Manufacturing enterprise

Practical Action no longer has a separate Manufacturing programme, but manufacturing and small enterprises remain a key part of our Markets and Livelihoods programme.

Small scale manufacturing plays a huge role in the livelihoods of women and men living in poverty in developing countries.

Tens of millions of people - rural people who lack land and or adequate employment in agriculture, and urban residents who do not have formal employment - depend for at least part of their income on small scale, often home-based manufacturing and processing activities.

But poor people are also consumers of manufactured goods which are essential for their livelihoods. Hundreds of millions of farmers, for example, require tools and capital equipment for their agricultural production.

Medium and large scale manufacturing is growing, especially in export-processing zones and other economic hot spots. But formal employment in these areas simply cannot absorb all the spare labour capacity.

In Zimbabwe, for example, 700,000 school leavers enter the labour market each year - competing for at most 40,000 jobs. So the informal sector is also rapidly growing. In Zimbabwe four million people are in informal employment, accounting for 25 per cent of GDP.

As the majority of people look to the informal sector for their livelihood opportunities, they are likely to be drawn into "micro and small scale enterprises" (MSEs); and it is here that Practical Action has concentrated its manufacturing enterprise work.

Micro and small scale enterprises

Micro and small scale manufacturing enterprises typically include small metal workshops, home-based textile production, craft products and repair shops. They may be single-person- or family-led enterprises, employing less than ten people.

Although apparently very local in scale and operating in an informal, unregulated sector, such enterprises may in fact be tied into regional, national or even international markets as part of supply chains. The expansion of global markets (globalization) may therefore create the potential for poor people to benefit from technological change.

The reality, however, is that it is the small scale enterprises that are the most vulnerable to rapid change, and the least well positioned to benefit, since they have very little market power, and may not have ready access to the information, knowledge and skills required to identify and exploit new opportunities.

ITDGPractical Action’s role concentrates on both on improving techniques and equipment, but just as importantly on the information, knowledge and skills - and the capacity to organise these effectively - which small scale manufacturers require.

Poor people as consumers of manufactured goods

Again, the expansion and extension of global markets has the potential to benefit end-users by bringing good quality, affordable mass-produced tools and equipment within reach of more communities.

But again, the reality is often different. Imported technologies are likely to be unaffordable for women and men living in poverty. They may also be inappropriate.

Manufactured on a mass scale in distant countries, imported tools and equipment may be unsuitable for local conditions and processes. What’s more, the cost of adapting it and repairing and maintaining it may be prohibitive.

At the same time, this opening up of markets frequently wipes out the local commercial capacity to produce goods for the local market. People living in poverty such as farmers and small scale processors and producers, may get the worst of both worlds - losing their local supply of tools and equipment, and unable to afford the global market goods.

So the other part of ITDGPractical Action’s strategy is to support the production of appropriate low-cost products for low-income markets.

Working with micro and small scale manufacturers and processors such as Peter Onyango, ITDGPractical Action aims to enable them to take advantage of technical change in order to increase their incomes.

This means working at different levels. First, we help MSEs identify promising market opportunities with a sustainable future. Then, we help our partners find ways to produce better quality goods with more added value for these markets.

This may involve a wide range of ‘business development services’ such as training in technical and business skills which is adapted to the needs of MSEs; creating information services which can supply knowledge and understanding of new technology options and markets; or helping MSEs to improve their product design and production techniques.

ITDGPractical Action also helps MSEs to increase their influence on markets and on relevant policies by bringing together associations of small producers and building their capacity to organise and represent themselves.

Together with such producers’ associations, we can also research the policy environment with a view to changing it in favour of the small scale producer, for example by reducing bureaucratic obstruction or harassment by police and officials; or by addressing the taxes, fees and subsidy biases which favour large scale over small scale production.

In working with poor people as consumers of tools and equipment, ITDGPractical Action aims to improve their access to appropriate and affordable goods.

We may do this by helping to spread appropriate technologies across a wider scale. This includes supporting manufacturers of tools and equipment with information or technical assistance that can help them to reach low-income markets. It also includes providing service centres where machine-tools can be hired out to manufacturers who could not otherwise afford access to them.

At the same time ITDGPractical Action will be involved in improving and adapting technologies which might serve these markets, and building links between technology institutions, those who manufacture for poor end-users, and the end-users themselves.

Further information

As well as the project reports, people stories and strategy and research findings detailed within this section of the website, please also note the following additional material on manufacturing:

ITDGPractical Action's Technical Information Service produces a range of Technical Briefs, practical fact-sheets on various aspects of manufacturing, including:

ITDGPractical Action has recently published a new book, Building Businesses with Small Producers, that examines the provision of non-financial services to small businesses and entrepreneurs in the developing world, and challenges current thinking about good practice in business development services provision