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The "missing middle" of small businesses with Shamina Singh

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In order to connect people to the networks that will help them thrive, we took a multi-pronged approach – the first, to help build capacity within the local government; the second, to educate and train the microentrepreneurs themselves; and the third, to engage financial institutions in the process. 

The United Nations General Assembly (UNGA) is an opportunity to elevate the best practices and lessons we’ve learned from the field and share them on a global stage. This year, we want to give a voice to small business owners, who have the power to make a difference in their communities. We hope to fuel the global conversation, so that together we can accelerate the achievement of inclusive growth. 

At the Mastercard Center for Inclusive Growth, our theory of change is that connecting people to the three networks that power the modern economy is essential for improving productivity – these are physical, virtual and social networks. Over the past year, we partnered with the STRIVE program, implemented by <a href="https://www.mercycorps.org/countries/indonesia/2245?page=6" target="_blank">Mercy Corps Indonesia</a> to put this theory into practice. The program focused on unlocking access to know-how through social networks to unleash greater productivity.
Putting theory into practice
In order to connect people to the networks that will help them thrive, we took a multi-pronged approach – the first, to help build capacity within the local government; the second, to educate and train the microentrepreneurs themselves; and the third, to engage financial institutions in the process. We recognize that no one company or sector can move the needle alone, so partnering with the public and private sectors as well as civil society for this program was essential to further inclusive growth.
Through engagement with local government resource centers, we trained official staff on key business development services, such as marketing, packaging and human resources management. We also provided training to government staff on how best to counsel entrepreneurs in the legal registration of their businesses. Being part of the formal economy is a prerequisite to tapping into the financial services network and entering large business contracts. Building the local capacity of government officials to extend tailored services to micro and small businesses helps transform the ecosystem and ensure increased and sustained access to the know-how that micro and small businesses need.
We also helped entrepreneurs access credit by connecting loan officers to small businesses as mentors. By providing mentoring around financial management, market opportunities and loan applications, we helped small businesses overcome these hurdles and created new client opportunities for participating financial institutions. In other words, we strengthened the social network between the entrepreneur and the financier and provided know-how in order to open access to financial services, a virtual network.
Unleashing greater productivity
Mario began his coffee roasting business, Bodronoyo, in 2012. He and family members were able to roast and prepare 360 packages of coffee per month. Mario joined the STRIVE program in 2017 and received a combination of training on financial management, marketing and packaging, as well as tailored business mentoring. With support via these two channels, Mario registered his business with the local government, improved his branding and expanded his sales channels. Mario now sells his roasted coffee on consignment in local shops and online. Demand has been high, leading Mario to hire four new employees to expand his production to 1,500 packages per month. Mario is now assessing the market demand for specialty coffee shops in Malang and Surabaya.
Mario is a paragon of success, but his success is not an anomaly. Rather, Mario demonstrates how millions of micro and small business owners can become more productive and successful when they have greater access to the networks that drive the modern economy.
Fanny and her mother Ummi own and operate a bakery, called D’ef, from their home. They have four staff who together bake 30kg per day of local sweet and savory delicacies. They sell their baked goods in the local market and three retail shops. Fanny joined the STRIVE training workshops to understand more about business administration and financial management. With her training, she developed an expansion strategy that focused on accumulating sufficient savings to purchase a second oven and mixer. With these business assets, Fanny is able to diversify the types of products they bake, expand production to 40kg per day and establish outsourcing contracts with other women in the community. Fanny aspires to grow her business even more by improving her product’s branding and packaging. She believes this will help open access to larger grocery stores in the city. To achieve this in the near-term, Fanny and Ummi would like to borrow working capital. Access to networks – such as financial services, mentoring, and training – help business women like Fanny and Ummi to pursue their aspirations today.
Creating tangible impact
Improving productivity in the local economy by enhancing businesses’ access to key networks resulted in an average increase in profit of US$56 per month. Nearly 1,300 micro and small businesses, more than 50 percent, that participated in the STRIVE program also reported an increase in revenue. Businesses in STRIVE have created more than 700 new jobs in and around Malang, Indonesia and over 600 entrepreneurs began the legal registration process to incorporate their businesses, thereby bringing them into the formal economy. This program illustrates how improving an enterprise’s access to networks can unleash productivity and fuel revenue growth, which over time leads to job creation in under-served communities. This is how we believe inclusive growth is achieved.
As world leaders and change makers at the forefront of inclusive growth meet at UNGA in New York, we hope they celebrate the successes of micro and small businesses, but also focus on what more still needs to be achieved. Mario, Fanny and Ummi have demonstrated how access to know-how, technology and financial services increases business productivity. They, however, are only a couple of the 62.9 million Indonesian businesses, of which 99% are micro and small, whose improved productivity depends on access to these networks. Imagine what could happen if programs like STRIVE were scaled nationally and internationally.
For inclusive growth to be achieved, we need impact-focused collaborations that provide access to these catalytic networks. Together we can transform ecosystems into supportive and productive societies that lead to shared opportunity and prosperity.
We cannot move the needle alone. If you want to partner with us or have ideas or solutions on how to connect MSME’s to the vital networks that drive inclusive growth and improve productivity, email the Center at <a href="mailto:inclusive_growth@mastercard.com" target="_blank">inclusive_growth@mastercard.com</a>.

Giving Voice to Small Business Owners