BY RURAL BOOST: Boosting rural entrepreneurship in Belarus via establishment &running of Komarovo Rural Business Incubator - Concept Note

  • BelarusCountry
  • EuropeAidDonor
  • ENGLanguage
  • rural developmentgender equalityTopics

The Applicant/ Leader (in English)

PUBLIC ASSOCIATION “WOMEN FOR RESTORATION OF NAROCH REGION”    

Project location

4 raions of north-western Belarus (BY): Myadel district, Minsk Voblast; Pastavy district, Vitebsk Voblast; Astravyets distric, Smorgon district, Grodno Voblast; in total 146,473 inhabitants (Belstat, 2011);    

Overall objective or goal

To boost development of a genuine private sector in the rural areas of Belarus by creating and running the pilot Rural Business Incubator;    

Specific objective(s)

To improve access to financing for newly created rural micro-enterprises;

To expand private employment/independent income generation in rural areas of Belarus;

To bolster the entrepreneurial spirit and enhance social capital &risk-taking attitude;

To increase the rate of setting up new micro-businesses in rural BY areas;

To heighten the survival rate of local start-ups and the newly established rural small &micro-companies;

To excel and optimize resources/capital allocation;

To improve rural business environment in Belarus;

To promote an innovative, financially &ecologically sustainable rural business model drawing on appropriate context-tailored skills &the EU know-how;

To promote gender equality in business and on the local labour market: to foster women-&mother-friendly workplaces;    

Target groups & final beneficiaries:

Targets grups: Genuine rural private sector of 3 focus districts: to be incubated &existing; micro &SMEs; experts; NGOs;

1. SME sector within the Project area, incl. 24 beneficiaries awarded grants/microloans for running business; min. 20 entrepreneurs/month receiving support from the Incubator; 40 Rural Business School (RBS) students, creation of 120 workplaces in the rural sector of services/production. Their needs: support in strategic planning and business know-how (this need is addressed by RBS, individual tutoring, start-up days); access to innovations, incl. technologies and management models (RBS, tutoring, follow-up assistance in the open door formula); adaptation of environment friendly solutions to the individual profile of an entrepreneur (cooperation with NGOs, tutoring, follow-up assistance); legal consultancy and aid, concerning also inclusive employment (setting up the Rural Business Incubator - RBI). Constraints: lack of access to capital (this need is met by awarding grants/microloans with the private equity option, start-up days); lack of access to office space and technical infrastructure (adaptation of the rooms for RBI, pthe Internet and technical base). The participation in the Project is guaranteed by the Project's formula based on practical support: an incentive in the form of a grant/microloan , access to practical knowledge, individual tutoring, access to offices and technical infrastructure make the offer attractive to entrepreneurs (competitiveness: more candidates than the pilot RBS may enrol). Recruitment process is open & non-discriminatory - the only limiting criterion is activity within the Project area.

2. Experts, policy-makers, NGOs, business organisations - in total approx. 120 people, participants in two mid-term conferences and one final conference. Their problems embrace: lack of statistical data and reliable information on the local barriers to conducting rural business (this need is satisfied by preparation and distribution of "white books"); lack of access to knowledge of innovations, technologies, incl. ecological solutions (RBS, presentations at conferences, implementations financed with grants/microloans), lack of cohesion and dialogue between communities (function of integration/exchanges at conferences). The Applicant and Project partners will ensure the presence of participants: the meetings take place in the open formula and at individual invitations. The Project is promoted by Social Media and PR.

Final beneficiaries: Rural communities of 4 focus districts &Belarus; BY rural private sector;

Final beneficiaries: 1. Community of 4 focus districts of the Project area (146,000 people in total) taking advantage of the economic development of the region, incl. formulation of 36 business plans; foundation of 24 new private businesses and creation of 120 workplaces in the private sector. The problems of these beneficiaries arise from lack of job diversification, inadequate education, negative net migration rate, uneven regional development, marginal position of the area. The problems are alleviated by a relatively high social capital. Economic development of the Project area will respond to the beneficiaries' needs (by creating new jobs and eco-friendly implementations). 2. Other rural communities and the sector of rural SME in Belarus, as well as academic community and experts will take advantage of 5 "white books" which analyse chances and obstacles for rural business and recommendations on institutional environment. Problems of the group: lack of access to practical knowledge, innovations, technological and eco-friendly solutions, considerable disintegration of the sector, lack of information flow between sectors (isolation), unclear law, subject to frequent changes. The needs are addressed by spreading practical knowledge acquired during the Project.

 

 

Outputs or immediate project products or results:

Sustainable rural entrepreneurship support model created and tested;

Community-driven, local development-oriented partnership scheme established;Relevant, adapted know-how and need-tailored best practices disseminated; Rural business innovations transferred; Socially beneficial business model promoted;

Desirable development model( horizontal, holistic, decentralized and sustainable;) tested

Description of the activities

ACT1. Incubator’s framework arrangements; initial capital; cross-sectoral partnership; ACT2. Adaptation, modernization & loans equipment; ACT3. Recruitment and running of 4 editions of the Rural Business School (RBS); ACT4. 4 x start-up days &grants/micro- award: negotiations of contracts; ACT5. Permanent support for entrepreneurs; ACT 6. Rural Regulatory Improvement Track (RRIT): knowledge collection, recommendations dev.&dissemination; ACT 7. Management, evaluation &audit.    

In the pre-project phase, the Applicant acquired the perpetual usufruct right to a classic manor house with an area of 950 sq. m and modern brick outbuildings, on condition that they will be adapted for the Rural Business Incubator. The Applicant makes a non-cash contribution of the right to use the buildings for the Incubator. Besides, the Applicant agreed about cooperation with "Komarovo” Rural Entrepreneurship Development Center, partners from Poland; Minsk Capital Association of Entrepreneurs and Employers and Ecohome National Level Non-governmental Environmental Organization which will all support the Project administratively and with professional advice.    

Background Outline & Justification

Pre-project situation in the target region –

1. Nature: almost 85% territory of Belarus tends to be plainly rural (half agrarian), while the rest are woods, peat bogs, wetlands, marshes, inland waters, relatively natural & unpolluted, except for the Chernobyl contamination zone. The north-western BY, remains largely unspoiled due to lack of industry and sparse, scattered population. Therefore, the Project area boasts a rich fauna (particularly ichthyofauna) and flora (mire spruce woods & marshes). Post-glacial landscape is widely varied, with numerous lakes (the lake complex of the Naroch territory, Svir, Balduk, countless ponds). The homogeneous microclimate, which predominates in the Project Area, may be described as continental, transitory with the Atlantic influence: strong northerly and westerly winds make it one of the most attractive places in BY for the development of micro wind power plants.

 2. Material heritage & cultural landscape: a typically rural area with a very low population density and a heterogeneous network of bigger centres of an urban character (Myadel, Lyntupy) and larger villages (Komarovo). Outside them, low-density housing prevails: the so-called "hutors". In architecture, traditional wooden gabled-houses with distinctive porches, painted in yellow, blue & green, are common. Besides, the region abounds in numerous, often neglected estates, manor houses (with parks), sites & monuments of industrial architecture (water mills, smithies, stone granaries).

3. Society: local/indigenous population, sharing the same social and historical background and enjoying relatively high levels of a social capital (measured by the coefficient of social trust, Komarovo 2012). Women remain socially more active than men and are often in their families. At the same time they encounter acute problems on the labour market (real unemployment rate among local women exceeds that of the analogous group of men by about 15%, Kom. 2012): women & mother friendly business & marketplace are missing. Rural population is steadily diminishing from approx. 32% in mid-90's to slightly above 24% in 2012 (Belstat, 2013): Depopulation is flagrant, though largely unregistered: independent estimations indicate that even 30-40% of that number have left to MSQ or Russia for studies or work but they remain formally registered in their native villages.

4. Economy: No fundamental formal constrains & unmitigated legal obstacles to micro/SME private sector development; cheap, relatively well-educated workforce, a unique landscape with natural resources (water, wind, biodiversity) and a tourist potential; a favorable location (close to the EU border) and a relatively good communication infrastructure. The genuine private sector in the Project Area remains extremely weak. It comprises: a) businesses drawing on local capital, i.e. 2 timber processing companies (in Lyntupy and Svir, employing 12 people altogether); shops (Svir, Naroch), a private bakery in Komarovo and about 100 registered individual entrepreneurs (30% pursue business): carpenters, furniture manufacturers, construction services providers. Moreover, there are 47 farmsteads and rural private accommodations. b) businesses drawing on foreign capital: 2 foreign investors (Russia): operating 2 bungalow settlements in Shwakshty and Grubinienty and adapting a manor complex in Lyntupy to an exclusive vacation centre. None of these investments contributes to the sustainable development of the Project Area.

The potential for PSD/private sector development encompasses:

1. Local material & cultural heritage: production of wooden furniture; timber treatment; dressing of fieldstone; processing of wicker (furniture, everyday articles) as well as straw and reed (also for construction and local low emission energy sources - biomass pellet); ceramics (incl. utilitarian articles, stove and roof tiles, flowerpots); weaving and lace-making; other traditional occupations: smithery, woodcarving, leather-working, manufacturing of traditional/wooden rowing boats, construction and maintenance of stoves and fireplaces; running of traditional bakeries/cheese dairies; production of traditional packaging.

 2. Energy saving technologies: biomass processing (supply of the unused biomass/manure from collective farms); micro investments in renewable energy sources (micro-hydroelectric power stations and wind turbines); home sewage treatment plants/bio-septic tanks/micro bio-sewage treatment.

 3. Construction industry: fire prevention technologies, prefabricated building elements; production of briquette/firewood; greenhouses (also those heated with biogas); professional waste utilization (incl. recycling); insulation of buildings.

 4. Agriculture: nurseries (frost resistant strains, coniferous and fruit trees, ornamental plants); organic production of herbs, honey, beeswax, pollen, mushrooms, forest fruit, vegetables and fruit; grass production; duck down processing (jackets, sleeping bags);

5. General services: auto repairs, car washes; logistics; construction and renovations/revitalisation of old rural cottages, systems; architectural activities, garden design and maintenance, catering; office support services, ICT;

 6. Tourism: guide services, sports and tourist equipment rental companies, farm tourism; the development of new/alternative tourist products, incl. integrated and thematic ones, e.g. gastronomic or astronomy oriented, such as stars observation (the Dark Sky project); services for dachas owners, e.g. transport, supply of products, event organization. There are 300,000 seasonal tourists during summer holidays and this number displays a tendency to grow by an average of 7% per year (incl. foreign tourists) in spite of the crisis.

7. Property sale - more and more various range properties and land are rendered for sale or rent by raion's authorities through still burdensome procedures.

Problems of the Project Area - 1. Peripheralization and marginalization due to the centralized model of development which ignores the unique character of rural and non-metropolitan areas. 2. Inconsistent legislation on the development of rural areas and rural entrepreneurship and a hostile institutional environment (WB, IMF, 2011). 3. Limited access to capital: deficiency of locally accumulated capital and a heavily restricted access to credit (rocketing interest rates, instability, devaluation, high inflation, lack of the market of collaterals, scarcity of rural mortgages, dearth of full credit information, adverse legislation on bankruptcy - actual unavailability of loans for people living on average incomes, especially in rural areas). 4. Out-dated, irrelevant education system (incl. technical and vocational education) which ignores the labour market needs (esp. in the rural context); lack of consultancy and business support institutions. 5. Inefficient management of resources, incl. labour: high employment in the deficit collective farming (about 30% of the total local labour force). Severe underdevelopment of private sector: a scant private sector’s stake in the local product creation and income generation (5/7%, Komarovo, 2012); a meager coefficient of employment in the private sector (2/3%, Kom. 2012) and a very low coefficient of the self-employed and individual entrepreneurs  (2/3%, Kom., 2012). Furthermore, the Project Area features an alarming rate of real local unemployment amounting to 37% (Kom., 2012; Officially 2%, Belstat, 2011) which will shoot up due to an inevitable restructuring/partial privatization of collective farms/kolkhozes. Finally, the added value of local production is insufficient (Kom., 2012). 6. Considerable out- flow migration from the project area: Komarovo Center estimates that approx. 80% of local youth/high school graduates, mostly women, leave to never be back (Kom., 2006 - 2012). 7. Development of mass tourism and its strongly seasonal character (limited only to summer holidays). 8. Insufficient technical, telecommunications infrastructure (incl. poor access to the Internet). 9. Construction of a nuclear power plant in Astravyets or, in broader terms, the harms done to the environment (and their detrimental effects on the tourist potential). 10. Scarcity of reliable data on impediments to rural entrepreneurship development in BY (different methodologies of data collection, out-of-date statistics).

Relevant plans undertaken at national/regional/local level - Overall underdevelopment of private, especially rural, entrepreneurship is formally recognised by the national authorities. There are numerous micro & SMEs support strategies & sector relevant law, incl. State Programme for SMEs Support 2013-2015 (????????????? ?????? ????????? ?????????? ????????, 29.12.2012 No. 1242), General Law on SMEs support (No 170, 2/1703, 2010), Decree on State Measures to Support Small & Micro Entrepreneurship (No 131, 1/10713, 2009; No 67, 1/12598, 2011). Although these documents point to overall underdevelopment of rural entrepreneurship (more than 60% of private entities are based in MSQ & agglomeration/70% of overall private output is generated there, Belstat, 2012), they largely ignore the roots of the problem, thus fail to offer an effective remedy. Besides, the impact of the proposed broad support measures is moderated as they rarely translate into any action. However, effective legal instruments exist on a local/regional level - Naroch Region preferential territorial regime (Presidential Decree On the State Program of Development of Naroch Region, 2011-2015, September 30, 2010 ? 514) was introduced & largely enforced, though its provisions make the conditions for business activity/start-ups dependent on a given location within the Project area. As such, the regulatory framework predestines Komarovo for an optimal Incubator location.

Previous actions  - The action constitutes a direct follow-up of the Applicant's activity. The Applicant, together with “Komarovo” Rural Entrepreneurship Development Center/the local partner, has implemented a dozen of projects & initiatives aimed at boosting rural entrepreneurship & eco-innovation (supported by UNDP, Eurasia, OSF, GTZ & FPD, Polish Aid, USAID, MATRA, EC). What we learnt, i.e. changeability- need-tailored capacity building, along with viable financial instruments, remains pivotal (Final Evaluation Report, Polish Aid, 2012, Pluznica – Komarovo; Evaluation: Svir: Perspective Region, FPD, 2012). Our previous experiences are duly integrated into the current project: selection of participants based on a demand/reward formula, start-up grants/microloans award scheme will constitute a tangible incentive & quality gate-keeper, the Rural Business School curriculum will focus on need-tailored praxis, emphasizing individual tutoring as the most effective approach, extended private sector involvement is secured under the Incubator's institutional framework, private capital will be attracted under grant/microloan-awards scheme, entailing private equity as an optimal, through not-required co-financing, the Incubator is to run in the open-door & permanent formula, rendering follow-up assistance for already existing, local micro & SMEs, also non-incubated start-ups; eco-innovations & sustainable business solutions are to be diffused, transferred & enforced via preferences under the grant/microloan-award scheme and further learning by doing: streamlined by follow-up assistance, data under the Rural Regulatory Improvement Track/RRIT is to be collected on a rolling basis, by both formal & informal (face-face) methods. The authority of the Applicant is to guarantee confidentiality, which increases reliability of information.

1.1.1.               Describe and define the target groups and final beneficiaries, their needs and constraints and how the action will address these needs

Cross-cutting issues & project & added-value & gender & environmental & PWDs & innovation employed

1. Project's innovativeness owing to its public-private formula; possibility to combine grants/microloans with co-financing by the private sector (private equity); opportunity to disseminate innovations through "green clusters", i.e. concentration of innovative, environment-friendly implementations within the Project farea (spill-over/multiplication effect).

2. The open formula improving the quality of vocational education (open lectures for students and graduates of the Svir Proessional Agricultural College in Komarovo) and integrating local community/people of different backgrounds, incl. dacha owners and educated elites from Minsk.

 3. Data collection as part of the Rural Improvement Track: data gathered permanently in the methodology of both formal and informal education, possibility to test hypotheses in the "life-laboratory". 4. Practical solutions of social entrepreneurship including the mentally handicapped, worked out during the pilot activities (carried out at present), will become part of the Project (PolishAid 2013).

Outputs or immediate project products or results:

Establishment of the cross-sectoral, international Board of Trustees embracing representatives of NGOs, business and informal social groups & local leaders with a mandate to boast local & rural entrepreneurship;   

- 24 grants / microloans awarded for rural start-ups in the total amount of EUR 150,000;

- Incubation of at least 24 rural micro & SMEs within the Project Area;

- General preferences given to socially and ecologically sustainable business ideas: empowering women and mothers in particular; 

- Creation of at least 120 genuine private sector jobs;

- Formulation of a two-track Rural Business School program & running of 4 editions of RBS (5 months each): in total, approx. 40 participants admitted (8-12 in each edition);

- At least 36 business plans developed and endorsed by individual tutors; 4 start-up days held: attracting private top-up to the Incubator grant/microloans within the equity model;

- Follow-up need-tailored assistance to all graduates / 36 individual assistance tracks implemented;

- Establishment of a local rural business support institution offering free-of-charge consultancy to all te interested local stakeholders, in the open door formula: at least 20 non-graduates/month receive assistance;

- Affordable/free-of-charge premises and infrastructure made available to rural entrepreneurs for running and developing their businesses: conference hall, meeting rooms, Internet access, data bases, guest rooms, production and storage premises;

- Five “white books” developed and distributed, examining the obstacles &  impediments to start and run rural business and offering relevant recommendations.

Project Start & End Date:

33-34 months; June 2013 is an optimal starting date. It will allow RBS to be opened in January 2014 (taking account of the building adaptation, programme development, recruitment of participants etc.)