<i>By Simon Collings, GVEP International Blog</i>

Three years into the programme GVEP International are building up enough data on these businesses to be able to generate some interesting analysis. One thing observed was that the Pareto principle applies to these micro-businesses just as it does in other markets – a small number of businesses out of the total account for the majority of the sales.

Take for example briquette makers in Uganda. Many of the ‘businesses’ we work with fabricate a small quantity of briquettes, by hand, as one of several income generating activities the family engages in. Monthly revenues for most are small – around $20 – but provide a handy extra source of cash for the family budget. For many entrepreneurs that’s enough. They have neither the resources nor the ambition to focus on briquettes as a serious business venture. Only a few show this appetite - turning over more than $100 a month. They are the ones who invest in mechanising production, improving quality, looking for new customers, and professionalise packaging and branding of the product.

Abhijit Banerjee and Esther Duflo in their book Poor Economics (Public Affairs, 2011) explore this phenomenon in a chapter entitled ‘Reluctant Entrepreneurs.’ Fifty percent of poor families in less developed countries engage in some kind of non-agricultural business activity. But these business are very small and generally remain so. The individuals running micro businesses are not ‘entrepreneurs’ in the sense used in the US or Europe. Petty commerce is part of a survival strategy where risk is diversified by having several income streams within a family group. Many of these businesses – such as small stores – are in saturated markets where room for growth is limited.

The DEEP programme recognises the reality that many people who join the programme are happy with their small scale operations. GVEP cannot turn them into something they do not want to become. Their attention focuses mainly on the enterprising few who really do want to make a business out of briquettes. These are the people they try to link with loan providers and equipment suppliers. Some of the most enterprising are relatively recent recruits to the programme – people who saw others making briquettes, realised the potential, and decided to take this up themselves. In contrast some of the businesses which joined at the start of the programme have hardly grown at all.