The sentence of the day in our media coverage in Haiti is ‘Nous contribuons à la création d’une dynamique positive pour le changement”, we are contributing to an environment that encourages positive change.

This is the message that Pioneers of Prosperity is sending (here in Haiti knows as le Prix Pionniers de la Prospérité) and that our sister OTF project is also sending (Une vision partagée pour un Haiti compétitive et prospère, led by Rob Henning). Working within the context of a recent report by economist Paul Collier in his capacity as adviser to UN Secretary General about the possibility of this moment in which Haiti finds itself (see paper here), OTF and Collier both are bullish about enterprise solutions to poverty. The two OTF programs in Haiti are therefore working together to create positive synergies and to highlight the success stories that exist here, despite the difficult environment.

But our role is only to contribute. The movement toward prosperity begins and ends with the countries, its citizens, the enterprises themselves. Positive attitudes and feelings about the role the private sector can play must be fostered after decades of an economic model that has benefited a small number of ruling elites and government officials at the expense of the vast majority of the population. Now however, through the example of the innovative, productive, and growing small and medium-sized enterprises in Haiti, Haitians have the opportunity to see the positive role models that, in the midst of everything, have emerged at home.

Haitians seem eager to embrace this new message – after a round of TV and radio talk shows today, 8 new firms threw their hats in the ring in the space of a few hours. I can’t wait to meet Haiti’s Pioneers of Prosperity.

The past few weeks have been quite exciting as I’ve been involved in the promotion of the Pioneers of Prosperity Award in Guyana, Jamaica, Trinidad, and Tobago. It’s been a great experience meeting with the wide variety of chambers, associations and other organizations that work with entrepreneurs and business owners in these countries.

The launches in particular have been inspirational. One of my favourite moments so far was hearing Audrey Marks, an entrepreneur and business leader, speak at the Pioneers of Prosperity launch in Jamaica. Audrey is the CEO of Paymaster, a company that pioneered bill payment services for consumers and the collection and remittance of payments for businesses. She is a serial entrepreneur, having started and operated five businesses already. Even though the business environment can be very challenging, and once she proved her business model worked she attracted bigger, well-financed competition who have since entered the market, she continues to pursue success relentlessly. That is the kind of spirit I think we’re looking for – that drive to succeed against all odds.

She gave a challenge to the country, urging both entrepreneurs and the government to do their part to create a business-friendly environment, particularly for small and medium enterprises that generate the lion’s share of economic growth and tax revenues by their creativity and innovation. This is the ending from Ms. Marks’ speech:

I would like to close with a quotation from Franklin D. Roosevelt, the man who led the United States through their Great Depression.  On assuming office in 1932, with the U.S. in the middle of its worst ever economic crisis, Roosevelt declared, “The country needs, and unless I mistake its temper, the country demands bold, persistent experimentation.” That’s entrepreneurship!

- Eva Wong

The Bahamas, an archipelago of nearly 700 islands, and best known for resorts that boast of translucent blue  waters and pink sand beaches, has been hit hard by the global economic crisis.

Tourism, which is dependent on the US economy, alone accounts for between  60% and 75% of Bahamas GDP and directly or indirectly employs almost half of the archipelago’s labor force. In just the last year, hotels in the Bahamas experienced a sustained drop-off in occupancies; year-over-year sales dropped 37.7 % from September 2007 to September 2008.

For Bahamians, this presents a seismic shift in the health of the economy, as well as the daily lifestyle and needs of the average Bahamian. While Bahamians remain optimistic for the long-term future of the economy, they realize it might be months if not years before the tourism industry picks up again.

The impact is readily apparent in the capital city of Nassau. A stroll down the main street reveals several shops boarded up and everything within, from the electric fixtures to the door knobs removed and resold.

Yet behind every setback lies an opportunity. The current situation perhaps being the perfect example.

During economic downturns, producers become more resourceful and consumers become more willing to explore and embrace innovative business approaches as well as alternative brands. One entrepreneur I spoke to in the Bahamas had started an ink cartridge recycling and refilling business. She mentioned that many business owners and individual consumers were at first very skeptical, concerned the quality of the ink would be inferior and the longrun costs would be greater as they feared the recycled cartridges would damage their printers. Prospective customers soon warmed to the idea when they realized it was far more cost-efficient than to buy new cartridges, and that the quality of the ink in the recycled cartridges was actually higher than in the new cartridges. The entrepreneur was relentless in her attention to customer service and product satisfaction. Eventually, the skeptics became converts. Recycled and refilled ink cartridges, once considered an alternative option for many businesses, now has become their preferred choice.

Local small and medium enterprises (SMEs) are often more nimble in an economic downturn than the larger, more established, multinational companies (MNCs). In the coming years, many SMEs that understand the local market will emerge from the shadows of the MNCs to become the preferred choice among consumers.  These local SMEs have taken innovative ideas and developed them into dynamic business models…and they will pave the way forward for prosperity in countries like the Bahamas.

Opportunity is knocking…

- Abby Noble

I want to further explore the role of SMEs in the growth of an emerging economy. As Nick Buckley mentioned in his posting, SMEs are thought to be central to a dynamic and thriving country. Even in the United States SMEs are seen as a central player in the economic revitalization needed as that nation faces its deepest financial crisis since the Great Depression (see article).
While we may not fully understand the dimensions of the role SMEs play, we do know there are simply too few of them in the formal sector of most emerging economies. In Haiti for example, a country of almost 9 million people chock full of entrepreneurial spirit, there are only 600 registered companies nationwide!

So while Haiti might have a real appreciation for entrepreneurship per-se, it does not have enough small and growing businesses in the formal sector. In other words, the contribution of its entrepreneurial spirit is not translating into real value for the country. Given that in OECD countries, 60% to 70% of all employees are employed by a small or medium enterprise, and 95% of all firms are SMEs, it is important for Haiti’s future for its entrepreneurs, and Haitian society as a whole, not to overlook the critical role that these businesses play in creating a problem-solving mindset, and economic value, for all Haitians.

At a macroeconomic level, there is a positive relationship between the size of the formal small business sector and economic development. Successful countries have far more robust formal SME sectors as a % of GDP. This leads us to the conclusion that 1) A dynamic and diverse set of industries that use the higher forms of capital are essential to growth, rather than raw commodity or resource based industries, and 2) SMEs are dynamic and diverse and form the backbone for knowledge-based economies, constantly innovating and thereby increasing the stocks of higher forms of capital.

In countries like Haiti, SMEs are not yet making contributions at a scale and scope that is transformative. They are generally too large to qualify for micro-finance (as Nick points out, we are not talking about micro-businesses) and too small for bank loans or foreign direct investment (FDI); there are few supporting structures to help them grow, and even countries with a tendency toward entrepreneurship, they lack a clear strategy to help support and recognize this sector.

It is for these reasons that Pioneers of Prosperity is focused on identifying, investing in, and inspiring small and medium enterprises. As we work to increase the growth and capacity of dynamic and innovative businesses, how thrilling would it be for everyone to jump on board, recognizing the invaluable contribution that SMEs make to economic growth and stability?

-Julie Kennedy

This article presents a very interesting brief by the IFC which  identifies how some microeconomic factors affect the robustness of  MSMEs in a national economy.  These trends define the landscape in which SMEs compete, which is worth exploring – both for SMEs themselves and those who work with them. (Note: the study includes Micro, Small, and Medium Enterprises, which may skew results somewhat from what would be found if only SMEs were included.  A micro enterprise is defined as having 0 to 4 employees.)

The study’s methodology takes an interesting approach —by aggregating national data gathered by the IFC relating to MSME density in terms of employment and contribution to GDP, and drawing correlations with another group of data by the World Bank called the “Doing Business” reports, which study local perceptions of firm-level indicators such as, difficulty to start a business, access to finance in local markets, etc.

The findings? Well of course there are the usual suspects—MSMEs tend to exist in countries which have easier access to finance and not to exist where it takes longer to start a business. But other areas that were interesting discoveries:

• MSMEs tend to not exist in countries where it is difficult to hire and fire people—this could indicate that SMEs tend to require more flexibility in the labor market so that they can cope with external shocks and survive in situations such as the present economic downturn.
• MSMEs are less prevalent in countries where it is difficult to trade across borders—the authors note that this was actually the strongest of all the relationships they found and is actually very surprising considering that SMEs are not generally viewed as being heavily involved in international trade. Their answer? MSMEs are heavily involved in providing business services to international companies, thus difficulties that shut out these larger companies remove the MSMEs market for services as well.

It is an interesting question—why are SMEs so much more prevalent in some countries than in others? What factors contribute to their success or failure on a national scale? What do you think?

Sources: Small and Medium Enterprise Department Background Note on Micro, Small, and Medium Enterprise Database. IFC. Full text available here. The entire database is available at:http://rru.worldbank.org/PapersLinks/Open.aspx?id=6358

The World Bank “Doing Business” reports are available at: http://www.doingbusiness.org

- Nick Buckley

We’ll kick off this blog installment by beginning a conversation around SMEs, which are at the heart of the Pioneers of Prosperity program. One of the most surprising things about small- and medium-sized enterprises (SMEs) is how little they are understood. Although the definition of an SME varies slightly from country to country, the most common definition is any organization having between 5 and 250 employees. Economists have great models for the ways governments’ monetary and international trade policies can affect nations. They also have interesting descriptions of the way consumers work at a personal level, but very little is known about how to link the two together, especially at the firm level where these two worlds often intersect (a firm’s customers are often individual consumers, yet it also faces challenges from government policies around currencies, tariffs, etc.).

Moreover, it is becoming increasingly clear that small and medium-sized businesses are at the core of a dynamic and thriving economy.  Just look at the technology revolution happening in Silicon Valley, where it seems like everyone there is running some sort of start-up out of their garage—it is clear that great ideas do not trickle down so much as they percolate up. The evidence that the richest nations are also the ones with the highest SME densities (in terms of both employment and contribution to GDP) is another indication that SMEs are essential to national prosperity.

Drilling down deeper into SMEs is a tough issue—they are often “below the radar” of governments because they are so small and prefer not to be noticed, perhaps because they fear increased taxes and competition while they are still finding their way.  In the next blog segment, I’ll take a look at an interesting report which sheds light on some key trends from this little-understood part of an economy.

- Nick Buckley

The Pioneers of Prosperity program has launched in the Caribbean in seven countries including Bahamas, Barbados, Belize, Guyana, Haiti, Jamaica and Trinidad and Tobago, and is accepting applications through March 23, 2009. The competition is open to all private sector Small and Medium Enterprises (SMEs) based in the participating countries that have between 5 and 250 employees and annual revenues of $100,000 USD and $5,000,000 USD.  The program launch has been supported by a series of events and articles around the Caribbean.

Below is a sampling of recent press coverage:

Bahamas: Officials of the Bahamas Development Bank,the Bahamas Chamber of Commerce, the Grand Bahama Chamber of Commerce, The Abaco Chamber of Commerce, and Local Government Officials attended the launch events.

Barbados: A recent article in the Barbados Advocatediscusses the importance of research and data collection to support a robust SME sector in Barbados.

Belize: 7NewsBelize.com and Love FM covers Pioneers of Prosperity in Belize.

Guyana: The Guyana Chronicle writes about the importance of SMEs and calls the private sector “the engine that pushes economic growth and wealth creation and creates employment for the poor”.

Haiti: Le Matin covers Pioneers of Prosperity’s launch in Haiti.

Jamaica: “SMEs Generate Growth and Jobs More So than Conglomerates” writes the Jamaica Observer

Trinidad and Tobago: “Trinidad and Tobago’s Express urges region to embrace change” Trinidad and Tobago Express

In the coming weeks, this blog will cover important topics related to the program; share perspectives from the PoP program on the ground; and introduce you to the firms that are participating in this exciting competition.  We invite you to check back, and to reach out to us through the comments or via email atawards@pioneersofprosperity.org with your thoughts.

- Julie Kennedy, Regional Director of Pioneers of Prosperity, Caribbean