Strengthening Micro-Enterprise in Peru
Alfredo Peña Rojas owns a local mini-market and delivery service in Iquitos, Peru. He has built himself a strong business thanks to his boundless personal enthusiasm, and established a good trade despite the location’s poor roads and consequent access difficulties. But basic efficiency problems were evident in day-to-day operations. For example, some customers were no longer buying from him as he had forgotten to note orders and failed to make delivery as a result; personal and business finances were intermingled, making it very hard to know whether the shop was profitable or not; poor inventory management meant stock occasionally became stockpiled.
Micro and small businesses play a vital role in the economic and employment landscape of Peru. 42% of GDP is generated by SMEs and a substantial 88% of private jobs. Peru has a strong spirit of enterprise. 40.3% of nationals are classed as entrepreneurs, contrasted with a world average of 9%. It is a sector that both governments and large corporations have woken up to.
SABMiller plc operates in Peru under the Backus Group. Progresando Juntos Clientes is a programme developed by Backus that seeks to improve micro and small businesses within the company’s value chain, particularly the small groceries, restaurants and bars that sell Backus products to the final consumer. Supporting these businesses not only reinforces social improvements, it has the added benefit of strengthening business-to-business relationships between vendors and suppliers, ultimately boosting sales.
It works by offering training sessions - operated by socially committed partners - and printed materials to owners of micro and small businesses. Practical management advice, ranging from the formalisation and registration to financial inclusion and marketing strategies improves competitiveness. Cash payments are discouraged to improve the safety of both client and dispatchers and improve traceability.
With assistance and training from a specialized small and micro-business development programme, Alfredo has increased sales revenues by 4%, despite extra challenges imposed by an extended rainy season, which saw his shop flooded and inaccessible for several month. He has improved his financial management to separate personal and business expenditure, instated customer service guidelines to ensure that every order is picked and delivered and runs promotions to maintain adequate through-flow of products. He has improved the layout of the mini-market to make it more appealing and developed a marketing strategy and loyalty incentives.
“We sometimes don’t know how to improve or where we are going wrong,” says Alfredo, “but Progresando Juntos helped me to win over more customers, get to grips with my accounts and plan my purchases and sales deliveries.”
Backus can only be successful if it operates in healthy communities – economically and socially. Progresando Juntos Clientes maintains Backus’s local goals of leadership and organization and supports SABMiller’s global priorities of Enterprise Development and Benefit to the Community. In addition, the programme aligns with the Peruvian government’s ‘inclusivity’ agenda, which works to enable development across the country through regionalization and decentralization.
SABMiller believes that aligning support for entrepreneurship with core business priorities enables scale, making the impact of these activities more substantial. Demonstrating a strong business case for small-scale business-to-business relationships can also stimulates further investment from industry and other donors.
It also performs a strategic function. A network of robust small businesses creates a market for its products as well as improving employment, empowering poor workers and strengthening communities. Through investing to create shared value in the supply chain, Backus buys client loyalty and improved social perception, and improves economic sustainability.
Since the program began in 2010, 3000 micro and small clients have been trained though the training sessions. They have received 16 hours of free training in business management issues, banking, taxation, and responsible business among others. Printed materials have been supplied to a further 10,000 clients.
Working with such a large number of clients open informal forums for discussion with a large group of small business owners and through this, other opportunities for constructive support were unveiled.
Many customers were accessing business capital through very high-interest loans from unscrupulous lenders. By forging alliances with two financial institutions, Backus is able to give clients access to preferential rates with reputable bodies. So far this scheme has resulted in lending of US$15 million. 85% of the loans were used to purchase Backus products, highlighting the direct advantages to the company that community schemes can bring.
Furthermore, stronger business practices generate increased sales of Backus products: on average, the micro enterprises that we help increase their Backus product purchases by over 31%.
In helping shop owners like Alfredo to consolidate and grow his business, Backus builds its own market and distribution channels, and contributes to the positive development of its home nation.