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
Creating and Entrepreneurial Environment
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
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
Non-availability of appropriate training and
technical assistance (TAT)
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
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
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.
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?