Statement by Dr. Henning Karcher, Resident Representative, UNDP at the National Workshop on Micro-Enterprise Development

May 20, 2002

Statement by Dr. Henning Karcher, Resident Representative, UNDP at the National Workshop on Micro-Enterprise Development,

Kathmandu, 20 May 2002

Hon’ble Assistant Minister for Industry Commerce and Supplies, Mr. Prakash Gurung, Dr. Shankar Sharma, Honourable Member, National Planning Commission, Dr. Bimal Koirala, Secretary, Ministry of Finance, Distinguished guests, friends and colleagues,

It is a great privilege and pleasure for me to address you today on the occasion of the National Workshop on Micro Enterprise Development. At the outset I would like to express my appreciation and gratitude to the organizers of this workshop, the Ministry of Industry, Commerce and Supplies. The Ministry and UNDP have been close partners in our joint effort to support the development of micro enterprises and as we look back at over three years of cooperation in this important field we can say that it has been an exceptionally fruitful partnership. Let me also say at the beginning that what you will hear today represents a rare success story in Nepal’s relentless fight against poverty, which, I am sorry to say does not have all that many successes to show for the time being.

Poverty represents, of course, as we all know the overriding development challenge for the country and a large number of reports and strategies has already been written on the subject. We in UNDP believe that social mobilization represents one key element for poverty reduction in Nepal and we also feel that we are now in a position to present a number of success stories which can live up to any analysis and scrutiny and deserve to be seriously considered for replication.

While empowerment through social mobilization has to be at the heart of the strategy, social mobilization by itself is, of course, not sufficient to lift people out of poverty. There has to be a host of accompanying measures dealing with issues such as marketing and training. There has to be access to credit and there have to be entrepreneurial skills.

Let me now focus on a number of key features of the UNDP supported Micro Enterprise Development Programme (MEDEP) which have led to the programme’s success.

1. First of all there is the Enterprise Creation methodology: The market-led approach to micro-enterprise development combined with the sequenced delivery of different components - community mobilization, micro credit, skill training, entrpreneurship development, appropriate technology and marketing linkages is the main features of the programme. In previous programmes, similar elements adopted were mainly piecemeal, fragmented and implemented in isolation. Technology, entrepreneurship and business developments were often not integrated. The net result was often ineffective and expensive in an environment where funds for development are limited.

2. Secondly let me draw attention to the implementation point of Entry: MEDEP's point of entry is focused on districts where the DDCs have already instituted a district planning and development process with the support of successful UNDP-supported decentralization programmes. The DDCs, as elected local bodies, have a compelling interest in ensuring that enterprise development support activities are continued within their jurisdiction.

3. Thirdly institutional Delivery Mechanism. MEDEP has avoided the temptation to create new institutions but rather seeks to make maximum use of Nepali institutions, public and private, that already exist. It has been able to demonstrate that the district level partnership approach is effective in utilizing existing institutional resources to deliver the components necessary for microenterprise development. The existing public and private sector district-level organizations, under the coordinated guidance of the DDC, are able to deliver the needed services to would be micro entrepreneurs. Participatory planning processes have been initiated in all districts to establish functional partnerships among implementing partner organizations and create synergistic effects for sustainable micro-enterprise development.

When I visited Parasi recently I was amazed to see that MEDEP has not only helped to improve the living conditions of the target beneficiaries but also created an amazing trickle down effect on their neighbors. I had the opportunity to meet with one of the beneficiaries of the programme who's name was Shyam Bhattarai. He used to be engaged as a worker in Dairy shop in India. With his skills in working with milk products, the entrepreneur started two years ago making Khuwa from some 30 liters of milk each day with a loan assistance of Rs 5,000 under the MEDEP programme. He was able to increase his capacity to 300 liters a day in a matter of six months and created backward linkages to some 200 milk-producing farmers by buying their milk.

Similarly the accomplishment of MEDEP go beyond increasing the income of poor people. Women have been the focus of the programme as it targets 70 % women participation in its entrepreneurship development objective. The programme is conscious of the fact that women have priorities that go beyond reducing income poverty such as a more equal role inside and outside the household. The programme has been able to help in the mobility of women and their access to information by the process of interaction with people who come to buy their products and services. Some of the information acquired lead to the expansion of their economic activities while others contributed to the improvement of their social status. Empowerment of women in this context could mean influencing decisions regarding children’s education, purchase of assets, investment in other income generating activities, mobility or relocation to other areas where economic opportunities are better.

Before I close let me also mention that important policy lessons have been drawn from our work with Micro Enterprises. I have always felt that policy advices can only be valid if it is informed by work at the grassroots. Having been associated with MEDEP for over three years we are now in a position to formulate some policy recommendations which are based on empirical experience. These will be provided later today and I do not want to steal the thunder of subsequent speakers. Let me just mention that so far micro enterprises have not been recognized as having greater potential in economic development hence no policies have been formulated for this sector and that no specific definition has been formulated for the Micro Enterprise sector as it has been intermingled with the cottage and small enterprise sector.

The timing of this workshop is particularly auspicious as the Government is engaged in the formulation of the country’s 10th Five-Year development plan. Focussed exclusively on poverty reduction the plan will present strategies aimed, in particular at improving the quality of the lives of the poorest of the poor. We trust that at the end of the day all of you will be convinced as we are, that given the right guidance and support the poor represent not a burden but have the potential to become a source for significant growth of the economy.

I wish you success in your deliberations.

Thank you.

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