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4.1.2 Enterprises with growth potential: The demand for training

Written by: International Labour Organization

Article Overview: Most training strategies in the informal sector have targeted manufacturing microenterprises that are considered to have some growth potential. However, even within this relatively better-off segment of the informal sector, the effective demand for training has frequently been found to be quite limited.

4.1.2 Enterprises with growth potential: The demand for training

Most training strategies in the informal sector have targeted manufacturing microenterprises that are considered to have some growth potential. However, even within this relatively better-off segment of the informal sector, the effective demand for training has frequently been found to be quite limited.

Lack of effective demand: Innumerable surveys of informal sector enterprises have shown that formal training and skill constraints are perceived as being relatively unimportant by most entrepreneurs and workers. Since they have to be 'persuaded' to become training clients, the chances of success are limited from the outset. The low level of formal education is also frequently cited as a key factor limiting the demand for training as well as the overall trainability of operators and workers.

The ILO has had considerable experience in trying to graft training projects onto indigenous apprenticeship systems, particularly in SSA. One of the main lessons that has been drawn from the ILO's 'self-training projects' in Francophone Africa is that, initially, informal sector artisans do not usually regard skills training as a priority. They only become aware of its usefulness once they have gained access to new markets and have negotiated favourable terms of purchase for key raw materials (see Maldonado, 1989). Similarly, the results of a large number of country surveys in SSA during the 1990s (especially those conducted under the auspices of USAID's GEMINI programme and the World Bank) have repeatedly shown that training is not perceived as a major problem viv-a-vis other operational constraints. While training is invariably identified as being desirable, when respondents are asked to specify particular problems facing their enterprises, training and/or availability of skilled labour are nearly always ranked as being of very minor importance (see, for example, Mead, 1990; Parker et al, 1992;). While this does not mean that appropriate skills training could not significantly improve productivity, the overwhelming perception among informal sector operators is that its role is limited.

Most surveys identify credit and access to markets as the most critical constraints. Because replication rather than intensification of activities is generally regarded as the main source of short-term growth, the provision of credit is seen as having the greatest potential for improving incomes. However, because relatively small amounts of credit are, on their own, unlikely to lead to the adoption of new techniques and technologies, the scope to improve livelihoods without significant skills upgrading is likely to be quite limited in the medium-long term.(9)

The general consensus is that, unless a number of key constraints can be effectively tackled, there is little point in providing training to most entrepreneurs and workers in the informal sector. However, whereas training on its own is not usually effective, this is not generally the case for other services, most notably microcredit. There is broad agreement, therefore, that training should be integrated in a package of services. Where these are not affordable or the expertise is not available to design and implement what are typically complex, multi-input interventions, then there has been a marked preference for 'targeted' services such as credit. These can be delivered on their own and have lower opportunity costs than most formal training activities.

Indigenous skill formation: The prevalence of relatively well developed indigenous training systems among MSE in many countries, particularly in West Africa and South Asia is a key factor accounting for the low level of demand for formal training. The authors of the World Bank's influential VET Policy Paper go so far as to suggest that "traditional apprenticeships provide most of the training needed in the informal sector in most countries" (World Bank, 1991:60).

Growing recognition of the importance of indigenous training systems has had a major impact on government and donor training policies and practices. Where these indigenous training mechanisms are in place, it has been argued that "there is no a priori case to be made for specialised training interventions" (Middleton et al, 1993: 167). While there is scope for improvement, there is understandable concern that poorly conceived training interventions could easily undermine the traditional master-apprentice relationship on which the entire system is based. This has, in turn, dampened the interest of both governments and donors in getting too heavily involved in improving indigenous training systems. Informal credit systems, on the other hand, are almost universally inefficient and ineffective which has provided the necessary justification for the provision of cheaper, alternative forms of microfinance that are targeted at the poor.

Formal sector experience: Where MSE entrepreneurs and workers have been previously employed for relatively long periods in the formal sector, this is also likely to lower the demand for formal training. For example, King argues that in most of South America, "the majority of business people who receive training, credit, and other support services have only been able to start their own businesses only after many years of employment in other (formal sector) businesses" (King, 1996).

Direct training costs: The costs of formal training courses is frequently cited by MSE operators as an important reason for not taking up training opportunities. For example, in a large survey of MSEs in Kenya, over 40 per cent of respondents stated that they could not afford training because of 'limited resources' (see Table 2).

Trainability: Illiteracy among the poor significantly lowers their trainability. In South Asia, in particular, a high proportion of workers in the urban informal sector are illiterate rural migrants (see ILO, 1997). Acquiring basic literacy and numeracy skills is, therefore, generally regarded as being of higher priority than conventional VET. There is a growing group of NGOs which see the "transformative potential" of well designed, mass literacy programmes as being the key to poverty reduction. In recent years, Actionaid's REFLECT literacy projects have become perhaps the most well known example of this approach.

EMPLOYMENT AND TRAINING
PAPERS
43
Learning to change: Skills
development among the
economically vulnerable and
socially excluded in
developing countries
Paul Bennell
Employment and Training Department
International Labour Office Geneva
First published 1999

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Article Tags: 1990s, apprenticeship systems, artisans, auspices, country surveys, formal education, francophone africa, gemini, ilo, informal sector, mead, microenterprises, operational constraints, outset, raw materials, respondents, skilled labour, ssa, training strategies, world bank



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