Enterprise development programs are designed with long-term sustainability in mind.

Key indicators (to be read in conjunction with the guidance notes):

• Mutually-beneficial (win-win) inter-firm relationships are strengthened (see guidance note1).
• Programs engage the private sector as partners, while ensuring this engagement does not contravene Standard 4, “Protecting Individuals and the Environment” (see guidance note 2).
• Subsidies are time-bound and used selectively to stimulate a market response (see guidance note 3).
• Programs avoid directly entering the supply chain, when possible. When they must do so, they ensure that an exit strategy is in place from the outset (see guidance note 4).

Guidance Notes:

1. Strengthening relationships: Strong, mutually beneficial relationships among enterprises facilitate the transference of information, skills and services. Market opportunities and constraints generally require a coordinated response by multiple firms in an industry or subsector—which necessitates trust and a willingness to collaborate. Establishing communication and increasing transparency are essential trust-building activities in conflict-affected environments that require focused planning and time to demonstrate results. Associations or industry working groups can play an important role in rebuilding relationships among similar firms or among those linked vertically in the supply chain.

Example: Trust can be encouraged in many ways, such as creating a “safe space” for buyers and sellers to meet; acting as an “honest broker” to ensure compliance with contract terms; establishing objective quality standards; and establishing market information systems.

2. Partnering with the private sector: In many industries, there are private-sector firms with the ability and economic incentives to link enterprises to markets, technologies or information. These firms, whether buyers, processors or producers, can provide sustainable leadership for an industry, driving innovation and facilitating the development of trust. Programs promoting enterprises and households livelihoods should explore partnerships with the broader private sector, or at the least engage with them. This ensures programs are grounded in market realities.

Example: Buyers may be willing to provide technical advice to their suppliers to ensure they receive the quality products they need. Similarly, input suppliers often have an incentive to disseminate technical information to ensure the use of inputs results in improved production in order to broaden their customer base and build customer loyalty.

3. Use of subsidies: Subsidies, by definition, are unsustainable and therefore distort market incentives. Consequently, implementers should plan from the outset for subsidy withdrawal, and should communicate this clearly to recipients and other stakeholders. Subsidies should stimulate or redirect, but not replace, market activity. Subsidies can be effective in increasing the availability of market information to increase transparency and trust, to “level the playing field” for small enterprises, and to assist with asset replacement. Subsidies can also be used to demonstrate the potential of an improved technology; to reduce the risk to enterprises investing in new technologies or techniques; or to accelerate the development of an industry by resolving key constraints.

Example: In-kind credit, cost-sharing and other risk-mitigation mechanisms can encourage firms to invest in new production technologies or target new markets. Once the investment is shown to be profitable, the subsidy can be withdrawn.

4. Entering the supply chain: Direct intervention in a supply chain to compensate for a gap in the chain, to reduce risk, or to provide a more equitable alternative to an existing market actor, may “kick start” an industry. However, while only ever intending this as a stop-gap measure to create momentum, projects that step into the supply chain often have difficulties in extricating themselves. Direct intervention creates dependency and delays the emergence of private-sector solutions to industry problems. It should therefore be avoided whenever possible. When there are no market actors capable or willing to serve an essential function in the chain, services provided by a project should be unsubsidized and should be passed off to private-sector firms as soon as possible. A plan to identify, partner with and build the capacity of private sector firms to assume project services should be designed prior to entering the supply chain.

Example: Buyers may fail to pay producers on time, causing a breakdown of trust and an increase in side-selling on the part of the producers. In response to this situation, a project may decide to become a market intermediary, buying the product from the producers and selling it to the buyers. By intervening directly, the project reduces risk for the producers and buyers alike and may increase production volumes and sales revenues. However, such an arrangement creates dependency on the project and does not create any incentive for buyers and producers to resolve their problems.