Speaking from the perspective of a family foundation dedicated to economic opportunities in rural Sub-Saharan Africa, we are keen to see cross-sectoral, systemic collaboration happen. Only if we look beyond our sectoral silos will we be able to create opportunities for SMEs, corporates and intermediaries in some of the world’s toughest markets. We would like to see innovation reflected both in practical, cross-sectoral projects on the ground, and in high-level interventions that change the paradigm at the level of corporate and investor thinking. We need to walk and chew gum at the same time – and create change, even if we know that this is hard. Corporate intrapreneurs need support to look beyond short-term gains. At the same time, there is a role for catalytic funders to create the runway that allows for risky and innovative cross-sectoral projects to be pioneered. If we can show that by investing in an ecosystem-strengthening project we can strengthen the corporate bottom line, we can pave the way for systemic change. We would love to see the creation of a platform of sorts, which brings together changemakers from the corporate, MSME and intermediary sector and creates opportunities for innovation and collaboration
In ANDE’s view, collaborations will be most effective if they embrace an entrepreneurial ecosystem approach in their design and implementation. We propose an approach that incorporates the following:
• Identify key people and organizations across actors, who see the value in coordination and collaboration and are willing to engage in collaborative activity
• Facilitate regular convenings and other communications that are explicitly designed to help build trust and support network interactions outside of just the formal meetings
• Start to build on shared experiences by inviting stakeholders will be to co-design initiatives that address the most binding constraints to MSME growth. Seek to align collective efforts of many stakeholders, not dictate specific efforts.
• Leverage funding partners in supporting collaborative and sustained action rather than one-off projects
• Throughout this effort, curate learning and share it with a broader audience for accountability and as a tool to continue to galvanize support.
Would love to learn more @schetail! We work with a number of early stage capital providers with portfolio companies that I think would benefit from this kind of mentorship.
1/2 Seeing that Business Fights Poverty has been able to put together this diverse panel is a great step! 
When it comes to social businesses as a sub-segment of MSMEs, we see it as a combination of all of the things we have discussed so far.
The incentives should be obvious: Supply chains need to be more resilient against external shocks like pandemics – especially as we are facing an unequally greater challenge in climate change. I am looking forward to updated financial models to factor in that risk into capital allocation decisions in the future.
National governments know that economic growth can be significantly driven by a strong fabric of MSMEs and entrepreneurial acumen.
But at the same time, we also need to realize that endless growth isn’t the answer to our future challenges. So looking at economic development with a lens of how this will positively impact communities in a truly inclusive way is an imperative.
I love the equation: Purpose + Business = Positive Impact.
One of the biggest challenges I see for CEOs and Managers is around what metrics could we put in place to measure the performance of the company not only against business KPIs, but also impact KPIs for CEOs and managers, so they are incentivized to invest energy and effort to make that equation a priority for their business model.
Every single stakeholder in the value chain has to be part of the solution. Vendors, distributors, fast manufacturers, government, NGOs, incubators, investors, point-of-sale solutions, business owners and clients. Value proposition of any solution needs to make sense, be economically viable and offer sustainability
Economic empowerment of the micro and small business space requires a collaborative approach, a long-term commitment, a different metrics in terms of ROI vs business as usual and leverage technology to reach scale, sustainability and behavioral change for good.
This type of framework makes a lot of sense. The one additional element I would add is governance-- the metrics and transparency needed to manage the execution of a system transformation strategy that aligns objectives, but then also builds trust by showing all actors that the new strategy is working for them
The challenge of enabling greater collaboration between sectors lies in its complexity and the fact that each player only sees part of the opportunity from their vantage point. This highlights the need for a variety of different platforms to bring players together – we have identified different platform models in our new guide and their pros and cons. Intermediary organisations, governments and donors have a key role to play in establishing and managing these platforms but to be effective and sustainable over the long-term they need sufficient funding and resources.
Facilitation is important. Market Building Collaboration can be rather complex, involving multiple players and activities. Intermediaries, including consultancies and NGO, as well as donors and large companies can facilitate collaboration. Where large companies are already supporting SMEs, they can engage value chain and business partners with complementary skills and resources. Governments can support the development of platforms. SME service providers and funders can play the role of, or fund, neutral catalysts.
This shock has demonstrated that the longer the value chains, the most vulnerable they are to shocks and pressures. It is our responsibility, from all stakeholders, to turn this crisis into an opportunity to support shorter and more localized value chains. In Lebanon, where all borders, ports and the international airport have been closed, Mercy Corps’ interviews with medium and large food processors and exporters indicate a renewed focus on finding and bolstering relationships with local suppliers, including farmers and local industries for packaging materials. How can we support them in this new business experience?
The incentive should come from realizing what the outcome can be of supporting MSMEs and the impact that can be felt in the local community and beyond.
With a collective impact on our environment, and an exponential effect on livelihoods all over the world, small farms can drive big change.
When we and others help these farms become more resilient, food accessibility and nutrition aren’t the only differences we see. Education rates increase. Businesses and communities grow. Poverty declines. And low- and middle-income countries become more active participants in the global economy, which is good for us all.
Today, we see many technology providers in the private sector available and interested in investing in rural areas. We see also many available development funds and high interest from public sector and governments to develop rural areas. What is however badly missing, are “ecosystem facilitation” players, able to aggregate and coordinate all the partners in the same focus areas with the objective to create value for all. Each partner will have an important role to play and the value is there for farmers, MSMEs and all involved. The ambition is however too high for single players to bring it at scale by themselves. Bayer is no exception and we continue strengthening partnerships in our long-lasting commitment to support 100 mio smallholder farmers.
Many business ecosystems are characterized by short term transactional relationships in which supply and distribution MSMEs are squeezed on price and where there is little transparency and trust. Long term collaboration requires companies to realize that their own growth and competitiveness is based on the competitiveness of their entire ecosystem. This requires them to make longer term commitments to a more direct and transparent relationship with MSMEs that can be integrated into more inclusive business ecosystems. This can be achieved by seed funding a catalyst or facility that coordinates the integration and financing of the key actors around a new business model. This often requires a lot of financing, especially for the least established or poorest participants. However, impact investors and financial institutions are also looking for good opportunities at a reasonable risk and cost. Again, the critical role of the catalyst and a viable business model.
There is a very clear role for coordination which in our case existing institutions like SMEDA – SME Development Authority, has not been able to play effectively. This needs to remain in focus. A better coordination role will greatly help in diverting limited public funds to right places.
More focus is now required on shifting to digital. The large value chain will play an important role. Large businesses need to cascade this down in their value chains. New start ups be encouraged to take advantage of this evolving situation.
Yes, that is the key question. We work SMEs to understand the business case for digitized farmer-level data. They are incentivized to have data from farmers, and have it digitized, in order to negotiate contracts, streamline certification processes, track inventory, etc. In our approach, the business owns the data and makes decisions on which actors across the value chain can access the data. In terms of coffee, buyers, SMEs and farmers can make data-driven decisions. Here’s a case where control over data helped the business negotiate larger contracts and earn higher incomes for their farmers: https://rootcapital.org/these-guatemalan-farmers-are-harnessing-the-power-of-digital-data-with-help-from-root-capital/
As for who pays, we have seen interest in businesses to pay for such digital business intelligence services for the business reasons above. Another example in coffee, as well as other commodities, is that certifiers rely heavily on farm-level and SME-level data, so there is a case to be made here around 1) efficiency gain when you consider frequency of farm-level data gathering demands and 2) ways for those needing access to such data to pay for the data.
There’s also an opportunity for MSME collaboration efforts to engage consumers in opportunities and solutions to support small businesses in their local communities. In our COVID-19 response, our teams created platforms to enable consumers to purchase pre-paid vouchers to support their local bar or restaurant, putting cash in retailers’ hands – examples are Apoie um Restaurante in Brazil, Save Pub Life in United Kingdom and Café Courage in Belgium.
2/2 In that way, governments also need to take a leading role. Public procurement from social businesses and MSMEs (buy local, buy green, buy social) will not only be a signal to corporations. It will also strengthen MSME balance sheets to be ready for procurement from MNEs.
The good news is that more and more social businesses are achieving this critical mass and financial health to find access to global value chains. So the sector is growing up. But we need more support for social businesses – especially on the capacity building front – and more corporate leaders who are willing to procure from those ventures.
And we need sufficient access to capital for social businesses and MSMEs – in all shapes and forms. Linking that capital to impact objectives is an honest way to enable sustainable rebuilding post-COVID. I am weary that once the immediate urgency has passed, people all over the world will at some point ask who benefitted from the huge bailout packages and whether it truly reached those populations most in need. We have to be able to prove that it was allocated to benefitted all of society.
The discussion so far is fascinating - thank you. I appreciate the insights on expanding use of digitalisation and cloud-based technology, etc. This is particularly important to agriculture MSMEs. But I would like to ask the panelists to reflect on what can be done to support TOURISM MSMEs, of which there are many in the countries we work. COVID-19’s impact on their livelihoods is massive, and until travel resumes and demand builds, what can be done to support these MSMEs? How can they be linked in to other industry value chains for example, until tourism begins to recover?
Provide catalytic funding: Governments could issue SME Bonds, in the same way they offer Green Bonds, to attract capital to SME growth. Impact investors could set up third party funds that pool money from different organisations for the purposes of strengthening SME ecosystems and generating financial returns. Large companies can leverage corporate (impact) venture capital to invest in companies that strengthen critical SME partners, or bring their foundation in the game to build coalitions.
This framework was developed after multiple conversations and analysis on cost/benefit ratios, roles, potential impacts, etc. There are no silver bullets but we nee to test, learn, pivot, test again. Great work BFP team.
I like the term “ecosystem facilitator” - it makes a lot of sense, and this is a role that non-profit can play, as they are often seen as less bias.