Small business

5.2 Developing the NGO sector
Objective: To design an NGO sector for SME support, sustainable in the long run through engagement and
partnership. 
The SME development infrastructure is often characterised by a large number of NGOs whose objectives
range from social aspects of poverty alleviation through to self-help and enterprise development. NGOs
have been favoured in the past as organisations to deliver services to small businesses for a number of
reasons:
• They are essentially ‘bottom up’ organisations, supported by and made up of members of the local
community; therefore they are more likely to share local values and be more sensitive to local business
needs;
• They are likely to be entrepreneurial. As small organisations, they probably combine some of the key
characteristics of the entrepreneurial organisation described earlier;
• They reflect differences in local needs due to their differentiation; 
• Because of strong local pressure they may be less susceptible to corruption;
• They usually operate with tight resources. This helps in their understanding of the conditions of the
micro and small business client group.
These are important areas upon which public policy can build. But policy should also recognise the
limitations of NGOs and find ways to overcome them. These limitations include:
• Frequently they have a weak resource base, with accordingly less capacity to guarantee quality and
consistency in services delivery;
• Weak resources also make them prone to falling in the trap of chasing funding organisations. They may
therefore become supplier rather than local demand led;
• Their local base and resource weakness may limit their outreach and prevent them from offering a
sufficiently wide range of services;
• They may be isolated from the broader local stakeholder network as, in the struggle for survival, they
become competitive with other local service providers;
• Their differentiation may make for difficulty in promoting standards in service delivery; 
• Because accounting in standard outputs may be difficult for NGOs, providers of funds may have
problems in measuring  cost effectiveness ; 
• Local differentiation may make working within a national public policy framework difficult;
• Because of their smallness and vulnerability, resource providers may consider NGOs incapable of
sustainable service delivery and programme execution. 
Public policy should seek to remedy these weaknesses while building on the strengths of the NGO
sector. Once the exact role of NGOs in outreach to SMEs has been determined, government funds can be

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used to leverage existing private and non-government resources to shape effective partnerships and
harmonise NGO activity with policy goals.