Micro and Small Enterprises (MSE) are very important in Bolivia, eight out of ten employments are created by this sector. Most of MSEs work in an informal economy, having strong impact in job quality, tax contribution and weak national services delivered to this companies. Aimed to public authorities and cooperation agencies, the proposal explore some financial mechanism and tools that can allow incorporate this sector to formal economy, improving productivity, work conditions and cluster integration. Bolivian Economic and Social Development Plan 2015-2020 is specific in looking for a strong MSE participation in the national effort aimed to diversify the productive matrix
2. Table of contents
1. Country context
2. The MSE problem
3. MSE perspective in National Economic and Social Development Plan
4. Policies and tools proposals
4. Bolivia’s general information
Surface área: 1’098’581 KM2
Population: 10’000’000
Officially considered a lower Middle
Income Country
Doing Bussiness Rank: 157/189 countries
5. Bolivia Key Development Indicators
Units 2011 2012 2013
Latin America & Caribbean
2013 Lower middle income 2013
Geography
Surface area thousand sq. km 1098.58 1098.58 1098.58 19461.73 21590.48
Population
Population, ages 15-64 in thousands 6155.21 6291.35 6427.95 386631.87 1629311.84
Population growth % 1.64 1.65 1.65 1.14 1.49
Urban population % of total population 66.86 67.28 67.70 78.97 38.84
Economic development
GNI, Atlas method current USD in millions 20265.90 23298.80 27214.31 5607105.89 5310498.10
GNI per capita, Atlas method current USD 1960.00 2220.00 2550.00 9535.58 2073.53
GNI per capita, PPP current international $ 5200.00 5410.00 5750.00 14204.14 5965.94
GDP growth % 5.17 5.18 6.78 2.47 4.96
GDP per capita growth % 3.46 3.45 5.03 1.32 3.41
Poverty
Poverty headcount ratio at $1.25 a day, PPP % of population 6.97 7.98 n/a n/a n/a
Poverty headcount ratio at $2 a day, PPP % of population 11.95 12.72 n/a n/a n/a
Life expectancy at birth, total years 66.63 66.93 n/a n/a n/a
Infant mortality rate per 1,000 live births 33.40 32.20 31.20 15.50 44.00
Child malnutrition % of children under 5 n/a n/a n/a n/a 24.38
Education
Adult literacy, male % of ages 15 and older 96.60 97.11 n/a n/a n/a
Adult literacy, female % of ages 15 and older 88.08 91.87 n/a n/a n/a
Gross primary enrollment, male
% of population of official
age group 95.16 n/a n/a n/a n/a
Gross primary enrollment, female
% of population of official
age group 93.72 n/a n/a n/a n/a
Access to resources
Access to an improved water source % of population 88.00 88.10 n/a n/a n/a
Access to improved sanitation facilities % of population 46.30 46.40 n/a n/a n/a
Source: www.aidflows, World Bank 2015
6. Bolivia key economic indicators
Source: Bolivia Systematic Country Diagnosis, World Bank Group
8. Relevance of MSE in Bolivia
Sector/Number
Large
enterprises
Small and
Medium
Micro enterprises Total %
Productive 921 13.851 213.584 228.356 32,0%
Services 753 20.292 169.046 190.091 26,6%
Commerce 635 22.588 271.786 295.009 41,3%
Total 2.309 56.731 654.416 713.456
% 0,3% 8,0% 91,7% 100%
9. Large enterprises
0%
Small and Medium
8%
Micro enterprises
92%
Composition by size
Large enterprises
Small and Medium
Micro enterprises
Relevance of MSE in Bolivia
10. MSE relevance in Bolivia
92% of the
entreprise’s universe
are microenterprises
83% of jobs are
provided by
microenterprises
63% of the population
work in the informal
economy
11. MSE characterization in Bolivia
Micro enterprises
•1-10 employees
•Assets less than USD
60’000
•Annual sales less
than USD 100’000
Small enterprises
•11-30 employees
•Assets less tan USD
200’000
•Annual sales less tan
USD USD 350’000
12. MSE obstacles in development context
Specific sector
policies
Job’s quality
Economic
integration
• Weak cluster integration
• Absence of infrastructure
• Poor work conditions
• Without access to social and economic
benefits
• Limited Company registration and
statistics
• Poor tax contribution
13. MSE main obstacles and bottlenecks
Limited Access to
technology
Limited Access to
financing
Work force’s low
level of skills
Limited access to
attractive markets
and little added
value in products
14. Some highlights of MSE in
National Economic and Social
Development Plan 2015-2020
Source: Plan de Desarrollo
Económico y Social
en el Marco del Desarrollo Integral
para Vivir Bien
(2015 – 2020)
15. Transformation of the National Productive matrix
Community Economic,
and Social Productive
Model
Hydrocarbons
Minning
Electricity
Environmental Resources
Industry, manufacture and
crafts
Turism
Agriculture development
Housing
Trade, transport service and
other services
Strategic sectors
generating
surpluses
Income and
Employment
generating
sectors
Industrialization
National social bonds
Poverty reduction
Income redistribution:
social programs
STATE REDISTIBUTIONS SYSTEM
SURPLUSES
16. Selection of sectoral goals
Economic and Social Development Plan, Goals 2020 Base line 2014
50% of the banking portfolio is dedicated to
productive micro, small and medium enterprises
34%
At least 40% of Foreign direct investment (FDI) is
aimed to the diversification of productive matrix, FDI
reach at least 8.1 of GDP
6.4% of GDP
Micro and Small Enterprise Gross Production
Value reach USD 3’644 MM
USD 2’275 MM
Medium, Small and Micro Enterprises share at
least 10% of export’s value.
3%
MSE increase their access to Technology (10%),
Financing (35%) and Training (15%)
Actual: Technology (6.1% ), Financing (23.5) and
Training (8.2)
18. The formalization road, a tough challenge….
Increase Tax
revenu
• Policies aimed to
increase
bussiness
formality
Infrastructure
Investments
• Accountability
to sector tax
payers, how
money is spent?
Financial
Incentives :
bonds and funds
•Increase
private and
public sector
participation
19. INCREASE TAX REVENU
TOOLS POTENTIAL RISKS
Design specific tax system,
regarding sectoral characteristics
and needs
National tax system can benefit
through at least 2 million new
contributors.
MSE deliver of oficial receipts will
permit operate new financial
products, as leasing or factoring
Organized social opposition, since
actual system seems “fair” for MSE,
even if Simplified Tax Regime
contributes less tan 0.05% of total
contributions.
Weak own capacities for tax report
Implement National Micro and
Small Entreprise Register
The register will permit to know
better sectoral needs and to
develop specific policies.
Register will allow MSE participate
in State’s contracts and other
formal contracts and tenders
Register is perceived as State
control for tax proposes.
20. INFRASTRUCTURE INVESTMENTS
TOOLS POTENTIAL RISKS
Productive Infrastrucuture could be
provided by public or private
invesments: roads, industrial water
and electricity supply.
Increasing public and private
investment will have a positive
efect in MSE running cost and
competitiveness
MSE sector is volatile and can make
some infrastructure useless.
Invest in Productive Innovation
Centers
Increase level and use of technolgy
in MSE process
Configure clusters and improve
vertical and horizontal intergration
in production systems.
Services sustainability could be
hard to reach. Explore private and
public colaboration to pay off
investements.
Invest in MSE’s human resources,
technical formation programs
Penetrate in new markets and
sectors, integrating information
technology. Improve MSE
management culture
Human resources are unstable.
21. Bolivia has succesfully issued emission of national bonds in international financial
markets. A special emission could be feasible in order to boost MSE sector.
Financial Incentives : Bonds and funds.
TOOLS POTENTIAL RISKS
Training and capacity building
bonds
MSE could receive “Training bonds”
that can be exchanged against MSE
specific training programs.
MSE personal unstability.
Cleaner production bonds MSE could receive “Cleaner
Production bonds”, wherever
environmental friendly measures
are adopted in production systems
MSE don’t consider environmental
factor as a social duty.
Financing cluster integration Large and medium size companies
could benefit from special credit
conditions (guarantee fonds, low
interest rate, long term funding…),
wherever MSE are integrated in the
value chain.
Risks are similar as current banking
operations.
