...
|
Handbook
to Generate Wealth
|
ISBN: 92-1-1314 03-8
UN: HS/544/98
| . |
He
is not poor who hath not much
But he
who craves much.
Thomas
Fuller
|
....
...
...
| This
is the second of three companion hand books for the field worker.
Most community development workers are concerned with the generation or
creation of public or communal wealth (access to human settlements
facilities or services such as schools, clinics, roads, market-places,
water supplies, sanitation). |
. |
The
first companion hand book (Handbook for Mobilizers) concentrates on that.
This one looks more at private (individual or family) wealth, how the reduction
of poverty can include small scale or micro enterprise, and how a community
mobilizer can contribute to its development. |
...
| It
is the result of six years of mobilization and community management training
in the CMP (Community Management Programme) of Uganda, executed by UN-HABITAT
(Habitat) and implemented by the Directorate of Community Development of
the Government of Uganda. Many lessons were learned over the years, some
by success, some by failure. Through it all we have seen the potential
strength and amazing resilience of the communities. |
. |
What
we have come to realize is that all communities, no matter how poor, have
resources (many that still need to be identified) that can be tapped,
so that they, and all of the country, can develop. To tap this huge
national resource, mobilization and management training are needed.
This handbook shows how those potential resources can be released for sustainable
development. It is intended for Government, NGO, professional and
voluntary mobilizers everywhere. It is not limited to Uganda. We
pray that it is useful to you. |
...
| . |
Phil
Bartle, Chief
Technical Adviser
Laban
Mbulamuko,
National
Co-ordinator
Community
Management Programme
1992-1998
|
...
...
| This
is the second of three companion handbooks for the community mobilizer.
It is a companion to "Handbook for Mobilizers,"
and "Handbook for Monitoring and Evaluation." |
. |
While
the first of these is aimed at fighting poverty by the creation of wealth
of a communal nature (eg with public access and/or publicly owned), this
hand book is aimed at the creation of wealth (to fight poverty) for private
ownership (individuals and their families) through micro enterpreneurship. |
...
| This
is a "how-to" book for community development workers who aim to help to
eradicate poverty. There are many different methods of promoting the generation
of wealth; this is one. |
. |
It
begins with an analysis of poverty and its causes, leading to actions aimed
at removing it. It then goes on to look at using a combination of credit
and training to promote enterpreneurship. |
...
| Then
some tips on organizing groups. The next part describes the skills you
will need to transfer to those who would become entrepreneurs. Finally,
the requirements for running a viable micro enterprise. |
. |
This
handbook aims to minimize theory, history, and narrative; it concentrates
on what you, as a community mobilizer, need to know, and what skills you
need, to promote poverty reduction. |
.
...
...
| Our
long term goal is the eradication of poverty. We will not eliminate it
by temporarily alleviating the discomfort and pain caused by poverty.
Those are symptoms. |
. |
We
must identify the causes of poverty, and counteract those powerful negative
forces. We must devise methods to create genuine wealth as a sustainable
process of growth. |
...
| Every
great military leader will tell you that, to defeat the enemy, you need
to know all about that enemy. If we are to defeat poverty, then we must
know much about poverty (not only its symptoms) and about wealth. |
. |
This
handbook does not tell you everything about poverty; it introduces you
to the main elements, and points you in the direction of your teaching
more to yourself. Take these ideas, write them in your journal, think
about them, expand them, challenge them, discuss with friends and colleagues
at workshops, seminars, and during your rest times. Use this handbook as
a starter. |
...
| 1.1.
An Alternative Perspective: |
...
| In
understanding the nature and causes of poverty and wealth, we must first
discard some common assumptions. |
. |
Poverty
is not merely the absence of money. Wealth is not merely the possession
of money. |
...
| Poverty
and wealth go far beyond the absence or presence of money. |
.. |
Money
can be used sometimes as a measure of wealth, a means to store wealth,
and a useful set of symbols for the exchange of wealth. But money is not
wealth, and the nature of poverty is far more interesting and challenging
than just the absence of money. |
...
| Once
you start with this radical or revolutionary idea, that wealth
is more than money, and that poverty is more than the lack of money, then
you can learn how to more successfully attack the common enemy, poverty. |
. |
This
is not to belittle money. In our fight against poverty, money can be a
very useful tool. Much of the "how-to" parts of this handbook
shows how money can be used to fight poverty and generate wealth.
Remember, money itself will not eliminate poverty. |
...
| You,
as a community worker, need three things to contribute to the removal of
poverty: (1) an understanding of concepts and principles (2)
some
skills in training, facilitating and organizing, and (3) personal
characteristics, including integrity, motivation and creativity. |
.... |
Without
being too theoretical, therefore, the first two chapters of this handbook
point you towards the principles and concepts you must understand. |
...
...
| If
money is not the same thing as wealth, and just adding money will not eliminate
poverty, then what is wealth and how will it help to fight poverty? |
. |
If
we simply add some money to an economy (eg printing more bills), then we
contribute to inflation, making the money worth less than it was.
Inflation simply means that the costs of things goes up. If we just transfer
money, from rich people to poor people (alms, charity), we do not
create new wealth and we do not attack causes of poverty. |
...
| If
we look at the economist's definition of wealth, we will come closer to
seeing how it will be used in the fight against poverty. |
. |
Economists
talk about "goods and services" with value,
but even "goods" have value only in the extent to which they provide a
service. The key concept, here, is value. Something has relative value
according to two attributes, (1) if it is relatively useful (has utility)
and (2) if it is relatively scarce. |
...
| Any
of us who have been short of cash feel that we know what poverty is. But
the experience of individual poverty, which is alleviated by getting some
money, is very different from the social problem of poverty,
which a problem of the whole economy. |
. |
The
social problem of poverty is lack of wealth, not lack of money. For
low- income persons, poverty is also how wealth is distributed through
the society. If you add money to the system, you only create inflation,
and that does not rid society of poverty. |
...
| The
answer to fighting poverty, the social problem, then, is not to add money
but to create or generate wealth; that is why the title of this handbook
is about wealth generation, not merely income generation. |
. |
You
can do three things with wealth: (1) consume it, (2) store
it, and (3) invest it. |
...
| To
illustrate this, let us take the example of an African farmer. Since
the vast majority of farmers on the continent are women and girls, we will
use "she," but will not discriminate against or forget males. Let
us say she has just harvested a crop of corn. |
.... |
She
can (1) consume, (2) store, or (3) invest it.
She can cook and eat some, with her friends and relations; that is to (1)
consume.
She can put some away in a container; that is to (2) store.
If parasites and pests destroy some of the stored corn, we will just call
that an unfortunate form of consumption. She can also put some of
the corn aside to use as seed, to plant and grow further crops in the future.
This is (3) investment of her wealth, corn (which is relatively
scarce and useful). |
...
| The
clue to increasing wealth in an economic system, then, is investment, where
immediate consumption is forgone in the present or short run, in order
to make increased production of wealth in the future. |
. |
Our
modern complex world is not as simple as that of one farmer making three
choices, but the principle remains the same, investment leads to increasing
wealth, and fighting poverty. |
...
...
| What
causes poverty? The social problem
poverty. Lack of money is a measure and a symptom of poverty; not a cause.
Treating the symptom will not cure the disease. |
. |
The
causes of the social problem of poverty lie in several factors, especially
the
big five: disease, ignorance, dishonesty, apathy and dependency. |
...
| Disease
causes the labour supply of the society to be less productive. Sickness
and death subtract from one of the three main factors of production, human
labour. Disease itself can be reduced by a greater understanding
of how to prevent disease, and ensuring that public wealth intended to
be used to prevent and cure disease is not diverted for personal gain. |
. |
Thus
the factors of poverty are inter linked: dishonesty and ignorance contribute
to disease, and all three contribute to poverty. |
...
| Ignorance,
as mentioned elsewhere, is not a shameful thing, it is merely a fact. It
is caused by isolation so that some people do not know some things simply
because they have not heard of those things (information). |
. |
Other
factors of poverty can contribute to ignorance, including disease and dishonesty.
Both those factors contribute to a lower availability of education and
information. |
...
| Dishonesty,
in turn, is a major cause of poverty as a social problem. When a person
in a position of trust diverts a hundred units of value towards personal
use, the society at large may lose much more than a hundred units of value
that could contribute to development and to the reduction of poverty. |
. |
That
is part of what economists call the "multiplier effect." Dishonesty
thrives in an atmosphere of apathy, ignorance and dependency, so here is
another example of the inter-linking of factors of poverty. |
...
| Note
that this is not a value judgement. We do not say dishonesty, disease,
ignorance and apathy are bad. That is for our religious leaders to teach
about good and bad. |
. |
This
is just a scientific analysis (social science) of the factors of poverty.
To fight the social problem of poverty (if that is the decision of the
people) it is necessary to identify and analyse the causes of poverty. |
...
| Further
factors of poverty include lack of markets, lack of leadership, lack of
supporting institutions, corruption and poor infrastructure. |
. |
These
factors, in turn, are the results of the five key causes: apathy, disease,
dishonesty, dependency and ignorance. |
| Poverty,
like wealth, comes in several varieties -- related to ownership. |
. |
The
lack of communal human settlement facilities and services belongs to public
or group ownership. These include lack of access to health facilities and
educational facilities, lack of infrastructure such as roads, market places,
electricity or telephone, and lack of other communal infrastructure such
as sanitation, potable water and a dependable food supply. |
...
| These
forms of communal wealth differ from personal ownership, where poverty
is manifested in low or no wages, lack of land and other property, lack
of privately owned capital (tools, buildings, factories), and lack
of human skills. |
. |
The
attack on poverty in the communal sector is described in more detail in
the first of these companion handbooks, "Handbook
for Mobilizers." This handbook emphasizes private capital formation
and poverty reduction by stimulating private micro enterprise. |
...
...
| This
method initiates, at a very low level, private investment that, if it takes
root and grows, contributes to country-wide wealth creation and poverty
eradication. |
...
| Existing
wealth can be directed towards consumption or investment. Corn, as a food,
is an example of a consumption good. A garden hoe, used to prepare the
farmland, is an example of a capital good. |
. |
A
capital good can not be directly consumed, but can contribute to increased
further wealth. Investment means directing wealth towards the production
of capital, which is needed to contribute to growth of wealth in the community
and society. This handbook shows you how to initiate investment. |
...
| Small
scale productive business, especially the initial processing of agricultural
products, is most effectively carried out by individual entrepreneurs.
That initial processing is highly needed throughout the continent, and
is the most promising sector for reducing poverty on a wide scale basis. |
. |
Your
job as a mobilizer is to introduce low income individuals, especially women
(also
unemployed youth, disabled, vulnerable), to become creators of wealth,
ie individual off farm entrepreneurs processing agricultural crops. |
.
...
| 2.
Credit and Investment: |
...
| The
method that is presented in this handbook is to introduce credit to would-be
entrepreneurs, who then use other people's savings (as loans) to
divert away from immediate conception, towards investment, and the creating
of wealth. |
...
| When
some one borrows money, it is not a gift; it must be paid back. If it is
not paid back, the borrower has engaged in theft, and is dishonest. |
. |
If
there is a widespread attitude that borrowed money need not be paid back,
that dishonesty is one of the big five factors of poverty as a social problem. |
...
| The
causes of defaulting on a loan may be innocent enough: un-realistic high
hopes, navet (by both to lender and borrower), and expectations
that are not realistic (at the time the loan is made). Un-realistic borrowing
can be a major cause of the breakdown of trust and the break-up of friendships. |
. |
It
has also made many Governments bankrupt. |
...
| As
a mobilizer, in your crusade against poverty, it is your responsibility
that any loans intended for creating wealth are not un-realistically too
high. |
. |
You
must be able to honestly say to yourself, about every loan you approve
or recommend, that it can be re-paid (100%). If not, then you support the
survival of poverty. As Eldritch Cleaver and Malcolm X said, "If you are
not part of the solution, then you are part of the problem." |
...
...
| Remember
the story above about the farmer and her choices of what to do with her
corn harvest? There we mentioned she could consume, store or put aside
some of it for seed. |
. |
A
fourth alternative is another form of investment, she could process it.
Milled corn is more valuable than non milled corn. By adding factors of
production (land, labour, capital) she can add value to her (or someone
else's) corn by milling it. |
...
| The
processing of the corn creates wealth. It does not happen by itself; she
must put in more inputs: capital (tools, including a milling machine),
land (a place to mill), and labour (putting the corn in; taking the posho
out). If the value of the output, milled corn, is more than the combined
value of the original un-milled corn and the production costs of milling
it, then real wealth (not just money) has been generated by the activity. |
. |
It
is in this little story that we find the essence of fighting poverty on
a continental scale. This is "value added." |
...
| Most
of Africa, indeed most of the developing world, is agricultural. Some crops
are exported for cash, most are consumed by the producers. One of the major
elements lacking is the initial (let alone subsequent) processing
of agricultural products. |
. |
If
we can find a way to fill this void, by helping women to fight personal
and family poverty, then we support a revolutionary battle in the war against
poverty. The important task is to identify a "value-added" sector when
the value that is added contributes to eradicating the social problem of
widespread poverty. |
...
| 2.2.
Using Borrowed Money to Create Wealth: |
...
| The
money that is loaned by the lender and borrowed by the borrower, is credit. |
. |
The
"principal" of the loan is the amount loaned. The "interest" on the loan
is the "rent" value of borrowing and using the loan. Service charges may
be added as further costs of borrowing the money. |
...
| When
we talked about the farmer investing by setting aside some of her crop
as seed, she was investing her own real wealth. The target group you aim
for (beneficiaries), low income women, may not have enough of their
own wealth to invest. |
. |
Other
people may have stored wealth that they are willing to "rent" out
(for a price, the interest) for others to invest. That is the credit which
is an available resource. |
...
| Do
not give your target group money (grants) as capital to invest;
do not hand out free sewing machines; that trains them to become dependent
on an unsustainable source as a factor of their production. |
. |
Instead,
you give them some skill training and assist them to obtain some credit.
These must be realistically sized loans that they can use as investment
in creating wealth, and pay back both the principal and interest out of
the wealth they have created. |
...
| 2.3.
Why Credit and Not Grants? |
...
| The
core handbook for which this is a companion (Handbook
for Mobilizers), pointed out an important principle of empowering and
strengthening. If your muscles do not exercise, they atrophy (get weaker);
if you do push-ups, your arms will get stronger. |
. |
If
a community is given everything, it will not become self-reliant. If you
give free money to a business person, you train her to become dependent
upon gifts or charity. |
...
| If
a person wants to start a business, she needs financial capital to get
started. If you give her that money she gets training in dependency. |
. |
That
financial capital is valuable, and she should pay some rent for temporarily
possessing and using it. That "rent" for the use of someone else's
money, is the "interest" she should pay on the loan of that money.
Just as some one pays rent for accommodation to the owner of a house, so
a borrower should pay interest on the loan to the owner of that money. |
...
| She
should also pay back the loan. It is not a gift, alms, or charity. It is
a business input or resource, and is rented. It must be returned. |
. |
The
rented house, like the borrowed money, remains the property of its owner
(landlord, lender). |
...
| If
you allow an entrepreneur to default on a loan (not pay it back), you do
two disservices: (1) to the individual and (2) to the community and society
as a whole. |
. |
The
entrepreneur will get training that encourages dependency and dishonesty
(two major factors of the social problem of poverty) and you contribute
to mismanagement and loss of capital in the economic system. The entrepreneur
will miss out on an important lesson of personal empowerment in running
a viable business, while the society misses out on one more potential for
economic growth and eradication of poverty. |
...
| Notice
that a moral judgement about defaulting on a loan has not been made. The
non payment of money back to its owner (which is theft) may be immoral
or a crime, but it is up to our religious leaders and law keepers to attend
to that. A social science analysis merely points to how it reinforces the
social problem of poverty. |
. |
The
need to emphasize that grants should not be given, that loans should be
repaid, and that they should be paid for (interest), are three good reasons
why initial loans to inexperienced borrowers (your target group) should
be small (ie affordable), and therefore more re-payable. |
...
| 2.4.
What Interest Rates? |
...
| If
your objective is to train new entrepreneurs to become empowered, to create
and run viable enterprises, then their loans should not be free, and the
interest not subsidized. |
. |
Many
persons, on first hearing this, may object. "But these are poor women!
We should not force them to pay interest on loans! They are too poor!"
Their sentiment is charitable, but their analysis is weak. Do we want to
train poor women to stay poor? Or do we want to empower them? |
...
| If
we want to train them to become self reliant and to create wealth, then
we need to train them to devise a profitable enterprise, one that makes
a profit high enough to pay the market value of the "rent" (interest)
for
using other people's money. |
... |
Better
to guide them towards designing a smaller scale of business, to gain experience,
to borrow less money, make an honest profit and pay back both the loan
and its interest. |
...
| Make
sure your target group, your participants, are trained from the beginning
in being strong enough to pay a market rate of interest, the same as charged
by a commercial or Government bank. |
...
| 2.5.
What Sizes of Loans? |
...
| The
prefix "micro" means tiny. This methodology is aimed at very low
income persons who have no experience in business. Micro enterprise. |
. |
If
someone is already successfully in business, and needs a 50,000,000/= ($50,000)
loan, then they do not belong to this target group, and should look elsewhere. |
...
| This
scheme is aimed at individuals who will initially borrow between 10,000/=
and 100,000/= ($10 to $100) and use it to generate wealth. If they
are successful the first time, make a profit, keep accurate records, pay
the interest as well as the principal, then they can get a larger second
loan. |
. |
If
the range is from 10 to 100, all the loans can not be 100. The average
of all loans should be 50 to 60. |
...
| The
second loan can be from two to twenty times larger than the first loan,
depending upon how promptly they repay the first one, how much profit they
make after paying all costs, including interest and their own labour. |
. |
If
they can not learn to make a profit on a loan of 100,000/= ($100),
then we can not expect them to make a profit on 1,000,000/= ($1,000). |
...
| The
third loan can be two to twenty times larger than the second loan, again
depending upon the level of success the second time. |
. |
You
job as mobilizer is to challenge each participant who is a potential entrepreneur.
This will be expanded in chapter five. |
...
| Very
often the participant will be naively optimistic, and ask for a loan for
greater than her capacity to use in generating wealth and making a profit. |
. |
She
must have a realistic business proposal that will establish a viable enterprise,
not one based on ignorance and wishful thinking. |
...
| Keeping
the initial loans small is an important contribution to viability. |
.
...
...
| Remember
that this handbook, like its companions, is aimed at community mobilizers,
or animators. What is the most important skill of a mobilizer? It is the
ability to organize a group for action. Now it may sound strange that our
proposed method of generating wealth is aimed at the individual (low-income
entrepreneur), yet we need the group facilitation skills of a community
mobilizer. |
. |
When
we look at this overall all method more carefully, however, it looks less
strange. Some essential elements of the whole method involves training
individuals, other elements involve organizing groups. |
...
| You
are already skilled and experienced as a community mobilizer (see "Handbook
for Mobilizers") aiming at fighting communal poverty by promoting self
help community projects. |
. |
Now
you can add to your tool kit the concepts, principles, and methodology
of this handbook, and find further use for your mobilizing concepts and
skills. |
...
| The
pyramid you will organize has an umbrella group at the top, five to seven
trust groups in the middle, and individual entrepreneurs at the base. Each
individual belongs to a trust group, and everyone belongs to the umbrella
group. |
. |
The
individuals play different roles as trainees and participants, at each
level of the pyramid. They create the micro business enterpreneurships
that produce the much desired "value-added," and they are the participants
and members of the groups that facilitate their businesses. |
...
...
| A
trust group is composed of five to seven individuals, usually women, who
know and trust each other. As a mobilizer, you build several trust groups
out of a larger (20-40) community group. |
. |
You
give each participant a paper, and she puts her name on it, then a line,
then the names of five others that she can trust to hold her money for
her. It is helpful to have one or two assistants doing this. Then, confidentially,
you take the slips of paper and group the participants into groups. |
...
| If
a participant does not have her name on any list, then she can not join
a trust group. |
. |
She
may complain, but you must be firm, that she needs at least four or five
other women who trust her before she can belong to a trust group. |
...
| As
time passes, some individuals may drop out; they lose interest, immigrate,
find some paid occupation, or whatever. The trust group must then decide,
by consensus, to take her name off the membership of the group. Conversely,
a person may be, or become, known to a trust group, and wish to opt in.
She can join that group so long as the maximum size is seven persons, and
if she is unanimously accepted by the others. |
. |
Although
it is not necessary, you could ask each trust group to give itself a name:
serious or humorous, as they wish. The choice of name should be by consensus
among all members of a trust group. If another group has chosen a particular
name, mention it, so as to avoid duplicate names. |
...
| Each
trust group will choose, unanimously, one of their member to hold their
money for them. |
. |
She
does not have to be literate, but must be trusted by the other member.
Between meetings, this "Trustee" (or treasurer) holds the money
of the whole trust group. |
...
| Each
trust group should meet, preferably weekly, and each member deposits the
same amount of money with the Trustee. One person can have two memberships,
and then deposit twice the amount. |
. |
Each
trust group must agree that the weekly payment should be consistent with
what the umbrella group chooses (all trust group member are also members
of the umbrella group). |
...
| As
with traditional credit rotation groups, the trust group may go on to do
other things in their weekly meetings. |
. |
That
differs from group to group, community to community, country to country. |
...
| Your
job is to organize five to seven trust groups for each umbrella group. |
...
...
| Then
you mobilize and organize a larger "umbrella" group (composed of
all the trust groups) for bulk breaking capital (banks do not want to make
small loans) and for training in the necessary skills of investment, enterpreneurship
and production. |
. |
The
umbrella group is at the top of the pyramid (that you organize). Every
member of every trust group is automatically a member of the umbrella group.
No one can be a member of that umbrella group unless they are a participating
member of one of the constituent trust groups. As mobilizer you should
not be a member of any trust or umbrella group. You organize. |
...
| Each
umbrella group should have a name chosen by all its members: a slogan of
encouragement, good luck, wisdom, prosperous future or similar positive
phrase. |
. |
Unlike
the trust groups, the umbrella group should be a little more structured,
perhaps with a standard executive of chair, vice, secretary, treasurer,
other functional offices (as deemed needed by the group) and a member or
two at large. The executive should have at least one member from each and
every trust group. |
...
| The
umbrella group should meet every three to five weeks, preferably on the
same week day at the same time. All members of every trust group should
attend. Members of the executive who miss more than two or three (chosen
by the group) consecutive meetings, must be replaced with more participatory
or active members. |
. |
The
main tasks of the umbrella group are to: (1) take regular deposits
or contributions from the trust groups, (2) break a large bank loan
into smaller loans that go to the trust groups, and (3) receive
the repayments of the loans from the trust groups. |
...
| During
umbrella group meetings, all such payments should be public, verbally announced,
recorded, and as transparent as possible. Help each umbrella group to develop
an open style of making payments in each direction. |
. |
One
designated member should announce very loudly where each payment comes
from, what it is for, and where it is going. Simultaneously, another person
(eg
treasurer) records each payment in the appropriate place in the appropriate
ledger. Each participant (eg the trustee from a trust group), should
get up and bring the money across the floor and count it out for all to
see. Make a public ritual of this. |
...
| Another
responsibility of the umbrella group is to decide upon and set the amount
of money and interval for contributions by individuals to trust groups. |
...
| The
umbrella group then becomes the single "legal individual" or party that
deals with the bank, opens up a savings account, makes savings deposits,
negotiate a loan (amalgamation of all the individual small loans to individuals,
channelled through trust groups), takes out a single large loan, and divides
it into proportional medium sized loans for the trust groups to further
bulk break and distribute to their individual members. |
. |
The
trust groups and the umbrella group are composed of the same individuals,
and complement each other in roles and functions. Jointly, they form a
pyramid that is a vital bridge between the bank (or other lending agency)
and the individual entrepreneurs. |
...
...
| Training
takes place at all three levels of the pyramid: the umbrella group, the
trust groups, and the individual entrepreneurs. |
. |
Each
level has different kinds of training (topics and methods) for different
purposes, while there is some overlap, and a functional relationship between
the different levels. |
...
| Financial
training is needed at all three levels of pyramid, although the specific
aspects vary. |
. |
See
a list of different topics of financial training;
be sensitive to the expressed needs of the different groups as you set
up your training plan. |
...
| Organize
your training according to the needs of the pyramid. Do not hold workshops
where individuals from outside the pyramid are present. Keep training groups
as small as possible, 8-15 persons. Hire temporary trainers skilled in
the various skills needed (See Chapter 4, below):
management,
planning, credit, communications; marketing and production. |
. |
Train
your trainers to use a facilitating approach rather than a lecturing approach.
Ensure that training sessions are all conducted in a practical manner,
where skills are not taught as theory, but with concrete examples taken
from what the groups and entrepreneurs are doing. |
.
...
| 4.
Skills Needed for Generating Wealth: |
...
| What
does an individual need to know, and need to know how to do, in order to
create and maintain a successful, profitable, private enterprise? |
. |
Remember
that your target group is low income, usually illiterate or semi-literate,
unsophisticated, having little general knowledge about the world, unskilled
in any technical skill, un-informed about obtaining credit or managing
money, people, things. |
...
| Almost
anything necessary to run a business can be included in the skills needed. |
...
The
kinds of skills needed can be put into several categories:
-
Management
skills: to manage people, physical resources, finance;
-
Financial
skills: keep accurate records, make budgets, calculate profits and losses;
-
Communication
skills: speaking, writing, reading;
-
Marketing
skills; research, sales, enterpreneurship;
-
Credit
skills: borrowing money, dealing with banks or other creditors, interest;
-
Technical
skills: the applied physics, chemistry, biology, craft and artisan skills
of a chosen profitable and productive enterprise.
This
chapter identifies some of those needed skills, and directs you, the mobilizer,
to ways of imparting those skills to your target group. |
...
| 4.1.
Planning and Management Skills: |
...
| The
small scale entrepreneur must know how to manage her business. She must
know how to mobilize resources (inputs). She must know about people; not
staff at first, if she is starting very small, but suppliers, family members,
customers, investors, authorities. |
. |
Skills
in human interaction are necessary. For you, as mobilizer, many management
skills were described in the construction and maintenance of communal facilities
and services ("Handbook for Mobilizers"), companion to this handbook. Your
challenge now is to convert that management training to this effort. |
...
| Management
and planning skills include the identification of needs, the generating
of goals and objectives, locating of resource, identifying constraints,
devising possible strategies, choosing the most effective strategy, and
determining important details such as budgets, monitoring methods, clarifying
roles and tasks, devising work plans, and making changes in response to
evaluation. |
...
| For
an illiterate, small scale entrepreneur, these need not be very elaborate,
sophisticated, or written down, but they must be discussed and considered
by her. |
. |
Your
job as a mobilizer is to challenge her to demonstrate that she has considered
all these issues and made realistic decisions. |
...
...
| Most
people assume that skills are needed in order to work in a bank. What many
overlook is that skills are also needed to be a customer of a bank. |
. |
To
a low income person, especially if illiterate and humble, a bank is a very
threatening and fearful place. The customs and expected procedures are
foreign and incomprehensible. |
...
| Your
target group (beneficiaries) are people who need to learn about the nature
of credit, the institutions that provide credit, and the people in those
institutions. |
...
| Informal
loan sharks may charge up to and over 200% p.a. interest, without that
being made explicit to a borrower. |
. |
Banks
loaning at commercial or Government rates are far less expensive. Ignorance
of skills to obtain credit is a barrier to overcome. |
...
| The
skills your target group need are the understanding of credit, principle,
interest, service charges and all the methods and procedures for borrowing
and returning money. |
. |
As
with other skills, the best method of learning about credit is by doing. |
...
...
| It
is useless for a small scale entrepreneur to invest her resources in producing
something of value, and then not be able to sell the product. Sales provide
the cash for repaying the loan and any other debts, paying herself and
others a fair wage, and paying for all the other costs of production before
taking a fair profit. |
. |
Marketing
skills include knowing how to find interested customers (including research
skills for finding them), and how to present the product in a manner attractive
to buyers. |
...
| No
matter how enthusiastic and optimistic an entrepreneur may be, her business
will not be viable if she can not sell her product. |
. |
Your
job as mobilizer is to challenge her to demonstrate that she has a realistic
marketing plan and strategy. See Marketing |
...
| 4.4.
Financial and Accounting Skills: |
...
| Unless
your target group participants can always know their financial position,
and calculate their income and costs, they can get into serious financial
trouble. |
. |
The
range of accounting and budgeting tasks needed is dependent upon the size
and complexity of the enterprise. |
...
| The
most essential skill (and habit to be encouraged) is in keeping a daily
accounts ledger, no matter what the size of business. The first training
in accounting, therefore, should be in keeping financial records. |
. |
As
with as it other training in capacity development, avoid lecturing, preaching,
pontificating or dictatorial styles of presenting the material. See "Handbook
for Mobilizers;" learning for capacity development should be by
facilitation. |
...
| If
you organize a workshop, keep it small. Limit the number of participants
to a maximum of ten. Every participant should have a business planned,
and, during the workshop, prepare financial documents specific to their
planned or ongoing enterprise. |
. |
These
should start with recording (eg ledger) exercises, and go on to reporting
(eg financial statements) exercises. |
...
...
| While
you will not dictate to your target group participants as to what sector
they choose, your advice to them is to guide them towards initial processing
of agricultural products. |
. |
For
them to run a successful business, then, they must know a sufficient amount
about the processing; technical knowledge. |
...
| Small
scale enterprises in the following sectors should be encouraged: off farm
agro-processing (milling, baking, fish smoking); artisans (farm equipment
repair and fabrication; brick making, weaving, construction, tailoring,
carpentry), food preparation and petty trade or marketing. |
. |
While
the needed skills can be identified, how you go about transferring those
skills to your target group must be appropriate. |
...
| Avoid
classroom lectures, with a lecturer droning on about the processing. |
. |
Seek
creative innovative, unorthodox and relevant methods of training. |
...
| Emphasize
practical activities (we learn best by doing). Visit operating processes
and enterprises, different kinds and sizes; talk to owners and workers. |
. |
Bring
trainers in with practical, experience, but do not let them lecture; let
them facilitate and demonstrate (teach facilitating methods to your trainers),
where participants can get hands-on experience. |
...
...
| Unlike
"training as mobilization," as in chapter 3 above, or in mobilizing
communities to solve communal problems (Handbook for Mobilizers),
training in this chapter emphasizes skill transfer. Nevertheless, it is
not orthodox and institutional training. |
. |
The
central method is on-the-job training, and that means every participant
(trainee) must be a full participant in creating and running her own enterprise. |
...
| Avoid
inviting any non participants, except trainers to any of your workshops. |
. |
Run
small, half-day workshops at the locations of each of your participants,
using their enterprise sites as the venue and example of the training. |
...
| Prepare
a flexible, rotating, participant sensitive training plan. The major topics
of your training should be as above: planning, management skills, skills
in obtaining and using credit, marketing skills, financial and accounting
skills, and technical (production) skills. Modify the plan according to
your monitoring of the needs and weaknesses of your participants. |
.... |
Obtain
experienced specialists in each topic, but ensure they take a facilitating
and participatory approach (you teach the trainers in those techniques),
and ensure that the participants all get hands on, supervised experience
that is relevant and valid to their chosen enterprises. |
.
...
| 5.
Running a Successful Enterprise: |
...
| This
chapter reviews some of the factors of or reasons for success and failure
in running a productive enterprise. |
. |
Remember
that this handbook is intended for you, the mobilizer, that wants to fight
the causes of poverty as a social problem. Keep these factors in mind while
giving encouragement, training, advice and support to participants who
want to generate wealth. |
...
| The
success of a venture can first be measured by its viability. Can it survive?
Is it sustainable or will it crash when outside support is withdrawn. Financially,
viability means that the enterprise is profitable. |
. |
That
means, over time, that the income for the business is more than the expenses.
The level of profit must be high enough that the entrepreneur will not
decide some other activity is more worth while. |
...
| Two
important characteristics that contribute to viability and profit are integrity
and good will. Integrity means the business is run in an honest and honourable
manner. If not, ultimately it will fail. |
. |
Good
will is a special concept in business; it means the total of all the non
materiel assets of a business: its reputation (ie for quality service,
for honesty, for dependability), its popularity, its good name (how well
it is known to customers and suppliers), how much credit it can attract,
and how good an "image" it has in the public eye. A third characteristic
is to be practical, had nosed and tough, not being cheated or misled. |
...
| These
three contribute to viability, and your job as mobilizer is to get that
simple but important message to your target group. |
...
...
| The
most important feature of a business that you help to set up is that is
successful. It must be able to survive. If it can survive, it is considered
"viable." |
. |
Viability
requires several things, but the foremost feature is that it makes a profit. |
...
| What
is profit? |
. |
After
you add up all the costs of production (land, rent, labour, wages, capital,
including cost of credit) and you subtract them from all the income
(eg
from sales, rentals, fees), and if it is a positive number, it is the
amount of profit. If it is a negative number, it is the amount of loss. |
...
| A
business can incur some loss, for some time, but, in the long run, must
have profit to survive. |
...
| You,
as mobilizer, want to do two apparently contradictory things: (1) encourage
low income persons to create and run a business (be optimistic) but
also (2) encourage caution to avoid too much enthusiasm (be realistic)
for
starting a business that might fail. |
. |
As
in any development work, start small, begin modestly, and win success;
that will encourage others to join in. If you start big and have a failure,
it will be more difficult to get other to join in. As the clich goes,
"success
breeds success." |
...
| The
key to resolving the paradox or apparent contradiction between optimism
and realism is how you go about your mobilizing. You encourage your target
participants to each start a business, but only a viable business. |
. |
While
you mention this from the start, you do not leave it to an introductory
sermon. Throughout the organizing process you challenge your participants
to plan for viability. |
...
| Practical
examples of this planning are included in some of the appendices. Copy
the forms and instructions for handing out in workshops, and require that
participants each produce a realistic work plan to make a viable enterprise. |
. |
Remember,
workshops are not merely conferences; participants must be prepared to
work at workshops and their outputs should be the production of realistic
work plans for starting and maintaining viable enterprises. |
...
| Again,
learning by doing, not just listening to speeches, harangues, lectures
or sermons. |
...
...
| Think
back to Chapter One and the big five among the many factors
of poverty. Here is when you have an important role in the attack against
causes of poverty. Dishonesty is one of the big five. |
. |
Beware!
Do not be a preacher to make sermons against dishonesty. That is for our
religious leaders; moralizing. No. In a calm, informed, and confident manner,
you explain that business survival depends upon viability, variability
requires profit, a profitable business must have integrity. |
...
| If
a business person cheats her customers, they will not want to return, and
sales drop. If she cheats her supplier, they will try to take their resources
elsewhere. |
. |
If
she short charges her staff, the motivated and competent ones will leave,
and only the incompetent and corrupt ones will stay, bringing the business
down with a crash. |
...
| Remember,
your job is to fight dishonesty, a major factor of the social problem of
poverty, not by preaching against it, but by helping low income persons
set up viable micro enterprises, which require integrity to survive. |
. |
Incorporate
the above logical reasoning into all levels of your organizing and training
of the pyramid and the individual businesses. |
...
...
| The
concept, "good will" sounds like what we call a "warm fuzzy" (ie that it
sounds attractive but is not very practical). In the jargon of business,
however, "good will" is a concrete characteristic of any business. It is
composed of all the non material assets of the enterprise. It includes
its reputation, and number of customers and suppliers, how well it is known. |
. |
It
includes values other people make about its honesty and integrity; will
people trust the business or fear to get cheated by it? In big companies
such as Coca Cola, Pepsi, Nile Lager, Sportsman, it includes the musical
jingles that race around in our heads. It includes the degree to which
the motto of a business is familiar to people. |
...
| All
of these intangibles contribute to the value of an enterprise, and are
assets. |
...
| How
does this relate to your training and organizing? |
. |
You
ensure that your target group participants recognize that good will is
a valid and important factor of business success, and it is consciously
included in the training for running a viable enterprise. |
...
| Staff
loyalty (as well as customer loyalty, and supplier loyalty) is important.
An entrepreneur can plant the seeds of loyalty, and help it grow, on a
daily basis, by genuine friendly concern for others. Be interested in them
as total persons, not just factors of production. Speak to them respectfully
and positively. Avoid criticism, but give positive and encouraging hints
about how to improve performance. |
. |
Recognize
achievements often and before witnesses. Greet every one every day on arrival
at the work site. Do not act haughty and superior to those with menial
tasks and low wages. |
...
| Treat
everybody with friendly respect. This is the message of your training. |
...
| Many
small or new restaurants lose customers and go bankrupt, not because their
food is bad, but because their good will is bad. Sometimes this is blamed
on inadequate staff training. A restaurant entrepreneur should ensure that
staff are informed that their job description includes the building of
good will of the business. |
. |
This
is especially true in any enterprise in the service industry. Staff should
be reminded that customers pay their salaries, and should be all treated
as respected bosses. |
...
| A
table attendant may be very obsequious to her boss, but be rude to customers
when the boss is absent. When an item is not available, for example, an
untrained table attendant will just say "not available." An attendant
that understands good will, in contrast, will say please they are sorry
that it is not available, and then offer one or two alternatives in a positive
and pleasant manner. |
. |
If
staff are loyal to the boss (because of her good will ) and she shows them
that she wants their customers to be treated with friendly respect, the
business will flourish as customers recommend it to others, and its good
will increases. |
...
| 5.4.
Sound Planning and Management: |
...
| While
you are demonstrating and encouraging micro entrepreneurs to be pleasant,
respectable and friendly, as above, you also show them how to be careful,
cautious and thorough in running their business. |
. |
Being
friendly does not mean to allow suppliers, staff or customers to take advantage
of you, or cheat you. |
...
| First
this means having practical, viable, and well organized detailed plan and
budget. Second this means sticking to it, or having good reasons to divert
from it. |
. |
Third
this means good monitoring: watch the production and financial changes,
in detail, daily. Always know what is going on. Fourth, when things go
off track, take decisions , and act quickly, to get things on track again
before they get worse. |
...
| As
a mobilizer, your task is to impress upon your target group that they should
not abandon their business. Staff and family members should not be expected
to have the same motivation and desire as the entrepreneur to make the
business a success. |
. |
Delegate
responsibility whenever possible, especially as the business grows, but
monitor daily and show your interest in what is happening. |
...
.
|
