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The Nucleus Approach


Nucleus and SME statistics

Statements of chambers and SMEs

Impact: What changed? Interview with Jordi Castan


Legal property of the Nucleus Approach



Types of Nuclei

Manual for the Nucleus

The start

9 criteria for the selection of a sector

How to kill a Nucleus

Chambers and Associations

Lobby and Public Private Dialogue

Benchmarking of chambers


Subject: Institutional sustainability of the Nucleus Approach and the instrument "subsidies"

Extract from the NEF information letter 07-21

Looking 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

2007 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.

The 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.

This 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.

The 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).

The 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 sustainability that 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.

Comment from Siegfried Jenders

08 January 2008

Dear Amina,

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 support."

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 promotional activities.

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 - E-val Expert

Dear Amina,

thanks for sending me your newsletter. And, first of all, I also wish you all the best for 2008!

I like your newsletter for 2 reasons:

• 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 understandable.

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

Comment from Siegfried Jenders, consultant, Germany

Comment from Monika - E-val Expert

Comment from Marisa, FLICT, Sri Lanka

Comment from Bill at WUSC, Sri Lanka

See more about the institutional sustainability and the ESSP subsidy system in the Impact Report (Müller-Glodde & Lehmann) from 06/2007