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The role of markets in delivering BDS to the poor

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Sustainability can be defined in many ways, but I suspect we are agreed that in the field of small business development it usually means ‘ability to cover all its costs with fees paid by its clients’. I think we also agree that a market can be said to have been created in a given commodity when two or more providers, not being in connivance with each other, are able to cover their costs by selling it to clients who pay for it.

The current enthusiasm for markets and sustainability, at least in the subjects covered by Small Enterprise Development, arises mainly because some providers of microfinancial services appear able to cover all their costs, including in rare cases even the cost of inflation, with the interest they charge on their loans. Here, at last, is a form of enterprise assistance which does reach poor people, and which need not depend forever on subsidy.

Providers of non-financial business services, or BDS as they are now called, want to show that their product can do the same. They are emboldened in this attempt by their ‘discovery’ that there has always been a thriving market in BDS; businesses have always bought training, advice and marketing assistance from other businesses. Donors have only to discover and remedy the market imperfections that prevent these services being made available to poorer people, as they famously have with microfinance, and small businesses will be able to select and pay for BDS in the same way as they are beginning to be able to with financial services.
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Document Type: Research Article

Publication date: December 15, 2005

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