LEARNING TO IMPROVE BUSINESS SERVICES FOR RURAL MICROENTERPRISE ITDG's experience of using participatory processes to establish enduring impact assessment systems among business service providers in rural Bangladesh

This paper discusses participatory methods in the design and implementation of performance and impact assessment systems among business service providers in rural Bangladesh. Impact assessment systems are more than just mechanisms for accountability. They should inform an enduring learning process among service providers, sustained by rewards of better management information and market responsiveness. These benefits are more likely when service providers participate actively in system design, so that it reflects their own priorities, resources and capabilities – and the needs of their clients. However many factors constrain this frustrating the development of business service markets that include responsive and intelligent service providers: Incentives: where activities are dictated by external project frameworks, service providers lack real incentives to value their own learning Guidance: there is little practical advice available to service providers seeking pragmatic, low-cost methods of measuring their own performance and impact Capability: many service providers lack the confidence, skills and resources to invest time in developing their own measurement systems ITDG’s small enterprise programme in Bangladesh aims to build business, technical skills and organisational capabilities, through a civil-society network that trains business service providers in rural Faridpur, Barisal and Dinajpur. ITDG does not directly fund these partner organisations, so the relationship has been less influenced than usual by local donorrecipient dynamics. In this context, ITDG encouraged its six leading partners to participate in developing performance monitoring systems. Consultation meetings with stakeholders agreed qualitative and quantitative indicators most useful to assess different levels of impact that ripple out from ITDG’s interventions and our partners activities. Monitoring formats for collecting information were developed, and ITDG’s partners took responsibility for field testing these. They allocated specific personnel for system implementation, and co-ordinated a small team of staff from different organisations to assess training requirements. Field testing is on going. First reports suggest that the participatory approach has produced a simple and practical system which both the service providers and their clients value. M. Albu, A. Rob & A. Chowdhury Learning to Improve Business Services for Rural Microenterprise 1 LEARNING TO IMPROVE BUSINESS SERVICES FOR RURAL MICROENTERPRISE ITDG’s experience of using participatory processes to establish enduring impact assessment systems among business service providers in rural Bangladesh Mike Albu, Abdur Rob & Anisur Chowdhury November 2003 INTRODUCTION This paper discusses ITDG’s experience of using participatory methods to design and establish performance and impact assessment systems among business service providers serving microenterprises in rural Bangladesh. Many development practitioners now appreciate that the goals of impact assessment (I.A.) must extend beyond merely creating mechanisms of accountability (see for example Simanowitz, 2001). In the messy and uncertain real world of development practice, I.A. systems that only seek to “prove results” risk being seen as impositions by those whose work is under scrutiny. In practice this means that such systems are vulnerable to false reporting, encourage dubious attributions of impact, require costly auditing, and create disincentives to learning from mistakes. “Proving” impact via externally-imposed I.A. systems is particularly contentious when the principal aim of a programme is to build the long-term capacity and institutional sustainability of service-providing organisations or agencies. In this context – which is typical of business development services (BDS) support programmes – externally-imposed I.A. systems are most unlikely to sustain after external support and supervision is withdrawn. The challenge is to move from I.A. systems that aim to prove results, toward I.A. systems that help improve performance. By this criterion, effective I.A. systems are practitionerfocussed: characterised by their ability to contribute to enduring learning processes among those whose work is being assessed. Such I.A. systems have to be sustained by the advantages which “leaning” organisations gain from having better information about their own performance and the needs of their customers or service users. In its work with business service providers in rural Bangladesh, ITDG hypothesised that a critical factor in establishing I.A. systems that facilitate such performance improvement is the active participation of service providers in the I.A. system design and implementation process. This paper describes how this was achieved and reports some provisional outcomes. CONTEXT 1: POVERTY AND RURAL NON-FARM EMPLOYMENT IN BANGLADESH Bangladesh has levels of rural poverty of a unique scale and intensity. Nearly half the rural population some 50 million people are estimated to be living on diets that fail to meet minimum desirable levels of nutrition. In an overwhelmingly agricultural economy, recent agricultural improvements offer little hope to Bangladesh’s poorest people. Land is already intensively cultivated and there are great inequities in distribution. Average farm sizes have declined steadily (e.g. from 0.8 ha in 1983 to 0.6 ha in 1996), to the point where typical holdings are now only adequate to meet 50% of a household’s livelihood needs. 1 ITDG is an international NGO that works to help poor people create their own solutions to poverty. ITDG sees technology including physical infrastructure, equipment, knowledge, skills and the capability to organise and use all of these – as a vital contributor to people’s livelihoods. By sharing knowledge, skills and influencing others, ITDG envisions a world free of poverty and injustice in which technology is used to the benefit of all. M. Albu, A. Rob & A. Chowdhury Learning to Improve Business Services for Rural Microenterprise 2 In this context, rural non-farm employment (RNFE) offers an indispensable alternative to destitution or urban migration. Moreover, during the 1990s, rural non-farm employment not only played a critical role in poverty reduction – it also made the major contribution to overall economic growth in Bangladesh (Osmany et al. 2003). A detailed recent survey of enterprise in Bangladesh (Daniels, 2003) found that in rural areas 9 million people (13% of adult population) already work in non-agricultural small and microenterprises. More than half of these are home-based enterprises – whose scope ranges from retail trading, to snack food-processing and small-scale manufacturing of basic household goods. Four factors are critical to RNFE growth and impact on poverty: access to markets or buyers, access to skills and technology, access to credit and the overall policy environment facing microenterprise. Key characteristics of the Bangladesh context are summarised in Figure 1 Figure 1. Factors influencing rural non-farm enterprise in Bangladesh Strengths & Opportunities Weaknesses & Threats Access to Markets • Fast expanding domestic urban markets • Very low labour costs • Rural isolation – shoddy transport & communications infrastructure • Changing patterns of trade & competition • Lack of market intelligence capabilities Credit / Finance • Extensive outreach of microcredit programmes • High participation by women • Little or no coordination between credit and non-financial services Skills & Technology • Anachronistic skills base • Inadequate quality assurance • Weak supply of appropriate technologies Policy Environment • Inadequate transport infrastructure • Unreliable electricity supply • Official harassment & rent-seeking CONTEXT 2: GENDER, ACCESS TO CREDIT AND SKILLS Due to the phenomenal success of group-based lending, women have unparalleled access to credit in Bangladesh. Almost all of the many micro-finance institutions target women as their priority borrowers (Jackelen 1999), and most aspire to lift their clients out of poverty through income-generating activities. Despite their high uptake of micro-credit, however, women represent a tiny fraction of the workforce in rural non-farm small & microenterprise – much of which is unpaid work by family members. Less than 3% of rural women own or have paid employment in non-farm enterprises (compared to around 33% of rural men) (based on analysis of data in Daniels, 2003). Most of this female employment occurs in home-based businesses concentrated in stereotypical activities with low returns: garment-making, petty trade, spinning and weaving of textile. Even though micro-credit schemes in Bangladesh are rotating large volumes of money, ostensibly through women’s hands, this has not generated much employment for women. Much lending to women is, in practice, diverted directly into hands of male relatives, but this is only part of the explanation. It is also the case that women, and poorer, marginalised 2 Of these: 21% are owners, 15% are unpaid-family members and 64% are paid workers. 3 In Daniel’s survey, an enterprise was defined as any income-generating activity that markets at least 75 percent of its product M. Albu, A. Rob & A. Chowdhury Learning to Improve Business Services for Rural Microenterprise 3 segments of the population in general, lack the skills, information and access to markets that are needed to succeed in business. This is epitomised by rural producers frequent inability to understand and meet the needs of large-volume buyers, and aggravated by the absence of appropriate technologies and skill-base. The huge disparity between women’s use of micro-credit and their actual participation in small-scale enterprises is evidence of this. ITDG’S APPROACH TO RURAL BUSINESS DEVELOPMENT SERVICES ITDG Bangladesh, with financial assistance from DFID, has been working to support development of rural non-farm enter