|Needs and Characteristics of a Sample of Micro and Small Enterprises in Thailand - Working Paper N°5 - Micro and Small Enterprise Development and Poverty Alleviation in Thailand - Project ILO/UNDP: THA/99/003 (ILO-ISEP - ILO - UNDP, 1999, 102 p.)|
|2.0 Survey of selected Thai urban-based MSEs|
As described above, the Bangkok survey includes 23 supported microenterprises, 32 independent enterprises, and 22 small enterprises. The results of the survey, as formatted according to the design of the questionnaire, are given below, and the corresponding tables can be found in the annex to this report.
2.3.1 General information
The general information on the enterprises interviewed is shown in Tables 2, 3, 4, 5 and 6 in the annex to this Working Paper. Table 2 outlines entrepreneurs gender, age, and educational background. The survey shows that most of the supported microenterprises, assisted through both DPW and UCDO, are owned and operated by women. Their age ranges from 25 to 60, with a slight majority in the 30-40 age range. Their education is mainly at elementary level, with a few having high school education. One entrepreneur in this group has a university degree.
In comparing the supported microenterprises to independent microenterprises, the profile shifts slightly. Although females still dominate the group, there is a higher portion of male entrepreneurs in the independent microenterprises group, while the age profile is similarly concentrated around the 30-40 and 40-50 ranges. However, the educational profile shows a much higher number with a higher level of education in independent microenterprises than supported microenterprises. From the independent microenterprises, the educational level is spread quite evenly from elementary to high school to university levels.
In the small enterprises category, the age and education profiles are quite similar to those of the independent microenterprises. However the gender profile changes significantly. Unlike in the supported microenterprises and independent microenterprises, male entrepreneurs in this group clearly outnumber the females as can be seen in Table 2.
Table 3 shows the type of business carried out by the enterprises interviewed. Incidentally, all of the supported microenterprises are in manufacturing and concentrated in food and garment products, while the independent microenterprises and small enterprises are more diverse both in terms of sector and product type.
The number of workers employed in the enterprises interviewed is shown in Table 4. By the definition used in the survey, microenterprises (MEs) would have 5-10 or even less workers, while the small enterprises have between 10-50 workers. Most of the enterprises fit this definition, with only 3 exceptional cases. They are:
i) Three of the supported microenterprises have more than 20 workers. These are community enterprises with around 30 and 50 members. Although their businesses are conducted on a group basis, the manufacturing of products is done by the members individually, and the proceeds are returned to the members according to their output. Moreover, their operations are micro in nature when compared with the small enterprises. Therefore they are treated as microenterprises.
ii) One of the independent microenterprises (in the service sector) has 11 workers, which is at the threshold of the definition. It is a silk-screen printing shop which is enjoying good business and on the brink of expanding to become a small enterprise. However, at present its operation is still seen as micro in nature.
iii) There are 2 small enterprises with 4 workers, and 11 small enterprises with 10 or less workers. These enterprises reported that they normally employed more than 10 workers, but in recent times they had been operating with fewer workers. They had laid off some of their regular workers because the economic crisis had affected business. Even so, because of the size of the establishments and the way business was conducted, they are treated as small enterprises in this survey.
Table 5 shows the value of assets of the enterprises interviewed, as well as the ownership of the business premises. As expected, the profile of the value of assets of supported microenterprises is rather lower than for independent microenterprises, and that of small enterprises is even higher. It is also noted that the profiles of asset value of UCDO-supported microenterprises is slightly higher that those of their DPW - supported equivalents, and indeed it is quite close to the profile of the independent microenterprises. Table 5 also shows that while most of the microenterprises are operating from rented premises, most small enterprises own their business premises. This may explain the higher profile of asset value in the small enterprises, and may suggest that they are even more mature enterprises.
In the case of supported microenterprises, besides working at home, their business transactions take place either in a community hall, on community ground, or in temples which they neither rent nor own. It can be said that their business premises are not yet really established. Thus these are not reported in the Table 5.
Finally, commercial registration of enterprises is shown in Table 6. It was found that most of the supported microenterprises do not have commercial registration, while about half of the independent microenterprises and the majority of small enterprises are registered. The main reason why enterprises register is to acquire a legal identity. One UCDO-supported enterprise (the brassware manufacturer) was an exception - it was told to register for pollution control purposes, and an independent microenterprise (a barber shop) was a controlled occupation and had to be registered. Of those who registered, most reported that the procedure was simple and easy, while a few reported the procedure to be moderately difficult, or complicated (Table 6).
2.3.2 Enterprise start-up
All of the enterprises interviewed started their businesses with their own business ideas. The reasons these entrepreneurs gave for starting up their businesses can be summarized as:
i) To have a business of his/her own: Usually, these entrepreneurs had previously been working as an employee in an enterprise. They had learned and developed skills from their earlier employment. Although they may not have aimed for self-employment when they started their career, when they spotted the opportunity they were ready - both financially and adequately skilled - and they resigned and set up a business of their own. The businesses that they set up are usually the same or related to that of their former employer.
ii) To create a career for themselves. Entrepreneurs of this type seek no other career than self-employment. In several cases this way of thinking has been influenced by a tradition of self-employment among their family or society. Thus, right after completing their formal education - although they could have sought employment elsewhere - they sought an opportunity to set up a business of their own. This category of entrepreneur usually has little or no training prior to the start-up, and learned about the business on the job.
iii) To earn their living. These entrepreneurs started up their businesses because they had no other employment choices. They may have been laid-off or have been forced to resign from their former employment, or are not adequately trained (such was the case with several housewives) to gain employment elsewhere. Thus, in order to earn their living they have no alternative to self-employment.
As would be expected, the survey found that most of the entrepreneurs in the third category (above) are from the supported microenterprises. In the independent microenterprises and small enterprises, the responses were a mixture of all three, with the first category having the highest proportion, while the second and third types had smaller shares respectively.
As shown in Table 7, in starting up a business most microenterprises made use of their own money - except for the supported microenterprises which started up with the assistance of loans from the government (DPW, UCDO), or from cooperatives. Most microenterprises reported that they have had no access to commercial bank loans due to their lack of assets which can be used as collateral. Only one UCDO-supported enterprise and one independent microenterprise started up their business with loans from banks. It should be noted that the survey found that most supported microenterprises, especially those assisted by DPW, would not have been able to begin in business if the government support had not been made available to them.
On the other hand, Table 7 shows that most small enterprises started up with loans from banks. Less than one-third started their business relying solely on their own capital. Care should be taken in interpreting this information as this only means that capitalization of these enterprises involved loans from banks when they started or became small enterprises. In fact most of these enterprises did not start up their business as small enterprises. They usually started as microenterprises, and expanded to become small enterprises. However, at the microenterprise stage, they, too, had no access to bank loans. The start-up capital (as reported in Table 7) is the capitalization when they reached the small enterprise classification, by which time they would have accumulated considerable assets to be used as collateral.
Table 7 also shows the number of years that the interviewed enterprises have been in business. It can be seen that since the governments special support programmes have just been started, most supported microenterprises are less than 1 or 2 years old. And while the age of independent enterprises is quite evenly distributed, most small enterprises have been established for between 5 to 10 years. This supports the observation above that small enterprises are generally more mature firms than the microenterprises.
Table 8 demonstrates the difficulties experienced in starting-up, as reported by the entrepreneurs. It suggests that funding is the greatest difficulty for both micro and small enterprises. Next in order of priority, microenterprises seem to experience more difficulties in finding premises for their business than the small enterprises. This seems to conform to the observation above that most microenterprises have to operate from rented premises, while small enterprises own their own business premises. Unlike the microenterprises in which the operations are mainly done by the entrepreneurs themselves, the small enterprises had more difficulties in finding skilled workers for the start-up of their business as seen in Table 8.
2.3.3 Operational aspects
Table 9 shows the responses of Bangkok-based MSEs when questioned about the operational aspects of their business. As may be expected, since most enterprises are not engaged in businesses that require a high level of operational technology, they seem satisfied with their present technology. Most claim that their quality is satisfactory to their customers. Of the enterprises that expressed areas of dissatisfaction, the main concern is with their equipment which is old and inadequate. The next problems are inadequate premises, lack of information about technology, and poor raw materials, respectively. The problems of premises and raw materials mainly involve the microenterprises, while the small enterprises are more concerned with the lack of information about technology.
On the issue of workers skills, most of the microenterprises expressed their satisfaction on this point, while more than half of the small enterprises felt that their workers skills are inadequate, as shown in Table 9. However, many micro-entrepreneurs wished to further develop their workers skills. Thus, when asked about the possible improvements in their operations, skills development comes first for both micro and small enterprises. Next are improvements to equipment, premises, raw materials, technology, and product design respectively. In addition, the survey has noticed that when technology was discussed, most entrepreneurs were concerned only with that technology affecting their principal operations. They are either not aware of or not interested in technology as it relates to their supporting activities, such as materials handling, information technology, etc. which could also have helped them to improve their efficiency.
2.3.4 Marketing aspects
The monthly sales income of the enterprises interviewed is shown in Table 10. As many enterprises feel that their sales figures are sensitive information, they refrained from giving detailed answers. This, together with the fact that proper accounting is not widely practised in many MSEs, may contribute to making the replies as reported in the table not very reliable. Most figures - especially those of the small enterprises - seem to have an over-emphasis towards a lower sales value. However, as many enterprises reported that their businesses have been quite seriously affected by the financial and economic crisis, they may be quite accurate.
Table 11 shows the market for the enterprises interviewed, as well as their assessment of the adequacy of their income. It was found that most Bangkok-based MSEs market their products and services in nearby areas and/or within Bangkok. Only a few manage to achieve some sales outside Bangkok, and only three of the small enterprises export their products. Of these, it was reported that the export market was developed and handled by their customers, and not administered or managed by the small enterprises themselves. On the adequacy of sales income, quite a large proportion of the enterprises interviewed (almost half) said that the level of their sales income was not adequate. This inadequacy is more evident with the supported microenterprises, than with the independent micro and small enterprises (Table 11).
It was also noted from the survey that most enterprises surveyed are passive in relation to their marketing activities. Most enterprises do not have any market development or promotional activities. Their marketing activities generally rely on their customers approaching them with orders.
2.3.5 Financial aspects
Table 12 shows the sources of funds for the operation of the enterprises interviewed. It can be seen that supported microenterprises have no sources of external financing, other than the original funds received at their start-up. Similarly, the majority of the independent microenterprises do not use external financing for their operations either. However, a few managed to obtain financing from suppliers, friends and relatives, and cooperatives. Only 4 out of 55 microenterprises used bank loans. On the other hand, the majority of the small enterprises have been able to use bank loans to finance their operations. None use any other form of external financing. This may support earlier observations that small enterprises seem to be more formal and mature than microenterprises, and consequently have less difficulty obtaining support from the banks.
It was noticed in the survey that most enterprises interviewed do not use any proper accounting systems, except for a few enterprises in which a spouse or relative is well-trained in accounting. Many of the small enterprises seem to hire an outside accountant to make bookkeeping entries for them. This book-keeping is used only for registration and tax purposes, and most of the time is not very reliable. These records are seldom used in the financial or operational management of the enterprises. Other enterprises - especially microenterprises - may only have book-keeping records for their cash and at best their inventory transactions, or indeed maybe not at all. As a result, most of these enterprises pay tax on an estimated basis, rather than on an actual calculation of net income. From time to time, interviewees said, Revenue Department officials visit and observe the business of the enterprises, make estimates on the volume of business and net income, and dictate to the entrepreneurs the amount of tax that they have to comply with. The entrepreneurs interviewed generally have no idea whether their tax bill would have been higher or lower if they had kept proper accounting records and prepared objective net income statements.
2.3.6 Legal aspects
The results of the legal aspects of the Bangkok survey are shown in Table 13. Most of the entrepreneurs do not have a great deal of knowledge about the civil laws governing the legal aspects of their business. Among those enterprises that are registered, most did so only to avoid complications involving government officials, rather than independently wanting to receive benefits from being legal. Under these conditions relating to the legal requirements, five out of the 32 independent microenterprises interviewed felt that tax was too high. One DPW-supported microenterprise had problems with food and drugs regulations when it wished to get approval to distribute its food products in the wider market. One computer system analysis consulting microenterprise said that patent laws made its business more difficult because it had to pay a high price for software. Other than these, the enterprises interviewed stated that no law or regulation was seen as a constraint to their business. Likewise, most enterprises do not see any law or regulation that is helpful to their business, except for a few who feel that the value added tax (VAT) reduction announced recently seems to be helpful to their business (Table 13).
2.3.7 Business development services (BDS)
Table 14 shows the range of business development services (BDS)3 received by the enterprises interviewed. Of the supported microenterprises, those under the UCDO reported receiving marketing advice and assistance from the support organization, while those under the DPW also received marketing assistance by attending fairs organized by government agencies. Few reported receiving any information, while one from each group reported receiving training. However, almost half of each group said no assistance had been received in business development services. Among independent microenterprises and small enterprises, most reported that no services had been received at all. Two independent microenterprises reported receiving training from suppliers of equipment, and one small enterprise received training from the Federation of Thai Industry (FTI) - of which it is not even a member. One independent microenterprise (in silk screen printing) is a member of the Silk Screen Association, and it receives information from the associations journal regularly. Other than that, a few enterprises received information and marketing assistance from customers, suppliers and friends.
3 This term is now widely used to cover all forms of support for enterprise development other than financial support. It includes training, marketing assistance, information, advice, etc.
Even if BDS are to be made available or more accessible, the survey found that more than half of the enterprises surveyed do not feel that that these services will be helpful (as shown in Table 14). The impression gathered from the interviews was that most enterprises are not using the BDS because they do not believe that these services will be effective for their particular enterprises, rather than because they do not need the services.4 Of those who do wish to use these services, it was found that marketing assistance is needed most, especially for the microenterprises. Other needs are for skills development, product development, supplier information, market information, technology information and premises, respectively. Some enterprises interviewed - especially those supported by the DPW, as well as a few independent microenterprises and small enterprises - expressed their desire for financial assistance (this is not categorized within BDS- see footnotes 3 and 4), as also shown in Table 14.
4 Editors Note: As has been seen in related Working Papers, the provision of BDS in Thailand is not well developed. Therefore, the lack of awareness of both the services and related benefits is to be expected.
2.3.8 Business associations
Apart from the supported microenterprises which have to be members of a cooperative or a womens group to qualify for the support (Table 15), the survey found that most enterprises are presently not members of any association or organization. Incidentally, only one microenterprise (in silk screen printing) is a member of an association (the Silk Screening Association), and one small enterprise (the environment consultant) is a member of an association (the Association of Environment Consultants).
Likewise, most enterprises interviewed are indifferent to, or do not feel that associations would be useful to their businesses, while only 25 out of 77 enterprises feel that an association would be useful. Especially, there were no small enterprises that felt that an association would be useful at all. This attitude towards associations seems to be based upon their experiences and observations concerning the existing associations, which they see as either ineffective or irrelevant. All of the entrepreneurs agreed that an ideal association would be useful, if it were properly established and run. However, they did express doubts about such associations being possible in Thailand. Of the enterprises which feel that an association is useful, the supported microenterprises reported preferring a cooperative structure, while the independent microenterprises preferred associations of businesses within the same sector (Table 15).
2.3.9 Business prospects and entrepreneurship
Table 16 reports on the entrepreneurship commitment and business prospects of the enterprises interviewed. The entrepreneurial commitment is measured by asking whether the entrepreneur would abandon the business if a steady job with comparable income were available. It was found that almost half the DPW-supported microenterprises would abandon their businesses, while a small proportion of independent microenterprises and an even smaller proportion of the small enterprises would do so. Likewise, the profile is quite similar when asked whether they would advise others to become self-employed. Negative attitudes towards business were found to be based mainly on the poor performance of their businesses, and the uncertainties of sales due to the financial and economic crisis.
The business potential of the enterprises interviewed (Table 16) is based on an assessment made by the surveyor. Questionable, means that the business is not doing well and might fail in the near future if no radical change takes place. Struggling means those enterprises which are still viable but not yet stable, and this makes their future quite uncertain at this time. Sustainable means those businesses that are stable and quite secure. However, their potential to grow further than at present seems to be limited. Finally, good potential means those enterprises reporting good business performance and showing good potential to grow. From the survey, a high proportion of the enterprises are in the sustainable and struggling categories, with a smaller proportion in the good potential category, and a few of questionable status. Table 16 shows that the small enterprises are probably in a better state than the microenterprises. It should again be noted that such profiles are obviously affected by the financial and economic crisis since many of these enterprises have reported adverse effects.