Paper

Synergies Through Linkages: Who Benefits from Linking Finance and Business Development Services?

Costs and benefits in linking finance and business development services for micro/small enterprises

This paper explores the synergies derived from linking business development services (BDS) and finance for micro and small enterprises (MSEs). The central hypothesis of the paper is that MSEs in developing countries can benefit from linking finance and BDS. This, however, will only happen if the providers of finance and BDS also benefit from the linkage.

The paper considers the costs and benefits of linking for MSEs, financial service providers, and BDS providers. It finds that major benefits can accrue to MSEs that gain access to additional services that are essential for their growth. The paper proposes a six-part typology of linked service provision, based on whether the linkage is voluntary or compulsory for the client. The typology is also based on whether delivery is provided through one unified department of an organization, through parallel departments, or through separate partner organizations. Conclusions include:

  • There is no one best type of linked service delivery;
  • Circumstances of local providers and their markets will determine the appropriateness of the approach;
  • Voluntary provision of BDS is preferable to compulsory approaches;
  • Single department approaches should be used sparingly;
  • Smaller MFIs should attempt to partner instead of adding a parallel department.

About this Publication

By Sievers, M., Vandenberg, P.
Published