Corporate social responsibility and corporate governance for Bolivian SMEs

(La Paz, March 28, 2012).- To encourage introduction of Corporate Social Responsibility (CSR) and Corporate Governance (CG) into the management of the Bolivian small and medium enterprise (SME) sector, the IDB Multilateral Investment Fund (MIF), CAF - Latin American development bank - and the Swiss Agency for Development and Cooperation (SDC) have supported a project implemented by the Foundation for Sustainable Development (FUNDES) in 28 SMEs in La Paz, Cochabamba and Santa Cruz.

The project was in response to current trends which require companies to take responsibility for the social effects of their activities. Irrespective of size and ownership structure, every business needs to put formal practices in place to govern relations between providers of capital (shareholders and creditors) and managers.

These practices create transparency and accountability which gives confidence and certainty to the conduct of the business, which in turn facilitates access to alternative sources of financing and improves relations with stakeholders (shareholders, employees, suppliers and customers, among others).

Although SMEs do not have the same capabilities and motivations as large companies, CSR and CG are instruments that directly affect their results and competitiveness. Moreover, as part of the value chain of the productive sector, they are required to meet the quality standards that the chains are integrating into their operations.

During the 14-month project, the beneficiary SMEs received training in these areas along with advice on how to prepare and implement action plans in the three dimensions of CSR: economic, social and environmental.

Many of the programs in the areas of health, training, recycling, energy saving, donations, community support, among others, were transformed into long-term plans. Work was also done on improving CG based on the "Guidelines for a Corporate Governance Code" prepared by CAF.

The SMEs accepted the challenge of meeting the commitments made in these plans because they understood that the CSR model and CG brought evident benefits for the business and stakeholders.

The MSME sector in Bolivia

SMEs play a leading role in the business fabric of Bolivia, which is why it is essential to improve their transparency, accountability and responsible competitiveness in an effort to create successes which can be replicated in the country and in the region.

In Bolivia, micro and small enterprises account for 95% of the business sector, contributing about 29% of GDP to the national economy and 83% of employment. In particular, the sector generates income for low-income classes.

However SMEs face problems such as lack of a legal and regulatory framework, inadequate basic infrastructure and services, low level of labor skills, outdated technologies in many cases, and difficulties of access to financial and non-financial service markets, among others.

They are also characterized by the weak business training of their owners who, despite this, face growing competitive pressures from market liberalization and the opening of the economy.

The outcome of this project and a report on the CSR and CG of the beneficiary enterprises was presented on March 22.