Business Development Services (BDS) include consultancy and advisory services, business linkage promotion and training, marketing assistance, information, technology development and transfer. BDS can be categorised into two groups as far as SMEs are concerned.
SMEs: they are the potential and actual clients of BDS and are at the demand side.
BDS providers: are the entities that provide services directly to SMEs. These entities include for-profit firms (like consultants, lawyers etc), individuals, NGOs, national and regional government agencies, industry associations, etc.
BDS facilitators: they operates as medium to provide support to BDS providers for product development, capacity building, promoting best practice, external evaluation, quality assurance, advocacy, etc. BDS Facilitators include NGOs, industry and employers’ associations, government agencies, donors; project offices, etc.
Donors: are the entities that provide funding for BDS projects and programmes.
Governments: like donors, they provide funding for BDS projects and programs and provide an enabling policy, legal and regulatory environment for SMES and BDS providers as well as public goods such as basic infrastructure, education and information services.
Various services provided by BDS are as follows:
Market access: market research, market information, trade fairs, product exhibitions, advertising, packaging, marketing trips and meeting, subcontracting and outsourcing, etc.
Infrastructure: storage and warehousing, transport and delivery, business incubators, telecommunications, internet access, computer access, secretarial services, etc.
Policy and advocacy: training in policy advocacy, analysis of policy constraints and opportunities, direct advocacy on behalf of SMEs, sponsorship of conferences, policy studies, etc.
Input supply: linking SMEs to input suppliers, improving suppliers’ capacity to deliver quality inputs, facilitating establishment of bulk buying groups, information on input supply sources, etc.
Training and technical assistance: mentoring, feasibility studies, business plans, franchising, management training, counselling / advisory services, legal services, financial and tax advice, accountancy and bookkeeping, technical training, etc.
Technology and product development: technology transfer /commercialization, linking SMEs and technology suppliers, facilitating technology procurement quality assurance programmes, design services, etc.
Alternative financing mechanisms: factoring companies providing capital for confirmed orders, equity financing, facilitating supplier credit, equipment leasing and rental etc.
BDS play a very important and critical in providing support for the development of SMEs through a range of business advice, information and support. It contributes to sustainable development of SMEs by improving the general business environment while addressing market failures, lack of information ( like market opportunities, rules and regulations, access to credit, quality standards for export, etc.) which are posing as a barrier to foster economic development and growth of the area in which they operate. Some of the benefits that are gained through BDS are as follow:
BDS helps enterprises to raise the profitability and enhance the growth and competitiveness thus directly raising the income level.
For micro enterprises, BDS can help in enhancing economic security and incomes, thus permitting poor entrepreneurs including women, to invest in nutrition, housing, health and education of their families.
Enhanced employment generation as result of growth and development of enterprise may lead to excess labour absorption, innovation and add value to goods and services,
It provides ability and flexibility to enterprises to respond to dynamic and volatile markets.
The mechanisms or options available in order to avail the BDS are mainly divided into two approaches namely “Traditional Development” and “Market Development”.
Traditional Development (TD) approach involves creation of an organization/body to provide BDS directly to SMEs. This is usually done through NGO like Enterprise Development Agencies, Business Support Centres, Local Enterprise Agencies, Regional Development Agencies, etc that provides subsidized BDS at no or very low cost. However, this approach had some limitation like it can lead to local monopoly of the BDS provider, if there is only one institution in the area, they were supply-driven with vary low outreach thus providing services to limited number of SMEs, they had lack of financial stability as their only source of finance was central, regional and local governments etc.
The Market Development (MD) approach is comparatively new that focuses on maximizing outreach to large number of SMEs through sustainable increase in demand and supply of services primarily by Private Sector Suppliers. They will provide services on payment basis rather then offering subsidies. It enables SMEs to buy services of their own choice from a wide array of products offered by private sector suppliers.
The MD approach promotes the increase in suppliers to stimulate demand through discounted or subsidized services on temporary basis activities like provision of information, market research, product development, training of suppliers, monitoring and evaluations. All these services fall into the category of “facilitating” the market by stimulating demand and supply.