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January 31, 2019

Spreading Japanese-Style Support for Small and Medium-Sized Enterprises to the Western Balkans

Japanese-style support for small and medium-sized enterprises, which is characterized by detailed management advice, is spreading to the Western Balkan countries. In this region that is overcoming conflicts to develop economically, encouraging SMEs, which make up the majority of domestic companies, is a significant key to stimulating the economy and expanding employment. On the other hand, providing a good amount of high-quality government services to assist SMEs is not necessarily sufficient because of a limited number of qualified personnel and other issues, and this has become an issue in the region.

photoA mentor, left, advises a Macedonian SME manager.

JICA has been training staff members of SME supporting agencies in Serbia and Montenegro to give management advice to improve the business performance of SMEs since 2006. Representatives of SMEs that received advice made such comments as, "Our profits increased" and "We managed to receive financing from financial institutions," and surrounding countries such as Macedonia and Bosnia and Herzegovina began incorporating this human resource training initiative into their SME policies.

Training mentors based on Japan's Business Adviser System

A mentor who provides business management advice to SMEs advised the Serbian furniture maker Ergomade to incorporate the opinions of factory workers into its operations. When it did so to improve the production line, "We reduced defective products by 17 percent," the company said.

Know-how from Japan's Business Adviser System has been utilized in training these mentors. A business adviser is a staff member of a chamber of commerce and industy or a government agency who advises SME managers on financial affairs and management. There aren't many other cases of public institutions certifying SME advisers; the Business Adviser System is a system for public institutions to support SMEs that is unique to Japan.

photoEmployees of Serbian SME support agencies receive training from Japanese experts to become trainers of mentors.

JICA has trained employees of public SME support agencies in the region to become mentors. While learning about marketing, financial management, human resource management and the like through classroom training, the mentors actually visit SMEs and interview the managers on the problems they face and experience other forms of training such as OJT after being certified as mentors. In Serbia, 55 people are now working as mentors to advise SMEs.

Just after they start operating, SMEs cannot afford to pay consulting fees to private consultants and have a hard time getting the advice they need. Given this situation, the governments dispatch mentors to SMEs that want management advice. Unlike consultants, who tend to provide too-professional and too-technical of methods an SME may have difficulty following, mentors are reassuring supporters of SMEs who get close to managers and carry on a dialogue with them to support them in improving business results.

Raising awareness of the business mindset

At one time, the governments in the Western Balkans were the main players in economic activity through government-owned enterprises based on planned economies. In the 2000s, the idea that managers of SMEs should work to improve productivity and bring efficiency to management had not yet taken root.

"Managers had no mindset of listening to outside advice and incorporating individual employees' ideas into management, so we worked to get them to understand the significance of mentors, including by holding explanatory meetings," said Gaku Funabashi, a JICA senior advisor who has been involved in establishing a mentoring service system in Serbia since 2006.

photoJICA Senior Advisor Gaku Funabashi, right, visits an SME that has received assistance from a mentor and asks about the subsequent management situation.

Mentors spend about 25-50 hours at one SME working with managers to analyze the financial situation and improve business results. Mentors use tables and graphs to explain to managers the management situation in a way that is easy to understand and put up suggestion boxes to gather employee opinions, for example, and their detailed advising styles lead to improved business results.

Managers who have actually experienced mentors' advice leading to results "undergo a change in mindset with respect to managing their companies," including ordering books on kaizen on their own and studying, Mr. Funabashi said.

Regional cooperation to address common issues in the Western Balkans

photoThe panel discussion on the first day of the workshop. From left are Hideya Kobayashi, the chief representative of the JICA Balkan Office; Ana Žegarac, head of international cooperation at the Development Agency of Serbia; Vladimir Minev, head of information services at the Bulgarian Small and Medium Enterprises Promotion Agency; and JICA Senior Advisor Gaku Funabashi.

A two-day workshop was held in late November in Belgrade in which representatives of SME support agencies from Serbia, Montenegro, Bosnia and Herzegovina and Macedonia gathered and shared information on the progress of the mentor programs in each country.

On the first day, a representative from the Bulgarian Small and Medium Enterprises Promotion Agency participated. JICA has provided cooperation to Bulgaria in the past in the area of SMEs and the country is already a member of the European Union. Hideya Kobayashi, the chief representative of the JICA Balkan Office, hosted a panel discussion on SME support policies in Serbia and Bulgaria, and the two countries shared their experiences and expertise.

This panel discussion was held to contribute to the Western Balkans Cooperation Initiative announced when Japanese Prime Minister Shinzo Abe visited Serbia and Bulgaria last January.

At a session for four Western Balkans countries to present their initiatives on the second day of the workshop, participants witnessed those in charge of mentoring in Serbia and in Bosnia-Herzegovina learning from each other. Mentor-based assistance is already underway in Serbia and Bosnia-Herzegovina wants to strengthen its support for SMEs. As it seems difficult for the two countries to organize joint projects considering a variety of barriers, Mr. Funabashi, who has long worked for the region on ODA projects, was happily surprised to see that they willingly cooperated to solve common issues related to the development of the SME sector.

The 10-year-plus initiative has succeeded in starting mentor training, in creating guidelines to ingrain mentor skills and in standardizing them. The mentoring service has spread from Serbia to surrounding countries. This successful model of Japanese-style support for SMEs in the Western Balkans region is now also spreading to other areas such as Vietnam and Ethiopia.

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