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close this bookTraining Entrepreneurs for Small Business Creation: Lessons from Experience (ILO, 1988, 154 p.)
close this folder3. Organisation and administration
View the document(introduction...)
View the document3.1 Institution
View the document3.2 Staffing
View the document3.3 Financing
View the document3.4 Evaluation

3.3 Financing

Government grants will be a significant component of the operating budget of any umbrella organisation. The heavy commitments of staff time for such activities as liaison with infrastructure organisations, researching and updating practices with regard to selection methodologies, training methodologies, training materials, training of trainers, evaluating programme performance, lobbying for appropriate government policies, etc., are overheads that should not normally be recovered from participants’ fees. Programmes undertaken for specific social benefits - e.g. the development of disadvantaged target groups - should not expect the beneficiaries to bear the full cost. But government grants should not be the sole source of revenue for the organisation(s). An example of the variety of sources of funding available to local entrepreneurship development organisations is given by the Calcutta “Y” Self-Employment Centre (CYSEC).

CYSEC is operated on a day-to-day basis by a paid administrative staff, selected by the Board. In addition there is an accountant, a project superintendent, a senior project officer, three project officers, teachers and three office support staff.

CYSEC funding has come from a variety of sources over the years. In 1978 its operating budget was Rs.367,112. It received Rs.251,283 from the Mennonite Central Committee in the form of a grant for general overheads and Rs.21,000 for the Capital Fund. It received from Kanoria Chemicals Ltd. Rs.1,000; from Kothani Foundations Rs.1,000; from Union Carbide Rs.2,000; from the Government of India Rs.25,414; from sales relating to the Production-cum-Training Centre Rs.99,886; from unused materials Rs.8,242; from interest on the Revolving Credit Fund Rs.2,888 and from fees from trainees Rs.850.

The variety of funding arrangements common to the 54 programmes surveyed by Harper is summarised as follows:7

Thirty per cent of the programmes were run and paid for by voluntary agencies, and it may be significant that most of these were locally based rather than of foreign origin. Although the research contacts were naturally often involved with aid projects, only 20 per cent of the programmes were actually paid for or otherwise supported by bilateral or multi-lateral foreign agencies. Participants themselves covered most of the cost of four of the programmes, but national or state governments were by far the most important source of sponsorship.

Programmes aimed at larger-scale entrepreneurial ventures will, of course, be looking at different categories of intake. There is no reason why these programmes should not be self-funding and, in fact, generate a surplus to subsidise other target groups in part.

In the initial stages of an entrepreneurship development programme, budget allocations from a stable source such as the government or a development bank will ensure a period of time for planning. Ideally this should be sufficient to allow the programme to start with small pilot projects, building on success, until participant fees and private sector participation makes it less dependent on such allocations.

It is important that the organisation’s funding is not solely from the government and that the amount of government funding does not vary with the amount of external financing received. This allows the organisation sufficient flexibility to be somewhat independent, and to add and delete initiatives in response to changing conditions.