Strengthening business support centers in Honduras that cater to MSMEs could help improve the economy and livelihoods of Hondurans. Lessons learned throughout this process may provide best practices for similar centers in other countries in Latin America.
Micro, small, and medium enterprises (MSMEs) are a vital source of economic opportunity for vulnerable populations in Honduras and make up about 25% of the country’s gross domestic product. However, MSMEs typically face significant barriers to growth, including a lack of access to financing and markets, lack of management capabilities, and limited use of technology.
For MSMEs to overcome these barriers and thrive they need access to high quality business support services. These are available in Honduras but service quality varies across different parts of the country. A network of 12 regional business support centers (CDE-MIPYME) play a key role in addressing the business support needs of MSMEs, providing training, expanding access to credit, and offering tax and legal advice, among other services. They are the main source of support for MSMEs in rural areas and are one of the few actors in the country that provide free support. And yet, because centers vary in quality, the support experience and impact on performance can be very different for MSMEs depending on their location.
Some centers do not provide the same quality of advice as we do because they do not have the resources. That in the end affects us all because we share a brand and people think we are all the same” CDE-MIPYME Advisor
Well-executed support service programs have the potential to catalyze MSME growth and are urgently needed in Honduras where the population of 9.5 million people experience the highest poverty levels in Latin America at over 66%. As part of an effort to improve the business ecosystem for MSMEs, Dalberg worked with the Transforming Market Systems (TMS) program supported by USAID, and led by ACDI VOCA in collaboration with Alterna and SENPRENDE, to assess the capabilities of business support centers and identify areas for improvement that could be implemented across the center network.
Understanding and improving business support for MSMEs
A primary reason for inconsistencies in service quality among the 12 MSME support centers is their independent evolution over time. Although at launch their systems and approaches were aligned, new centers were eventually opened and the operations and processes of each center became tailored to the individual needs of the regions they served. This is a good thing, with some centers continuing to mature and offering their MSME clients better and more valuable services and systems – but this process did not happen consistently across the country.
The support from the center has been very helpful, the advisory and managerial staff give excellent guidance,” says one client, but according to another, “Centers need to innovate more, and help more with process and training.”
Strengthening the support center network would in the longer term lead their MSME clients to perform better, but to achieve the largest impact for the country overall, additional focus should be placed on improving access and services for the dynamic and high-growth companies that can scale and create the most economic benefit.
Dalberg developed a framework to assess the network and the 12 individual business centers that included the selection process, type of support provided, access and use of resources, learning, and sustainability. For this process, Dalberg engaged with center employees, MSME clients, and other players in the ecosystem such as chambers of commerce and NGOs to identify opportunities for improvement.
Good practices from the more mature centers formed the basis for a set of recommendations that is now being implemented across the CDE-MIPYME centers to help steer and strengthen those that lag behind. They offer lessons that could potentially support other MSMEs support centers in Latin America including: recognizing the importance of adequate segmentation to improve client targeting and selection; exploring charging models that ensure that clients have skin in the game to promote full engagement; and diversifying delivery models to fit the needs and preferences of clients – which was particularly important to reduce the impact of COVID-19 and establishing formal processes for knowledge sharing and ongoing learning.
Impact and next steps
While there were many opportunities for centers to improve, their willingness to take steps towards improvement was a good starting point, and helped create an actionable plan to implement and improve services.
The government and support centers have been receptive and welcomed the opportunity to explore better ways of working. They have started to implement changes, and alliances between the government, regional organizations and academia are now more streamlined for the entire network.
These are the initial steps towards creating consistent, high quality business support services across the network of MSME support centers, and in time the economy will benefit.