Enterprise Development in Context of Human Rights and Sustainable Livelihood

Anton Florijan Barisic, MSc (1) Universit degli studi di Trento, Master on Local Development for the Balkans

Summary
The process of globalization of markets and economies continues influencing all the aspects of human, social, economic and political life, and especially living conditions of poor population. The world needs not only economic growth, but also equitable growth that benefits vast numbers of poor people. The poor need protection because they depend heavily for their income and economic security upon business, whether through self-employment, or as employees in small and medium-scale enterprises. Enterprise development increases the capacity of individuals, groups and organizations to successfully supply goods and services to the market. It supports the development of important business skills, enabling the actors to adapt to rapidly changing market conditions, and to ensure and maintain business growth. Support can be directed at improving services for entrepreneurs or improving the policy and operating environment as well as regulatory mechanisms enabling business to develop. Enterprise development policy can make a significant contribution to human rights and social inclusion. The elimination of poverty through promotion of sustainable growth can only be achieved through the engagement of poor people in the development processes which affect their lives. Human rights approach to enterprise development issues is based on three interconnected principles; participation, inclusion and strengthening of institution and policies protecting and promoting human rights. Rights-based approach to enterprise development promotes and protects human rights (those rights that have been recognized by the global community and are protected by international legal instruments). These include economic, social and cultural as well as civil and political rights, all of which are interdependent. Running through the rights-based approach are concerns with empowerment and participation, and with the elimination of discrimination on any grounds (race, language, gender, religion, etc.). Gender discrimination and child labor are undoubtedly the greatest social constraint to equitable enterprise development, and to normal economic growth.

Introduction
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The author is a Principal consultant and CEO of CHRONOS Info, Consulting company, Croatia, Zagreb, 10000, Medvedgradska 35, tel: +385.1.4667.059, fax: +385.1.4666.977, e-mail: afbarisic@zg.htnet.hr

As globalisation of markets and economies continues, the world needs not only economic growth, but equitable growth that benefits vast numbers of poor people. The poor depend heavily for their income and economic security upon business, whether through self-employment in microenterprises, or as employees in small and medium-scale enterprises. Their most frequent escape from poverty is through successful self-employment in micro and small business, in which the dynamism, creativity and hard work of poor entrepreneurs is given full expression. This requires a favourable operating environment in which investment, job creation and the generation of wealth occurs across the entire national economy, whether for large or small business. Support must be targeted not only directly at micro-entrepreneurs in the informal sector,(2) but also at small and medium-scale enterprises. By virtue of their greater scale, financial and technological resources, and their pivotal role linking larger businesses with micro-enterprise, small and mediumscale enterprises create significant commercial opportunities and employment for low-income groups. (3)

Enterprise Development
Enterprise development increases the capacity of individuals, families, groups and organisations to supply useful goods and services profitably to the market. It supports the development of essential business skills, enabling individuals to adapt to changing market conditions, and maintain business growth. Support may be directed at improving services for entrepreneurs, such as savings and credit; management training; marketing linkages; and technology transfer - or improving the policy, regulatory or operating environment that enables business to thrive. The private sector is the driving force behind economic growth in all growing economies. Private enterprise, large or small, creates jobs and incomes, and provides essential goods and services. Several conditions are needed in conjunction to create the right incentives for private investment and economic growth. Amongst the main conditions are: a well-managed macro-economy; functioning capital markets; a coherent policy framework (including trade, industry, competition and commercial law); reasonable regulation; an educated and skilled workforce; adequate physical and institutional infrastructure; access to financial and business development services, information and knowledge; market access; and political security. All these conditions, along with perhaps the most important condition of all, good management, play their part in determining the success of an enterprise. (4) Most businesses in the developing world are one-person income-generating activities. These tiny microenterprises are part-time, temporary or seasonal, often based in or near the home. They are typically run by poor women, using free labour when available from children, grandparents or other family members. Micro-enterprises of this kind operate in highly competitive marketplaces, since they have very low barriers to entry - requiring little or no land, simple management skills, and minimal capital.
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DFIDs publication, Halving World Poverty by 2015, Economic Growth, Equity and Security. Ibid 4 DFID (2000) Achieving Sustainability, Poverty Elimination and the Environment: Strategies for achieving the international development targets, DFID, London.

They may not provide the main source of family income, and offer very low returns to labour. However, they serve the crucial purpose of spreading economic risk across the family, particularly when the principal source of income (notably agriculture) fails. Survivalist micro-enterprises in some areas comprise a substantial part of the local economy as a whole, providing important economic security for poor families and communities. (5) It is useful to distinguish between two different but complementary approaches to enterprise development. On the one hand, there are interventions targeted directly at poor micro-entrepreneurs in the informal sector. On the other hand, there are more leveraged interventions targeted at somewhat better-resourced small and medium-size enterprises and larger enterprises that by virtue of their linkages to and impact upon lower income groups can offer significant indirect benefits for the poor. Interventions aimed at the micro level, if successful, immediately increase economic security and incomes from micro-enterprises. Raising returns from micro-enterprises is a constant and overriding concern of poor people. The main priority of the poor is to improve employment opportunities and incomes. (6). Bigger earnings from micro-enterprises have permitted thousands of entrepreneurs (especially women) to invest in better housing, nutrition, health, and education for their families. (7)

The role of Small and Medium-sized Enterprises

SMEs have other economically useful purposes that make them the target of leveraged interventions in enterprise development. First, they are a leading source of job creation in developing countries. Of special value to the poor, many SMEs operate in labour-intensive industries such as textile manufacture or agroprocessing, which employ semi-skilled or unskilled labour from low-income areas. Although many are located in towns and cities and therefore have a more significant positive impact upon urban poverty, those that are established in rural areas help to diversify weak rural economies from dependence upon agriculture. (8)
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Micro-enterprises at the larger end of the scale may be professional, full-time manufacturing or trading enterprises with their own premises, up to ten employees, and very little capitalisation. Micro-enterprises are nevertheless informal, unregistered businesses not liable to pay tax. They usually earn impressive returns on capital, especially in busy urban markets. Run as full-time businesses, micro-enterprises can provide the main source of family income and the opportunity for a poor family to advance beyond subsistence. 6 The World Banks recent Consultation with the Poor corroborates this view, finding that the most frequent escape from poverty is through self-employment and entrepreneurship 7 The arrival of effective and profitable micro-finance institutions that supply simple, low-cost credit and savings instruments has dramatically improved the economic security and empowerment of millions of poor women. However, whilst it is valuable to maintain the focus on improving and extending financial services to the poor, it is important to recognise that for longer-term growth, microenterprises need much more. To release their enormous economic potential, they need access to more diverse management training and other business development services, a more positive enabling environment to run a business, and stronger institutional links with larger enterprises. 8 Micro-enterprises and small and medium-sized enterprises, (MSME) are to some degree economically interdependent. Micro-enterprises are important suppliers of materials and services to small and medium-sized enterprises, whilst at the same time providing access for poor producers or traders (of, for example, timber, fish or agricultural products) to larger urban, national or international markets. In the reverse direction, micro-enterprises and poor consumers are also customers of small and medium-sized enterprises. Consequently, improvements in

SMEs are innovative and adaptable. Todays rapidly evolving global market economy underscores the critical importance for developing countries of identifying their comparative advantage, and creating economic structures that are responsive and flexible enough to exploit it. In order to survive in national or export markets that by nature must respond quickly to new competitive conditions, technology, or consumer trends, small and medium-size enterprises have to be highly flexible. Evidence from recent studies in both industrialised and developing economies suggests that clusters of these businesses can lead to successful export growth, producing a form of economic organisation that is highly efficient and competitive. (9) (10) SMEs add value to goods and services, absorb excess labour, respond flexibly to dynamic markets, and pay taxes to hard-pressed governments. All these factors are leading to an ever-sharpening focus in enterprise development circles on this segment of the enterprise market.

Main constraints to Enterprise Development

The private sector faces many constraints that impede business formation and expansion to varying degrees. Some of the greatest constraints are: An unfavorable policy, legal and regulatory environment for enterprise: due in many developing countries to a heritage of heavy state intervention, outdated laws, excessive regulation and discrimination against micro-enterprise. The private sector as a whole needs to operate in an environment that encourages fair competition and market efficiency. This demands a framework of sound and stable macro-economic policy; competent legal and regulatory institutions; functioning commercial, contract and bankruptcy law and justice; effective property rights, employment and consumer standards; and sensible regulation on health and safety, business registration and trade licensing. Over the last decade, however, many governments have recognised the importance of liberalising the economy, breaking down political monopolies and patronage, and providing a more enabling environment for the entire private sector. However, a heritage of the past still exists, and heavily constrains enterprise set-up, growth and development. Even where national enterprise policy is now more positive, legislation is often applied across several, poorly co-ordinated government departments. The bureaucratic barriers are facing entrepreneurs in simply registering a business, obtaining a trading licence, or complying with health and safety or labour law at local level. Lack of appropriate financial services: particularly for poor families and micro-entrepreneurs through stronger and more extensive micro-finance institutions with stronger links to the commercial banks and mainstream capital markets. Since all businesses require capital, microentrepreneurs need appropriate credit services from micro-finance institutions to support longterm micro-enterprise growth. Despite the recent success of many micro-finance institutions in

the efficiency or quality in the small and medium-sized enterprise sector tends to translate into better trading opportunities, or better products and services for the poor. 9 Picciotto R (2002) Scaling Up: A Development Strategy for the New Millenium Global Policy Project, Washington DC: World Bank 10 Commission of the European Communities (2001) Communication from the Commission- a sustainable Europe for a better world: a European Union strategy for sustainable development. European Commission, Brussels

extending savings and credit sustainable to the poor, these services still reach only a very small number of micro-enterprises. The rest survive with no institutional finance, depending instead on family savings or informal moneylender credit that is usually either too scarce or too costly to permit business growth. It is therefore very important to expand the micro-finance institution sector to reach vastly greater numbers, at the same time building its retail capacity through the introduction of management training, innovative financial services, and progressing institutions towards full commercial viability. Despite increasing concurrence that subsidies undermine the sustainability of financial services and divert benefits from the poor, many governments and donors continue to provide heavy subsidy. This approach usually distorts private capital markets, as the potential profitability of micro-finance is endangered by cheap or free donor capital, and goes largely unnoticed by private financial institutions (11) Shortage of management skill and business development services: the private sector is in need of better access to effective training in management systems, production and distribution technologies, marketing technology and market research. Skill shortages can cripple economic growth in poor countries, whether at the level of senior policy makers or micro-entrepreneurs. This is particularly true for SMEs, as they emerge from family control into broader public ownership structures. Successful transition may be blocked by a variety of factors: low productivity; poor resource use; and weak management systems. Above all, low levels of literacy and educational achievement in the workforce obstruct the hiring of competent staff. There is need to develop direct vocational skills, relevant to the needs of informal sector entrepreneurs as well as larger, more formalised businesses. Raising the level of computer literacy is also a major challenge to enable SMEs to take commercial advantage of the internet revolution. (12) Insufficient market knowledge, poor communication and institutional linkages among SE: there is a need for better transport and communication facilities, access to trade publications etc., and to strengthen institutional linkages and partnerships. Many SE are geographically remote from markets, and are impeded by poor physical infrastructure such as roads or transport facilities. This raises business costs and reduces the competitiveness of their products and services. To overcome market failure, businesses need to develop multiple institutional partnerships with other firms; producer groups (such as chambers of commerce or trade associations); centres of research; clients and suppliers, all of whom can provide useful market intelligence and new opportunity.

Human rights approach to enterprise development

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DFID (2000b) Making Markets Work Better for the Poor, DFID, London Dalal-Clayton B and Bass S (2002) Sustainable Development Strategies: A Resource Book, Earthscan, London

The human rights approach to development means empowering all people to take their own decisions and enable them to be active citizens with rights, expectations and responsibilities, rather than being the passive objects of choices made on their behalf. ( 13) Adopting a rights perspective means: incorporating the empowerment of poor people into programmes aimed to tackling poverty ensuring that poor people's voices are heard when decisions which affect their lives are made recognising that equality matters making sure citizens can hold governments to account for their human rights obligation Participation: enabling people to realise their rights to participate in, and access information relating to, the decision-making processes which affect their lives Inclusion: building socially inclusive societies, based on the values of equality and nondiscrimination, through development which promotes all human rights for all people Strengthening institutions and policies which ensure that obligations to protect and promote the realisation of all human rights are fulfilled by states and other duty bearers

Human rights approach to development is based on three cross-cutting principles:

Human rights also cover those rights and freedoms necessary for human dignity, creativity and intellectual and spiritual development, e.g.: the right to education and access to information freedoms of religion, opinion, speech, expression freedom of association the right to participate in the political process the right to participate in cultural life

Human rights and freedoms necessary for liberty and physical security, e.g.: freedom from slavery and servitude the rights to be free from arbitrary arrest or imprisonment, and to a fair trial freedom from torture and from cruel, inhuman or degrading treatment or punishment

Cross-cutting are the twin principles of equal rights of women and men, and the prohibition of discrimination of any kind on the grounds of race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status. (14)

Main stakeholders

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The term "human rights" is used in connection with those rights that have been recognised by the global community and protected by international legal instruments. Human rights include all those rights essential for human survival, physical security, liberty and development in dignity. They stem from the recognition of the inherent equality and dignity of all human beings. Every man, woman and child is entitled to enjoy their human rights, merely on the basis of their humanity and regardless of any distinguishing characteristics, such as race, gender, creed, opinion and class. All States have committed themselves to respect, protect and realise human rights, both in a number of international treaties, and through a series of recent UN Conferences. 14 DFID's White Paper "Eliminating World Poverty" (1997)

The rights based approach will involve broadening the types of stakeholders generally involved in enterprise development. A rights based approach, based on principles of equality and inclusion, will require an acknowledgement of the needs of: poor entrepreneurs, including women, the poorest and most disadvantaged and particularly those involved in micro-enterprise workers in enterprises of all sizes other affected poor and disadvantaged people in the households, communities and markets where enterprises of being promoted. (15)

Micro enterprises and micro entrepreneurs are crucial links in the market chain as both producers and consumers. The well-being and job satisfaction of workers are crucial elements in increasing enterprise productivity. They are also the main source of future entrepreneurs. Concern with needs in households and communities provides important information about ways in which enterprises or the local economy can diversify. Human rights and democratisation at the national and international levels are crucial for establishing an enabling environment for enterprise development. (16) In a stakeholder analysis some particular issues to consider that will reflect the rights based approach are: are marginalised groups included, and how are they represented? Does achievement of their needs require differentiation, and if so how will that be implemented? are there any covert forms of discrimination? (17) does the process of undertaking the analysis give all stakeholders a chance to express themselves? (18) the capacities of different stakeholders to participate in (and benefit from) development activity, the relative political power, and institutional means to command attention of different groups; access to information and the complexity of organisational relationships; the area and sources of power and patronage; who depends upon which environmental resources and services and how they are affected by change; gaps and overlaps in the roles and functions of different stakeholder groups.

Stakeholder analysis can help to reveal, for example: -

If carried out properly, stakeholder analysis also helps bring the poor into the development process and ensure that their views are incorporated in decision-making. Implications for enterprise development

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It also points to the need for enterprise development agencies to work more closely with multi-national companies, informal sector associations, international trade and aid agencies, and wider movements for human rights, democratisation and change. This more inclusive approach will contribute not only to poverty elimination but also sustainable growth. 16 DFID documents, in particular the Target Strategy Paper "Realising Human Rights for Poor People." http://www.dfid.gov.uk/public/what/strategy/papers/target_strategy.html 17 For example, do all households in the village have equal opportunity to participate in the programme? (e.g. minority ethnic or religious groups) Do all members of the household have equal access to the benefits? (e.g. widows, disabled people) 18 e.g. poor women are often more able to express themselves better in small groups rather than at large formal mixed meetings; disabled people may not be able to attend without transport or other assistance; some people's religion may not permit them to attend meetings on certain days

Enterprise development policy can make a significant contribution to human rights and social inclusion. The elimination of poverty through promotion of sustainable growth can only be achieved through the engagement of poor people in the development processes which affect their lives. Poverty elimination involves more than increases in income. Poor people are concerned about the lack of control they have over their lives. Many people are unable to access the resources made available by growth because of discrimination on the basis of gender, ethnicity, age and other social distinctions. This means that human rights and social inclusion must be at the heart of all policies for enterprise development and sustainable growth. The contributions Enterprise Development can make to achieving human rights include: employment creation and increased incomes and standard of living economic independence of poor people, health and well-being security and social protection skills acquisition and access to information political and cultural participation who is included in enterprise development as acknowledged stakeholder the degree to which the enterprises address gender equality, recognize workers rights and the potential impacts of enterprises on health and the environment the ways in which enterprise development is promoted including structures for participation, inclusion and accountability

This contribution, however, depends crucially on:

A rights based approach to enterprise development needs to address a number of key questions as indicated below: How far do the programmes, enterprises and types of employment generated - aim to contribute to the rights necessary for survival and dignified living? (not just incomes but also well-being, food, housing and continuous improvements of living conditions) - aim to contribute to social protection and security in the longer term? - aim to contribute to physical and mental health and promote favourable conditions of work? - promote work compatible with privacy and family life for both men and women? - promote education and access to information? - recognise freedom of association, religion, speech and expression? - promote participation in political and cultural life? - contribute to freedom and security of the individual? How far do the institutions involved: - promote participation in decision-making? - recognise the needs of the different stakeholders, particularly women, the poorest and most disadvantaged? - what structures of accountability exist for those affected by their policies?

Some important steps have been made recently to include this type of analysis in management of enterprise development programmes. For example: (19) the emphasis on micro-enterprise has contributed towards inclusion of the very poor and women in enterprise development. However these groups are generally ignored in other areas of enterprise development, for example business regulatory frameworks and business development services initiatives on fair trade have led to development of new and more participative forms of enterprise development. However these organisations do not necessarily reach the poorest and may replicate rather than challenge inequalities initiatives on Corporate Codes of Conduct have made a positive contribution to the rights based approach by acknowledging the needs of workers as well as entrepreneurs. There is however need to address more fully the broader needs of households, communities and the poor and disadvantaged competing in the same markets, as well as those directly involved in the enterprises which are being supported the initiatives on advocacy and lobbying and linking with business associations are important steps towards strengthening civil society. However these also need to link with multi-national corporations, international trade associations, informal sector organisations and broader movements for human rights, democratisation and change. recent initiatives to reduce child labour broadening ownership of productive assets like land, in particular amongst women implementation of health policy (e.g. social marketing of items such as condoms), household and community services (e.g. laundry and waste disposal) and social security (e.g. insurance and pensions) employment of disadvantaged groups such as the disabled and the elderly mainstreaming enterprise and workers' rights to education for both girls and boys delivery of essential services such as water, electricity

There is also need for greater attention to the role of enterprise development in areas such as:

Sustainable livelihood approach

The livelihoods approach is a way of thinking about the objectives, scope and priorities for development. In essence it is a way of putting people at the centre of development, thereby increasing the effectiveness of development assistance. Adopting the sustainable livelihoods approach provides a way to improve the identification, appraisal, implementation and evaluation of development programmes so that they better address the priorities of poor people, both directly and at a policy level.

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DFID, 1997, White Paper on International Development, http://www.dfid.god.uk

The word livelihood can be used in many different ways. The following definition captures the broad notion of livelihoods understood here: A livelihood comprises the capabilities, assets (including both material and social resources) and activities required for a means of living. A livelihood is sustainable when it can cope with and recover from stresses and shocks and maintain or enhance its capabilities and assets both now and in the future, while not undermining the natural resource base. (20) The sustainable livelihoods approach is broad and encompassing. It can, however, be distilled to six core objectives promoting: - improved access to high-quality education, information, technologies, nutrition and health; - a more supportive and cohesive social environment; - more secure access to, and better management of, natural resources; - better access to basic and facilitating infrastructure; - more secure access to financial resources; and - a policy and institutional environment that supports multiple livelihood strategies and promotes equitable access to competitive markets for all

Sustainable livelihoods and rights-based approaches

Rights-based approach to enterprise development promotes and protects human rights (those rights that have been recognized by the global community and are protected by international legal instruments). These include economic, social and cultural as well as civil and political rights, all of which are interdependent. Running through the rights-based approach are concerns with empowerment and participation, and with the elimination of discrimination on any grounds (race, language, gender, religion, etc.). Because rights-based approaches are founded in international law they can give a livelihood analysis a wider focus. Whether at local, national or international levels, rights-based approaches can point to the legal and other mechanisms that can enhance the delivery of entitlements. Rights-based approaches are particularly valuable in situations of conflict, where abuses of human rights may make sustaining livelihoods exceptionally difficult. Rights-based and sustainable livelihoods approaches are complementary perspectives that seek to achieve many of the same goals (for example, empowerment of the most vulnerable and a strengthened capacity of the poor to achieve secure livelihoods). The primary focus of the rights perspective is on linkages between public institutions and civil society. The livelihoods approach recognizes the importance of these links and of enhancing accountability, though it takes as its starting point a need to understand the livelihoods of poor people in context. From this starting point it then tries to identify the specific constraints which prevent the realization of peoples rights and consequently the improvement of their livelihoods on a sustainable basis.

Adapted from Chambers, R. and G. Conway (1992) Sustainable rural livelihoods: Practical concepts for the 21 st century. IDS Discussion Paper 296. Brighton: IDS.

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A sustainable livelihoods approach can help identify which rights are important for poor peoples livelihoods. A livelihoods perspective encourages a holistic analysis of the social context in which rights are present or absent. Adopting the sustainable livelihoods approach provides a way to improve the identification, appraisal, implementation and evaluation of development programmes, and as well enterprise development, so that they better address the priorities of poor people, both directly and at a policy level. (21)

Sustainability Sustainability has many dimensions, all of which are important to the sustainable livelihoods approach. Livelihoods are sustainable when they: (22) - are resilient in the face of external shocks and stresses; - are not dependent upon external support (or if they are, this support itself should be economically and institutionally sustainable); - maintain the long-term productivity of natural resources; and - do not undermine the livelihoods of, or compromise the livelihood options open to, others. Another way of conceptualizing the many dimensions of sustainability is to distinguish between environmental, economic, social and institutional aspects of sustainable systems. - Environmental sustainability is achieved when the productivity of life-supporting natural resources is conserved or enhanced for use by future generations. - Economic sustainability is achieved when a given level of expenditure can be maintained over time. In the context of the livelihoods of the poor, economic sustainability is achieved if a baseline level of economic welfare can be achieved and sustained. (The economic baseline is likely to be situation-specific, though it can be thought of in terms of the `dollar-a-day of the International Development Targets.) - Social sustainability is achieved when social exclusion is minimized and social equity maximized. - Institutional sustainability is achieved when prevailing structures and processes have the capacity to continue to perform their functions over the long term. Very few livelihoods qualify as sustainable across all these dimensions. Progress towards sustainability can be assessed, even if full sustainability is never achieved.

Links with other approaches The livelihoods approach represents a different concept for development. Understanding and outlining the links between different approaches is essential in sense to define proper policy mode, (participatory development, sector wide approaches and integrated rural development). Other linking issues, such as

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Ashley C and Carney D (1999), Sustainable livelihoods: Lessons from early experience DFID http://www.livelihoods.org

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decentralization, public sector reform and community-based development are addressed at relevant points in subsequent sheets. Participatory development: The livelihoods approach will not be effective unless realized in a participatory manner by people who are skilled in social analysis and who share an overall commitment to poverty elimination. This approach incorporates: - It promotes peoples achievement of their own livelihood objectives. There is no prejudgment about what these are they must be established through participatory activities. - It builds upon peoples strengths. Again, this is only possible if participatory methodologies are used to establish who has access to which types of capital and how this is affected by the institutional, social and organizational environment. - It seeks to understand, through participatory analysis, the effects of macro policies upon livelihoods. - Indicators of impact are expected to be negotiated with local people. This idea of negotiation goes well beyond minimal ideas of participation as consultation. There are particularly strong links between the sustainable livelihoods approach and participatory poverty assessments (PPAs). (23) Sector-wide approaches: Livelihoods and sector-wide approaches are broadly complementary; each should gain from recognizing the strengths of the other. Livelihoods analysis lays a heavy emphasis on understanding the structures and processes that condition peoples access to assets and their choice of livelihood strategies. Where the major constraint is poor performance by government agencies at a sectoral level, then sector wide support development programmes will be highly appropriate. This is especially the case for government-dominated areas such as health and education. Livelihoods approaches and the support activities which derive from them should also gain from the objectives pursued in sector approaches. These include: - the importance of ensuring domestic government ownership of the development process; - the need to base all support on best-practice public management principles (i.e. not to extend the role of government to inappropriate activities and to stress the importance of developing capacity in areas such as financial management and budgeting); and - the value of co-ordination between different donors (and the steps required to achieve this) Integrated rural development: One of the early criticisms that have been directed to the livelihoods approach is that it is too similar to the failed integrated rural development (IRD) approaches. In particular, the livelihoods approach does not aim to establish integrated programmes in rural areas. While recognizing the importance to rural poverty reduction of a wide range of factors it will target just a few core areas so that activities remain manageable. The livelihoods approach will also address macro level and institutional factors where these are a major constraint. IRD, on other side, was forced to operate

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PPAs have been developed as an instrument for including the perspectives of the poor in the analysis of poverty and the formulation of strategies to deal with it. Early PPAs were mostly commissioned to contribute to the preparation of a particular broader document (e.g. a World Bank Country Poverty Assessment, or a UN Country Human Development Report).

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within a hostile macro-economic and institutional environment, dominated and often heavily distorted by government. (24)

Sustainable livelihoods and enterprise development

The livelihoods approach fits naturally with enterprise development, since enterprise is a key component of peoples livelihoods. The principal implication of the approach for enterprise development is to encourage a broadening of the analysis, so as to give greater assurance that an intervention will meet its objectives and be secure (sustainable) in the face of shocks and stresses. An investigation of livelihood strategies may reveal a wide range of alternatives and options. The most visible livelihood strategy may not be the most important. General concerns when conducting analysis of strategies are: Investigations which focus on income sources may neglect other considerations. The approach encourages a broad view of what people are trying to achieve (livelihood outcomes) rather than what they may be doing at any point in time. Issues to be addressed include: the way in which people use their assets (to maximize income or minimize vulnerability); which assets they choose to invest; where they are obtaining the skills necessary to pursue different strategies; and the money-saving (as opposed to money-earning) or non-monetary (e.g. domestic) activities they undertake. Different household members may adopt very distinct livelihood strategies. The household may therefore not be the most appropriate unit of analysis. Livelihood strategies are in a continuous process of flux: people adapt to evolving threats and opportunities, changing livelihood objectives and also as their own capabilities alter during their lifetimes.

Design of proper development strategy has to include a policy and social change perspective. The possible aspects to consider are as follows: (25) Social relations: the way in which aspects such as gender, ethnicity, culture, history, religion and kinship affect the livelihoods of different groups within a community or neighborhood. Social and political organization: decision-making processes, civic bodies, social rules and norms, democracy, leadership, power and authority, rent-seeking behavior (if any). Governance: the form and quality of government systems (structure, power, effectiveness, efficiency, rights and representation). Service delivery: the behavior: effectiveness and responsiveness of state and private service delivery agencies. Resource access institutions: how the institutions that determine access to resources function. Policy and the policy process: the effect on livelihoods of key policies (and legislation) and the way in which policy is determined (by whom, for whom and influenced by which groups).

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DFID, 1997, White Paper on International Development, http://www.dfid.god.uk http://www.livelihoods.org

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This is a broad agenda that requires a wide range of analytical skills and techniques: social, political, organizational, managerial, economic, operational and technical. Potentially, the approach could entail considerable extra time, effort and cost. It is important to focus on the principles of the approach, and concentrate on those aspects of the framework which may be particularly important for a given development intervention. A particular focus should be placed on issues of sustainability: that policies, institutions and processes are sustainable over the longer term, as well as do they promote social sustainability and create an overall enabling environment for sustainable livelihoods.

Impact assessment for enterprise development

Many governments, institutions and project managers are reluctant to carry out impact evaluations because they are deemed to be expensive, time consuming and technically complex, and because the findings can be politically complex, particularly if they are negative. Many evaluations have also been criticised because the results come too late, do not answer the right questions, or were not carried out with sufficient analytical rigour. Yet with proper and early planning, the support of policy makers, and a relatively small investment, a rigorous evaluation can be very powerful in assessing the appropriateness and effectiveness of programmes. (26)

Introduction Impact assessment is now an established part of development activity. There are many guidelines, tools and Best Practices in different areas of enterprise development. There is increasing concern about the role of impact assessment in improving programme effectiveness through innovations in stakeholder participation and implementation-led impact assessment. Currently there has also been growing interest in macro-level strategic impact assessment for developing future policy work. This is becoming increasingly important in the context of involving networks and partnerships between governments, donors, NGOs and other stakeholders. (27) Impact assessment for enterprise development (ED) has three different, but interrelated, objectives: Accountability: to provide evidence about the achievements of ED interventions and their costs Improving Programme/Project Effectiveness: providing recommendations about the means by which present and future programme/project performance could be improved

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Baker, J.L. (2000) Evaluating the Impacts of Development Projects on Poverty: The World Bank, Washington DC, p. v The term strategy is used to imply an explicit attempt to design an intervention to achieve an explicit development goal. Strategies are required at all levels: projects, programmes and macro level policy and strategic plans are produced at all these levels. The term Strategic Impact Assessment refers to assessments which not only assess the degree to which existing strategies achieve their goals at any of these different levels, but also assess the options for strategic improvement.

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Policy Development: to provide guidance about the ways in which government and donor policies should be reformed so that the environment for enterprise development becomes more favorable.

Each of these objectives is likely to shape the design of an IA in different directions. Accountability encourages a quantitative focus and the comparison of inputs with outputs and outcomes. Improving effectiveness encourages a focus on the processes by which inputs are converted into outputs and outcomes. Often this means that there is an extensive use of qualitative research methods. Policy development encourages a focus on macro-level contexts and often involves international comparisons. Impact assessment for ED is important in showing how ED work contributes to poverty alleviation by benefiting the poor. Examples of this include support for small and medium enterprises (to create jobs or lower cost goods and services for the poor) and creating an enabling environment for private sector development (to promote pro-poor economic growth). (28)

Principles of impact assessment Impact assessments carried out as part of planning and approval of an intervention (ex ante) are predictive in nature, and generally follow well established methodologies (e.g. for environmental impact assessment, social impact assessment, health impact assessment, economic appraisal). (29) Assessments carried out subsequently (ex post) aim to evaluate actual impacts. While techniques vary according to the nature of the intervention and the purpose of the assessment, the basic impact assessment methodology is similar: - define the scope of the assessment and impact targets - define indicators and identify unplanned impacts - identify and involve stakeholders - assess and quantify impacts - identify corrective actions and necessary policy lessons - report and dissemination of findings Assessment requirement include the specification of the policy options for enterprise development that are to be assessed; the poverty impact indicators to be used in the IA; and the significance criteria to be used.

Impact Indicators The goals of each enterprise development policy need to be carefully defined at the outset and should be translated into more specific targets (short-term, intermediate and long-term) as the assessment progresses. Targets play a key role when formulating the appraisal and evaluation criteria by which each
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The breadth of ED interventions means that very different approaches to IA have to be adopted, depending on the nature of the intervention. Methodologies are relatively well advanced at the micro-level (especially for microfinance) but are less mature at the macrolevel of policy reform and institutional change. 29 Kirkpatrick and Parker 2003 Regulatory Impact Assessment and Regulatory Governance in Developing Countries. Centre on Regulation and Competition, IDPM

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policy is to be assessed. Many goals are multi-dimensional and will need to be represented by multiple targets. (30) Target (core) indicators are used in assessing final impact in terms of the goals for the policy intervention. This requires some form of measurement for the target indicators. In economic analysis, this is provided by attaching an economic value to all positive (benefits) negative (costs) impacts, which can be aggregated into a single measure of net economic benefit. But it is seldom possible to value all impacts in economic terms, and different impacts will be valued or measured in a variety of different ways. It then becomes necessary to use some form of scoring or ranking criteria which can be applied to impact estimates that have been assessed using different units of measurement. One of the main purposes of SIA is to support better decision making relating to policy choices for enterprise development that will contribute to the goal of poverty reduction. They should be limited in total number but, they should be comprehensive in their significance criteria.

Strategic impact assessment (SIA) Strategic- level impact assessments of different kinds are now being much more widely applied than in the past, with the aim of improving the quality of policy design and the effectiveness of their implementation. There is growing use of SIA to assess the economic, social and environmental impacts of trade policy in developing countries. With the increasing acknowledgement of the need for effective regulatory measures in newly liberalised market economies, strategic impact assessment of regulatory measures is beginning to be adopted in a growing number of developing countries. (31) The following components are incorporated in SIA: Measurement: The adoption of targets such as the Millennium Development Goals has highlighted the importance of measurement in development policy. Measurement, or assessment, serves a number of related purposes. First, ex ante assessment provides an evidence-base for better policy formulation and implementation. Second, ex post assessment serves as an instrument for monitoring progress and measuring performance. More generally, it contributes to learning and understanding what contributes to more effective policy. (32) (33)

Lee, N. and George, C. (authors/eds) (2000) Environmental Assessment in Developing and Transitional Countries, John Wiley & Sons, London. 31 Kirkpatrick C and George C (2003) Sustainability Impact Assessment of Proposed WTO Negotiations: Sector Studies for Market Access, Environmental Services and Competition: Final Report, Institute for Development Policy and Management, University of Manchester 32 Stern N (2002) A Strategy for Development. Washington D.C. World Bank 33 An important distinction is to be drawn between ex-ante appraisal and ex-post evaluation in SIA, since they serve different purposes and are different in character. However, when they are applied in a consistent and coordinated manner, they should be mutually reinforcing in enhancing the performance of enterprise development measures. Appraisal involves assessing the likely impacts of a proposed measure before its approval and implementation. It should be closely coordinated with the planning of the proposed measure and influence its evolution. Negative as well as positive, impacts should be assessed and be used in shaping modifications to the proposal to enhance its potential performance. Proposals, which specify ex-post evaluation requirements and arrangements for the collection of data needed for this purpose, should be incorporated into the final version of any proposal for the approval and implementation of the measure . Evaluation involves assessing the actual impacts which result from the implementation of the proposed measure. The evaluation findings may be used for a variety of purposes including, assessing whether the actual impacts are consistent with the goals that have been set for the measure, assessing whether the actual impacts are consistent with the impacts predicted in the appraisal, and assessing whether the impacts resulting from projects implemented within the framework of the policy or strategy are consistent with those predicted in the policy

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Assessment creates the need for indicators, and there is an ongoing debate on the choice of target indicators and measurement techniques. The use of quantitative and qualitative techniques in assessing impacts, the particular indicators to be used, and the relative weight to be attached to each indicator, are still issues of great discussion (34) Integrated Development: The Rio Summit firmly established the concept of sustainable development strategy as comprising economic, social and environmental components. Practice has largely failed, however, in combining these three pillars of sustainable development into an integrated, holistic approach to development policy. Instead, economic, social and environmental policies have been formulated and applied in separation from each other with little attempt to exploit the synergies or use the potential trade offs between the three components of sustainable development. Interest in developing a methodology for measuring the impact of development policies on sustainable development has increased in recent years. The implementation of separate forms of economic, social and environmental assessment at the project level has been practiced for many years, and the application of these forms of assessment at the strategic (policy) level has also increased in recent years. Strategic impact assessment which accords the same level of consideration to economic, social and environmental impacts (sustainability impact assessment) is now beginning to be adopted at the international and national level of decision making as a means of measuring the potential or actual impact of development policies and strategic interventions on sustainable development. Ownership: There is widespread agreement on the need for national strategic development planning processes to be countryowned. Lack of national ownership and commitment has been seen as a major factor contributing to the failure of development assistance programmes. The principle of national ownership implies that the processes and targets should be based on a countrys own perceptions of what constitutes its national strategy for sustainable development (35) Ownership also needs to extend beyond government and include the other national stakeholders. The involvement of non governmental stakeholders in strategic planning strengthens the planning process by building broad legitimacy for the process, by widening the range of skills, information and understanding available for formulating and implementing the strategy. The level of participation that is possible and appropriate will be determined at the country level, in the light of the particular configuration of actors at national and local level, their capacities to participate, and the degree to which the countrys political and social context is conducive to civil society engagement with government (36)

appraisal. This is an important test of the consistency between project appraisal and implementation and strategic appraisal, especially where responsibility for project implementation is decentralized and undertaken by different authorities. 34 Lee, N. (2002) Strategic Impact Assessment and Enterprise Development. EDIAIS http://www.enterpriseimpact.org.uk/overview/index.shtml 35 McGee, R. and Norton, A. (20001) Participation in Poverty Reduction Strategies: A synthesis of experience with participatory approaches to policy design, implementation and monitoring. IDS Working Paper 109. Institute of Development Studies. Brighton. 36 Dalal-Clayton B and Bass S (2002) Sustainable Development Strategies: A Resource Book, Earthscan, London

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Implications of the human rights approach for impact assessment The rights based approach also has implications for impact assessment and programme learning.Firstly it means that the criteria for impact assessment need to go beyond increases in income and assets to include: - control over income and assets to enable continuous improvements - broader aspects of well-being including health and housing - working conditions and contribution to access to skills and information - impacts on family life and long-term security - freedom of expression and association - participation in political and cultural life - dignity and self-esteem Secondly it means that the stakeholders for impact assessment need to include not only entrepreneurs directly affected but also: - poor entrepreneurs, including women, the poorest and most disadvantaged and particularly those involved in micro-enterprise - workers in enterprises of all sizes - other affected poor and disadvantaged people in the households, communities and markets where enterprises of being promoted Thirdly it means that the methodologies for impact assessment should conform to the operational principles underlying the approach: participation inclusion of stakeholders, not only as objects of investigation but also in analysis of the policy implications

The impact assessment and policy learning process can also be an important contribution to the skills acquisition and access to information of the participants in the assessment.

Implications of the sustainable livelihood approach for impact assessment The sustainable livelihoods approach is about supporting people to achieve their own livelihood goals (with the proviso about sustainability). Livelihoods programmes should therefore be judged on whether they contribute to the achievement of the livelihood outcomes that people consider important. Care should also be taken to observe unplanned changes associated with development activity (for example, changes in social relations, accumulation or loss of assets by particular groups, etc.). There are, though, several difficulties in this area, including that: - different outcomes may conflict; - some outcomes (such as increased well-being) may be extremely difficult to translate into monitorable indicators; and - it is hard to ensure objective monitoring of impact by groups with different interests, especially when they themselves do not prioritize a given outcome (e.g. environmental sustainability).

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As always with development activity, it is hard to achieve an adequate understanding of the nature of causality, so the comprehensive approach of the livelihoods framework may provide some assistance here. (37) There is no single definition of people-centered impact assessment. Approaches such as beneficiary contact monitoring, stakeholder analysis and participatory assessment commonly include one or more different elements. A range of impact assessment tools can be used or adapted to address these issues. However, having a clear understanding of the objectives of impact assessment (for whom, by whom and for what purpose is the information collected) is as important as the selection of particular instruments. Impact assessment should strive to monitor both policy-level and local-level changes, as well as the links between them. Measures of institutional change (e.g. changes in service provision, representation in decision-making processes) should be supplemented by monitoring local perceptions of change, using techniques such as institutional mapping. The SL approach endeavors to ensure that external support reinforces positive patterns of change and mitigates negative trends. A mix of indicator-types is required to capture dynamic processes. (38) Outcome indicators: these relate to longer-term targets. Measurement indicates what has been achieved Process indicators: these measure on-going progress towards planned outcomes. Leading indicators: these suggest what will happen; especially over the longer-term (e.g. indicators of behavioral change provide early evidence of progress).

It is important not to try and measure everything. An institutional map locates a group in terms of its relationships with other organizations and the importance and strength of these relationships. The approach can be used to determine where the group is now; where it would like to be; and changes in relationships over time. The distinction between process indicators and outcome indicators is important. Process indicators may suggest that a project is doing very well (e.g. the participation of excluded groups may be increasing), while outcome indicators may be disappointing. Understanding cause and effect relationships is therefore critical.

Enterprise development measures Enterprise development measures may be defined as actions taken by a donor to promote the contribution of enterprises (in the private or public sector) to meeting specified development goals in an observed developing country. They may be confined to small and medium-sized enterprises, located within the private sector. (39) The general case for supporting business enterprises in developing countries is often based on the following:
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Kirkpatrick C and Lee N (2002). Further Development of the Methodology for a Sustainability Impact Assessment of Proposed WTO Negotiations (Final Report). IDPM University of Manchester 38 World Bank (2003) A Users Guide to Poverty and Social Impact Analysis Washington D.C. World Bank 39 Dalal-Clayton B and Bass S (2002) Sustainable Development Strategies: A Resource Book, Earthscan, London

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Enterprise development is the main engine of economic development, which is, in turn, an important instrument in realizing a wide range of other development goals. Enterprise development has been inhibited in fully playing its development role due to market and regulatory failures. These, it is claimed, have particularly disadvantaged small and medium-sized indigenous enterprises and those employed in them. Where poverty reduction is a primary goal, the case for supporting enterprises will depend primarily upon their direct and indirect contribution to poverty reduction.

More specific arguments for supporting business enterprises are related to the goals on which the development strategy is based. For example, where poverty reduction is a primary goal, the case for supporting enterprises will depend primarily upon their contribution to poverty reduction, but also taking other costs and benefits of any enterprise support into consideration. (40)

Main types of Enterprise Development intervention

Improving the legal and regulatory enabling environment for enterprise (at all levels): Raise public awareness of the economic importance of micro-enterprises; engage public and private sectors to create better, pro-poor enterprise policy; simplify and improve business regulation, licensing and other legal requirements. Developing financial markets, institutions and instruments to support enterprise growth (particularly for micro, small and medium scale enterprise): Strengthen retail capacity of microfinance institutions by: further development of financial sustainable savings, credit, leasing and insurance services that reach more clients, and advance the institutions providing these services towards full commercial viability; deepen penetration by mainstream capital markets to micro-finance institutions and small and medium scale enterprises; encourage the use by donors of non-grant-based support mechanisms (which minimize subsidy and market distortion) such as convertible loans, guarantees, asset leasing and equity instruments). Addressing constraints in management, technologies and market knowledge (for small and medium scale enterprise): Strengthen management and business development services by: strengthening governance and leadership; financial management; production and distribution methods and technologies; and research. Help to create a better-trained workforce. Improve market knowledge, communication and institutional linkages by: integrating larger enterprises vertically with smaller enterprises; deepening market activity, trade, and knowledge from big business down to small enterprise (e.g. involving ecommerce and new information and communication technology). (41)

40

A list of policy measures for promoting enterprise development will be the starting point for the assessment. Ideally, a number of policy options should be assessed. But in practice it may be necessary to limit the assessment to a single policy proposal. 41 McGee, R. and Norton, A. (20001) Participation in Poverty Reduction Strategies: A synthesis of experience with participatory approaches to policy design, implementation and monitoring. IDS Working Paper 109. Institute of Development Studies. Brighton.

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REFERENCES
A Users Guide to Poverty and Social Impact Analysis Washington D.C. World Bank, 2003 Commission of the European Communities (2001) Communication from the Commission- a sustainable Europe for a better world: a European Union strategy for sustainable development. European Commission, Brussels Dalal-Clayton B and Bass S (2002) Sustainable Development Strategies: A Resource Book, Earthscan, London DETR (2000) Good Practice Guide on Sustainability Appraisal of Regional Planning Guidance Department of the Environment, Transport and the Regions, HMSO, London DFID (2000) Achieving Sustainability, Poverty Elimination and the Environment: Strategies for achieving the international development targets, DFID, London. DFID (2000b) Making Markets Work Better for the Poor, DFID, London DFID, Draft Evaluation Guidelines (First Draft Nov 2000), Evaluation Dept, DFID, UK Goodland R and Mercier JR (1999) The evolution of environmental assessment in the World Bank: from approval to results Environment Department Papers No 67 The World Bank, Washington DC 10,11,15 Gosling L and Edwards M Toolkits: a practical guide to assessment, monitoring, review and evaluation Save the Children Development Manual 5, SCF London Kirkpatrick C and George C (2003) Sustainability Impact Assessment of Proposed WTO Negotiations: Sector Studies for Market Access, Environmental Services and Competition: Final Report, Institute for Development Policy and Management, University of Manchester Kirkpatrick C and Lee N (2002), Further Development of the Methodology for a Sustainability Impact Assessment of Proposed WTO Negotiations (Final Report); IDPM University of Manchester Kirkpatrick and Parker 2003; Regulatory Impact Assessment and Regulatory Governance in Developing Countries; Centre on Regulation and Competition, IDPM Lee, N. (2002) Strategic Impact Assessment and Enterprise Development; EDIAIS http://www.enterpriseimpact.org.uk/overview/index.shtml Lee, N. and George, C. (authors/eds) (2000) Environmental Assessment in Developing and Transitional Countries; John Wiley & Sons, London. Lee N and Kirkpatrick C (2000) (eds.) Sustainable Development and Integrated Appraisal in a Developing World, Edward Elgar, Cheltenham McCulloch, N., Winters, L.A. and Cirera, X (2001). Trade Liberalization and Poverty: A Handbook. Centre for Economic Policy Research, London. McGee, R. and Norton, A. (20001) Participation in Poverty Reduction Strategies: A synthesis of experience with participatory approaches to policy design, implementation and monitoring. IDS Working Paper 109; Institute of Development Studies Brighton. Picciotto R (2002) Scaling Up: A Development Strategy for the New Millennium Global Policy Project, Washington DC: World Bank Stern N (2002), A Strategy for Development; Washington D.C. World Bank

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