Tag Archives: SMEs

Overcoming the Collective Action Problem: How to Encourage Businesses to Fight Against Corruption

Without a strong compliance program, many smaller Russian firms could be locked out of lucrative contracts with big multinationals.

Without a strong compliance program, many smaller Russian firms could be locked out of lucrative contracts with big multinationals.

By Henry Nelson

In countries with weak rule of law, anti-corruption efforts suffer from a collective action problem: because bribery and corruption are endemic and occur frequently, individual small business owners hesitate to reform because they fear that doing so will reduce their competitiveness.

If a small or medium-sized enterpise (SME) begins to eschew bribery, it might be incapable of securing contracts that require paying a bribe, for example. The threat of short-term loss of business is serious for SMEs and can deter companies from pursuing anti-corruption compliance.

Furthermore, the collective action problem effects the general business environment. Without a strong, coordinated voice on the importance of compliance, corruption continues to be seen as “business as usual” and the consensus continues to be that bribery is a necessary component of conducting business.

This collective action problem is pervasive and continues to pose issues for CIPE and its many global partners. It is difficult to implement reforms when SMEs fear that the reforms will hurt their business.

Earlier this month, CIPE’s Washington office hosted a delegation of CIPE Russia officers and regional CIPE partners for a discussion on value-chain anti-corruption efforts in Russia. The discussion yielded plenty of interesting information on CIPE Russia’s plan to work with regional Russian chambers of commerce in order to educate local SMEs about international anti-corruption laws like the U.S. Foreign Corrupt Practices Act (FCPA) and UK Bribery Act.

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The Impact of the Property Rights Regime on Small Business in Kenya

New "malls" in downtown Nairobi offer opportunities for small business. But are their property rights being  respected?

New “malls” in downtown Nairobi offer opportunities for small business. But are their property rights being respected?

By David Owiro

Over the past few years, residents of Nairobi’s central business district (CDB) have noticed an interesting phenomenon. The previously large commercial premises on the main streets and avenues have been subdivided, converting them to mall-type premises that allow for subletting to many micro, small, and medium businesses. This phenomenon is, however, not unique to the CBD. This model, I’m made to understand, was borrowed from India, where mostly fabric traders sell their wares under one roof. The concept has spread to Eastleigh estate in Nairobi and can also be observed in some of the major towns in Kenya.

The Institute of Economic Affairs (IEA) carried out a qualitative survey of small businesses who operate in such mall-type commercial premises in Nairobi’s CBD to determine the impact of the property rights regime on their businesses, and the findings point to a deeper policy problem. In spite of the recent property rights reforms brought about by the new constitution, the study found poor enforcement of property rights, agency coordination problems, and low awareness levels among small businesses, leading to exploitation, abuse of tenant rights, and a hostile business environment.

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Creating a Framework for Small Business Growth in Kenya

kenya-scales

Malach Onditi started Elemach Scales, a small business that manufactures weighing scales, in Nairobi, Kenya twelve years ago with a startup capital of $120 and one employee. Today the company has an annual turnover of $52,000 dollars, has twelve employees, and sells the scales not only in Kenya but also in Uganda and Tanzania. To exist this long in an environment where over 90 percent of business start-ups do not survive to the third year has not been an easy undertaking. Elemach Scales has experienced several challenges along this journey including inaccessibility of affordable credit, barriers to regional trade and access to markets, and harassment by county government officials in regards to licensing and workspace

Elemach Scales typifies a majority of small businesses in Kenya — a sector which currently provides 78 percent of the country’s total employment, more than 90 percent of new jobs, and 18 percent of GDP.  CIPE has worked with its partners over the last five years in efforts to build awareness for micro and small enterprise policy reform, facilitating extensive stakeholder input and building capacity for its advocacy which culminated in the signing into law of the MSE Act in December 2012.

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Strengthening the Voice of Ukraine’s Entrepreneurs and Small Businesses

Ukraine GEW Blog Post Picture2

“But wise is the man who disdains no character, but with searching glance explores him to the root and cause of all.” — Nikolai Gogol, Dead Souls

Corruption in Ukraine cuts across regions, all sectors of the economy, and almost every institution. In some sense it’s become a rallying point: since everyone is harmed by corruption, CIPE’s private sector-led, collective action approach to anticorruption in Ukraine is based on bringing the business community together to work towards common solutions.

Given that Ukraine’s business associations are among the country’s weakest civil society institutions — such associations did not exist during 70 years of Communist rule — small and medium-sized enterprises (SMEs) are underrepresented nationally in civil society and political life. Despite this fact, Ukrainian public discourse on issues affecting the business community is vibrant and relatively open. This appears to be improving on the regional level, in part through CIPE support of business associations representing SMEs, a little more notably each year. Individual business associations, as well as eight new coalitions of associations, now work collectively at the regional level.

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The Private Sector in Turkmenistan: A View from the Regions

Turkmenistan's capital Ashgabat, seen at night. (Photo: Wikimedia Commons)

Turkmenistan’s capital Ashgabat, seen at night. (Photo: Wikimedia Commons)

The private sector faces challenges to growing and developing within Turkmenistan’s primarily state-controlled economy. For small and medium-sized entrepreneurs in the regions, the challenges vary but include overregulation and excessive bureaucratic procedures. A survey of SMEs in the country’s five regions found similar obstacles for business growth as well as some differences.

In the northern province of Dashoguz, SME representatives identified the following as the most pressing barriers to growing their businesses:

  • Limited access to credit
  • Lack of information on business-related legislation
  • Not enough information available about the domestic market situation

In Ahal region, where the capital Ashgabat is located, entrepreneurs report that the situation for business has stabilized in the past year. SME owners expressed optimism about the state of their business activities, asserting that if one is persistent and driven, it is possible to operate a successful business. SMEs in the Balkan region, which borders the Caspian Sea, also note some improvements in the ease of doing business, citing market stabilization as the main factor.

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The Customs Union through the Eyes of Belarusian SMEs

business-in-belarus

Russia, Belarus, and Kazakhstan formed a Customs Union in 2010 to integrate the three economies more by removing trade barriers across borders. The member states have shared a single economic space since the beginning of 2012.

The Institute of Privatization and Management (IPM) based in Minsk, Belarus surveyed 400 small and medium-sized enterprises (SMEs) in 2012 to understand better how SMEs view the Customs Union. The survey results showed that Belarus’ membership in the Customs Union poses challenges for small and medium-sized enterprises due to the difficulty of competing with Russian and Kazakh SMEs.

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Achieving Impact in Senegal

Dakar_-_Panorama_urbain

My recent visit to Dakar, Senegal, where I met with longtime CIPE partner, l’Union National des Commercants et Industriels du Senegal (UNACOIS) was very informative and revealed how much impact a good CIPE partnership can bring to bear.

The decade-long partnership between CIPE and UNACOIS – a Senegalese private sector association with 70,000 members who operate small and medium enterprises, mainly in the informal sector — is proving increasingly consequential within Senegal’s civil society circles. CIPE and UNACOIS have partnered on three programs whose core objective was to enhance UNACOIS’ internal governance capacity.

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