Let us start with three pairs of words. Small enterprises versus big future; micro-credit versus micro-enterprises; and traditional development versus inclusive development.
Often people raise their eyebrows when they hear the word “micro or small enterprises.” They think, what can be achieved with small enterprises. Initiatives and enterprises must be big -- they should be mega projects.
That is what development is all about, right?
But the fact is that small enterprises are characterized by three traits, which make them unique.
First, behind every small enterprise, there remains a personal dream of an entrepreneur. In fact, a small enterprise starts with a long-held, carefully crafted dream.
It then encourages the entrepreneur to implement it, followed by even bigger dreams, and drives him or her towards that dream. At that point, the dream and the initiative become mutually synergetic.
Second, every small entrepreneur provides personal labour and efforts to make his or her big dream come true. He or she looks towards a big future and works day in and day out to reach his or her goal.
Third, with personal dreams and efforts of the small entrepreneurs, one day, the big future, longed for by them, becomes a reality. In that journey, there are failures, frustrations, yet the dream of a big future never fades away.
The next issue is between micro-credit and micro-enterprises. Lots of people think that micro-enterprises entail lots of problems. Series of things need to be organized -- land, enterprises, raw materials. Micro-enterprises also involve various risks and there are chances of failures also.
On the other hand, the management of micro-credit is easier -- except for defaults, the associated risks of micro-credit are smaller. Yet, micro-enterprises are preferable, because micro-enterprises are a holistic initiative, where all the production inputs are there.
Micro-enterprises differ from micro-credit in three fundamental ways.
First, in micro-enterprises, there is a dimension of creativity and innovation by the entrepreneur, but there is no counterpart in micro-credit.
Second, in a micro-enterprise, there is an entrepreneur; micro-credit does not necessarily have it.
Third, the phenomenon of credit is somewhat material, but an entrepreneurship initiative is human-centric.
Before embarking on a discussion on differences between traditional versus inclusive development, it may be worthwhile to distinguish between “progress” and “development.”
Progress means quantitative increases in something positive (such as increases in national income), or quantitative decreases in something negative (such as infant mortality rate).
On the other hand, “development” implies not only quantitative changes, but also qualitative transformations of outcomes.
For example, quantitative increases in national income are progress, but if that results in equitable distributions, that would be development.
Similarly, quantitative reductions in infant mortality rate are progress, and when they are associated with better nutrition for children, that would be termed as development.
In simple terms, if progress is associated with qualitative transformations, that would imply development. Thus, progress is a condition of development -- a necessary condition, but not a sufficient one.
Traditional development is nothing but progress, where quantitative changes in outcomes remain central. But inclusive development takes qualitative transformations into consideration.
Development is inclusive, if it meets three criteria.
First, people will participate in the production part of development. But that participation will not only be limited as an input for production (example, labour), but it will also be engaged in participation and development decisions.
Local people will be involved through discussions and interactions in development decisions (programs and projects), both in their formulations and implementations. If necessary, such participation could be extended in the monitoring and evaluation processes as well. Thus, people will be active agents in the development process.
Second, people will not only take part in the development processes, but will also enjoy the benefits of development and those benefits would equitably be distributed among different groups.
Third, if development is to be inclusive, disparities in development opportunities and development outcomes must be reduced. In order to achieve that, the income growth of the lowest quintile of the population must exceed the income growth rates of all other socio-economic groups in the society.
If all these three conditions are met, development will be inclusive.
The question is: Do small enterprises contribute to inclusive development? If we look at the conditions of inclusive development, it becomes obvious that such enterprises enhance inclusive development.
One, with their labour, materials, and innovative ideas, these entrepreneurs directly participate in the development process. They also take production and development decisions. The small entrepreneurs perform monitoring and evaluations of the whole process as well.
Two, small enterprises employ skilled and unskilled labour in the production process. Through their employment, the jobs and the earnings of those employed are secured. Furthermore, as the enterprises are small, the distribution of incomes from them are directly distributed among those working for the enterprises.
Three, through pursuing a strategy of growth-led employment, rather than employment-led growth, small enterprises accelerate inclusive development.
With all these, small enterprises act as a driving force for inclusive development.
Dr Selim Jahan is the Former Director, Human Development Report Office and Poverty Division, United Nations Development Program, New York, USA.
