Local Economic Development and Access to (MSME) Finance6TH African Microfinance Conference

Workshop

15 August 2013

Roland V. Pearson, Jr.

Centre for Inclusive Banking in Africa

Outline

1. Background & definitions

2. Introduction to ‘Collective Impact’

3. Case study of Ekurhuleni

4. Group exercise

Background• Partnerships are a sub-set of collective impact

• LED is a comprehensive, spatially specific approach to livelihoods development

• Successful LED is a function of successful collective impact

• An outgrowth of the ‘developmental State’ in SA

• Began as mainly an urban (re)development discipline, then housing, now broader

The Five Conditions of Collective ImpactCondition Definition

Common Agenda All participants have a shared vision for change including a common understanding of the problem and a joint approach to solving it through agreed upon actions.

Shared Measurement Collecting data and measuring results consistently across all participants ensures efforts remain aligned and participants hold each other accountable.

Mutually Reinforcing Activities

Participant activities must be differentiated while still being coordinated through a mutually reinforcing plan of action.

Continuous Communication Consistent and open communication is needed across the many players to build trust, assure mutual objectives, and create common motivation.

Backbone Support Creating and managing collective impact requires a separate organization(s) with staff and a specific set of skills to serve as the backbone for the entire initiative and coordinate participating organizations and agencies.

See “Channeling Change: Making Collective Impact Work. An in-depth look at how organizations of all types, acting in diverse settings, are implementing a collective impact approach to solve large-scale social problems”. By Fay Hanleybrown, John Kania, & Mark Kramer

Some Insights on the 5 Conditions• A simple, well-defined vision is easier to rally around

• Good M&E and impact assessment can be expensive, but manageable, if properly designed from the start

• Discerning core competencies and who is best placed to manage or mitigate which risks helps to differentiate roles

• Quality, not quantity of communication is most important (message, medium, mode, etc.)

• Very hard to find the right backbone organization and to get money to pay for it

Isolated Impact vs. Collective ImpactIsolated Impact Collective Impact

Funders select individual grantees thatoffer the most promising solutions.

Funders and implementers understandthat social problems, and their solutions,arise from the interaction of many organizations within a larger system.

Nonprofits work separately and competeto produce the greatest independentimpact.

Progress depends on working toward thesame goal and measuring the same things.

Evaluation attempts to isolate a particularorganization’s impact.

Large scale impact depends on increasingcross-sector alignment and learningamong many organizations.

Large scale change is assumed to dependon scaling a single organization.

Corporate and government sectors areessential partners.

Corporate and government sectors areoften disconnected from the efforts offoundations and nonprofits.

Organizations actively coordinate theiraction and share lessons learned.

• Note the approach of MasterCard Foundation: Initiative vs. Partner led• Reaching the next milestones in microfinance are unlikely to be met in the same

way that we achieved the first milestones. Why?• The ‘shared economy’ vs. The ‘competitive’ economy (Think about how many things

have been or are being commoditized.)

Phases of Collective ImpactComponents for Success

Phase I Initiate Action

Phase II Organize for

Impact

Phase III Sustain Action &

Impact

Governance and Infrastructure

Identify champions and form cross-sector groups

Create infrastructure (backbone and processes)

Facilitate and refine

Strategic Planning

Map the landscape and use data to make case

Create common agenda (goals and strategy)

Support implementation (alignment to goals and strategies)

Community Involvement

Facilitate community outreach

Engage community and build public will

Continue engagement and conduct advocacy

Evaluation and Improvement

Analyze baseline data to identify key issues and gaps

Establish shared metrics (indicators, measurement, and approach)

Collect, track, and report progress (process to learn and improve)

Collective Impact is a function of a series of institutional arrangements and coordinated processes.

A Closer Look at Backbone Organizations

Many Actors Unfamiliar with Each Other: G2P Example

Government (inc. many

Departments & Layers)

Banks & Financial Svc. Organizations

Private Sector

(merchants, etc.)

Donors

Social Svc. Providers (NGOs, CBOs, Govt.)

Technologists (providers,

consultants, etc.)

Beneficiaries / Clients

Similarly complex landscape in youth development / youth financial services

Ekurhuleni Metropolitan Municipality• Ekurhuleni Metropolitan Municipality is a metropolitan

municipality that forms the local government of the East Rand region of Gauteng, South Africa. The name Ekurhuleni means ‘place of peace’ in Tsonga. Wikipedia)

• Population: 3.178 million (2011) (Statistics South Africa)

• Unemployment rate: 28.8% (2011) (Statistics South Africa)

• Population growth rate: 2.5% annual change (2011) (Statistics South Africa)

• Third largest city in South Africa

• Manufacturing hub that contributes more than 20% of the GDP of Gauteng province

Ekurhuleni Metropolitan Municipality Upgrading for Growth Strategy • Imperative to rapidly and equitably provide housing and basic services

to all its residents

• The past initiatives of upgrading and low cost housing provision in South Africa has had limited success in creation of wealth and employment opportunities for beneficiaries of upgrading

• Break the cycle of poverty by ensuring development of human capital is the core outcome of the upgrading process

• Instead of focusing solely on housing for slum residents, the Upgrading for Growth approach involves providing opportunities for economic growth that meet the livelihood and social needs of the poor within Ekurhuleni’s informal settlements.

Project Objectives• Harness the informal settlement upgrading process as the

driver for sustainable human settlement development

• Make development of human capital a core outcome of the upgrading process

• Ensure that beneficiaries of upgrading have access to opportunities for economic growth, creation of wealth and employment

• Ensure that the framework of household social assets and networks is strengthened through the upgrading process

• Conduct upgrading processes in a highly participatory and coordinated fashion

Key Characteristics Across All of the Settlements

•An overwhelming majority of inhabitants moved to and want to stay in the area because they want to find formal jobs – no fewer than 90% and on average, 95% of people moved to EMM for “better work prospects”

•In all three areas, at least 50% of people reported that they were “employed / self-employed”, representing a proportion of gainfully employed people that is below National trends, and in very low wage jobs

•Very low levels (in quantity and quality) of self-employment and microenterprise activity point to a confluence of strong desire for formal wage employment, limited market access and opportunities, and extremely poor skill and education levels

•With the vast majority willing to earn monthly incomes below R2,000 per month, and fully half willing to earn below R1,500 per month, the willingness to accept low-skilled jobs and earn modestly from microenterprise activity should be high

•Nonetheless, the large income disparity between self-employment and a formal job heavily influences people’s desires to continue seeking wage employment

•Relatively very small household sizes (about 3 people per household) and the opportunity to build new spaces with good infrastructure (especially electricity) that optimize the trade offs between personal accommodation and business premises may increase basic micro and small enterprise viability, but perceptions that formal wage employment is better are likely to persist

•Subject to more detailed investigation, EMM, as the country’s industrial hub and center of substantial manufacturing, transport, and other core industries, should offer better than average prospects for formal job creation

Levels & Nature of Income Across 3 Settlements

Expected Impact & Results• Increase in the number of households receiving housing and basic services on a priority basis

• Enhance institutional framework to supportive stakeholder networks to assist communities as they use newly available resources to both improve physical environment but also to make use of new economic opportunities

• Improved understanding of linkages between formal and informal economies

• Enhanced infrastructure planning and social investments that can be leveraged to increase the economic well-being of poor households in EMM

• Community led decision making process for development of upgrading plan

• Consistent input into strategic planning by all segments of EMM community, including low income residents

• Improved planning across government departments responsible for providing other socio-economic amenities e.g. health, education and LED to ensure alignment of plans and implementation of the Ekurhuleni CDS

• Improved service delivery policies informed by continuous input and upgrading experience in EMM

Role of Local Government

“…Despite the interconnectedness between economic and political stability, the local government’s ability to act in the economic arena is limited. For example, local government does not have a direct mandate to conduct trade promotion and regulate industry. Local government does, however, play a crucial role in the provincial and national economies by providing core infrastructure and services (i.e. water, electricity, and refuse removal) that no other level of government provides. Thus, the political mandate of local government is to facilitate the growth of the economy at local level by providing these services without which the economy would grind to a halt”.

Source: EMM LED Strategy, 2004

Critical International Trends in LED Practice

• Bottom-up, local stakeholder-driven processes

• Rapid mobilization around practical initiatives that converge towards longer term goals

• Simplified, rapid, entrepreneurial processes

• Mainly local resources – people, institutions, finance, & materials

• Increasingly demand-driven, market-provided services

• Opportunities & problem-focused initiatives

• Smaller, networked, viable initiatives with cumulative impact

Lessons Derived from eThekwini• Stability in policy and politics is critical in development

• Responses need to be comprehensive in nature

• Both policy and process need to be focused on together

• The absence of effective monitoring and evaluation undermines effective pro-poor development

• There is a need for more defined planning

• Explicit support for pro-poor development, in terms of funding, participatory development, policy and partnerships, clearly needs to be in place

Attributes “Winning Communities” from the Masakhane Campaign

• Building Bridges

• Partnerships

• Business Plans

• Record of Work

• Expertise

• Use of Limited Resources

• Training

• Financial Control

• A Leading Light

• Stable Team

• Community Support

• Overcoming Lethargy

Why Masakhane Campaign Masakhane came into being as a national campaign aiming at encouraging community members to pay for services rendered by municipalities. It is now an outreach program that promotes and strengthens communication between the municipality and citizens. This further encourages interaction between elected representatives and the community. What does Masakhane Campaign entail? Masakhane ensures that communities understand council programs and know their responsibilities towards the municipality. This is done by organizing a series of road-shows that take place over weekends. Different departmental representatives attend these road-shows and make presentations to the community. The community in turn raises questions and concerns around service delivery. Issues raised are referred to relevant department for actioning.

The ‘Hard’ Outputs• Facilities through which to access work opportunities

• Waste management and recycling facilities (e.g. collection, sorting, and cleaning points)

• Industrial hives, with training facilities

EMM UFG Conceptual Framework

Financial Services as Part of Value Chains

‘Microfinance’ has been criticized for its muted impact upon job creation and enterprise creation and growth.

LED at the Individual & Household Levels

Housing as the Leverage Point

Costs of Delivering on LEDItem Contents Unit No. of

UnitsCost Per

UnitFull Cost

LED Processes

Labour Market Demand Side Survey

External researcher Research report

1 R100,000 R100,000

FinScope/GEP Extension Survey

Research firm, survey and segmentation specialist

Settlement survey (all of EMM)

1 R750,000 R1,000,000

By-law Amendment

External Legal counsel technical assistance and review

Report 1 R100,000 R100,000

Investment Promotion (Policy & Practice)

Assistance in policy and procedure development

Report 1 R50,000 R50,000

Monitoring & Evaluation

IT review & enhancement; training in M&E techniques

Consultancies

4 R150,000 R600,000

CDWs {No external costs foreseen}

Specific Projects & Programmes

Work Seeking Design of ‘job-seeking suites’ Consultancies

1 R20,000 R20,000

TOTAL R1,870,000

In addition to R6.2 M of individual site costs & $1.1 M in feasibility costs.

Person-days to DeliverAspect Comment Duration

(days)Priority OneLabour Market Demand Side Survey 45

FinScope/GEP Extension Survey 90

Monitoring & Evaluation Time indicated relates to the review, design, and installation of updated systems, along with capacity building of key EMM staff. Clearly, the function is on-going.

180

CDWs This relates to the initial recruitment and training period 90

Enhanced EPWP Time indicated relates to the design & initial roll-out of the first project 120

Business-Linked Training Time indicated relates to the design & initial roll-out of the first project 90

Work Seeking Time indicated relates to the design & initial roll-out of the first project 90

Business & Office Support Facilities Time indicated relates to the design & initial roll-out of the first project, including procurement of key equipment and materials

60

Industrial Hives & Training Centres Time indicated relates to the design & initial roll-out of the first project, including construction time

120

Priority Two Action Research Estimated time to execute one Action Research study 60

Orientation to Work Time needed to design and implement first offerings of this aspect 30

Investment Promotion (Policy & Practice) Time needed to design new policy and procedures and conduct whatever training may be necessary

60

Agricultural Value-Addition (Bapsfontein only)

Time needed to design and implement first offerings of this aspect 60

Waste Management Facilities Time to equip the first site and train the initial set of entrepreneurs 90

Priority Three By-law Amendment Time related to the review and recommendations consultancy, not the time

necessary to go through the legislative process (if necessary)30

FET Visits Time to establish the necessary relationships and organise the first visits 90

FET Scholarships Time to establish the necessary relationships and set out the design of the programme

90

TOTAL 1,395

Group Exercise• Thinking about a spatially defined problem, wherein the

solution would include access to finance for MSMEs, develop a Collective Impact Plan using the 5 Components

• Common Agenda

• Shared Measurement

• Mutually Reinforcing Activities

• Continuous Communication

• Backbone Support

Thank You

Roland V. Pearson, Jr.Email: rvpearson@verizon.net Mobile: +1 (202) 674-9788Skype: rolandinsaTwitter: @RolandPearsonLinkedIn: http://www.linkedin.com/in/rolandvpearsonjr