The Laws: Do They Make Any Difference?

Many forms of government intervention were analyzed during the Cartagena Forum. But perhaps the government activity that generated the most opinions was the enactment of laws for small business development.

Under this provocative title, one of the best-attended round tables was conducted at the VII Microenterprise Forum in Cartagena, Colombia. It was also one that gave rise to the most opinions. So much so that there were participants who gave an opinion in favor of the development laws, and minutes later, expressed their opposition.

However, if there was one phrase that perfectly summarized this collision of points of view, it was stated by Daniel Novak of United Nations Development Program (UNDP): "It is not quite clear whether the situation of microenterprise improves or not with a law. It is not quite clear because it depends on the law."

We have highlighted below other memorable phrases from this round table that Juan José Llisterri moderated.

"The primary problems of microenterprise are managerial and institutional in nature and beyond the scope of the law. The law cannot resolve the basic problems of the sector, [namely], the fact that the institutions do not function as they should and that there is no management capacity."
—Miguel Cabal, a consultant with 20 years' experience improving the living conditions of low-income communities in rural and urban areas

"Laws resolve some things, but not much. In Mexico, the law establishes quotas for micro, small and medium firms and requires that 30% of government purchasing go to mipyme, but banks do not want to extend loans. The government purchasing aspect has still not occurred and the bureaucratic process continues for business creation."
—Clemente Ruiz Durán, professor from Universidad Autónoma de México

"Development laws are declarations of good intentions, which is necessary, but not sufficient. Adopting a law is not the end, but rather the beginning of the challenge."
—Miguel Cabal

"In Argentina, there are 25 tools for PYME development and 16 originate from laws. Only six of these 16 are fully effective. In addition, of the nine tools that did not originate from laws, seven are being fully applied. Laws authorize, but do not require something to be done."
—Daniel Novak, United Nations Development Program (UNDP)

"In El Salvador, there is a full development policy for small and medium enterprise that provides support tools to companies. This shows that there is a capacity to establish tools without laws."
—Juan José Llisterri, Inter-American Development Bank

|sidebar| Those with laws and those without

"Between developing a policy and passing a law, it is better to develop a policy because it facilitates the development of tools and their implementation. This is all carried out with the participation of the private sector, and [is something] that cannot be legislated."
—Miguel Cabal

"Venezuelan law requires banks to invest 3% of their credit portfolio in small and medium enterprise, but the banks are not complying."
—Juan José Llisterri

"First, the policy must be defined, and a law created only if it is necessary to modify some legal framework in order to carry out this policy. If not, it is not necessary to create a law, and unfortunately, many PYME laws include the creation of programs or initiatives that in reality do not correspond to the legal framework."
—Daniel Novak

"Special development laws are not necessary, but more flexible legal frameworks are. The ideal for microfinance institutions would be the ability to expand their services without changing their legal status. The laws should be changed to take these new realities into account."
—Eduardo Briceño, payroll manager of the Mexican microfinance institution Compartamos