Sustainable SMEs: Building Blocks of a Healthy Economy*

Dynamic SMEs can propel "an explosive economic and social situation in the right direction", explains Khater Abi Habib, President of the Kafalat S.A.L., a government-backed company that guarantees 75% of small loans through local banks to small and medium scale enterprises (SMEs) in the local productive sector.

SMEs are crucial to the economies of developing countries since they generate employment, hone the skills of entrepreneurs, and enhance the self-sufficiency of both enterprise owners and their staff in the management of their businesses.

Lebanon, Abi Habib explains, is only a few steps away from attaining optimum results from its SMEs. "For over a century, Lebanon has invested heavily in nurturing its human resources, one of the country’s most precious assets, but in order to achieve commercially viable SMEs there is a need for a clearer strategic vision".

A reliable recipe for the successful management of SMEs and a blend of the right ingredients can advance their role in the alleviation of poverty and the preservation of a sound national economy.

For the time being, loan providers such as Kafalat, which provides loans to local enterprises who employ less than 40 workers in the industrial, agricultural, tourism, local craftsmanship and the high-tech sectors (including electronic hardware, programming, internet and e-commerce), are providing much needed financial and technical support to local entrepreneurs.

According to Abi Habib, "all sectors need our continued and sustained support, but the high-tech sector gives tangible results quite quickly and they can employ so many highly-educated, competent young people who would otherwise leave the country".

Budding SMEs such as those in the high-tech sector will provide well-educated youth such as computer engineers and graphic designers with job opportunities in the local market. This will alleviate the growing surge of the country’s human resource assets who are traveling abroad in search of better paying and more stable job opportunities.

In order for SMEs to become productive, dynamic participants in the national economy, Abi Habib explains that three main components should be taken into consideration: there is a need for active involvement and support of both local and international organizations to promote the entrepreneurial and management capacities of SMEs and in the long-term, SMEs should attract investments from other sources.

For their part, local NGOs have already cultivated a more mature approach to addressing the financial and technical needs of prospective SMEs. "They have moved away from traditional views on empowerment and have become more aware of the necessity to address the needs of SMEs in a set of well-judged priorities".

Local NGOs have the important task of providing both technical and financial support to SME staff and managers. This includes training entrepreneurs how to devise their own business, management and marketing plans, conceptualizing financial studies, and drawing up feasibility cash flows. Dr. Abi Habib doesn’t believe that there is only one up-to-date training method.

NGOs should be free to devise their own made-to-measure training programs that they believe will be best suited for specific communities and will yield optimum results: "just like banks and firms compete to provide cutting edge services". The best option is for people to be open with others and exchange experiences. "With conceptual and experimental application you are bound to achieve something". In addition, civil society, especially academic institutions such as universities are already supporting SMEs by setting up enterprise support units and incubators on their campuses.

The second condition that Dr. Abi Habib believes is necessary to create a favorable environment for the promotion of SME development is the continued support of international donor agencies. Alongside local partners, including NGOs such as EDF, SMEs have received funding and training in the most up-to-date business skills. In recent years, the United States Agency for International Development (USAID), United Nations Industrial Development Organization (UNIDO) and the European Union (EU) "have urgently addressed the needs of SMEs" by promoting capacity-building of communities through education and training. Furthermore, for the first time, serious attempts have been made by local enterprises to set up seed capital and venture capital sources.

In the long-term, Dr. Abi Habib foresees more active involvement in equity and other capital investment sources. "If you have seed capital participation and constantly remind yourself that you need a vision, there is a budding tendency in the right direction even though it will take time". With a clearer strategic vision, there will be more investment in management development in order to maximize their growth potential. "If the current positive trend persists we are going to get international results from the support side of SMEs.When you have skills of this kind they may go to the equity side and will include seed and capital ventures, financial market support etc…We will eventually have a very mature set up". Dr. Abi Habib believes that the future is bright for SMEs: there may be a transition of SMEs onto the financial markets, as is the case in Ireland, Spain and Italy for example where full fledged economies cater to SMEs. "Support is sprouting in a very diversified manner and very soon the grid will be complete," concludes Dr. Abi Habib optimistically.

 

EDF News

NGOs are also a Precious Source of Entrepreneurial Know-How

NGOs are not simply financial providers: they are the strongest link to entrepreneurs in even the most secluded areas and can serve as the primary vehicle of skills transfer between government agencies, training institutions and entrepreneurs.

Realizing the crucial and multi-faceted role that NGOs play in the sustainability of rural communities nationwide, EDF and the Ministry of Social Affairs paired up to organize a workshop on "Non-financial services that can be provided by NGOs" on June 27, 2002.

The participants in the workshop hailed from different areas nationwide representing 14 NGOs that provide credit funds to local entrepreneurs to set up and run their own businesses. The NGOs were provided with the basic guidelines of providing non-financial services to entrepreneurs, which includes the most up to date techniques for the optimum management of their businesses such as the formulation, implementation and follow-up of a viable business plan, as well as other training services such as book keeping and other skills that will ensure the best use of existing valuable resources to attain their target budgets.

Representatives of the NGOs exchanged valuable information with one another, and with Ministry officials, with whom they engaged in resourceful and motivating conversations on how best to run their own activities.

 

EDF Staff Revamp Their Business Skills

With a solid business plan, and good management skills, the only way is up, agreed participants at the end of a workshop at the American University of Beirut’s Business School, "Executive Course in Best Practice Entrepreneurship" that was held from July 31 till August 2, 2002.

EDF’s Executive Director Majid Joumblat and Program Coordinator Lara Khalil joined participants from Arab countries, to hone their entrepreneurial and management skills and ensure that they remain abreast with the most up-to-date business techniques.

The workshop included the latest techniques aimed at sharpening their entrepreneurial skills and included tips on how to draw up adequate business plans, which are prerequisites to successful enterprises.

EDF staff is now more adept at reading between the lines when they receive business proposals from entrepreneurs seeking funding. They have benefited greatly from the workshop since the issues addressed are directly related to their everyday work in assessing prospective entrepreneurial projects and ensuring that budding entrepreneurs are equipped with the necessary business know-how to successfully manage their own businesses.

Discussions at the workshop, which was hosted by AUB was organized by Mr. Alberto Haddad, who highlighted the vital importance of a well- devised, feasible business plan in order to initiate and operate successful enterprises which will bear fruit not only in the short-run, but in the long- run when the entrepreneur is basically on his/her own.

Mr. Haddad provided participants with the essential guidelines to international and venture funding, a business method that entails the grouping together of entrepreneurs seeking potential investors and funding for projects. The industry is a smooth blend of risk financing and hand holding of entrepreneurs, whereby the entrepreneurs, the professionals and sophisticated investors finance and manage the businesses.

 

Twenty-One New Computers Donated by the Ousseimi Foundation to be Distributed by EDF

EDF will select 21 of its brightest graduate trainees from rural areas nationwide who showed perseverance and their superior capabilities in acquiring new skills, to receive brand new computers as an incentive for them to set up their own businesses or improve existing ones. We would like to take this opportunity to thank the Al-Ossaimi Foundation for their generosity and support of this project, which was launched in 2001.

 

Another Talented EDF Graduate Receives Brand New Computer

When talented, young Business Administration graduate Amal Sobh, caught the eye of EDF staff during one of the training sessions in 2001 little did she know that a year later she would be receiving a pristine computer all for herself.

Amal was selected from a list of participants in the training program that was held in the village of Ramlieh. The training sessions included courses in finance, economics and accounting, essential pre-requisite skills for the functioning of a successful enterprise.

"I really enjoyed the training session, the topics addressed have always interested me and at the time I was also learning the skills at university so the training sessions were a real bonus," explains Amal, who received the computer three weeks ago.

A few months after the training session Amal got an internship position at a prestigious auditing firm in Beirut. A few months after her internship they took her in full-time. " Thanks to EDF, now that I have a computer I can apply the computer-based skills I learn at work while I am at home," says Amal, who already had some computer knowledge from university but affirms that having a computer at home is an advantage.

This she says, will propel her towards her dream of one day setting up her own small auditing firm. "I still need a lot of experience and training though before I venture into something like that, but with the computer it has become more of a reality in the future," she adds.

Having a computer at home, Amal concludes, is not only a valuable impetus for her career but also for the education and the career prospects of her teenage siblings, who are as excited as she is about the new computer.