Locations
In recent years, there has been a growing recognition that traditional, project-based approaches to public policy interventions are often insufficient to address complex, systemic challenges. This has led to the emergence of a more dynamic strategy: the portfolio approach. Unlike a project-centric model, which typically focuses on isolated, short-term outcomes, the portfolio approach embraces a broader, more holistic perspective that integrates learning, adaptation, and innovation to develop higher-impact policies.
A Portfolio Approach to Develop the Entrepreneurial Ecosystem in Paraguay
In Paraguay, this shift is exemplified by a new proposal for a portfolio approach to develop the entrepreneurial ecosystem at the national, territorial, and sectoral levels–designed in a series of workshops held by UNDP Paraguay with representatives of the Vice Ministry of MSMEs of the Ministry of Industry and Commerce to implement UNDP’s Portfolio Initiation Framework. Over a period of a month in April 2024, UNDP’s portfolio initiation team implemented a "Portfolio Express Design," methodology that began by outlining desired systemic changes. This was followed by a “Sensemaking Workshop,” where invited institutions active in the entrepreneurship space presented their projects. The group engaged in collective reflection, identifying key patterns and connections between projects, ultimately developing a value proposition for the portfolio. Next, the team defined the composition of resources and actors, and their positions within the system they seek to transform. With this groundwork laid, they proceeded to design interventions aimed at addressing systemic challenges, and concluded by proposing a dynamic governance model to manage and adapt the portfolio over time.
This resulting strategy is designed to foster the conditions for sustainable and transformative change by addressing key areas such as the formalization of businesses, the promotion of decent work, and improving organizational efficiency.
The ultimate goal is to transform a current reality in whxich micro, small, and medium enterprises (MSMEs) are often survival strategies and reactions to chronic unemployment, rather than expressions of entrepreneurial ambition, and public institutions design services for MSMEs in isolation, into an inclusive and resilient entrepreneurial ecosystem that connects people’s aspirations with job opportunities, supports business growth, and empowers institutions to be more responsive and participatory.
The new approach arises also in response to limitations of traditional, enforcement-focused approaches to formalizing MSMEs that have become increasingly clear. Instead of relying solely on regulatory enforcement, a new approach is emerging that prioritizes integration with the formal sector by fostering the development of a supportive entrepreneurial ecosystem. This shift moves beyond compliance to create an environment where formalization becomes an attractive and natural step for businesses, driven by opportunity and growth potential–an approach to informality guides UNDP’s work on the informal economy in general.
Central to the portfolio strategy defined in Paraguay are five interrelated areas of policy intervention. First, personalized and comprehensive support for entrepreneurs forms the foundation, helping them build essential business and technical skills as they grow; second, developing the capacities of MSMEs ensures that they are equipped to thrive in a competitive market; third, public-private partnerships help build dynamic value chains that link MSMEs to growing lead firms; fourth, public policies support and develop entrepreneurial potential; and, fifth, creating collaboration and shared resources within business networks builds a supportive community that boosts efficiency. The goal of a policy portfolio that integrates these five areas is ultimately to enable public agencies to collaborate for the creation of quality employment opportunities, improved access to markets, and above all to provide services that are grounded in the lived realities of workers and businesses.
The Lessons of Local for a Portfolio Approach for MSME Promotion and Formalization
In parallel, from approximately June 2023 to July 2024, UNDP Paraguay’s Accelerator Lab designed and implemented the Local program as a prototype of a portfolio approach to MSME promotion and formalization. Its objective was to facilitate and consolidate supplier links between lead firms and MSMEs the apparel industry in order to promote MSME upgrading and the formalization.
Local, in collaboration with actors in three apparel clusters in the districts of Yaguarón, Pilar, and Mariano Roque Alonso, provided a practical experiment of integrating multiple interventions that correspond to the policy areas listed above. In addition to connecting lead firms with MSMEs (Area 3) Local’s multiple intervention strategies included providing personalized support to apparel workshop owners (Area 1), developing business and technical capacities of apparel MSMEs (Area 2), and fostering associationalism in apparel clusters as a way to strengthen collaborative networks (Area 5).
The lessons from the Local program provide crucial insights for the broader emerging portfolio approach to MSME promotion and formalization in Paraguay. One of the key findings is that fostering relationships between MSMEs and lead firms can create a more predictable environment for MSMEs, but it also requires that lead firms have strong internal capacities in product development and planning, as well as access to external support services to transmit production standards to their MSME suppliers. In Paraguay, this means that interventions must seek to upgrade both lead firm and supplier capacities and that both these focuses must be integrated into a broader portfolio approach.
A related finding from Local is that the instability of the domestic and regional apparel markets means that lead firms are not always able to provide the stable demand and predictable environment necessary for MSMEs to invest scarce or borrowed capital into their workshops. This market instability makes it risky for MSMEs to formalize. In this context, public procurement could offer MSMEs the stable demand they need to confidently invest in their operations and pursue formalization. Thus, an additional element of an integrated portfolio could be experiments with public procurement, such as the purchase of hospital, military, and school uniforms and linens, as a tool for MSME-oriented industrial policy.
Another significant finding from Local is that training in interpersonal conflict management and communication can improve authority relations within workshops, supporting both greater efficiency and a more pleasant work environment for owners and workers alike. However, the scarcity of skilled labor in the apparel industry is a barrier that firm-level interventions cannot resolve. This suggests that territorially focused labor training should be an additional component of the MSME entrepreneurship portfolio.
Finally, we learned that there is a strong interest among apparel workshops in inter-firm collaboration and associationalism as mechanisms to simultaneously support collective upgrading of MSME productivity and improve working conditions and social protection for workers. However, MSMEs need far more support to develop the administrative and political capacities required for this kind of collective upgrading, suggesting that this, too, should be an important focus within the broader portfolio of MSME interventions.
