, 2004) As a result, in the highly competitive markets in which they usually operate (Karnani, 2009) MEs suffer from a high failure rate during their infancy (McPherson, 1996; Midgley, 2008) Poor people whose micro businesses fail are likely to face livelihood challenges that are more severe than those faced by the non-poor when their businesses fail (Midgley, 2008) Therefore, improving skills and capabilities, and helping MEs deal with market issues are still challenging problems for MEPs under a traditional SD approach

Regarding the available research on the DD approach, researchers (Goldmark, 2001; Sinclair, 1993; Tendler & Amorim, 1996) have reported on practical cases of demand driven MEPs Under this approach, MEPs mainly help MEs deal with

market issues and provide support based on MEs’ actual needs In terms of dealing with market issues, MEPs group MEs into activity categories and work directly with reliable customers via product development and marketing, to provide stable markets for MEs They train people living in poverty in production techniques based on MEs’ activities at the MEs’ premises They oversee quality control to fulfill customer requirements, and reject defective goods at the MEs’ cost (Goldmark, 2001; Sinclair, 1993; Tendler & Amorim, 1996) Under the DD approach, researchers (Ghate et al., 1996; Tendler & Amorim, 1996) also suggest that MEPs can operate sustainably once they generate income from services provided, rather than fully relying on donated funds Ultimately, this helps to ensure that MEPs provide services that fit the needs and capacities of poor communities, so that the micro businesses of people living in poverty can survive and grow

Sievers and Vandenberg (2007) argue that every MEP should adopt a demand driven approach, as it involves providing training and technical support based on the practical needs of MEs charging reasonable fees to build capacity and improve production capabilities In addition, this approach provides inter-firm cooperation between small firm suppliers and larger firm customers via intermediate parties – either support agencies or MEPs (Tendler & Amorim, 1996) Additionally, this approach enhances MEs’ bargaining power not only in purchasing raw materials but also in sales transactions, and provides access to new markets It potentially improves productivity, resulting in efficient use of resources and provides better quality products to the community (Goldmark, 2001; Hoque, 2004) Ultimately, it provides poor communities with opportunities to generate sustainable incomes This leads to an increase in the sustainability of MEPs through ongoing support for

successful operations in poverty alleviation (Sievers & Vandenberg, 2007) While theoretical support for a demand driven approach has grown, little examination of this approach has been undertaken in practice (Goldmark, 2001) Accordingly, this study considers the presence and nature of the demand driven approach through an examination of International NGOs (INGOs) operating MEPs in Vietnam Section 1.3 describes the context for this research, and how the context chosen helped the researcher in gaining an understanding of the different approaches of MEPs

1.3 CONTEXT FOR THIS STUDY

This research investigates the role played by INGOs in alleviating poverty in Vietnam by examining INGOs’ approaches It does so in order to gain an understanding of how the demand and supply driven approaches are being used in practice Vietnam is a low-income developing country, yet it has achieved an impressive record in poverty reduction (AusAID, 2010) and macroeconomic stability

by any measure since the economic renovation (Doi Moi) in 1986 (ADB, 2005; World Bank, 2007) Doi Moi reforms shifted Vietnam’s economic priority from

heavy industry to three major economic programs: production of food, production of consumer goods, and production of exports It encouraged foreign and domestic private investment while reducing government participation in business, resulting in

a dramatically improved business climate (AusAID, 2010; CIA, 2012; World Bank, 2007) Agriculture production has increased significantly with exported agricultural products growing by 16.8% per year (Powell, Swartling, & Ha, 2011) The economic growth has resulted in significant increases in domestic consumption The retail sales index, an indicator of household expenditure, rose by 20.5 per cent during 2005 (World Bank, 2007), and is expected to increase around 24% during 2011–2012

(RNCOS Industry Research Solutions, 2011, Vietnam Business News, 2011) This increase has supported accelerated international integration, market liberalisation, private sector job creation, and better livelihoods (AusAID, 2010; World Bank, 2007), resulting in poverty reduction The poverty rate fell from 58 per cent of the population in 1993 to 14.7 per cent in 2007 (AusAID, 2010) and reached 10.6 per cent in 2010 (NationMaster, 2011) This remarkable record is in part attributable to the support provided by INGOs, which disbursed more than US$800 million for the period from 1993 to 2003 (Khadka, Price-Thomas, Khanna, & Hughes, 2004) Furthermore, foreign donors pledged nearly eight billion US dollars in new development assistance for 2011 (CIA, 2012) Funds donated by foreign governments are spent more on business development programs at the province level with the assistance of different NGOs and agencies, Local authorities also assist with implementation and improvement of laws and regulations to provide useful and transparent information, and clearer legal frameworks in order to develop the private sector as a foundation for the development of household businesses and microenterprises (ADB, 2005) The level of partnership between the Government and the donor community has greatly improved (AusAID, 2002) However, the majority of projects (69%) are still concentrated in urban areas Less than 10 per cent

of all projects have been located in the most poor and remote areas (ADB, 2005), and rural non-farm businesses and microenterprises are often overlooked

INGOs in Vietnam focus mainly on poverty reduction, increasingly directing their assistance to remote areas which are the homes of the poorest and most vulnerable communities Other areas of focus include improving social equality, decreasing vulnerability, and increasing participation – “the voices” of poor communities

(Khadka et al., 2004) These objectives provide a good foundation to gain an understanding of INGOs’ activities in poverty reduction in Vietnam, and in particular the approaches adopted for MEPs

1.4 PURPOSE OF THE RESEARCH AND RESEARCH QUESTIONS

This study aims to gain an understanding of the common approaches of INGOs in Vietnam in helping poor communities engage in business under market constraints This is particularly important, given that MEPs often help people living in poverty start up small businesses, yet many of the businesses do not survive in competitive markets This understanding will then be used to examine whether these approaches are supply driven (the traditional approach of MEPs) or demand driven, or a mix of both The findings will contribute to an understanding of whether the demand driven approach has been used to create sustainable MEs and if so, how this has been done This study focuses solely on INGOs because the local NGOs in Vietnam are governed by different legal regulations and are subject to political influences (Aschhoff, 2008; Bach, 2001; Lux & Straussman, 2004; Ngo, 2007) which may affect their activities, making comparisons with INGOs difficult

Given the lack of available information on the approaches of INGOs operating MEPs

in Vietnam, and the lack of practical cases examined involving a demand driven approach, a number of research questions have been formed to gain a practical understanding of MEP approaches The research questions also aim at providing an insight into whether DD or SD approaches emerge from INGOs’ operations, and how these approaches help MEs to operate within market constraints The research questions developed for this study are detailed below:

1 What approaches do INGOs in Vietnam use in helping poor communities

to engage in MEs?

Answering this question is designed to provide a broad understanding of different forms of assistance provided by INGOs to help people living in poverty engage in business

2a How is the demand driven approach being used?

Answering this question will help to identify whether the demand driven approach is commonly used, how INGOs are using it, and whether this approach helps people living in poverty engage in business which survive and grow sustainably

2b How is the supply driven approach being used?

Answering this question will help to identify reasons why a supply driven approach has been used rather than a demand driven approach Understanding both demand and supply driven approaches will provide a more comprehensive understanding of INGOs’ operations in Vietnam, and the benefits and limitations of each approach

3 How do these approaches help MEs grow in areas where there are

market constraints?

Answering this question will help to investigate INGOs’ focus, which has assisted MEs to overcome market constraints such as high competition, and low or no demand Answering this question will aid in understanding whether INGOs facilitate sustainable growth for MEs or are merely providers of donated services or funds with temporary benefits In addition, issues relating to this question may help to reveal any new approaches adopted by INGOs in Vietnam

1.5 SIGNIFICANCE

The available literature suggests that MEPs which adopt demand driven approaches are more effective than supply driven approaches, but that most MEPs are supply driven However, empirical evidence to support this suggestion is limited and outdated, and documented knowledge of MEP developments in Vietnam is scarce Accordingly, this research contributes to both the existing literature on the role of MEPs in poverty alleviation, and to the practical approaches used by MEPs The outcomes of this study will contribute to an understanding of the support provided by INGOs in alleviating poverty in Vietnam, to an appreciation of how the demand and supply driven approaches are being used, and to an understanding of how these approaches can help MEs grow in areas where there are market constraints These outcomes will provide updated findings on MED, based on practical cases (INGOs operating in Vietnam) for the implementation of DD and SD approaches in MEPs Further studies can be undertaken based on the knowledge acquired from this study

to raise the level of understanding of demand and supply driven approaches The understanding gained from such research could be used to develop a suitable model

to assist MEPs or INGOs to achieve more sustainable growth for MEs

Regarding the contributions to practice, this study will provide a detailed account of the practice of MEP approaches in alleviating poverty in Vietnam Given that more than 1.1 billion of the world’s population live on less than one US dollar a day, and poverty has continued to increase due to natural disasters in recent times (for example earthquakes in New Zealand, earthquakes and resulting tsunami in Japan, floods in Australia) fundraising for MED will face challenges in the future Hence there is a need for research that provides an understanding of what underlies cases of

success in poverty reduction (such as Vietnam) Based on findings and insights from this study, an improved understanding of the factors contributing to success can be applied in MEPs in order to better help MEs survive and grow sustainably, and to help INGOs operate more effectively Donors may provide more support to INGOs that adopt more efficient approaches in poverty alleviation Ultimately, poor communities will hopefully benefit from successful MEPs to progress out of poverty

by the literature Chapter 4 presents the findings (through deductive and inductive analysis) mainly related to the first research question on the common approaches of INGOs Chapter 5 discusses the findings mainly related to the remaining three research questions on the DD and SD approaches to helping MEs deal with market challenges Chapter 6 discusses the findings, and how these findings address the research questions Chapter 7 presents the conclusions of the study, highlighting significant findings, literature gaps, limitations of the study, and areas for further related research

CHAPTER 2: LITERATURE REVIEW

2.1 INTRODUCTION

Chapter 1 briefly introduced the background, research setting, and significance of this study This chapter reviews the existing literature on MED in developing countries and proposes a framework for analysis on which this study builds MED is widely accepted as an effective and sustainable way to fight poverty In order to understand the reason for this perspective, Section 2.2 outlines the existing literature

on poverty, its roots, and approaches to poverty alleviation including MED As MED

is not the only alternative to fight poverty, Section 2.3 reviews the successes and limitations of MEPs in developing countries As noted in Chapter 1, the literature argues that the current approach of MEPs is more likely to be SD than DD Section 2.4 examines the DD and SD approaches to provide a foundation for investigating the approach of INGOs in Vietnam Alleviating poverty by MED cannot be done by MEPs alone Hence, Section 2.5 reviews the role of coordinated action involving three sectors, government, private, and civil society, in contributing to the successes

of MED programs As the theoretical framework of this study is developed by investigating INGOs’ MED operations in Vietnam, Section 2.6 provides a background to Vietnam and MEPs in Vietnam

2.2 UNDERSTANDING POVERTY

Microenterprise programs are implemented as poverty alleviation strategies, so understanding the nature of poverty provides a foundation to investigate approaches

significantly over the last 15 years, shifting from poverty understood and measured

by direct outcomes of “hunger or under nutrition”, to the causes of those outcomes, such as “lack of income, assets, civil and political rights, voice, and rule of law and services, including safety nets” (Bass et al., 2005, p.11) Focusing more on the direct causes of poverty, Townsend (1979) defines poverty as the experience of lacking resources to obtain basic needs, participation in basic social activities and access to amenities of life in a particular society Rather than focusing on a lack of material resources, Sen (1986, p 163) looks at the roots of poverty in order to identify its causes, in which Sen views poverty as limited access to basic needs, and considers poverty in terms of dignity versus “living without shame” Similarly, Ridge and Wright (2008, p 1) consider poverty to be inextricably linked to inequality of access

to “resources, opportunities, assets, income, and wealth”; and being unable to afford better living conditions which are normal for other members of a particular society Therefore, Ridge and Wright (2008) argue that poverty is not only about material, social and economic resources, but also about social relationships, social possession, and the control and exercise of power When these resources are missing, they cause

a lack of confidence and a fragility of self-identity and social identity These are seen

as the roots of poverty (Ridge & Wright, 2008) However, the perception of what constitutes poverty can be different in different social circumstances (Sen, 1986) For example it is different in developed and developing countries This needs to be understood when implementing anti-poverty programs in different regions

Poverty is a complex problem, so a better understanding of the factors that cause poverty is important in poverty reduction From this viewpoint, Bass et al (2005, p.11) identify eight different aspects of poverty:

- inadequate and often unstable income;

- inadequate, unstable or risky assets;

- poor quality, often insecure, hazardous and overcrowded housing;

- inadequate provision of public infrastructure;

- inadequate provision of basic services;

- limited or no safety net to mitigate risks;

- inadequate protection of poorer groups’ rights through the operation of the law;

- poorer groups’ lack of a voice and their powerlessness within political systems and bureaucratic structure

In identifying these eight aspects, Bass et al (2005) argue that sustainable poverty alleviation should be integrated with environmental management (e.g of extreme weather events); and a good governance system which not only involves good performance of government institutions (political, bureaucratic, or legislative), but also a good relationship between these government institutions and civil society (citizens, community organisations, NGOs), as well as private enterprises Such relationships provide people with improved access to public services and opportunities in society, ultimately addressing the causes of poverty

As can be seen from the first three aspects of poverty identified by Bass et al (2005), inadequate and unstable income is just one of the major causes of poverty Therefore, looking at poverty in terms of income alone is inadequate (Cabraal et al., 2006; Lohmer, 2008) Rather, income should be considered in terms of whether it provides

a sufficient and sustainable source of finance for poor communities to accumulate savings and build assets Lohmer (2008, p 37) comments that an asset-based

approach to poverty alleviation helps people living in poverty have a better life and

be able to deal with “unexpected burdens”, so assets resulting from an “accumulation and investment of savings” are central to poverty reduction Building assets helps poor communities to have higher wealth, education, economic, and civic involvement levels, along with better health All these things assist household stability (Lombe & Sherraden, 2005; Paxton, 2001, as cited in Cabraal et al., 2006) Cabraal et al (2006) also argue that assets provide a sense of security for households, particularly those facing financial hardship, and more importantly they provide choices and opportunities These outcomes cannot be achieved by welfare or subsidies alone Sherraden (2002, as cited in Cabraal et al., 2006) indicates that implementing asset-based policies particularly benefits the future of today’s children Therefore, in the context of poverty related policies, asset-based policies create sustainable poverty reduction Furthermore, Lohmer (2008) comments that people living in poverty, who often have low education and high vulnerability, need support from institutions to help them generate income and encourage savings Savings tools and other initiatives, such as financial literacy, accessible banking services, and microenterprise support need to be encompassed in poverty alleviation programs for long-term solutions to poverty Effectively engaging with these mechanisms will help microenterprise and microfinance programs to better succeed in poverty reduction

The existing literature indicates that poverty is a multi-faceted condition and that poverty alleviation is therefore a complex process Building assets can be an important approach, yet this alone cannot overcome challenges such as unexpected adversity due to extreme weather event It also requires a good governance system

with the participation of different sectors of society In this thesis, building assets is considered as a key component of poverty reduction, which needs to be combined with governance systems which ultimately support asset-building programs for success in poverty alleviation Eberly (2008) argues that solving problems caused by poverty is far beyond the capacity of any government or combination of governments Poverty alleviation cannot be achieved without engaging in business,

or increasing income (Karnani, 2007) Building assets is a result of accumulation and investment of savings from income-earning activities Income can be generated by creating small businesses, self-employment or employment in existing businesses, and it can be supported by asset-building programs designed to develop microenterprises and ultimately savings Microenterprise development has been recognised as one of the most effective ways to reduce poverty, and allows poor communities to be in charge of their own futures (Eberly, 2008) Accordingly, given the increasing popularity of MEPs in developing countries, it is important to understand whether these programs are effective in helping people living in poverty engage in MEs with long term success This issue is examined in the next section

2.3 MEPs IN DEVELOPING COUNTRIES

As discussed in Section 2.2, MEPs are considered a useful way to help people living

in poverty build assets by engaging in MEs This section reviews the literature on MEPs to understand the current applications of MEPs in developing countries It examines the successes and limitations of MEPs, and then identifies gaps in the literature on which this research will focus

2.3.1 Microenterprise program definition

In most research on MEPs (Green et al., 2006; Jurik, 2005; Mead & Liedholm, 1998; Midgley, 2008), a microenterprise is commonly defined as a very small business with a self-employed owner, or one with less than five employees Such businesses typically have a very small capital investment, commonly provided by MEPs or microfinance programs MEs are mainly small vendors, traders or small manufacturers (Ghate et al., 1996; Mead & Liedholm, 1998; Shaw, 2004) Developing MEs has been viewed as a way out of poverty, as people living in poverty can generate additional income by engaging in business activities As a result, they can accumulate savings as a way of building assets and accumulating wealth This can enable poor people to access increased levels of education, economic and civic involvement, and better health services Improvements in these areas increase household stability (Cabraal et al., 2006; Lohmer, 2008; Tinker, 2000) MEPs are run mainly by non-profit or non-government organisations, which typically offer credit, technical support and standardised training (Ghate et al., 1996; Jurik, 2005; Bhatt, 1997; Tendler & Amorim, 1996; Vargas, 2000) These programs help MEs in networking and organising within the community for the purposes of peer group lending, providing credit to start micro businesses, basic business management skills, and technical support They also assist in expanding businesses

by helping MEs prepare documents to access additional loans (Jurik, 2005; Bhatt, 1997; Vargas, 2000)

2.3.2 Available evidence on the performance of MEPs

The success of MEPs is thought to be because they are market-based rather than purely charitable or welfare programs, and because they work towards the following

common goals: (1) alleviating poverty via self-employment, (2) stimulating economic development in impoverished areas, (3) promoting individual self-sufficiency, and (4) providing seedbed funding for microentrepreneurs (Green et al., 2006; Jurik, 2005; Midgley, 2008; Strier, 2010) By providing credit, MEPs seek to help MEs become less dependent on money lenders charging high interest rates With the technical support and training provided by MEPs, poor communities are trained in business management skills and techniques, which assists them to deal with business issues and avoid failure (Hoque, 2004; Jurik, 2005; Midgley, 2008) Undertaking business activities also provides beneficiaries, often women, with their own incomes, which helps them be more independent of men This is important as the extremely poor are mainly women with a marginalised voice in their communities (Strier, 2010) The training and technical support provided by MEPs helps MEs increase productivity and produce better quality products (Mead & Liedholm, 1998; Tendler & Amorim, 1996) McPherson (1992, as cited in Mead & Liedholm, 1998), in a study about the growth and survival of MEs in Southern Africa, found that MEs that receive training expand faster than those without such training Furthermore, Bhatt (1997) comments that, besides providing additional income from business activities, forming lending groups provides group members with a chance to share knowledge or social experiences in order to help group members to make personal or business decisions, to explore new markets, and to save costs in purchasing and delivery As a result, lending groups help people living

in poverty develop individual self-sufficiency The growth of MEs creates employment, especially in rural areas, and enhances and provides markets in those areas with suitable, cheap products for low-income consumers and producers (Weijland, 1999)

2.3.3 Limitations of MEPs

MEPs have been found to have the potential to increase social and economic benefits for poor communities However, it is difficult to have an accurate sense of that potential as it is not known how many people are receiving those benefits, under what conditions, and at what cost (Jurik, 2005) MEPs’ potential or success may not

be realised in some areas, due to the absence of some essential conditions, and because of cost-benefit considerations (Jurik, 2005) Hence, the four common goals

of MEPs as discussed above should be evaluated with respect to these considerations Each of these areas of criticism are considered below

2.3.3.1 Alleviating poverty via self-employment

Alleviating poverty via self-employment is the primary goal of all MEPs They are based on the belief that attaining self-employment by engaging in MEs will help people living in poverty earn extra income and find a way out of poverty However, some researchers (Gobezie & Garber, 2007; Jones et al., 2004; Matin & Hulme, 2003; Midgley, 2008; Mosley & Hulme, 1998; Nawaz, 2010; Vargas, 2000) suggest that the benefits from most MEPs do not generally reach the poorest of the poor1, with the beneficiaries usually being the upper or middle poor This issue is more apparent in remote rural areas, as MEPs often choose to work in areas that are accessible (both geographically and socially), or with poor households that have land, rather than with the landless poor (Helmsing & Knorringa, 2009; Surender &

1

Defined as those living below US $1 per day at purchasing power parity (PPP) rates

Niekerk, 2008) Thus, the poorest of the poor located in remote regions, or without basic resources such as land, are often overlooked

While one of the key supports provided by MEPs is credit, credit alone is unlikely to help poor communities progress out of poverty (Ghate et al., 1996) MEPs’ credit helps people living in poverty avoid the pressure of credit risk from formal lending institutions, yet credit is often available either from friends or relatives who offer funds interest free (Aworuwa, 2004; Ghate et al., 1996; Tinker, 2000) This view is shared by Hoque (2004, p 32) in his research on credit provided by NGOs in Bangladesh, in which he found that for MEs which receive credit and training alone,

“a large number of MEs do not survive for long and those who survive do not grow beyond the subsistence level” Servon and Bates (1998, p 427) argue that, “a small loan cannot remove the main barrier to successful small business creation, and small amounts of financial capital cannot overcome human-capital deficiencies” This may explain why many MEPs report that an increasing number of MEs is being supported, yet the majority of MEPs’ loan funds are not granted (Epstein & Yuthas, 2010; Servon & Bates, 1998) While poor communities need credit to undertake MEs (large or small), MEPs often grant credit to MEs that are willing to engage in business, have a greater likelihood of success, and have a low credit risk, regardless

of whether the individual recipients are poor in a general sense, or among the poorest

of the poor As such, Schmidt and Zeitinger (1996) argue that MEPs often distribute credit too broadly, rather than targeting the poorest of the poor

Standardised training is provided by MEPs to MEs to enhance their business management skills before granting credit However, several studies (Servon & Bates,

1998; Sievers & Vandenberg, 2007) have found that many MEs report that standardised training is not useful as it is unsuitable for MEs’ individual needs Attending training means that MEs face opportunity costs for their time, as there is

no income or profit during training time As a result, MEs are often not motivated to attend the training provided (Servon & Bates, 1998; Sievers & Vandenberg, 2007)

Another concern relating to MEPs is the uncertain outcomes of MEs While MEPs support people living in poverty to engage in micro business, this engagement may lead poor communities to a worse livelihood and uncertain future if their business fails Thus, financial success and sustainable growth of MEs is crucial Yet, researchers (McPherson, 1996; Midgley, 2008) indicate that the failure rate of MEs

is quite high, with many dying in their infancy Aworuwa (2004) comments that four out of five new MEs fail in their first year A large percentage of MEs fail within three years of commencing operations (Jurik, 2005; Mead & Liedholm, 1998) Mead and Liedholm (1998) surveyed MEs’ life cycles from 1990 to 1995, covering 28,000 enterprises in six countries in Africa and Caribbean: the Dominican Republic, Botswana, Kenya, Malawi, Swaziland, and Zimbabwe They found that 50 per cent

of MEs close during the first three years of operation, and the failure rate of retail trading MEs is 30 per cent higher than those in manufacturing McPherson (1992), via a survey of the growth and survival of MEs in Swaziland and Zimbawe in 1991, reports that 82 per cent of small firms in Swaziland close by their fourth year, while the rate is 64 per cent in Zimbabwe Meanwhile, in related research, Parker and Dondo (1991, as cited in Sam, 2007) report that 86 per cent of small firms in Kenya fail in their fifth year Even though the data from these studies dates back to the early

1990s, these findings are consistent with more recent research, which reflects the low survival rate of MEs during their infancy (Sam, 2007)

The poorest are often more risk averse and more likely to default on credit provided (Servon & Bates, 1998; Midgley, 2008) Further, when a default occurs, poor communities are more likely to experience a livelihood crisis than the non-poor (Midgley, 2008) They bear the default debt while losing any subsidies, such as government welfare for people living in poverty (Strier, 2010) This explains why there is a low percentage of poor communities escaping poverty even though they have received support from MEPs Shaw (2004) for example, via a questionnaire of

253 MEs, together with interviews and focus group discussions with two NGOs in Sri Lanka, found that only 25 per cent of the poor participants progressed above the poverty line after joining the program Another 18 per cent of participants who were above the poverty line fell into poverty during their participation in an MEP Researchers (McPherson, 1996; Vargas, 2000) argue that this problem is more severe

in rural areas where most of the poorest of the poor live Thus, the survival rate and sustainable growth for MEs in rural areas are far less than those in urban areas, indicating that the goal of alleviating poverty in these areas is a significantly larger challenge This raises questions about approaches that assist MEs to survive and grow

2.3.3.2  Simulating economic development in impoverished areas

By stimulating MED, MEPs aim to develop the local economy of poorer areas to provide sustainable poverty reduction However, challenges also exist with respect to different market conditions In low demand or saturated markets, especially in rural

areas, setting up new MEs or expanding MEs to stimulate economic development may not be feasible In those markets, even though poor communities are provided credit, training and technical support, their business may still struggle to survive Various studies show that the most severe problems for MEs are related to marketing their products and lack of demand (Mead & Liedholm, 1998; Moyo, 2003; Shaw, 2004) Mead and Liedholm (1998) argue that nearly 50 per cent of ME closures occur because of a lack of demand and working capital shortages Other reasons are personal illness or retirement, moving to better options, or “the government force them to close” (Mead & Liedholm, 1998, p 65) When the market is saturated, the growth of MEs will lead to overcrowded markets and waste scarce resources (Shaw, 2004; Weijland, 1999) Owners of MEs commonly lack knowledge, skills and literacy, and are poorly educated This results in the production of homogenous products, low competitive ability, and MEs being unproductive businesses (Hoque, 2004) Therefore, the market in which these MEs operate are highly competitive, as there is no demand for more technologically advanced products and entry barriers for new MEs are low (Karnani, 2009) Further, Surender and Niekerk (2008), based on research involving 12 income generation projects in South Africa, suggest that MEs face extreme difficulties in competing with larger producers, with respect to both quality and price This is because customers are often suspicious of the quality of MEs’ products, despite the very low profit margins of MEs When the market is stagnant, these conditions may limits an ME’s ability to expand or they may cause the failure of MEs, as low profits (or no profits at all) cannot cover loan interest costs and repayments, or (Hoque, 2004; Karnani, 2009; Shaw, 2004) This problem becomes more severe for MEs located in rural areas with infrastructure constraints (Shaw, 2004; Weijland, 1999), and in developing countries plagued by unstable

politics or policies, high corruption, and deficient infrastructure systems These issues contribute to the failure of business developments in general, and MEs are no exception (Aworuwa, 2004)

Based on the evidence from the literature reviewed above, it appears that current support from MEPs is often not sufficient to promote economic development in impoverished areas when there are market constraints Hoque (2004) recommends that MEPs should provide guidance or advice to MEs on their products such as design, packaging and quality to improve their competitiveness, and on how to market their products Such support should be provided free of charge or in the form

of grants or subsidies, and can effectively increase income for people living in poverty by helping them produce better quality products, thereby increasing revenue and profits (Ghate et al., 1996; Tinker, 2000) Furthermore, researchers (Ghate et al., 1996; Jones, 2000) also indicate that this support should be combined with business incubators, market development and shared networks, so that MEs can fulfil the requirements which enable them to compete in larger markets in terms of quality, and services This would increase the survival rate of MEs and provide opportunities for growth (Ghate et al., 1996; Weijland, 1999) Weijland (1999), based on a survey

of 4400 microenterprise clusters in Indonesia, argues that MEs in remote areas can still survive and grow if there is cooperation between buyers, suppliers and MEPs in the development of trade networks and in solving marketing and technology problems Cooperation in these areas helps MEs reduce transport costs, decrease the costs of purchasing inputs and marketing outputs, and provides access to technical assistance and credit MEs can then focus on product development and improve their productivity (Tendler & Amorim, 1996)

2.3.3.3 Promoting individual self-sufficiency

Engaging in micro business provides a way of helping poor communities earn extra income as a foundation for building assets, integrating with society, and fostering individual self-sufficiency However, while credit is provided to people living in poverty to set up a ME, it is initially used for daily survival (as poor communities struggle for daily income), rather than for commercial needs and profit Hence, it is important that funds allocated are useful for the intended purpose Yet, it is also important that poor communities have basic resources (e.g food) in a stable environment, so that they can focus on developing business activities through MEs Ultimately, MEs can help people living in poverty earn a stable income and accumulate savings as a base for sustainable growth; a way for building assets (Jurik, 2005) Yet, this growth should be the “simultaneous achievement of economic, social, and ecological development”, such that poor communities have enduring financial and social resources (e.g equity and efficiency) in order to enjoy long-term benefits (United Nations, as cited in Vargas, 2000, p 12) Therefore, MEPs need to support people living in poverty in the early stages by assisting them to access basic resources, so that MEs can develop and grow to become financially sustainable

2.3.3.4 Providing seedbed for microentrepreneurs

When MEs operate well, they may provide “a good training ground” for microentrepreneurs who are likely to develop bigger businesses in the future (Moyo,

2003, p 167) Karnani (2009) refers to (micro) entrepreneurs as those who have the vision and creativity to convert new ideas into successful innovations or businesses, generating more income Nonetheless, poor communities are often illiterate, with a lack of business skills which influences their ability to produce quality products or

services, and limits their ability to progress from ME to a microentrepreneur (Karnani, 2009; Moyo, 2003) They are reluctant “to psychologically commit themselves to the project of making as much money as they can” (Banerjee & Duflo,

2006 as cited in Karnani, 2009, p 81) Furthermore, most poor people, in particular those living in rural areas, are self-employed not by choice, but because they do not satisfy job requirements in formal industries where they could otherwise have stable jobs paying reasonable wages (Karnani, 2009) Shaw (2004) concludes that only five per cent of poor communities in rural areas voluntarily choose entrepreneurial activities MEs often have inconsistent production and lack an understanding of the importance of quality products, which causes many complaints from customers, who often refuse shipment, and goods often require rework This weakness results in wasted resources (Prasad & Tata, 2009), and limits MEs’ expansion opportunities when bidding for larger contracts (Tendler & Amorim, 1996) In addition, MEs often have low capabilities or are less likely to change to integrate new market requirements such as improved packaging, and they are less likely to work with suppliers to improve their quality (Prasad & Tata, 2009) This may be attributable to lack of information, skills and market orientation, and raises the question of how the current approaches of MEPs might overcome these market constraints in order to help MEs survive and expand as microentrepreneurs

2.3.3.5 The effectiveness of MEPs

Most MEPs support MEs rather than work with them directly Therefore, if MEPs are not pressured by performance measures such as cost-effectiveness, they may not operate to their full potential Yet evidence from the literature suggests that support alone is not sufficient Some researchers find MEP support is most effective when

combined with the pressure of responsibility, as this facilitates improvement in MEs’ skills, networks and expansion, rather than simply growing in the number of MEs supported (Schmidt & Zeitinger, 1996) This concern is reinforced by other researchers (Matin & Hulme, 2003; Surender & Niekerk, 2008), who refer to the importance of factors beyond breadth (the number of MEs supported), such as depth (the extent to which the poorest of the poor are included in MEPs), and financial accountability (Hackett, 2009; Alam & Ahmed, 2010; Carroll & Stater, 2008) Thus,

it has been argued MEPs should be financially accountable for the funds used in their operations, including their own revenue streams and the profit they generate from charging project participants a nominal and affordable fee for services provided; or that they should be accountable for generating social profit (funded by donors or welfare) by maximising their reach into the poor population (Bhatt, 1997; Jurik, 2005; Moyo, 2003)

MEPs operate with high overhead costs (Jones, 2000) as they require high quality trainers However, the training provided is often deficient because MEPs typically provide standardised training which may be not useful for MEs Therefore, researchers (Hoque, 2004; Tendler & Amorim, 1996) argue that MEPs should provide MEs with both credit and tailored development services They believe MEPs should focus on local expansion opportunities or sustainable growth, rather than focus solely on growth in the number of MEs they support

Furthermore, when poor communities want to expand their micro businesses, they often have little chance of working with large firms, or connecting to other markets Ryan (2005 as cited in Green et al., 2006) indicates that when an economy has grown

and industrialised, MEs seem to co-exist with large firms However, there is no intermediate party to help them link and co-develop, and MEPs do not often support MEs to connect with larger firms Therefore, Jurik (2005) argues that MEPs should act as an intermediate party between MEs and state or private sector customers, and that they should understand MEs’ needs and be less bureaucratic Mead and Liedholm (1998) argue that MEPs should have a deep understanding of business growth opportunities so that they can advise MEs about appropriate market orientations and help them implement those orientations This is because finding buyers and suppliers is crucial for MEs to expand and survive The support they get cannot only be credit, training, and technique; it must include product development and marketing (Ghate et al., 1996) The support should be a combination of advice and support about market requirements, available capital, and business methods such

as quality management, which can increase the competitiveness of MEs (Easterly, as cited in Prasad & Tata, 2009) Effectively addressing these needs will help MEPs provide better assistance to MEs The approach suggested in the literature involves a

DD approach, the characteristics of which are discussed in more detail in the next section This approach will be used as a basis to investigate different types of support provided by INGOs in Vietnam, and their roles in helping MEs deal with market issues

2.4 DEMAND DRIVEN VERSUS SUPPLY DRIVEN

This study investigates the approaches of INGOs in Vietnam to identify whether these approaches are demand or supply driven, and ultimately to understand how either approach works effectively in MED This section reviews the literature on these approaches and how they are applied in developing countries

2.4.1 Understanding of demand driven and supply driven approaches

The literature suggests that most MEPs are more supply-driven Under this approach, MEPs provide standardised services, credit, business management training, and technical assistance (Tender & Amorim, 1996) based on what MEPs perceive as appropriate, rather than on market needs or the actual needs of MEs (Amha & Ageba, 2006) MEPs generally try to assist as many microenterprises as possible, in

as many sectors as possible (Tender & Amorim, 1996), and sometimes tend towards

“production of lower quality products using traditional skills and lack a focus on the market” (Esim, 2001, p 8) Poor communities are encouraged to take credit by support programs, but often use this credit for consumption purposes rather than for investment opportunities (Jain, 2009) A key concern is that these programs require poor communities to fit their procedures and terms (Gobezie, 2005) Esim (2001) notes that MEPs provide training based on needs determined by trainers rather than trainees, and are often disconnected from market analyses or market demand (Albu, Rob & Chowdhury, 2003; Amha & Ageba, 2006) MEPs focus on marketing issues

by providing training and information, but there is no guarantee of sales or subsequent contracts after this assistance Furthermore, “the service provider is not judged to be at fault if the firms it assists cannot produce something that sells” (Tender & Amorim, 1996, p.410)

Some researchers (Goldmark, 2001; Sinclair, 1993; Tendler & Amorim, 1996) suggest that a demand driven approach makes MEPs more effective in helping MEs overcome market constraints Under this approach, MEPs focus on a certain industry and then gradually extend their operations beyond it MEPs connect MEs with a reliable customer network, which helps MEs focus on improving quality and