Alleviating poverty by engaging in microenterprise how can INGOs in vietnam help microenterprises overcome market constraints

ALLEVIATING POVERTY BY ENGAGING IN MICROENTERPRISE: HOW CAN INGOS IN VIETNAM HELP MICROENTERPRISES OVERCOME MARKET CONSTRAINTS? Vien Thi Thanh Chu MBus (Applied Finance) Queensland University of Technology Supervisors: Associate Professor Josephine Barraket Dr Belinda Luke Submitted in fulfilment of the requirements for the degree of Master of Business (Research) Faculty of Business Queensland University of Technology 2011 Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? Keywords Demand driven, INGOs, market constraints, micro business, microenterprise, poverty, supply driven, Vietnam Page i Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? Abstract Microenterprise programs (MEPs) that aim to help poor communities engage in micro businesses have contributed significantly to poverty reduction in developing countries However, a review of the literature suggests that the current approach adopted by MEPs has mainly provided services to microenterprises (MEs) based on what MEPs can supply rather than on what MEs actually need and what the market demands Therefore, MEPs’ approaches are more likely to be supply driven Yet when there are market constraints, such as high competition or low demand, this approach has been linked to the failure of MEs in their infancy The alternative is a demand driven approach, in which MEPs provide MEs with support based on what MEs need, and what markets demand However, research examining the application of this approach is limited In order to gain an understanding of the approaches of MEPs, to identify whether these approaches are demand or supply driven, and to discover how these approaches are used to help MEs operate under market constraints, this study examined the operation of International Non-Government Organisations (INGOs) operating in Vietnam This exploratory study involved in-depth interviews with senior executives from 10 INGOs Thematic analysis was used to analyse data collected from the in-depth interviews The results were further verified with publicly available data from the INGOs The findings of this research indicate that the demand driven approach is dominant in most approaches of INGOs in Vietnam, and has become a key approach in helping MEs deal with market constraints Further, rather than explaining the demand and supply driven dichotomy, the findings highlight that MEPs’ approaches can be viewed in two dimensions: a participant-demand driven approach focusing on the basic needs and capabilities of the extremely poor, irrespective of market demands; and a marketdemand driven approach focusing on the capabilities of poor communities, while also accommodating market demands This research provides contemporary and practical insights into the DD and SD approaches, and a better understanding of MEPs’ approaches to MED in Vietnam   Page ii Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? Table of Contents Keywords i  Abstract ii  Table of Contents iii  List of Figures vii  List of Tables viii  List of Abbreviations ix  Statement of Original Authorship x  Acknowledgments xi  CHAPTER 1: INTRODUCTION 1  1.1  INTRODUCTION 1  1.2  BACKGROUND 2  1.3  CONTEXT FOR THIS STUDY 5  1.4  PURPOSE OF THE RESEARCH AND RESEARCH QUESTIONS 7  1.5  SIGNIFICANCE 9  1.6  THESIS OUTLINE 10  CHAPTER 2: LITERATURE REVIEW 11  2.1  INTRODUCTION 11  2.2  UNDERSTANDING POVERTY 11  2.3  MEPs IN DEVELOPING COUNTRIES 15  2.3.1  Microenterprise program definition 16  2.3.2  Available evidence on the performance of MEPs 16  2.3.3  Limitations of MEPs 18  2.3.3.1  Alleviating poverty via self-employment 18  2.3.3.2  Simulating economic development in impoverished areas 21  2.3.3.3  Promoting individual self-sufficiency 24  2.3.3.4  Providing seedbed for microentrepreneurs 24  2.3.3.5  The effectiveness of MEPs 25  2.4  DEMAND DRIVEN VERSUS SUPPLY DRIVEN 27  2.4.1  Understanding of demand driven and supply driven approaches 28  2.4.2  Demand driven versus supply driven MEP approaches in practice 30  2.5  THE INFLUENCE OF DIFFERENT SECTORS ON MEPS 32  2.6  MICROENTERPRISE PROGRAMS IN VIETNAM 34  2.6.1  Background about Vietnam 34  2.6.2  Overview of MEPs in Vietnam 36  2.7  SUMMARY 40  CHAPTER 3: RESEARCH DESIGN 42  Page iii Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? 3.1  INTRODUCTION 42  3.2  RESEARCH APPROACH 42  3.3  THE SAMPLE 46  3.4  PREPARING THE INTERVIEW PROTOCOL 47  3.5  DATA COLLECTION 49  3.5.1  Conducting in-depth interviews 49  3.5.2  Collecting data from publicly available sources 54  3.6  DATA ANALYSIS 54  3.7  ETHICS 55  3.8  VALIDITY AND RELIABILITY 56  3.9  LIMITATIONS 57  CHAPTER 4: FINDINGS – COMMON APPROACHES TO MED 59  4.1  INTRODUCTION 59  4.2  INTEGRATED APPROACHES TO POVERTY ALLEVIATION 60  4.3  UNDERSTANDING THE LOCAL COMMUNITY 62  4.4  FORMING GROUPS FOR WORKING OR LENDING 63  4.4.1  Required characteristics of groups 64  4.4.2  Generating benefits from group activities 67  4.4.3  Forming cooperatives for wider long-term benefits 70  4.5  MICROENTERPRISE DEVELOPMENT 71  4.5.1  Implementing MED projects in Vietnam: opportunities and costs 72  4.5.2  Encouraging participation in MED projects: Non-monetary support 74  4.5.3  Step-by-step approach to MED 75  4.5.4  Connecting MEs with supply chains via output market linkages 77  4.5.5  Value chain development 78  4.5.6  Challenges of MED support 82  4.5.7  Developing non-farm MEs 84  4.6  SUMMARY OF COMMON APPROACHES 86  CHAPTER 5: FINDINGS – IMPLEMENTING COMMON APPROACHES TO MED 87  5.1  INTRODUCTION 87  5.2  BENEFICIARIES OF INGOs’ PROJECTS 88  5.2.1  Identifying participants for projects 88  5.2.2  Working with local authorities 92  5.3  APPROACHES TO PROVIDING CREDIT 94  5.3.1  Not providing credit 95  5.3.2  Providing livestock or grants 98  5.4  APPROACHES TO PROVIDING TRAINING 99  5.4.1  Training approaches 99  5.4.2  Training courses and location 100  5.4.3  Underlying training principles 101  Page iv Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? 5.4.4  Encouraging households to participate in training 102  5.5  APPROACHES TO PROVIDING TECHNICAL SUPPORT 104  5.6  APPROACHES TO PROVIDING JOB OPPORTUNITIES 106  5.6.1  Connecting households with labour market demands 106  5.6.2  Underlying principles in providing job opportunities 107  5.6.3  Engaging in Social Enterprises 108  5.7  INCOME OF INGOs 111  5.8  THE ROLE OF GOVERNMENT IN MED 112  5.9  CULTURAL INFLUENCE ON MED 114  5.10  SUMMARY 115  CHAPTER 6: DISCUSSION 116  6.1  INTRODUCTION 116  6.2  APPROACHES TO MED 116  6.2.1  A comprehensive approach to poverty alleviation 117  6.2.2  Implementing different approaches 118  6.2.3  Building bridging social capital 118  6.2.4  Having a strong focus on agricultural activities 124  6.2.5  Using different income sources to fund INGOs’ operations 125  6.2.6  Providing non-monetary support 126  6.2.7  Developing bonding social capital 127  6.2.8  Using pilot farmers to encourage participation 130  6.3  DEMAND DRIVENAPPROACHES IN MED 131  6.3.1  Demand driven approach in grouping beneficiaries 131  6.3.2  Demand driven approach in providing non-monetary capital 132  6.3.3  Demand driven approach in providing training 133  6.3.4  Demand driven approach in providing technical support 134  6.3.5  Demand driven approach in providing job opportunities 135  6.3.6  Demand driven approach in dealing with market issues 136  6.4  SUPPLY DRIVEN APPROACHES IN MED 139  6.4.1  Supply driven in choosing beneficiaries 139  6.4.2  Supply driven in providing support 140  6.5  LEARNING TO OPERATE WITHIN MARKET CONSTRAINTS 143  6.5.1  Approaches in dealing with market constraints 143  6.5.2  The role of the government 146  6.5.3  The impact of culture 147  6.6  SUMMARY 147  CHAPTER 7: CONCLUSIONS 149  7.1  OVERVIEW OF THE STUDY 149  7.2  SIGNIFICANT FINDINGS 150  7.2.1  New perspectives on MEPs’ approaches 151  7.2.2  Emergent findings 153  7.3  CONTRIBUTIONS FROM THE STUDY 154  7.3.1  Contributions to the existing literature 154  Page v Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? 7.3.2  Contributions to practice 156  7.4  LIMITATIONS OF THE STUDY 157  7.5  AREAS FOR FURTHER RESEARCH 158  REFERENCE LIST 160  APPENDICES 170  APPENDIX 1: SEMI-STRUCTURED INTERVIEW PROTOCOL: MICROENTERPRISE 170  APPENDIX 2: INFORMATION FOR PARTICIPANTS 174  APPENDIX 3: CONSENT FORM 176  Page vi Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? List of Figures Figure 5.1 INGO’s use of social enterprise funding arrangements 110  Figure 6.1 Common approaches in ME 144  Page vii Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? List of Tables Table 2.1 Dimensions of a supply driven and demand driven approach 30  Table 3.1 Topics covered in the interview protocol 48  Table 3.2 Participant profiles 51  Table 4.1 Issues considered before designing projects 63  Table 4.2 Group characteristics 67  Table 4.3 Group activities 70  Table 4.4 Levels of INGOs’ approaches 84  Table 5.1 Key characteristics of INGOs’ beneficiaries 91  Table 5.2 Key roles of stakeholders 94  Table 5.3 Key reasons for not providing credit 98  Table 5.4 Aspects of training under a demand driven approach 104  Table 5.5 Technical support 106  Table 5.6 Aspects of vocational training provided by INGOs 108  Table 5.7 Funding arrangements of INGOs 112  Table 6.1 Dimensions of a demand driven approach 138  Table 6.2 Dimensions of a supply driven approach 141  Table 6.3 Dominant approach reveal in each INGO 142  Page viii Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? List of Abbreviations ADB Asian Development Bank DD Demand Driven FFS Farmer Field School INGOs International Non-Government Organisations MDG Millennium Development Goals MED Microenterprise Development MEPs Microenterprise programs MEs Microenterprises SD Supply Driven TOT Training of Trainers VBARD Vietnam Bank for Agriculture and Rural Development VBSP Vietnam Bank for Social Policies VCD Value Chain Development Page ix Reference list Corbin, J., & Morse, J M (2003) The unstructured interactive interview: Issues of reciprocity and risks when dealing with sensitive topics Qualitative Inquiry, 9(3), 335-354 doi: 10.1177/1077800403251757 Creswell, J W (2009) Research design qualitative, quantitative, and mixed methods approaches (3rd ed.) 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What is your key support/approach? Why is this support/approach chosen rather than others? Will this support/approach be continued and expanded? What are the main strengths in using this approach? And what are the main challenges? Beneficiaries of the support Who is the target group for the support? Where are they living? And how you identify them? Page 170 Appendices The types of support 4.1 Credit: Are there credits or grants provided to the poor? How and when are credit/grants provided? Do the poor have to form groups for lending? a If so, what are the criteria to form the group? b What involvement you have in running the group or assisting the group? What repayment rate you currently have? Is it possible for INGOs in Vietnam to charge interest to MEs? How you achieve this? i.e By what means? In case there is low chance or it is difficult for the poor engaging in micro business, what is the support available for them to escape from poverty? 4.2 Training Do you provide any training to MEs? What are the underlying principles to design the training? Why are these principles necessary? How you encourage the poor to participate in the training? How you evaluate the effectiveness of the training? How you encourage the poor to engage in MEs? 4.3 Technical support Is the quality of the ME’s product important? Why? Page 171 Appendices Do you offer technical support to MEs in order to improve the quality of their products or to increase their productivity? Who is the target of this support? Do MEs have to pay for this support? Why? 4.4 Customer source and Marketing Do you assist MEs to market their products? a If so, why you assist them? and how? b If not, why? Do you evaluate market conditions before helping the poor engage in MEs? Why? Is there a focus on particular regions where supported MEs are located? Which regions? and why? What are key successes and difficulties in assisting MEs market their products? Do you have any other suggestions for helping MEs market their products? 4.5 Supplier source and Storage/Inventory/Retails Do you assist MEs to have access to suitable supplier sources? If so, how? Do you help MEs develop a supplier chain? a If yes, how does it work? b If not, why? 4.6 Job opportunities Do you design training for the poor to find a job rather than engage in micro business? If yes, what is the training? And why? Page 172 Appendices What are the underlying principles to design the training? How you help them find a suitable job? Are there any support agencies? If so, why are these agencies necessary? 4.7 Length of projects Through examination of a project detailed in publicly available reports, I saw in your annual report of 2xxx (or project reports) a project (name:……) How long has this project lasted? a If it was finished, why? Was it successful? Why or why not? b If it was for a short period of time, why? And how did you evaluate the effectiveness and the result of this project? c And what did you learn from it? 4.8 Survival rate of MEs Do you follow up the survival rate of MEs supported by your projects? a If yes, how? b If no, how you know whether MEs can survive? c And how you evaluate the effectiveness of your support? How you evaluate the improvement in incomes of the poor? What are the successes and challenges of your operation and of supported MEs? 4.9 Cost-effectiveness: Do you evaluate “value-for-money” for your projects? If so, how? Do you ask for training fees? Why? Is your organisation funded 100% by ……? (e.g institution referred to in the annual or project reports) Page 173 Appendices APPENDIX 2: INFORMATION FOR PARTICIPANTS PARTICIPANT INFORMATION FOR QUT  RESEARCH PROJECT Alleviating poverty by engaging in microenterprise: How can international non-government organisations in Vietnam help microenterprises overcome market constraints? Research Team Contacts Vien Thi Thanh Chu – Master of Business Assoc Prof Josephine Barraket Research student School of Accountancy School of Accountancy Phone: +61 423 663 479 Phone: +61 3138 7699 Email: thi.chu@student.qut.edu.au Email: jo.barraket@qut.edu.au Dr Luke Belinda School of Accountancy Phone: +61 3138 4323 Email: b.luke@qut.edu.au DESCRIPTION (The contents of this form and of the Consent Form will be translated in writing into Vietnamese for prospective participants Project Managers or Directors of International Non-government Organisations (INGOs), who are not fluent in English.) This project is being undertaken as part of a Master of Business Research project by Vien Thi Thanh Chu The purpose of this project is to gain an understanding of the common approaches of INGOs in Vietnam in helping the poor engage in business under market constraints The findings will help to understand whether and how different approaches have been used, and will provide a foundation for further research in modelling effective approaches to poverty alleviation The research team requests your assistance because you are involved in an INGO operating in Vietnam, and have knowledge of how your organisation helps the poor engage in microenterprise through different projects Because of this special knowledge, you are able to help the team understand the approach adopted by your organisation, its successes and limitations PARTICIPATION Your participation in this project is voluntary If you agree to participate, you can withdraw from participation at any time during the project without comment or penalty Your participation will involve an interview at your office, and will take approximately one hour and a half The interview will be recorded and transcribed by Page 174 Appendices the researcher prior your permission The example of interview questions: Who is the target group for the support? Or, Are there credits or grants provided to the poor? Etc EXPECTED BENEFITS It is expected that this project will not directly benefit you However, it may benefit either your organisation or other INGOs in the future through insights gained from this study on alternative effective approaches in helping the poor engage in microenterprise Based on findings from this study and subsequent research, your organisation and other INGOs may decide to change or modify their current approach in order to help MEs survive and grow sustainably Donors may give more support to INGOs adopting a more effective approach to poverty alleviation RISKS There are no risks beyond normal day-to-day living associated with your participation in this project CONFIDENTIALITY All comments and responses will be treated confidentially The names of individual persons are not required in any of the responses Findings and reports from this project will also not identify participants individually Prior to leaving the meeting, it is my responsibility to verify with you any specific information which I may include in the final report Any notes and data provided during the meeting will be kept confidential CONSENT TO PARTICIPATE Enclosed below is a consent form which you can sign and return to us by email, fax or post to confirm your agreement to participate QUESTIONS / FURTHER INFORMATION ABOUT THE PROJECT Please contact the research team members named above to have any questions answered or if you require further information about the project CONCERNS / COMPLAINTS REGARDING THE CONDUCT OF THE PROJECT QUT is committed to researcher integrity and the ethical conduct of research projects However, if you have any concerns or complaints about the ethical conduct of the project you may contact the QUT Research Ethics Unit on +61 3138 5123 or e-mail ethicscontact@qut.edu.au The Research Ethics Unit is not connected with the research project and can facilitate a resolution to your concern in an impartial manner Thank you for helping with this research project Please keep this sheet for your information Page 175 Appendices APPENDIX 3: CONSENT FORM CONSENT FORM FOR QUT RESEARCH PROJECT Alleviating poverty by engaging in microenterprise: How can international non-government organisations in Vietnam help microenterprises overcome market constraints? Research Team Contacts Vien Thi Thanh Chu – Master of Business Assoc Prof Josephine Barraket Research student School of Accountancy School of Accountancy Phone: +61 423 663 479 Phone: +61 3138 7699 Email: thi.chu@student.qut.edu.au Email: jo.barraket@qut.edu.au Dr Luke Belinda School of Accountancy Phone: +61 3138 4323 Email: b.luke@qut.edu.au STATEMENT OF CONSENT By signing below, you are indicating that you:  have read and understood the information document regarding this project  have had any questions answered to your satisfaction  understand that if you have any additional questions you can contact the research team  understand that you are free to withdraw at any time, without comment or penalty  understand that you can contact the Research Ethics Unit on +61 3138 5123 or e-mail ethicscontact@qut.edu.au if you have concerns about the ethical conduct of the project  have the authority to provide information about [name of INGO]  agree to participate in the project Name Signature Date / / Please return this sheet to the investigator I accept that the project will include audio recording Please send me a Summary Report of the final research findings Please send me a copy of the Interview Transcripts Page 176 .. .Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? Keywords Demand driven, INGOs, market constraints, micro business,... Underlying training principles 101  Page iv Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? 5.4.4  Encouraging... business, microenterprise, poverty, supply driven, Vietnam Page i Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help microenterprises overcome market constraints? Abstract