The Myth of Small Enterprises

The popular view is that by leveraging on local competence, providing financial and technical support, the poor can be helped to grow small enterprises. They have been generally portrayed as being entrepreneurial and there are plenty case studies for cooperative, franchise and direct sales models being adopted to grow small enterprises successfully. How effective is small enterprise approach to address job and market challenges in poverty alleviation?

It's one of the key questions along with microfinance impact that Banerjee and Duflo explored through their book, Poor Economics. Their conclusion is that microfinance access to build small enterprises has been changing the lives of the poor but it's still premature to claim impact of poverty eradication. Banerjee and Duflo also dispelled popular claims of natural entrepreneurial talent of the poor, their research found majority of them start small enterprises because they could not secure stable jobs and many of those small ventures will struggle to grow and to be profitable.

Based on our pilot project to promote jobs and market opportunities for the socially underprivileged in Malaysia, it's unfortunate that I have to confirm much of that book passage. Irrespective of their poverty level/ forms of disabilities, we try to connect individuals who work hard to make a living/ run small enterprises with more potential customers and employers. The reality is that the majority still need some forms of charitable assistance or subsidy, the transition toward more competitive jobs and market opportunities is indeed challenging. So there is a high possibility that most ventures will fail and many more will struggle to be profitable, but these hard working talents persist in entrepreneurial path because they are shunned by employers.

One obvious challenge is that their enterprises are too small to scale with limited offerings and majority are still unable to match their skills with market demands. So we are trying to leverage on network potential by fostering collaboration among different NPOs working on the same job and skill training programs, in order to enhance their capacity to serve larger market, reduce unnecessary needs to compete on limited resources and small market demands.

Such attempt is not without serious obstacles, because NPOs in Malaysia have no track record in collaborating and working toward a shared agenda. As we learn along the way, it's much more complicated in reality to fix job and market challenges for the socially underprivileged with small enterprise approach. Even with the availability of funding and technical support, it's hard to ignore the need to create lasting change in how social sector players work and collaborate with one another to serve the market better.

Impact Obsession

I wholly support the need to track progress and impact for any social change initiative, but I also have reservation about popular slogans like 'evidence first', 'metric driven', 'impact based funding', etc.

The general argument for social impact assessment is lacking context, the focus on standardization also overshadows different needs and different forms of social enterprises. E.g. how much do we truly understand the assessment needs of fledgling startups? When is the right timing to hold them accountable to uniform standard? What should be in place before social enterprises adopting a more statistically rigorous approach? Etc.

Critics point out that if funders are primarily behind the drive of adopting uniform impact assessment standard, it will create a gap where the needs and voices of social enterprises may not be the key part of consideration.

So take a pause before reaching unhealthy level of rhetoric, give social enterprises the time and space to evolve, experiment to find the right indicators that are truly relevant to the beneficiaries. It's time to maintain a healthy obsession about impact assessment.

Social Sector Malaysia: When Charities Take Market Approach

From what I read and conversations I had with charities, the larger ones usually provide welfare along with some skill, job or business training programs to help the socially underprivileged. This approach is generally thought to be more sustainable but the evidence is less so.

Charities usually hold themselves accountable to providing grants and training opportunities that the socially underprivileged wouldn't have otherwise. Such assistance is important but there is a big gap in tracking their actual goals in creating and sustaining jobs and businesses for the underprivileged. It is always difficult to know if more lasting and meaningful results have been achieved.

Common reasons that I heard are no resources to track, immediate assumptions that the underprivileged are better off with assistance, no demands from funders, etc, there is still a long way to go before we see charities improve to align their market attempts to actual goals. No doubt that such tracking will be more complex but it is necessary to gradually move toward that direction.