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NGO Involvement in Small Enterprise Development

Empowerment of the Truly Poor - 1


02 / 1994

NGO involvement in small enterprise development aims to devise and implement interventions that will reduce poverty. This is common to the entire NGO movement in the South.

Poverty is calculated in access to basic needs - food, shelter, infant mortality rates health care, water, sanitation and literacy. These are quantifiable and help agencies assist nations and regions not just families and communities.

Interventions provide improved facilities like wells, piped water, schools,health centres and antenatal programmes vegun to help the poor. Capital injected for infrastructure is a on off process and running costs must be found internally.

Thus small enterprise development can either be maintained providing income and employment to look after the above facilities like running the health care centre or manage water resources or the poor can be supported in establishing small enterprises so that their income hence their purchasing power is increased and facilities bought in the open market. This presumes that there is some input from the state.

Most governments in the developing world used education as the promise to better living conditions in the future with higher aspirations but has proved to be a way of putting off development. Most educated rural youth have secondary or higher e3ducation and are unemployed resulting in frustration.

Development interventions must deal with these frustrations and design interventions not for small schemes but help access substantial resources to start growth oriented enterprises helping significant employment and income generation.

Poverty alleviation is linked to economic self reliance which requires income generation. with agriculture waning new avenues must be found with private sector aid creating new jobs linking the rural economy with the urban. Apart from the actual enterprise related interlinked jobs can be created back and forth by providing raw materials or transporting the product to town. enterprisesw can inject new money into a village creating a ripple effect.

Now donors spending has been cut by recession and other factors and beneficiaries have to show value for money in project proposals. Donors want proof that money invested in entrepreneurial activity results in generating income and employment for many and they want the ideology justified.

Enterprise is an economic activity which innovate accesses credit generates investment capital identifies and reaches markets uses technology and manages staff. Primarily NGOs provide credit to small enterprises because of the difficulties faced by the rural poor in getting formal credit as well as their eternal debt to moneylenders.

governments have not been able to solve this problem and few private banks regard the villager as a safe risk. The NGO sector knows and understands the processes at work in the village and as non-commercial entities they can absorb the high transactions of such loans.

NGOs establish rural savings and credit schemes introducing the discipline of saving which leads to asset accumulation a requirement for poverty alleviation and financial security. These savings in turn generate invgestment within the community, strengthening their position. Institution building further reinforces their position and plays an integral part in empowering the poor. Any enterprise thus can forge kinks outside the village by negotiating with financial technological and marketing institutions. Strong village institutions are essential for the route out of poverty and the premise for successful rural enterprises.

Clearly the NGOs most important function in enterprise development is providing credit. The prime limitation is how much. Credit is determined by the ability to save and repay. Amounts are minimal often no more than US$1 aweek or US$24 in 16 weeks. Thus the impact on poverty is very limited although even this improvement is felt in nutrition and perhaps literacy.

Such small loans are more suited to self employments rather than enterprise affecting only the immediate individual and his family. This is better than nothing but it is felt that it is the slightly better off villagers who are benefitted rather than the very poor. Can genuine enterprise development take place with credit of US$20.

The masses well being remains unchanged with limited resources increasing dissatisfaction with only marginal improvements in the standard of living. The North South relationship has to be radically changed with increased resources or NGOs will have to adopt high risk strategies to create substantial growth.

Key words


, Sri Lanka, Colombo



BYNON, Radhika, IRED GENERAL SECRETARIAT COLOMBO OFFICE, Support Services for Development (pvt)ltd. Sri Lanka, 1993/04 (SRI LANKA)

IRED Asie (Development Support Service) - 562/3 Nawala Road - Rajagiriya - Sri Lanka Tel : 94 1 695 481 - Fax : 94 1 - 688 368

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