THE successful implementation by the Small and Medium Enterprise Development Authority of a UNDP-supported initiative is expected to help protect micro and home-based enterprises, create jobs and alleviate poverty.

The ‘Pro-Poor Governance for Legal Empowerment of Small/Marginalised Businesses’ project is designed to knock down the barriers imposed by the governing laws and state institutions limiting the right of the poor and the disadvantaged groups to engage in economic activity.

The project is being “operationalised through a programme framework, anchored within the four Legal Empowerment of Poor (LEP) pillars: access to justice, property rights, labour rights, and the right to do business”. Smeda has been chosen by the UNDP for implementing the ‘right to do business’ component of the project.

“Smeda has been selected from amongst 22 countries to implement the right (of the marginalised segments of population) to do business component of the project,” says Shaheen Tahir, a senior Smeda official supervising the initiative.

The initiative aims to enable marginalised businesses (the businesses existing outside the ambit of legal and social protection in the informal sector) to “access legal services, claim and enforce their rights, discharge their legal obligations, and avail economic protection and opportunities”. The project, according to Smeda, will help in executing the “constitutional right (of a citizen) under Article 18 to enter any lawful profession or occupation and to conduct any lawful trade or business”.

“In countries like ours, laws, institutions, and policies governing the economic activities don’t afford a level playing field to the poor and the disadvantaged groups engaged in economic activity.

In many instances, laws, state institutions, and economic policies discriminate against micro and smaller businesses and limit their right to exist, let alone grow. This initiative will focus on the marginalised businesses — such as street vendors, home based entrepreneurs, and small sized shopkeepers and growers — with a view to enhancing their awareness of legal rights to engage in and do business,” Shaheen elaborates.

The size of the informal economy is estimated by national and international agencies to be over 30 per cent of the gross national product (GNP). According to the Economic Survey of Pakistan for the fiscal year 2009/10, informal employment in the economy constitutes 73 per cent of the total employment. Thus, as part of the informal economy, the marginalised businesses contribute a lot to the economic activity.

“It is time that the importance of the role of these businesses as markets and as a crucial link in the domestic supply chain realised and their existence and development facilitated,” avers Shaheen.

He seeks to dispel the widespread ‘contemptuous’ notions against the marginalised informal businesses, saying: “They are not a burden on the state or its resources. The state should step forward and help them through its policies and laws.”

The initiative will be implemented in seven cities and 25 towns around the country where there is a strong presence of marginalised businesses. According to an estimate, there are 330,000 marginalised businesses in the 32 places where the project will be implemented.

“Businesses, individuals, small entrepreneurs in the informal sector are more vulnerable to poor governance manifested in rent-seeking, anti-encroachment drives, and other forms of official harassment. They are also faced with barriers in entering the formal economy including complex and lengthy procedures, lack of services and facilities for commerce, and lack of awareness of mechanisms and benefits of formalisation,” says a Smeda introduction on the initiative.

“Supporting Pro-Poor Governance for Legal Empowerment of the Poor (Right to do Business) project aims to support and strengthen the marginalised businesses through advocacy of legal rights and facilitation for improved legal service delivery.

“Under the project, legal service outreach will be extended to marginalised stakeholders (street vendors, small traders/growers etc). In addition, these businesses will be mobilised to access business services. For this purpose Alternative Dispute Resolution (ADR) mechanisms and Third Party Facilitation Centres shall be established and promoted,” the Smeda introduction says.

Lack of governance, says Shaheen, by the state institutions results in inadequate legal protection for informal businesses, marginalising and subjecting them to unyielding regulators and inadequate policy framework. “Also, this increases their inability to enforce their claims legally (exploitation, eviction, rent seeking etc), and renders them ineligible for government support in any form and for formal credit.”

He says all government departments — such as labour, industries, police, anti-encroachment staff, etc -, legal service providers, bar associations, chambers, trade associations, and others linked to the marginalised businesses will be engaged for effective implementation of the initiative.

“We will set up legal aid centers for the smaller and marginalised businesses and will mobilise them into associations for collective action for their legal rights in addition to sensitising the existing market committees and associations of big traders on the importance of their existence for the big businesses,” he asserts.

Shaheen says it is not impossible to give awareness to marginalised businesses of their legal rights and help them. “But before that we (the state) must recognise them and their right to exist. The recognition of the economic importance of the marginalised businesses will help us protect the poor and enable them to use laws to advance their interests as economic actors.”

He says there are several models that exist in our own country — like the recently established model in Lahore bazaars where hawking vendors were given place to set up and do their business — where the right of marginalised people to engage in economic activity was recognised.”

The Smeda official is of the view that the removal of barriers in the way of the exercise of their right to do business will promote the ultimate goal of inclusive growth.