Published on May 8, 2009
SMALL & MEDIUM ENTERPRISE DEVELOPMENT (SME) : SMALL & MEDIUM ENTERPRISE DEVELOPMENT (SME) Team Name: 1919 Members : Glenroy Phillip Gerard Chung Hessie P. Martin Sarah Maharaj Dated : 7th March, 2009 Presentation Outline : Presentation Outline What is the SME? Profile of the SME sector Small Business Development Issues Microenterprises Development Creating and Entrepreneurial Environment Development Models Agenda for Entrepreneurship Conclusion What is the SME? : What is the SME? From a quantitative perspective - Small & Medium Enterprise comprise of : Less than 25 employees Less than 4,000 sq. ft. of manufacturing area Less than US$50,000 investment in equipment; (Note: Investments exclude real estate) Less than US$125,000 annual sales The value of the machinery, equipment and working capital must not exceed $1.5M - What is the SME? : What is the SME? From a qualitative perspective - Small & Medium Enterprise signifies : the owner of the enterprise works alongside his/her workers the enterprise is classified in the "formal" sector Profile of the SME sector : Profile of the SME sector Main Characteristics Challenges Barriers Profile of the SME sector : Profile of the SME sector Main Characteristics of the SME Sector of T&T can be classified in the following sub-sectors: v Food and agro-processing v Marine and fishing v Woodwork and furniture v Garments v Emerging technologies v Handicrafts v Transport v Services v Light engineering and electronics v Tourism and service related activities Profile of the SME sector Cont’d : Profile of the SME sector Cont’d Between 70 and 80 percent of businesses in the country belong in the SME sector Approx. 45,000 SMEs are operational in T & T The MSME sector contributes significantly to the country’s GDP (5-10%). The MSME firms are leaders in manufacturing sub-sectors such as wood products, garments and sewn goods and handicraft items. Profile of the SME sector Cont’d : Profile of the SME sector Cont’d CHALLENGES Lack of access to or knowledge about available resources including credit and training Limited market access Lack of e-business infrastructure Most of the MSEs are dependent on Imported raw materials (either primary or secondary) which are expensive and sometimes not available on time Profile of the SME sector Cont’d : Profile of the SME sector Cont’d CHALLENGES Skilled and experienced staff now attracted to the sector. Only 3.6% of the small businesses in Trinidad and Tobago are exporting goods and services. High financial and labour costs resulting in uncompetitive pricing. Profile of the SME sector Cont’d : Profile of the SME sector Cont’d BARRIERS Difficulties of access to new technologies or the inability to adapt to local conditions Inability to access private and public procurement opportunities Non-availability of affordable technical and managerial consultancy Educational levels including computer competency Inability to conduct Market research Small Business Development Issues : Small Business Development Issues MSEs have almost identical problems, but with varying degree: Legal constraints Institutional constraints Infrastructural constraints Financial constraints Non-availability of appropriate training and technical assistance (TAT) Marketing constraints Business Survival or Failure Small Business Development Issues Cont’d : Small Business Development Issues Cont’d LEGAL CONSTRAINTS While the importance of the MSE sector has been recognized and articulated in official statements, no clear and comprehensive policy has been put forward for its further development. With the exception of the various Co-operative Societies Acts and in some countries the New Companies Act, existing laws do not address the needs of the small business sub-sector. While there are existing laws in all countries which directly or indirectly affect the MSEs, there is no specific legislation aimed at the establishment and the development of micro and small enterprises. Fiscal Incentives and Hotel Aid Ordinances provide substantial incentives and concessions, however, MSEs are generally ineligible because they either do not satisfy the value-added criteria or are unable to present satisfactory investment plans. Small Business Development Issues Cont’d : Small Business Development Issues Cont’d LEGAL CONSTRAINTS Customs laws provide for the conditional exemption of duty. Benefits to MSEs particularly in the anufacturing sector are usually extended on an ad-hoc basis with approval of Cabinet given after long delays and complicated procedures. The Consumption Tax/VAT legislation generally requires that all enterprises engaged in manufacturing be registered. Unregistered enterprises remain ineligible for concessionary tax rates on raw materials and finished products Small Business Development Issues Cont’d : Small Business Development Issues Cont’d INSTITUTIONAL CONSTRAINTS Though there are many agencies which provide support for the small business subsector, there is no institutional framework for facilitating the planning, implementation, coordination and valuation of activities in this sub-sector. Considerable duplication and replication of programmes. There is no recognized national forum that provides an opportunity for MSEs to exercise leadership and to participate meaningfully in the national decision-making process. National Small Business Associations are weak or non-existent and also lack financial and human resources. The absence of an "one stop agency": small enterprises are unclear as to "whom to approach for what" resulting in bureaucratic delays; they find it difficult to access information, etc. Small Business Development Issues Cont’d : Small Business Development Issues Cont’d INFRASTRUCTURAL CONSTRAINTS The unavailability of economically priced factory/warehouse/commercial space for MSEs is considered in many Caribbean countries to be one of the major impediments to their growth and development. The high cost of rent and limited commercial space in urban areas adversely affects the profitability and development of MSEs. Inadequate, unreliable and high cost of basic utilities (electricity, telephone, water, roads, etc.) are considered to be other constraints faced by MSEs in most of the Caribbean countries. Small Business Development Issues Cont’d : Small Business Development Issues Cont’d FINANCIAL CONSTRAINTS The lack of accessible and affordable financing and appropriate financial mechanisms remain a major constraint for small businesses, mainly due to: lack of collateral low credit-worthiness in terms of business experience low capitalization which limits their borrowing capacity the high risk involved in unproven management capability uncertain market access apart from the difficulty in obtaining start-up loans, many MSEs are unable to source working capital resulting in premature failures. In fact, working capital has been identified as perhaps the single most relevant financing constraint. Small Business Development Issues Cont’d : Small Business Development Issues Cont’d NON-AVAILABILITY OF TRAINING & TECHNICAL ASSISTANCE (TAT) MSEs owners come from different social backgrounds, with varying degrees of education, little or no business experience and with little or no prior training. Many institutions involved in skills, business and some limited entrepreneurial training, the efficacy and relevance is far from what is desired due to: training materials being too complex and sometimes irrelevant the absence of qualified trainers the core function of many agencies is not training but provision of credit the absence of technical skills training and upgrading in the sector Small Business Development Issues Cont’d : Small Business Development Issues Cont’d MARKETING CONSTRAINTS Except in the agriculture sector, there is no formal institutional arrangement for marketing the products and services of MSEs in the national/regional and international markets. MSEs have no access to market information/opportunities and thus miss potential market for their products. Lack of financial and human resources, MSEs do not have the capacity for sustained advertising and promotion of their products. Small Business Development Issues Cont’d : Small Business Development Issues Cont’d From empirical studies the key determinants are: Choice of Business Education and Experience Collaboration: Internal/External team and connections Prior choices of Employer and geographic location Small Business Development Issues Cont’d : Small Business Development Issues Cont’d Starting Capital Management Practices Individual make-up General Economic Conditions Microenterprises Development : Microenterprises Development Government Initiatives Youth Training and Employment Partnership Programme (YTEPP). Small Business Development Company (SBDC) in Trinidad and Tobago Military Led Academic Training (MiLAT) and MiPART Microenterprises Development : Microenterprises Development Private Sector Initiatives BPTT’s programme in the Mayaro and Guayaguayare district. Microenterprises Development : Microenterprises Development The National Business Information Centre (NBIC) The Entrepreneurship Technology Institution and Incubation Centre (ETIIC) The Centre provides the following facilities: A Customer Service Centre: A Resource Centre: Computer Databases: Microenterprises Development : Microenterprises Development Educational Institutions The National Energy Skills Training Centre and the Skills Training Division of Metal Industries Company. Vocational Training: San Fernando Technical College and the John Donaldson Technical College and SERVOL. Creating and Entrepreneurial Environment : Creating and Entrepreneurial Environment Establishment of national micro and small enterprises boards Implementation of a national small business policy Introduction of entrepreneurial education in the school curriculum Develop programmes to identify prospective entrepreneurs and business opportunities Creating and Entrepreneurial Environment : Creating and Entrepreneurial Environment Development of exclusive entrepreneurship and enterprise programmes Management programmes for women, youth and other disadvantaged groups Development of stronger linkages between employers'/workers' organizations and the SMEs Creating and Entrepreneurial Environment : Creating and Entrepreneurial Environment Integrate technology-based institutions with the SME sector and establish a strong networking mechanism with other promotional/ financing agencies Development of infrastructural support services through Small Business Development Centres Development of the MSE Model : Development of the MSE Model Two SME Models were developed by Prof. Saburo Kameyama (Model for SME sector development, 2000), which were: Micro Model: Factors that impacts on SME itself. Macro Model: Factors that impacts on the socio-economic environment of the SME. Development of the MSE Model cont’d : Development of the MSE Model cont’d Mirco Level Sector Model Focus placed on development tools such as: Financial Assistance Gov’t incentive tools such as direct or indirect financial assistance or guarantee scheme and tax incentives Marketing Assistance Chamber of Commerce, Gov’t exhibitions to promote SME and their products Technology Assistance Gov’t agencies that focuses on research and development in several business sectors Training Assistance Agencies that provides education and training programmes that provided trained personnel to support the SME sector Development of the MSE Model cont’d : Development of the MSE Model cont’d Macro Level Sector Model Focus placed on Social-economic development tools such as: Structure Adjustment Gov’t policies that promotes productivity and demand in different sector of the economy, which impacts on GDP. Infrastructure Development of Industrial Estates, Ports, Access to Roads, Electricity and Water Development via Mutli-National Companies Development of SME through linkages / trade between multi-national companies and domestic SMEs. IT / Software development Institutions that provides training and support to an industry that is rapidly changing and very important to the development of any developing economy. E-teck Agenda / Outlook for Entrepreneurship : Agenda / Outlook for Entrepreneurship SME continues to be of strategic importance in any economy in its growth in GDP, industrial development and its immense potential for employment generation. The main issues in the development of SMEs in the future are: The continued lack of access to timely and adequate credit. New policies to restructure the industry in the context of current global economic and financial changes. Tighter patent laws through regulation of intellectual property rights. The creation of new economic union, which limits market access. Conclusion : Conclusion It must be recognized that the support of this country's entrepreneurial talent and spirit of enterprise could only be achieved through empowerment. Conclusion : Conclusion Development of SME sector: Importance For strengthening leading industries For developing future industries It provide the impetus fir socio-economic development in the country. Thank You : Thank You QUESTIONS?