I recently listened to Mike Baer’s interview of George Maru of Ambatana in Nairobi, Kenya. George as an environmental engineer is connected to Empower Hope of Kenya and articulated a term which is important in creating understanding in the BAM world. It is the “Forgotten Middle”.
The term is well known in educational circles as defining the students, coworkers, and regular people, who are often overlooked because they are seen as neither exceptional nor problematic. They are considered normal and in the middle of society.
George used the term to describe the economics of business and job creation. At one end of a continuum are the large companies which have achieved success and are growing and well known. In Kenya this would be the likes of Safaricom, Equity Bank and Kenya Airways. On the bottom end of the economic spectrum would be microenterprises and small family businesses with weak or no infrastructure, and no or low potential for growth.
So, what is the “forgotten middle”? George and Mike described it as the Small-Medium Enterprise (SME) sector with weak infrastructure, and with difficulty in finding intellectual and financial capital. However, this is the sector which creates jobs, provides opportunities for young people to develop and grow, and develops a true middle class in a community. The big challenge for BAM today is to develop growing SME companies.
Every country can define their own terms, but generally, Kenya is a good example of a developing country. They define microenterprise as fewer than 10 employees. These are typically family businesses or the product of micro-loans, which resulted in a one-person business. Small businesses would have 10-50 employees, and 50-100 would be considered medium-sized. In developed countries, the metrics would be somewhat larger.
In Kenya, half of the countries’ GDP comes from SMEs, and it is estimated that 80% of jobs created were in the SME sector. Most research suggests that SMEs are engines of growth and vital to most economies, as they create jobs, contribute to GDP, aid development, are innovative, satisfy local demand, and contribute to the growth of the middle class. In the United States, SMEs account for half of all jobs and 40% of GDP.
According to a recent study in Kenya, the greatest challenge for an SME is the cost associated with financing. In a recent survey of its clients, IBEC asked the question, “What are the greatest challenges you are facing in your BAM business today?” The answer was the same – access to capital.
Questions like this are important to us, because IBEC is focused on SME development. A recent response for us has been to become a partner in www.triventure.com, whereby potential SME startups can learn to develop a BAM company in the right way, get coaching and consulting help, and be prepared and qualified for capital. We call it COURSES (developed by Mike and Third Path Initiative), COACHING (with IBEC Ventures), AND CAPITAL (developed by Legacy Ventures Capital). No BAM company can operate without these three things.
These recent IBEC blogs have highlighted SMEs. Pray for them, consider investing in them, and cheer them on for the greater glory of God.
Larry W. Sharp, BAM Support Specialist, IBEC Ventures