Subject: Institutional sustainability of the Nucleus Approach and the
Extract from the NEF information letter
back at 2007…
by Amina Yoosuf, director of the
Nucleus Enterprise Foundation, Kandy, Sri Lanka, until 06/2007 ESSP -
GTZ, component 1 / Implementation of the Nucleus Approach
saw the conclusion of the ESSP and with it 20 years of German
development cooperation came to en end in the central province. It also
saw a paradigm shift in the Nucleus program as we had known it and as it
had functioned within the last 3 years.
first six months of 2007 saw the implementation of 115 Nucleus
activities supported by the subsidy system that was implemented by ESSP.
At the close of ESSP there were 7 implementing partners running 154
Nuclei with 2669 entrepreneurs.
Barely one month after the closure of ESSP four out of five chambers had
lost their counsellors to alternative employment opportunities. With the
departure of the counsellors the Nucleus program itself within these
organisations came to a permanent standstill. The Nucleus program within
SEEDS also came to a stop with the cessation of subsidies.
situation makes us question the notion that the Nucleus Approach is a
tool for organisation development of the implementing partners in
general and chambers of commerce in particular. Nucleus builds on the
hypothesis that a bottom up movement from the entrepreneurs who have
been empowered through better delivery of services and lobby function
contributes to the membership increase especially in chambers and
through extension strengthens the base the chambers are built on. What
are the primary reasons for the Nucleus approach not sustaining itself
within the chamber system as envisaged?
Three year project period is not sufficient for the
approach to institutionalise itself within such a fragile system as
those prevalent in chambers in Sri Lanka
Subsidies were given to implementing partners until the
end of the project phase whereas it may have been prudent to run the
program with only technical support to the partners for a certain
duration of the project
The ESSP did not have a suitable exit strategy is place,
this further promulgated the idea among stakeholders that the Nucleus
program was over when the project concluded and with it the delivery of
subsidies came to an end
Because of it’s attention towards subsidies the approach
was perceived as a delivery mechanism for channelling subsidies rather
than a MSME promotion and organisational development tool. Had the
project run the program without subsidies for a given period this
perception could have been avoided
Stakeholders sometimes assume that “technical” assistance
is synonymous with financial assistance and come to rely on the latter
as a natural precursor of the former.
experience of running the Nucleus program with subsidies granted through
a development cooperation project and running it as a private sector
organisation engaged in SME promotion has been very enlightening. Some
employees of the Nucleus Foundation profess that they
… are unable to carry on implementing the Nucleus
approach in an environment where the approach is not supported by the
granting of subsidies”
(these are their own words).
running of the Nucleus Approach pre and post project can be a good case
study for someone willing to study the merits and demerits of
development cooperation and the concept of
goes with it. Would it have been better to set up a separate entity that
could have carried forward the Nucleus approach in a sustainable manner
rather than implementing it through existing organisations? It certainly
would have been financially feasible considering the amount of money
channelled as subsidies, none of which contributed to the sustainability
of the approach within the implementing partners.
Looking forward to 2008 …
NEF was set up at the beginning of the year to carry forward the Nucleus
approach by a group of people who believed that the approach could
succeed in a subsidy free environment. It is an attempt to vindicate the
notion of “private sector development” in the truest form of the word.
This is what we have tried in the last six months. We have had our ups
and downs. We are challenged to work in a system that has been corrupted
by grants and a system that continues to be dependant on donors and
subsidies. But we are ready to face this challenge in 2008.
08 January 2008
thanks for the wishes for
2008, which I would like to return wholeheartedly to you and your
family. I hope you are doing fine.
I read the newsletter, and
must say that I share many of your views. I had just finished an
evaluation of a project in Tanzania, where one of my comments was the
following (expressed as a question in the final conclusions):
"3. Do public SME promotion organisations
still have a role to play?
The BDS discussion has taken the
attention away from public promotion institutions such as SIDO. The 2000
project review suggested that it was better to abandon the organisation
and to establish a system of BDS provision on a private sector basis.
This would narrow the range of services to SMEs to those that are
realistically deliverable on commercial terms. Though the retailing of
service provision can (and possibly should) be through private sector
(or at least commercially oriented) providers, there are many
promotional tasks that require intensive interaction with public
institutions, such as universities and local administrations, and which
are the domain of public organisations in industrialised countries.
There is no benefit in denying developing countries such promotion
systems, which are in many regards necessary to support them in helping
their SMEs to prepare for the challenges of globalisation. The private
sector cannot be expected to respond to such challenges without
Well, this is my view of
what international projects should do in private sector promotion: help
government realise what they should leave to the private sector to do,
and what the public sector must contribute as a public good. We are
using subsidies, only hiding them, also in Germany. We allow chambers of
crafts to have the monopoly in training and certification, which they
translate into significant amounts charged to craftsmen preparing for
their exams, and which the government reimburses to them in form of
scholarships. Such income in then used by chambers to subsidise
I have been very impressed
with your commitment and professionalism. You have been an exemplary
pillar of SME promotion. Please carry on, because, truly, you are
contributing a lot, and please do not understand my comment as criticism
– it is extremely important to push the capacity of SMEs to help
themselves to the limit, as you are doing it, through encouragement,
bright ideas and good planning.
But in the end,
competitiveness at global levels is not possible without subsidies when
the competitive nations all apply them. Governments in developing
countries also need to be informed about the best practice to subsidise.
I wish you well, and my
best regards to your colleagues
Comment from Monika -
thanks for sending me your
newsletter. And, first of all, I also wish you all the best for 2008!
I like your newsletter for
• it is short – 2 pages
are easily read by everybody.
• It is honest and
self-critical. That is great, but unfortunately rarely found. It makes
the team / the NEF much more trustful!
Let me give you my very
personal opinion on two little issues as well. The newsletter raises two
questions for me:
• What exactly could have
done better? Through existing organisations, exit strategy, etc. are, in
fact, appropriate catch words. However a bit more information about HOW
to do that (e.g. through whom) would be helpful to better understand an
alternative approach and to learn from that suggestion.
• Why were these thoughts
not raised during project implementation? Maybe it is really a “lesson
learned” right at the end of the project which would be absolutely
Then it could have been
added in a little sentence as such.
But these are just little
remarks and maybe also due to the fact that I am a total outsider.
Still, I really appreciate your newsletter very much and I wish you all
the best for a successful continuation!!!!
Monika - e val expert
Comment from Marisa,
FLICT, Sri Lanka
I read your newsletter.. appreciate very
much that you have taken a critical look at yourselves,
the approach etc etc and
have been open to share the challenges with all. That is such a
refeshing change from only
talking about the good aspects. Good luck with 2008.
Marisa at FLICT
Comment from Bill at WUSC
Thanks for the newsletter, which we found
very interesting and relevant to our MED work.
As we are now in the final
few months of the PCP and very much focusing on sustainability
strategies, hand-over and consolidation, the lessons that you have drawn
from your post-ESSP subsidy-free experience are very relevant to our
work as well. Some tough challenges to deal with. Good luck moving
things forward “sans grants”.
Sustainability is always
so much tougher than it sounds, but I think more times than not,
technical assistance alone (i.e. without any sort of “spoiling” grant)
is the way to go. I guess it’s human nature to look for and accept
something free when it’s available – but ultimately it undermines
self-sufficiency. We are constantly trying to get our entrepreneurs to
forget about WUSC and concentrate on the Plantation Communities Project
– which is their project, and hence they must take responsibility for
their own development.
Bill at WUSC