Using quality standards as a tool for business development is key to MSME growth
Micro, small and medium-sized enterprises (MSMEs) are caught between compliance with government policy and regulatory requirements, and the demands of the marketplace where investment in quality, quantity, price and timely delivery are critical.
Uganda’s Minister of Trade, Industry and Co-operatives Amelia Kyambadde highlighted the challenges faced by MSMEs which are typically family run businesses with low financial and technological base. Although they form the backbone of industrial development, producing a diverse range of products and providing employment and government revenue and national economies, MSMEs have to operate under harsh business environments in addition to facing competition and compliance on regulatory matters.
Speaking at a session on ‘Sustainability standards: from barrier to opportunity’ at the World Export Development Forum (WEDF) in Kigali, Rwanda, on 16 September 2014, organised by the International Trade Centre, Ms Kyambadde said MSMEs face difficulties in meeting technical standards.
‘Standards are technical in nature and require to be simplified and translated into local languages,’ said Ms Kyambadde. ‘This is an area of concern and a bottleneck to standards implementation. Other challenges include the lack of information as to which standards have to be applied in their business such as product standards, personal hygiene, and occupational safety and health. Businesses face difficulties in applying standards correctly due to the lack of technical expertise and the cost of obtaining certification of compliance with applicable standards. This cost involves investment in new equipment, training of staff, product testing and cost of audits for certification. These issues are normally beyond the reach of most MSMEs.’
Ms Kyambadde said while MSMEs may find that standards compliance adds extra costs to doing business in order to meet national regulatory requirements, non-compliance to standards is more expensive.
Other challenges faced by entrepreneurs include the lack of information as to which standards have to be applied in their business. Ms Kyambadde said this includes product standards and other related prerequisite standards that must be complied with such as personal hygiene, health and occupational and environmental safety.
She said entrepreneurs stand to gain by adhering to standard: it improves the quality of products and services which, in turn, facilitates market access. Meeting standards increases market share, which enhances the chances of business success and growth. It also increases the competitive edge of an enterprise which results in profitability. Standards compliance inspires trust in a brand that has quality and consequently, builds trust in the business. This will attract new customers and increase market share.
Ms Kyambadde said standards compliance makes products compatible with others, and this can be useful in the case of spare parts. Compliance with standards reduces the occurences of mistakes which lead to the rejection of products. All these factors, she said, contribute to a reduction in business costs, thereby increasing profits.
To assist MSMEs, Ms Kyambadde said governments can offer guidance to enterprises on standards compliance through a national standards board. This agency can also help to sensitise entrepreneurs to the value of standards as a powerful tool to achieve business growth, and provide technical assistance to help entrepreneurs better understand ways to implement required standards for product certification.
‘Government has a role to play in implementing policies and strategies that are conducive to the growth of MSMEs, namely through the provision of infrastructure, skills development, technology development and standards. Quality standards are a key pillar in the competitiveness equation and must be packaged together with other interventions so as to have impact on market penetration and access,’ Ms Kyambadde concluded.