Inclusive BDS service provision in Uganda - Lessons Learned
The 2015 Global Entrepreneurship Monitor (GEM) index ranked Uganda as one of “the most entrepreneurial economies in the world”. It is estimated that SME’s in Uganda constitute 90 per cent of the private sector and contribute approximately 75 per cent of GDP signifying their importance in the economic development of the country. However SME growth and its survival in Uganda faces severe constraints. About 78 per cent of all new SME’s in Uganda do not survive beyond their first anniversary. The main causes of these SME business failures are recapped below
The Top Twelve causes of SME business failures in Uganda
· Lack of business management and entrepreneurship skills
· Limited access to affordable finance
· Lack of business and financial planning
· Poor business records management
· Deficient corporate governance
· Poor banking and borrowing history
· A culture that disrespects business contracts
· Poor management of family businesses
· Poor savings culture
· Employing relatives and unavailability to supervise business
· Lack of financial discipline by business owners
· Short term business outlook
With such challenges of business failure, the case for BDS provision in Uganda is obvious. It not a coincidence therefore that a 2015 market survey carried out by the BID Network on BDS service provision in Uganda listed the top 5 services most demanded and most offered as being: Business plan development, Business to finance brokering, Financial management training & investment readiness Governance support and Mentoring & Coaching.
However in providing BDS to inclusive business SMEs in Uganda we at BSpace have learned some lessons which we would wish to share with other BDS providers in Uganda in order to improve the effectiveness of the current market offer. We do this in the belief that as BDS providers we are complementing each other and we are not competitors - Yet. There is still room for all of us in the BDS market space. Our Top 5 Lessons learned on BDS provision in Uganda are:
- Tailor made BDS is effective but takes time to develop and execute – Unlike other BDS service providers BSpace offers the option of tailor made BDS which takes longer to develop and execute than generic BDS but is more effective. Developing a new brand for a product can take weeks of back and forth discussions between a consultant and business owner with no decisions being made. A Go- to-market strategy takes three months to develop and execute.
- SMEs can pay for BDS support - A myth has been created that SMEs in Uganda are too financially constrained to pay for quality BDS. We beg to defer. Our experiences shows that quality BDS provision can unlock the willingness by SME’s to pay for BDS. However some form of initial subsidised BDS offer is necessary to get the SMES convinced to participate in any paid for, subsidised or cost sharing BDS arrangements.
- There is a missing link between BDS Provision and investment - Discussions with market actors in the BDS and investment space reveal that there are many accelerator and incubation programs in Uganda who provide different forms of BDS services but very few of them provide funding as part of their offer - yet nearly 100% of the BDS recipients mention affordable funding as a key need to nurture their start-ups or scale up their businesses. This means that there is gap in the market to link accelerator and incubation program ‘graduates’ to affordable finance
- The classroom experience is indispensable – Bringing together SME owners in a classroom environment was not in our initial BDS offers. But with cross cutting themes emerging among SMEs the class room experience has been added to our offer as an effective way of dealing with cross cutting issues e.g. Governance. This has turned out to be a good strategy as at times SME owners pick business ideas and solutions to their SMEs not from the BDS service providers but from their fellow SMEs owners
- Harnessing and measuring the full impact of BDS needs time - While the outputs of the BDS programs are easily realisable and quantifiable, realising and measuring the outcomes (effects of the outputs) takes much longer to be realised beyond the life of BDS. Yet most BDS service providers do not factor this in their plans. The impact of a new brand strategy to an SME’s sales volumes and market share OR the impact of product rationalisation to an SME’s profit margins.
This blog is part of the September 2016 series on Inclusive Business Development Services, in partnership with the Inclusive Business Accelerator. Don’t miss the whole series on support available to inclusive business from practitioners, donors and intermediaries including Afrilabs, DFID, Endeva, EY and many more…