Increasing the Participation of Women Entrepreneurs

in the Solomon Islands Aid Economy

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Acknowledgements and Disclaimer
This report was prepared by the World Bank, Solomon Islands. Tobias Haque (Economics and
Governance Specialist, World Bank) and Froniga Greig (Lead Consultant) coordinated the research
and prepared the final report. The research was conducted by a team of consultants: Froniga Greig,
Doreen Kuper, and Samuel Guirado. The Task Team Leader was Annette Leith (Country Officer,
World Bank).

Edith Bowles (World Bank Country Manager, Solomon Islands) provided valuable input during all
stages of this work. This research could not have been completed without support from a number
of individuals and associations within the Solomon Islands business community, including: the
executive team and members of the Solomon Islands Women in Business Association (SIWIBA), the
Solomon Islands Small Business Enterprise Center (SISBEC), and the Small Medium Enterprise
Council (SMEC). Samantha Clough and Caroline Bokabule at the World Bank Office, Honiara,
provided vital administrative support to the research team. Cover photo by Hamish Wyatt.

The findings, interpretations, and conclusions expressed herein are those of the authors and do not
necessarily reflect the views of the International Bank for Reconstruction and Development / the
World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or
the governments they represent.

The World Bank does not guarantee the accuracy of the data included in this work. The boundaries,
colors, denominations, and other information shown on any map in this work do not imply any
judgment on the part of The World Bank concerning the legal status of any territory or the
endorsement or acceptance of such boundaries.

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Table of Contents
EXECUTIVE SUMMARY i

1. INTRODUCTION 1

1.1 STRUCTURE OF THIS REPORT 2

1.2 SCOPE, DEFINITIONS AND METHODOLOGY 2

2. WHAT ARE THE KEY CHARACTERISTICS OF THE SOLOMON ISLANDS AID ECONOMY? 4

2.1 A SMALL PROPORTION OF REPORTED AID IS SPENT WITHIN THE LOCAL ECONOMY 5
2.2 DONOR PROCUREMENT PRACTICES INFLUENCE THE NATURE OF LOCAL PARTICIPATION 7
2.3 WOMEN ENTREPRENEURS CURRENTLY PLAY A CONSTRAINED ROLE WITHIN THE AID ECONOMY 10
2.4 VIABLE BUSINESS OPPORTUNITIES FOR WOMEN ENTREPRENEURS ARE NOT BEING EXPLOITED 11

3. WHY INCREASE PARTICIPATION OF WOMEN ENTREPRENEURS IN THE SOLOMON ISLANDS

AID ECONOMY? 15

3.1 INCREASED LOCAL SPENDING CAN FACILITATE GROWTH, REDUCE POVERTY AND MITIGATE RISK OF
CONFLICT 16
3.2 INCREASED PARTICIPATION BY WOMEN ENTREPRENEURS BRINGS BROADER SOCIAL BENEFITS 20

4. WHAT IS CURRENTLY CONSTRAINING GREATER PARTICIPATION BY WOMEN

ENTREPRENEURS? 21

4.1 SECURITY AND STABILITY CONCERNS 22

4.2 INFORMATION PROBLEMS 22
4.3 SKILLS GAP 25
4.4 PROCUREMENT PRACTICES 28
4.5 BUSINESS ENVIRONMENT ISSUES 29

5. WHAT CAN BE DONE TO ADDRESS EXISITING CONSTRAINTS? 31

5.1 SECURITY AND STABILITY CONCERNS 33

5.2 INFORMATION PROBLEMS 33
5.3 SKILLS GAP 34
5.4 PROCUREMENT PRACTICES 35
5.5 BUSINESS ENVIRONMENT ISSUES 36

APPENDICES 37

APPENDIX A: DETAILED METHODOLOGY 38

APPENDIX B: FINANCIAL ANALYSIS OF POTENTIAL BUSINESS OPPORTUNITIES 42

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Executive Summary
International aid flows are equivalent to almost half of Solomon Islands’ economy, making it one
of the most aid-dependent countries in the world. Around US$250 million of non-military aid
enters the country, but only 15-20 percent of this amount is spent locally through local
procurement or staff expenditure.

The World Bank undertook this study to explore the scope for, and potential impacts of,
increasing the local economic impact of aid through increased local spending by donors. More
specifically, this study examines the potential for increasing participation of Solomon Islands
women entrepreneurs in relation to local aid-economy opportunities. The research is framed
around four key questions:

1. What are the key characteristics of the Solomon Islands aid economy?
2. Why increase the participation of women entrepreneurs in the Solomon Islands aid
economy?
3. What is currently constraining greater participation by women entrepreneurs?
4. What can be done to address existing constraints?

This research was primarily based on interviews and workshops with women entrepreneurs and
analysis of women-owned businesses. Constraints to increased participation identified in this
report are those cited as particular problems by women. But many of the constraints also impact
on businesses owned by men, and some recommendations in this report would have a positive
impact on Solomon Islands businesses operated by both men and women entrepreneurs.
1. What are the key characteristics of the Solomon Islands aid economy?
Existing businesses participating in the aid economy can be roughly categorized into three tiers, as
shown in the following table.
Tier Description
1 A small number of large, international firms dominate procurement and supply opportunities,
holding most major local donor contracts.
2 A larger number of family businesses, often owned or managed by long-term expatriates supplying
a range of goods and services to donors and the expatriate community.
3 Very small businesses – mostly sole traders – providing goods and services on very small scales to
expatriates, on a sole-source/shopping basis to donors or as subcontractors to the larger firms.
Women entrepreneurs in Solomon Islands typically operate very small businesses providing a
very narrow range of goods and services. Few women-owned businesses provide goods or services
to donors or expatriate aid workers. Those that have been contracted by donors are almost all
within the third tier, supplying goods and services on a very small scale. The types of goods and
services provided by women are gendered (food and personal services).

A range of existing aid-economy-related business opportunities are not being exploited by

Solomon Islands women entrepreneurs. Women entrepreneurs should be able to break into
supplying existing demand of donors, and increase the overall local economic impact of aid by
supplying goods and services that are currently being imported, or are not supplied at all.
Opportunities exist in information technology equipment, catering, gardening, landscaping,
furniture-making, fresh and manufactured food, consultancy services, cleaning, drinking water and
small scale construction.
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2. Why increase the participation of women entrepreneurs in the Solomon Islands
aid economy?

Increasing the local impact of aid expenditure in Solomon Islands through increased local
procurement and expatriate expenditure can have important positive impacts on standards of
living and private sector development.

Firstly, the skills and knowledge acquired by Solomon Island entrepreneurs and workers from
increased participation in the local aid economy would expand Solomon Islands’ capacity for
successful business activity more generally, and potentially build the skills and abilities required
for growth in various new and existing export sectors. Secondly, increased local aid expenditure is
likely to expand income-generation opportunities available to Solomon Islands in both rural and
urban areas – with an important impact on poverty and living standards. Finally, increased local
expenditure can lead to an expansion of Government revenues and the tax base, at a time when
the Government is facing severe revenue pressures.

Internationally, women are more likely to use income for investments that benefit children and
the wider community. Increasing the ability of Solomon Islands women to take advantage of aid-
economy opportunities is an important step towards addressing existing gender disparities, and is
likely to assist in translating the benefits of private-sector development into reductions in poverty
and improved social outcomes.

3. What is currently constraining greater participation by women entrepreneurs?

Constraints to greater women’s participation in the aid economy can be categorized under five
headings: security and stability concerns, information problems, skills gaps, procurement processes
and business-environment issues.

a. Security and stability concerns

Perceived continued risk of conflict and violence, and uncertainty regarding the continued
presence of an international peacekeeping force, is constraining participation by women.
Perceived risk of conflict may disproportionately inhibit entrepreneurship by women, given social
and cultural expectations that women remain primary caregivers to children. Security concerns
were not cited as a constraint during workshops with men.

b. Information problems

Prospective women entrepreneurs lack basic information on the extent of opportunities within
the aid economy. There was a clear lack of knowledge regarding the extent and probable duration
of donor expenditure. Women involved in this research were often of the view that expatriates did
not spend enough money locally to constitute a viable target market.

The nature of opportunities within the aid economy is not well understood. Women often cited
or demonstrated a lack of familiarity with the tastes and requirements of expatriates.

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Price and cost structures are opaque. The smallness of the private sector limits sharing of and
exposure to vital business information. Potential entrepreneurs often lack knowledge regarding the
costs of establishing and operating a business, and production volumes required to attain
sustainability. Often, women did not know how to assess the potential viability of a business idea
or take the initial steps towards establishing a business.

c. Skills gap

Existing business-support programs are subject to fragmentation and lack of coordination. The
existing range of support programs has evolved on an ad hoc basis over time. There is no overriding
strategy guiding the provision of assistance to women entrepreneurs, and existing support
programs show gaps and overlaps.

Assistance can be difficult to access. Awareness of existing programs is limited among

entrepreneurs, and few have been able to access available assistance. Accessing business
mentoring assistance is difficult and there are not enough mentors to meet demand.

There are gendered barriers to women accessing scholarships. At present there are no scholarship
schemes designed to increase the number of women studying business. Women may be
discouraged from applying to some scholarship schemes because of the absence of adequate
assistance for family members.

Existing support may reinforce culturally-based perceptions regarding appropriate roles for
women entrepreneurs. Current emphasis on rural livelihoods and very small-scale service business
operations within certain donor and NGO programs may foster a continued reliance on the same
business ideas, models and customer base, and inhibit development of more innovative business
ideas and strategies.

Entrepreneurialism is impeded by a lack of technical skills required for maintaining

competitiveness and reducing the costs of doing business. Women entrepreneurs reported a lack
of options for gaining specific skills and familiarity with technology required to operate certain
businesses without travelling overseas.

d. Procurement practices

Sole-sourcing reduces transparency and restricts the number of women who can participate as
suppliers. The common donor practice of consistently approaching a single, established sole-source
supplier for small contracts reduces opportunities for entry of new participants, and may also
increase costs for donors by inhibiting competition.

Donors are not making best use of social responsibility provisions in procurement guidelines.
While almost all donor procurement policies promote the participation of small business, only two
promote principles of gender equality and social inclusion. Donors that already have gender
provisions could make greater use of them to create opportunities for women entrepreneurs, and
women more generally.

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Women lack experience in applying and preparing tenders. New entrepreneurs often lack
familiarity with standard contracting processes, and do not have sufficient knowledge to complete
tender documents to the standards required by donors.

Liquidity requirements and international standards impose unnecessary barriers. For some
contracts, donors require businesses to be registered and able to demonstrate financial capacity to
cover the cost of the contract. Donors often also apply international quality standards. Most of the
small businesswomen involved in this research were unable to demonstrate sufficient financial
cover or to meet international product quality standards.

Government procurement practices are not always transparent and sometimes seem arbitrary.
Some of the aid provided to the Solomon Islands flows through Government procurement systems.
Government tenders are perceived as arbitrary and non-transparent, and entrepreneurs are
seldom aware of the criteria used by the Government in awarding contracts.

e. Business environment issues

Regulatory barriers, although not binding, are often time consuming and difficult. Rules and
regulations are often non-transparent, and personal connections and lobbying are often required
to acquire necessary permissions and approvals, as well as to access available Government
business-support programs.

High rents and land registration processes restrict the expansion of women’s businesses and the
ability to use land as collateral. Costly, time-consuming and risky processes for land transactions,
including the registration of customary land, both increase the cost of land in Honiara, and impede
the use of customary land as collateral by prospective women entrepreneurs. High rentals and a
lack of access to finance are both key issues cited by women entrepreneurs

Access to financial services is limited for women wanting to start a business. Women
entrepreneurs have trouble acquiring access to finance for start-up or business expansion.
Commercial banks are averse to lending to support innovative business activities, and are also
generally unable to provide loans of small amounts, as often required by small-scale woman
entrepreneurs.

Immigration policies could be better suited to local business needs, and currently restrict the
participation of expatriates in the creation and development of new markets and opportunities.
Current Government policy deters people from retiring in Solomon Islands. Acquiring a working visa
can also be difficult and time-consuming, preventing entrepreneurs from easily employing workers
from overseas.

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Workshop findings regarding potential differences in barriers experienced by men and women
entrepreneurs
Barrier Possible gendered difference in perceptions and experience
Security concerns Considered a major concern and disincentive to investment by women, but
dismissed by men entrepreneurs as irrelevant.
Regulatory barriers Women found to be very difficult to negotiate, requiring the right personal
connections. Men considered only a minor impediment.
Exchange rate policy Mentioned only by men, possibly reflecting higher representation of male
entrepreneurs within the tradables sector.
Skills barriers Basic financial literacy and business sense mentioned as a constraining skills gap
by women, whereas men considered the primary gap to be in access to training in
more technical areas.

4. What can be done to address existing constraints?

Actions by donors and Government could go a long way to addressing many of the constraints to
greater participation of women entrepreneurs in the Solomon Islands economy. Possible actions
are presented in the two following tables.

Prioritization analysis identifies the following five actions as immediately implementable and likely
to have a high-impact in improving the participation of women entrepreneurs in the Solomon
Islands aid economy:

Five high-impact, immediately-implementable actions

1 Donors update external website and produce other communication materials to ensure that accurate
information on procurement practices is easily accessible.
2 Government and/or donors provide additional financial support to existing training institutions or
business associations to strengthen business mentoring services.
3 Donors support business associations in establishing an online publicly accessible database, listing:
a. All upcoming donor procurement opportunities;
b. Relevant donor processes, links and contacts; and
c. All Solomon Island businesses that have previously supplied, or would be interested in
supplying, donors on a sole-source basis.
Donors support business associations in disseminating this information in hard-copy to businesses
that cannot access the internet.
4 Donors offer training to businesses in preparing tenders for their contracts.
5 Donors and Government commission and support a gender review of existing scholarship and
business training programs, and implement recommendations arising from the reviews.

A more complete set of possible actions is outlined in the following table under five headings:
security and stability concerns, information problems, skills gaps, procurement processes and
business-environment issues. The recommendations are categorized using a “traffic light” system in
terms of their ease of implementation and likely impact.

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 Summary of recommendations

General Recommendation Specific Actions

Ease

Impact

Security and Stability Concerns

Build confidence in ongoing peace and  Solomon Islands Government and donors enter into an explicit and well-publicized agreement
security.
Med

regarding the nature and duration of an international security guarantee.

Hard

Information Problems
Address confusion regarding donor  Donors update external website and produce other communication materials to ensure that
Easy

High

intentions and policies. accurate information on procurement practices is easily accessible.

Provide integrated and ongoing business  Solomon Islands Government and/or donors provide additional financial support to existing
High

mentoring to entrepreneurs.
Med

training institutions or business associations to strengthen business mentoring services.

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Strengthening brokerage services between  Donors support technical advisory programs run through the Government or NGOs to facilitate
suppliers and potential buyers.
Med
Med

communication of the needs of purchasers to rural and urban suppliers, while providing technical
assistance and extension services to assist producers meet those needs.
 NGOs or business associations establish informal platforms – such as newsletters or regular
meetings – for sharing information on potential areas of unmet demand and available goods and
services between expatriate families and Solomon Island women entrepreneurs.
Skills Gap
Offer new courses to meet key skill gaps.  Training institutions broaden business training courses to include entrepreneurial skills and more
Med
Med

specific technical skills such as market analysis, and research and development.
 Solomon Islands Government and donors shift the balance of existing scholarships towards
technical and vocational training, possibly in environments more similar to Solomon Islands.
 Donors offer scholarships for apprenticeships or study-tours to businesses operating in developed
or other developing countries.
Undertake gender review of scholarship and  Donors and Solomon Islands Government commission and support a gender review of existing
training programs.
High
Med

scholarship and business training programs.

 Donors and Solomon Islands Government implement recommendations arising from reviews.
 Procurement Practices
Establishment of a database for all  Donors support Business Associations in establishing an online publicly accessible database, listing
Easy

procurement and suppliers. 1) all upcoming donor procurement opportunities; 2) relevant donor processes, links and contacts; High
and 3) all Solomon Island businesses that have previously supplied, or would be interested in
supplying, donors on a sole-source basis.
 Donors support business associations in disseminating this information in hard-copy to businesses
that cannot access the internet.

Greater use of socially responsible  Donors review existing procurement procedures and processes with the intention of maximizing
procurement through activation of gender or
Med
Med

local economic impact, promoting improved gender outcomes and increased opportunities for
social clauses in procurement guidelines. women entrepreneurs.

Tender-writing training.  Donors offer training to businesses in preparing tenders for their contracts.
Easy

Med

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Improve Government procurement practices,  Donors support Solomon Islands Government in establishing programs to improve capacity and
and more consistent application of formal
Med

systems within procuring ministries to increase the extent to which Government procurement
Hard

standards. guidelines are applied, and improve transparency and understanding of requirements for suppliers.

Consider alternatives to and relaxation of  Donors review the necessity of currently applied international standards, with consideration of the
High

international standards, and room for relative risks and potential development impacts of relaxing these standards to facilitate
Hard

flexibility in their application. participation by Solomon Island suppliers.

Business Environment Issues

Give priority to regulatory and business  Solomon Islands Government ensures representation of women business owners during ongoing
environment reforms that will have a major
High

regulatory reform processes, including the Business Licensing and Administration Reform
Hard

impact on women entrepreneurs attempting Committee.

to access aid economy opportunities.  Donors ensure that a gender perspective is taken in ongoing assistance to the Government in
improving the business enabling environment.
 SECTION 1:
Introduction

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1. Introduction

Solomon Islands is currently highly reliant on logging for export receipts, Government revenues,
and employment. But existing stocks of natural forest logs are expected to be entirely exhausted by
2014. The Solomon Islands Government approached the World Bank Group to identify alternative
sources of revenue, foreign exchange receipts, and employment in the absence of logging. In
responding to this request, the World Bank Group has undertaken extensive analytical work
examining short- and medium-term prospects for economic growth in Solomon Islands, under the
Sources of Growth project. This report contributes to the Sources of Growth work, and is informed
by its findings.1

A key conclusion arising from Sources of Growth analysis is that aid is likely to remain a key part of
the Solomon Islands economy for the near future. The existence of an international security
guarantee, backed by the presence of an international peacekeeping force, is paramount for
security, and investment certainty. In the absence of clear or certain alternatives to logging, and in
the context of rapid population growth, current levels of service delivery will continue to depend
on high levels of aid expenditure.

Given the inevitable ongoing importance of aid to the Solomon Islands economy, the World Bank
Group is interested in exploring how international aid flows can lead to direct, sustainable local
economic benefits through the local supply of goods and services to donors and expatriate aid
workers. This report provides some answers to these questions, specifically relating to the potential
for increasing opportunities for women entrepreneurs in relation to the aid economy.

1.1 Structure of this report

The report is structured around the four key research questions that this work was intended to
address:

 Section 2: What are the key characteristics of the Solomon Islands aid economy?
 Section 3: Why increase the participation of women entrepreneurs in the Solomon Islands
aid economy?
 Section 4: What is currently constraining greater participation by women entrepreneurs?
 Section 5: What can be done to address existing constraints?

Appendix A includes the Detailed Methodology for the research. The Financial Analysis of Potential
Business Opportunities is presented at Appendix B.

1.2 Scope, definitions and methodology

This analysis was intended to identify policy measures to increase the positive impacts of
international development expenditure on the welfare of Solomon Island nationals residing in
Solomon Islands. Any businesses that generate employment and income for Solomon Island
nationals were included in this analysis, rather than just businesses providing an entirely new
product or service. Similarly, while this analysis focused on women entrepreneurs, many of the

1
The final Sources of Growth Discussion Note, Solomon Islands Growth Prospects: Constraints and Policy Priorities, is available at
http://go.worldbank.org/17KBS2XCI0.
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recommendations would benefit entrepreneurs in general. Accordingly, the following definitions
and assumptions are applied throughout this report:

 A Solomon Islands business is any business owned and operated by a Solomon Island
national, and providing goods or services in Solomon Islands;
 An international business is a foreign-owned business, operating in Solomon Islands and
employing at least some local staff and subcontractors;
 A foreign business or firm operates from another country, is not owned by, and does not
employ Solomon Islands nationals;
 A Solomon Island entrepreneur is any resident Solomon Island national who starts and/or
owns a business; and
 The aid economy encompasses businesses and individuals supplying goods and services
directly to donor agencies and expatriates, or those dependent on demand created by donor
funding of other Solomon Island agencies and salaries.

The research was focused on Honiara because of the concentration of donor procurement and
expatriate expenditure in the capital city. The focus on Honiara does not, however, mean that
implementation of recommendations would only benefit those living in Honiara. This and other
recent World Bank research has demonstrated the extent to which development of businesses in
Honiara can bring benefits to rural areas through increased demand for rural produce.

The research was conducted using qualitative and quantitative methods, including focus group
discussions, surveys, interviews, quantitative analysis and business modeling, and desk reviews
with a wide range of stakeholders and women entrepreneurs in Honiara. The research team
identified approximately 90 women entrepreneurs. The majority of the findings are drawn from an
analysis of data from a smaller sample group of approximately 43. Information from a small sample
of men entrepreneurs was also used for comparative purposes. Information from other
stakeholders including contract holders, donors, Government officers, bankers, business
associations, and representatives from programs and initiatives aimed at promoting business also
informed the analysis. (Appendix A provides a detailed outline of the methodology).

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 SECTION 2:
What are the Key Characteristics of
the Solomon Islands Aid Economy?

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2. What are the key characteristics of the Solomon Islands aid economy?

A small proportion of reported aid enters the local economy

Donor procurement practices influence the nature of local participation

Women entrepreneurs currently play a constrained role in the aid economy

Viable business opportunities for women entrepreneurs are not being exploited

This section maps the current extent of opportunities for, and participation of, Solomon Island
women entrepreneurs in the aid economy. Recent figures regarding total aid-flows to Solomon
Islands are reproduced and estimates of the proportion of donor funding that is spent locally are
presented. Basic local procurement practices of major donors are outlined and a three-tier
typology of the types of local business that are currently participating in aid-economy opportunities
is developed. The section concludes with a description of the part played by women entrepreneurs
within the local aid economy, and shows that existing viable business opportunities for Solomon
Island woman entrepreneurs are not being exploited.

2.1 A small proportion of reported aid is spent within the local economy

Reported aid flows to Solomon Islands are amongst the highest in the world; both as a proportion
of GDP and in terms of Official Development Assistance (ODA) per capita. ODA from all sources
reached 40 percent of GNI in 2008 and totaled US$229 million. Around 75 percent of ODA is from
Australia, with New Zealand, the European Community, Taiwan (China), the Asian Development
Bank, and the World Bank Group also significant donors. A large part of international aid is
channeled through the Regional Assistance Mission to Solomon Islands (RAMSI) – a regional
peacekeeping and recovery operation, with activities in policing, security, economic governance,
and other areas. More than 700 expatriates currently live in Honiara, with a large majority
employed by donor agencies or private firms supplying donor contracts.

Various estimates from the Peace Dividend Trust, World Bank, and Central Bank of Solomon
Islands, suggest that less than 20 percent of reported ODA is being spent within the local economy
– either through direct procurement of donors or expenditure by expatriate staff. The vast majority
of expenditure is either used to directly purchase imported goods and services from foreign
companies, or is repatriated in the salaries and expenses of staff and consultants.

This low proportion of domestic aid expenditure is not unusual. It is relatively high compared to
other peacekeeping operations around the world – where operations are often designed to
minimize disruptive local economic impact – but low compared to more typical general civilian aid
programs.2

2
The Peace Dividend Trust estimates that the average local economic impact of several UN peacekeeping operations was around 7 per-
cent of total reported expenditure.

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The proportion of local aid expenditure in Solomon Islands reflects the nature of the economy, the
sectoral allocations of aid, and the modalities that are used. As a small, undiversified economy, a
large proportion of overall spending is on imports both within and outside the aid economy. While
aid to security and governance sectors serves a valuable economic purpose in providing the
necessary conditions for market activities, high security expenditure is typically associated with low
local impact, as is international technical assistance provided in Government ministries. Direct
budget support is little-used in Solomon Islands, but it typically leads to the greatest local economic
impact.3

Box 2.1: Employment and growth in the Solomon Islands economy

There are substantial gaps in data and information regarding participation in the Solomon Islands
economy. Labor force data is not systematically collected. There has not been a recent labor and
employment survey.

Rapid economic growth (averaging 7 percent per annum between 2003 and 2008) has led to the creation
of many jobs. Growth, however, has been concentrated in unsustainable extractive logging and the aid-
reliant service sector. In 2009 the economy contracted by 2.2 percent, due to the impacts of the
economic crisis on demand for logs and other agricultural commodities. Future growth prospects remain
uncertain, and Solomon Islands is likely to become increasingly reliant on uncertain mining prospects as
natural forest stocks are exhausted.

The National Provident Fund records 48,385 formal sector jobs, with 72 percent of these taken by males.
The logging sector accounts for the largest number of jobs overall, while the education sector is the
largest employer of women. The vast majority of the population remains primarily engaged in small-scale
agriculture, with women playing a very active role in all stages of the production process.

Recent World Bank research suggests endemic unemployment in urban areas. Small surveys of those
aged between 15 and 30 in Honiara settlements indicated an unemployment rate of nearly 70 percent.
These surveys also showed a substantial wage differential between men and women, with women
earning approximately 8 percent less than men with this difference resulting both from differential pay
for similar work, and over-representation of men in well-paid jobs.

Figure A: GDP growth Solomon Islands Figure B: Employment by sector (2009)

3
See Peace Dividend Trust (2009) Spending the Development Dollar Twice: The Local Economic Impact of Procurement in Afghanistan,
http://www.peacedividendtrust.org/en/data/files/download/pdfs/PDT_Spending_Dev$_Twice_Report_0709.pdf.

7
Figure 2.1: Local economic impact as percentage of total aid

Note: Local economic impact for Solomon Islands reflects the mid-point of ranges from World Bank staff
estimates (15-20%) based on CBSI data and Peace Dividend Trust Estimates. Peace Dividend Trust data is
used for all other countries.

2.2 Donor procurement practices influence the nature of local participation

The extent to which aid expenditure has a local economic impact is strongly influenced by the
procurement practices used by donor agencies, and by Government agencies administering donor
projects. These practices influence the types of opportunity available to Solomon Island business-
people. Donor agencies use three distinct procurement practices, and businesses participating in
the aid economy can be loosely categorized into three types.

2.2.1 Donors use three types of procurement

Donor agencies typically follow standard policies that prescribe procurement mechanisms
according to the value of a contract. Typically, policies allow three methods of procuring goods and
services: 1) open competitive tender – national or international advertised tender opportunity; 2)
closed tender – a limited number of tenders are invited to submit proposals; and 3) sole sourcing or
direct approach – three quotes are sourced from local suppliers. The value thresholds for
procurement vary depending on the donor. Value thresholds for sole sourcing or direct approach
are between AU$20,000 and US$50,000 depending on the donor. Figure 2.2 provides typical value
thresholds taken from the New Zealand aid program procurement guidelines.

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Figure 2.2: Examples of procurement thresholds (NZAID)4

Value of goods or services Method of procurement

Less than NZ$20,000 No tender is required
Between NZ$20,000 and NZ$100,000 Closed tender required
Greater than NZ$100,000 Open tender required
Management Services Contract Multi-stage open tender required

While thresholds are substantially lower, the Solomon Islands Government’s formal procurement
processes closely resemble those of donors.5 Government guidelines require an open tender
process for amounts in excess of AU$5,000.

Periodically, RAMSI tenders internationally for four large contracts to procure a range of services
and goods. Three Australian companies – GRM, SKM (Sinclair Knight Merz), and HK Logistics – hold
these contracts.6 GRM holds two large contracts: the RAMSI Governance Support Facility (RGSF)
and the Law and Justice Facility. This research focused on the RGSF, which manages the
recruitment, logistics, housing, and vehicles for RAMSI staff and approximately 90 advisors. The
RGSF contract is AUD$106 million. The facility has spent approximately AU$25 million per year
since 2005, making it the largest aid contract in Solomon Islands. SKM works directly with the
RAMSI Infrastructure Unit and holds additional contracts for security upgrades, maintenance, and
construction with AusAID, RAMSI and the Solomon Islands Government. HK Logistics has only
recently won a large contract to provide accommodation and catering for the participating police
force at Guadalcanal Beach Resort (GBR).

Winning a bid advertised by foreign donors through an open tender process is beyond the capacity
of most local businesses, because of their small size and limited production range. Small value
contracts are more within the range of local entrepreneurs. These can be offered either by tender
or direct selection and are usually awarded on a value for money justification. The contracting
process requires only the provision of three quotes. Some donors use local tender processes to
offer small value contracts, but small numbers of local suppliers mean that this process is often not
used, with donors often awarding contracts directly to a preferred and established supplier. While
this is convenient and saves time, a small number of companies come to dominate aid economy
contracts. Bidding for and winning a Government tender is more realistic and offers the best
prospects for most Solomon Island entrepreneurs.

4
www.nzaid.govt.nz last sourced 2 July 2010.
5
New financial and procurement instructions are soon to be gazetted.
6
These three companies participated in this research.

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 2.2.2 Three categories of business participate in the aid
Women in Business: Monique Porras,
economy
Lime Lounge and BJS Group of
Companies. Monique Porras and her
A cursory appraisal of business providers and core suppliers to family have lived in Honiara for
RAMSI, the Solomon Islands Government, and other donors generations. Their company BJS
demonstrates three groups of entrepreneurs dominate the aid Group of Companies has grown over
economy. These three tiers of suppliers within the aid economy the years to provide a range of
services including a café and catering
reflect the three methods of procurement. services, customs clearance and
shipping, scrap metal recycling,
The first tier comprises a handful of international firms who hold events and recruitment, handicraft,
direct major procurement contracts with RAMSI, offering a range real estate, and insurance. Lime
of goods and services under a single arrangement, and typically Lounge is one of the most popular
cafés in Honiara among expatriates.
subcontracting various contract components to Solomon Island or
The BJS Group serves a number of
other international suppliers. donors and large contract holders in
Honiara. In 2009 Lime Lounge was
Suppliers within the second tier consist of locally based family awarded a tender by RAMSI to open a
businesses, often owned or managed by long-term expatriates. café called Sub-lime at the GBR base.
These businesses supply a range of goods and services including
drinking water, personal security, hardware, small-scale
construction, some furniture and fittings, human resources,
swimming pool maintenance, information technology equipment,
some fresh and manufactured produce and vehicles and
maintenance. Typically, these contracts are issued annually
through a closed tender or by directly approaching sole suppliers.
Silentworld is a local company, owned by an expatriate.
Silentworld is contracted to maintain generators, remove rubbish,
and provide logistical support. BJS, another expatriate owned
company, offers a range of services such as international movers,
customs clearance, induction training, and human resource
Women in Business: Harriet Aitorea,
management. Barak Enterprises. Harriet Aitorea
operates Barak, a grocery store in
The third tier encompasses Solomon Island businesses, usually Renadi. Barak services a number of
sole traders who provide small value goods and services. The expatriate customers, but most
opportunities available to these groups are limited to real estate, customers are locals. Recently Barak
won the tender to supply dry goods to
catering, cleaning, flowers, consultancy, manufacturing of soft the National Referral Hospital and
furnishings and uniforms and office supplies, and services such as GRML.
photocopying. Becoming a supplier at this level is comparatively
easy due to a perceived lack of competition and more lenient
contracting procedures. While opportunities within the first and
second tier are only available to registered suppliers, most donors
do not require sole traders for small value contracts to be
registered. However, opportunities available to the third tier of
suppliers are for ad hoc orders, which are not widely publicized.
Becoming a regular supplier within this tier is more likely if the
trader has an existing personal or professional relationship with
the Government, donors, or larger companies.
10
 2.3 Women entrepreneurs currently play a constrained role within the aid economy

Women entrepreneurs in Honiara generally operate small businesses, in a relatively narrow range
of sectors, with very limited access to donor contracts.

The majority of women entrepreneurs in Solomon Islands operate very small businesses, or work as
sole traders. The expatriate market provides the greatest opportunities for women entrepreneurs.
About half of the 90 businesses involved in our research serve an expatriate customer base. These
businesses supply real estate services, beauty services, food, administration assistance, handicrafts
and retail services. Notably, at least ten women entrepreneurs included in this research have
diversified their business portfolio by entering the rental market as landlords in Honiara. Expatriate
women own ten of the businesses supplying the expatriate market including in childcare, ice-cream
shops, gift shops, drinking water, boutiques, and a bakery. A number of expatriate women also
provide tuition and coaching in music, sports, art, and cooking from home.

Some women entrepreneurs are participating in subcontracting opportunities. The four large
RAMSI contracts provide a range of sole source opportunities for women entrepreneurs. Four
women hold regular contracts as suppliers of milk, security services, groceries, and catering
services. Many others receive occasional orders for catering, cleaning, office supplies, or
manufacturers of soft furnishings or handicrafts.

Participation in direct procurement is very limited. Only 25 out of the 90 women surveyed for this
research had experience as suppliers in the aid economy. The women in this research who are
suppliers within the aid economy tend to access opportunities described in the third tier – sole
traders providing small value contracts for goods and services. Less than 10 women included in this
study have experience applying for tenders. Only three of these women were successful: one
national and two long-term expatriates. Often small contract opportunities were tapped by
coincidence, through word of mouth or a personal contact. None of the casual suppliers hold
formal supplier contracts. Instead, they operate on an order-by-order basis.

Women tend to base business ideas on observed successful businesses. Women also referred to a
Ministry of Commerce list of business opportunities “reserved” for Solomon Island entrepreneurs
for business ideas, despite the fact that such reservations have never been effectively monitored or
enforced.

11
Box 2.2: Mapping opportunities under major procurement contracts

The figure below provides a visual representation of how women entrepreneurs participate in the
implementation of the HK Logistics and GRM RGSF contracts. The graphic demonstrates that women
provide a range of services and products usually of small value, and potential areas where women could
participate or benefit from the aid economy as sub-contractors. These areas include construction, trades
and labor. The graphic also highlights the areas where women are not participating, either as
entrepreneurs or as staff. Yellow denotes current women’s participation.

2.4 Viable business opportunities for women entrepreneurs are not being exploited

A range of quantitative and qualitative evidence suggests that a number of unmet business
opportunities exist within the Solomon Island aid economy – opportunities for women
entrepreneurs in supplying Honiara’s expatriate population and participating in direct donor
procurement. Detailed quantitative analysis suggests that many of these businesses could be
profitable.

12
 2.4.1 Business opportunities targeting the expatriate
market

The high inflow of aid has seen the expatriate population in

Honiara grow to approximately 700. Expatriates with high
disposable incomes have created a new market segment and
increased the potential for new businesses in Honiara. Interviews
and workshop results suggested that unmet potential business
opportunities targeting expatriates include:

 Expanding recreational opportunities, such as kayak hire,

hiking, and water sports; Women in Business: Lavalynn
 Bars and cafes, including fresh juice bars; Grossmith, Lava’s Original
 Services providing a larger range of fresh food, fruits and Fashionwear. Lavalyn’s tailor shop is
located in the heart of Renadi, the
vegetables, and imported specialty items;
industrial centre of Honiara. The shop
 Casual cleaning and domestic help;
is small and she shares it with her
 Childcare and children’s tuition, and recreation activities; husband who is an architect. Lavalyn
and has three sewing machines and
 Services providing delivery of goods and services, such as overlockers. Her proximity to the GBR
beauty services conducted in the homes of expatriates. base has opened up opportunities
within the aid economy. Previously,
2.4.2 Business opportunities supplying donor agencies Lavalyn used to make costumes for
GBRs themed parties. She has also
Donors, private businesses, and the Government mentioned the been asked to make curtains for the
need to expand opportunities supplying donor agencies beyond base. The curtain making started as a
the contracts currently held by major suppliers. This could be small job, but now Lavalyn has been
asked to make curtains for the entire
achieved through 1) breaking up existing large contracts; 2) sub-
base and Aspen medical centre. She
contracting to major contracting firms; or 3) opening up new
has also made uniforms for BJS and
supply opportunities by outsourcing additional roles. Specifically Government clients. The majority of
cited opportunities include: Lava’s business now comes from
expatriates and RAMSI.
 Individual Solomon Island consultants or Solomon Island
consultancy companies to provide professional and
administrative services;
 Provision of centralized cleaning services to major agencies;
 Provision of laundry / dry cleaning services to major
agencies;
 Manufacturing of uniforms and soft furnishings; and
 Provision of construction services, including painting and
laboring.

13
 2.4.3 Quantitative analysis of potential business opportunities

Basic financial modeling of a set of four representative business opportunities (laundry services,
juice bar, centralized cleaning services, and mobile pre-pay card on-selling) demonstrates that they
would be financially viable.

An Excel spreadsheet was used to model likely revenue, operating and fixed costs for each business
at various levels of output. Price and cost information was drawn from a variety of sources,
including interviews with business people and banks, Solomon Islands-specific research, and
international reports on cost structures of particular industries. A full description of this work is
presented in Appendix B.

The following assumptions were applied in the construction of business models:

 50 percent bank financing of initial investment at an interest rate of 18 percent;7

 The expatriate market will be willing to pay prices equal to prices charged in Australia for
similar goods;
 First-movers into these activities may be able to sustain prices in excess of marginal cost in
the absence of competition for some time, especially if the business has natural-monopoly
characteristics;
 Wages of SBD5.00 per hour for unskilled staff, and SBD15.00 per hour for administrative or
store-manager level staff;8
 Rental price of SBD300 per square meter per month;
 Constant returns to scale over modeled production range;
 Straight line depreciation of capital equipment (including vehicles) at 10 percent; and
 Overall business tax on profits of 35 percent.

7
Interest rate reflects reported commercial borrowing rates at main banks in mid-2010.
8
These wages reflect information from interviews with Honiara entrepreneurs and contents of the Solomon Islands Chamber of
Commerce and Industry wages and salary survey.

14
The results of this modeling suggest:

 Viable opportunities exist. All of the opportunities that were analyzed appear feasible under
a range of plausible input assumptions. These business opportunities could be pursued by
women entrepreneurs with support from the private sector, donors or the Government.
 Scale matters. A key variable in determining the likely profitability of identified opportunities
is the scale that these businesses would be able to achieve. Achieving comparatively large
turnover and volumes within the small Honiara market appears vital for business
sustainability, emphasizing the importance of investment in market research, marketing and
good choice of business location.
 Capital constraints are not binding. Even for comparatively capital intensive businesses such
as dry cleaning, capital costs accounted for only a very small proportion of overall costs. This
suggests that high costs of finance in Solomon Islands are unlikely to be the binding
constraint on this type of business venture (although problems with accessing finance may
be very important).
 Rental prices are a key cost. Rental prices are a core cost, and account for the greatest
proportion of costs for three of the four opportunities identified. Resolving current land
issues in Honiara may play an important role in reducing business costs and facilitating
women’s investment in the aid economy. Also, identifying mobile businesses (such as
services rendered in your own home), street selling or internet based businesses, which do
not incur rental expenses should be seriously considered by budding women entrepreneurs.

15
16
 SECTION 3:
Why Increase Participation of
Women Entrepreneurs in the
Solomon Islands Aid Economy?

17
3. Why increase participation of women entrepreneurs in the Solomon Islands aid
economy?

Increased local spending can facilitate growth, reduce poverty and mitigate risk of conflict

Increased participation by women entrepreneurs brings broader social benefits

Increased participation of women entrepreneurs in the Solomon Islands economy is desirable. This
section explains 1) the potential benefits from increased local economic impact from aid flows; and
2) the potential benefits of ensuring that women access a larger proportion of opportunities arising
from local economic impacts.

3.1 Increased local spending can facilitate growth, reduce poverty, and mitigate risk of
conflict

More aid money could be spent locally, if:

 Locally-owned companies won more contracts to supply donor agencies with goods and
services;
 Donor agencies were supplied with more locally-produced goods, through supply contracts
held by Solomon Island or international companies;
 Donor agencies directly employed more Solomon Island staff to provide various services; and
 Expatriate aid staff had opportunities to purchase a broader range of goods and services
locally, and therefore spent a greater proportion of their salaries and expenses on goods and
services within Solomon Islands, rather than repatriating money back to their home-country.

If these things happened, Solomon Islands could benefit in three ways. Firstly, the skills and
knowledge acquired by Solomon Island entrepreneurs and workers from increased participation in
the local aid economy would expand Solomon Islands’ capacity for successful participation in the
global economy. Secondly, increased local aid expenditure is likely to expand income-generation
opportunities available to Solomon Islands in both rural and urban areas. Finally, increased local
expenditure can lead to an expansion of Government revenues and the tax base, at a time when
the Government is facing severe revenue pressures.

3.1.1 Expanding skills and knowledge for successful participation in the global economy

The Solomon Islands economy remains small, poor, and largely subsistence-based. Only a tiny
minority of households depend on formal-sector employment or cash-generating businesses.
Financial literacy is low, and Government regulations are non-transparent and poorly understood.
A key finding of this analysis is that thinness of markets (a small number of buyers and sellers for
most goods and services) and lack of familiarity with the cash economy and entrepreneurialism
inhibit the recognition and exploitation of market opportunities in Solomon Islands in at least two
ways.

18
Firstly, thinness and lack of scale increase unit costs. The small size of local markets means that it is
often difficult for local producers to achieve production or transport at economic scale. The lack of
existing supply chains increases the costs of finding inputs, or wholesalers to supply.

Secondly, thinness creates huge information problems for prospective entrepreneurs. With a
relatively small number and narrow range of businesses operating, it is very difficult for prospective
entrepreneurs to understand the likely viability of potential enterprises. Entrepreneurs are not
exposed to good cost and market information, have limited capacity to deal with often non-
transparent business regulations, and little exposure to basic business good practices related to
accounting, investing and researching potential markets.

In this context, increasing local aid spending can prime the pump of private-sector development.
Offering domestic market opportunities – and providing support to businesses in taking advantage
of these opportunities – can build better entrepreneurial capacity and general business skills. A
flow of demand to the private sector can allow its development to a scale where some of the
clearest diseconomies of scale, such as those relating to labor-market thinness, high transport
costs, and low management capacity, may begin to be overcome. In short, a period of aid-led
demand can sow the seeds of entrepreneurship that underpin private-sector development, and
might eventually assist in broadening Solomon Islands’ export sector.

Box 3.1: Information problems as a barrier to entrepreneurialism

Recent economic theory and evidence has shown that innovative entrepreneurial activity (a new type of
business, producing a good or service that has not previously been produced domestically) creates
potentially huge benefits for an economy overall, but also carries high risks. 9 Innovative entrepreneurial
activity effectively tests the cost structures of the economy and renders them transparent for all other
potential investors. But the innovator may not capture the social benefits if they are competed away by
“copy cat” businesses: if the innovative business succeeds, subsequent investors do not face the same
uncertainty and risks. These copy-cat businesses can enter an industry at a lower cost, and compete with
innovators, eroding returns to the original innovator. Innovative entrepreneurial activity in any society is
therefore likely to be below socially optimal levels, with initial innovators bearing all the risks of
innovation, but with the benefits largely socialized.

In Solomon Islands, cost structures may be particularly opaque, increasing the importance of successful
"example" businesses. A very limited range of goods and services are domestically produced. The
informal, non-cash economy accounts for a large proportion of production, and many areas (where most
people live) have very little exposure to market practices of production. Participants in the formal
economy must operate within a range of overlapping and complex formal and informal regulatory
regimes. Cost structures may be especially difficult to discern for women, who tend to have less
experience in formal economy employment and entrepreneurialism. In this context, interventions that
foster entrepreneurship and innovation provide a valuable public good.

9
Haussman, R. and Rodrik, D. (2003) “Economic Development as Self-Discovery” in Journal of Development Economics, v72(2 Dec), 603-
633.
19
 3.1.2 Expanding income-generating opportunities for Solomon Islanders

As well as seeking to promote economic growth, donors are also concerned about poverty and
conflict. Increased local aid spending, if approached carefully, has the potential to both reduce
poverty and the risk of conflict.

Increased aid expenditure does not expand opportunities if it simply leads to the reallocation of
employment from one sector to another (i.e. production moving from exports or goods consumed
by Solomon Islanders, to goods consumed by aid agencies or expatriates) (See Box 3.2). In Solomon
Islands, however, formal employment is very low, opportunities to generate cash are often scarce
and an increase in the aid-related sector of the economy does not have to occur at the expense of
other sectors. Increased local aid spending – especially if providing supply opportunities in rural
areas or employment to low-skilled workers – could often lead to increased overall employment
and production of the economy. When this is achieved, local aid expenditure can have a direct
positive impact on incomes, opportunities, and standards of living.

3.1.3 Expanding Government revenues

Increased local aid expenditure can improve the revenue situation and expand the tax base, in the
context of the projected decline in logging.

Most directly, if donors increase the proportion of procurement undertaken by Solomon Island
companies and expatriates spend more of their benefits and salaries within country, firms
supplying donors and expatriates will pay more taxes in Solomon Islands and fewer to governments
overseas. This represents a direct transfer to the Solomon Islands Government. Increased Solomon
Island employment by donors may have particularly large impacts, given the current tax and duty
exemptions granted to expatriate staff.

In the medium-term, increased local procurement can foster the development of a cash economy,
and promote formalization. This broadens the overall tax base, providing durable revenue gains to
the Government.

20
 Box 3.2: The dangers of Dutch disease

There is a common theoretical argument that increased local expenditure (expenditure on locally produced
non-tradable goods and services) accompanying increased aid inflows could hurt export competitiveness
and growth. This theoretical argument may, however, have limited applicability to the Solomon Islands
context.

Only a certain amount of labor and other inputs is available within any economy. Donor funded purchases
(Note: it could be Government purchases as well as long as it is financed by aid, including budget support)
increase demand and bid up prices of these inputs. Local firms supplying local markets can simply increase
prices to reflect increased input costs. This option is not available to exporters who cannot pass on cost
increases, as they face set world prices. At the same time, higher prices for local goods and services mean
that imports (for which prices are also determined by the world price) become relatively cheaper, and
therefore more appealing to consumers. The combined impact is a reduction in exports – and resources
invested in export sectors – an increase in imports, and a widening of the trade imbalance. When aid-flows
are reduced in future, the economy may face high adjustment costs in reallocating resources back to export
sectors. In the interim, the aid recipient may lose the expertise and other capacities that it has built up in
various export sectors, as well as any ongoing benefits arising from having a vibrant export sector (much
evidence, for example, suggests that export sectors are a primary source of innovation and productivity
growth).

Empirical evidence of the applicability of the model presented above is mixed, and there are many
examples where aid flows do not seem to have adversely impacted on export sectors. 10 A feature of the
model, which may not be especially applicable in Solomon Islands, is that it assumes an economy within
which all resources are fully employed. In Solomon Islands, many resources, including unskilled labor, are
often not fully utilized, or utilized extremely inefficiently. If increased local demand, through appropriate
supporting policies and knowledge transfers, leads to the mobilization of available but underutilized
resources, the productive capacity of the economy can expand. Demand for local resources can be
accommodated at current prices. Aid-related demand can be met from new sources of production, rather
than through a reallocation of resources from the tradables sector. In Solomon Islands, aid is often explicitly
intended to increase supply by addressing problems such as poor security, weak institutions, and poor
infrastructure and human capital. Expenditure on roads, education, health, and security does not therefore
simply have a demand-side impact, but also increases productivity and production. Aid inflows that improve
infrastructure, skills and capacities, deliver increases in productivity, and reduce instability and the risk of
conflict will not necessarily lead to price increases, as supply can increase at the same pace as demand.

Another potential limitation to the model’s relevance to Solomon Islands arises in relation to the expected
duration of donor support. A key perceived risk of local economy donor expenditure is the adjustment costs
following donor exit, when resources must be reallocated to export or non-aid related sectors. In Solomon
Islands, however, it is reasonable to expect a high level of donor expenditure for the medium-term, with no
signs of an easing in the security situation, or of economic growth sufficient to drive locally-funded service
delivery to Millennium Development Goal levels. It is appropriate to somewhat discount the potential costs
of adjustment given that they are unlikely to arise in the near future.

Overall, the above implies that large increases in local expenditure that impact only on consumption
without addressing supply-side constraints should be avoided (examples of undesirable consumption
expenditure might include salary supplements or subsidies). Risks of negative macroeconomic impacts can
be minimized, and positive contributions to employment, social stability, tax revenues, and productivity
maximized, if local aid expenditure leads to the development of expanded productive capacities. A key
focus of this study is therefore identifying ways in which donors can promote increased participation in the
aid economy in ways that simultaneously expand overall productive capacity.

10
Younger (1992) and Sackey (2001) analyze the impact of aid on macroeconomic performance and the RER in Ghana, but with conflicting
results. White and Wignaraja (1992),Vos and Johansson (1994), Adenauer and Vagassky (1998), Vos (1998), and Nyoni (1998) analyze the
macroeconomic problems associated with large aid flows to Sri Lanka, Nicaragua, African countries of the CFA franc zone, Pakistan, and
Tanzania, respectively. These studies have also reached different conclusions as to whether aid has caused the Dutch disease. In Melanesia,
Gounder (2002) finds a positive relationship between foreign aid and economic growth in the Solomon Islands. Feeny (2005) finds that the
rate of inflation, real exchange rate appreciation, negative export price shocks, and environmental shocks all have a negative impact on
rural sector production, though that aid has no impact on rural production, and a positive impact on economic growth.
21
 3.2 Increased participation by women entrepreneurs brings broader social benefits

International evidence suggests that fostering women’s participation in economic development is

likely to lead to more sustainable and substantial development benefits for two reasons.

Firstly, women have been shown to respond more effectively to initiatives designed to foster
private-sector development in contexts where there is little familiarity with cash or the formal
sector. The superior performance of micro-finance mechanisms specifically targeting women
provides one example of this, with women more likely to meet repayments, reinvest profits and
achieve sustainable business growth.

Secondly, a broad range of international evidence has shown that increased incomes to women are
more likely to translate into improved social outcomes. Expansions in women’s incomes is more
clearly associated with improved health and education outcomes for children, and economic
empowerment of women leads to improvements not just for women, but also for their families,
communities and ultimately the country as a whole.11

Figure 3.1: Poverty and gender equality12

11
Morrison, Andrew, Dhushyanth Raju, and Nistha Sindha (2007) “Gender Equality, Poverty and Economic Growth” Policy Research
Working Paper 4349, World Bank, Washington, DC.; Schultz, T. Paul (2002) “Why Governments Should Invest More to Educate Girls”
World Development 30 (2): 207–25; World Bank (2001) Engendering Development: Through Gender Equality in Rights, Resources, and
Voice, Washington, DC: World Bank.
12
Source: Morrison, Raju and Sindha (2007). The scatter plot shows 73 countries. The poverty line is defined at US$2 per day.

22
 SECTION 4:
What is Currently Constraining
Greater Participation by Women
Entrepreneurs?

23
4. What is currently constraining greater participation by women entrepreneurs?

Security concerns discourage investment

Women lack information about market opportunities and how the private sector works

Women lack important technical and entrepreneurial skills, and face gendered barriers to accessing available assistance

Donor and Government procurement requirements are sometimes unclear and difficult to meet

Regulations, and limited access to land and credit, make it difficult to do business

Constraints to greater women’s participation in the aid economy can be categorized under five
headings: security and stability concerns, information problems, skills gaps, procurement practices
and business environment issues.

4.1 Security and stability concerns

Perceived continued risk of conflict and violence, and uncertainty regarding the continued
presence of an international peacekeeping force, is constraining participation by women.

The Tensions and subsequent political instability has left a pronounced legacy on businesses owned
by women. Most women involved in this study closed their businesses during the Tensions, but
have reopened their doors in the last five years. Several women, however, cited political
uncertainty and perceived risk regarding the return of conflict as a reason why they would not
expand their businesses. Several women wanted to relocate their businesses to the province, or
diversify into farming or rural development, in order to avoid the perceived greater likelihood of
exposure to violence or conflict in Honiara.

Perceived risk of conflict may disproportionately inhibit entrepreneurship by women, given social
and cultural expectations that women remain primary caregivers to children. Women may be more
averse to the risks of entrepreneurship in the context of potential conflict, and less willing to
relocate to areas where conflict is perceived as likely. Security concerns were not mentioned by
men during workshops discussing constraints to business activity.

4.2 Information problems

Interview and workshop evidence suggests that information gaps play a key role in limiting
women’s entrepreneurship within Solomon Islands. Many women lack the market, price and cost
information required for entrepreneurship and successful engagement in the formal-economy.

Basic knowledge of how businesses work is acquired in most contexts through exposure to
successful businesses. Potential entrepreneurs can see what works and what doesn’t work. They
can learn from others’ success, and establish copycat businesses. They can observe business
failures, and gain lessons from that failure that can be used to guide their own venture.

In Solomon Islands, basic knowledge of how markets and businesses work is not widespread,
because locally-owned example businesses are relatively few. Solomon Islands remains a largely
subsistence economy, with around 85 percent of the populations still reliant on subsistence
agriculture. The economy is small, with GDP at just over US$1,000 per annum. Since the Tensions,

24
the role of the public sector has grown considerably, with aid and
the Government accounting for at least 50 percent of production.

In the context of big government and poor governance, small

markets are often distorted through the presence of regulations or Women in Business: Ning Gabrino,
Ning’s Bakeshop, Popoy’s Grill, and
subsidies, or through the exercise of market power by one or more
Mum’s.
participants. Many successful businesses cannot be replicated Ning was born and educated in the
because of regulatory barriers to entry, or the ability of Philippines but became a citizen of
incumbents to exercise market power. Businesses that should be Solomon Islands in 2004. Twenty
years ago she moved to Solomon
viable sometimes encounter problems because of poor regulation
Islands for work. Ning, an accountant
or unfair competition. Businesses that might fail in many contexts by profession, is familiar with banking
sometimes succeed, simply through holding an inadequately procedures and regulations. When
monitored procurement contract. she wanted to open her bakery, she
applied for a business loan. Ning was
The existence of an unusually small and highly distorted private initially denied the loan due to
insufficient security relative to the
sector limits the nature, quantity and quality of information specialized machinery required for
available to prospective entrepreneurs on the following topics: her business. But through
perseverance and approaching other
 Basic information about how taxation and the economy banks, she finally got the much
work. During focus group discussions women discussed a needed capital for Ning’s Bakeshop.
Today as the President of SIWIBA,
fear of registering their businesses in case they received
Ning is helping other women access
high tax bills. This reflected misunderstanding of how finance and start becoming
taxation worked. Some women held and shared distorted entrepreneurs themselves.
perceptions regarding the overall functioning of the
economy, and the role of donors, banks, and the
Government (similar confusion was apparent among some
male entrepreneurs). Some women seemed resigned to not
understanding and not being able to access the right
information.
 The extent of opportunities within the aid economy. Very
few of the women involved in this research had information
regarding the duration of RAMSI’s presence. None had
information to assess whether the aid economy could
provide a robust and durable market. The RAMSI website
does not mention local procurement processes. HK Logistics
are buying locally wherever possible, but this has not been
advertised. There was a clear lack of knowledge regarding “Expatriates don’t spend money in
the extent and probable duration of donor expenditure Solomon Islands. They don’t come to
among both women and men. Some women and men my shop because they don’t like
queuing up. It’s better to open a
believed that foreign donors did not undertake any local
business for locals.”
procurement. Women often believed that expatriates did – Woman entrepreneur
not spend enough money locally to make them a viable
target market.

25
 The nature of opportunities within the aid economy.
Women often cited or demonstrated a lack of familiarity
with the tastes and requirements of expatriates. Women
mentioned examples of entrepreneurs making ill-advised
changes to their business-models or products based on
inaccurate information regarding what was likely to appeal
to expatriate markets, or meet the procurement
requirements of donor agencies. Some of the women
successfully catering to expatriate markets had strong
personal connections with expatriates, and had spent time
overseas. “Every time I travel I look out for new
 Price structures and business planning. Potential ideas. In the Solomon Islands we don’t
entrepreneurs often lack knowledge regarding the costs of have much but what we do have you
establishing and operating a business, and production can turn into something beautiful like
you see in a magazine. My ideas for
volumes required to attain sustainability. Often, women did
business are deep within me. I am a
not know how to assess the potential viability of a business creative person. I have not studied
idea or take the initial steps towards establishing a business. anything like design but I always ask
There were examples of poor pricing practices, with little friends to buy me magazines and
knowledge of how to engage effectively in price and non- when I am on the internet I can see
price competition, and some women setting prices below ideas from other countries. Then I can
the costs of production. Lack of access to finance was adapt them to here. But I don’t
advertise my business. I just tell
commonly cited as a barrier to establishing a business, but
people, contacts, friends in
many women assumed that capital raising could only be Government that I can plan their
achieved through family, wantok, or fundraising, with little wedding or event. This is the Pacific
familiarity of the concept of accessing investment on way of doing business.”
commercial terms from other businesses and individuals, or – Woman entrepreneur
obtaining loans through banks and concessional donor
programs. These knowledge gaps were less prevalent
among men involved in this research, but these men were
also generally more experienced and had operated
businesses for longer.

Availability of basic information regarding business and the

economy may be particularly limited to women because of socio-
cultural norms and expectations which sometimes associate
women with household production rather than income-
generation, and discourage formal ownership of businesses by
women.

26
 4.3 Skills gap

Existing programs to support skill development for women’s entrepreneurialism are provided
through NGOs, Government, business associations, and donors. While these fulfill a range of useful
functions, they do little to address many of the information problems identified above. Further,
existing business support and training focuses on an inadequate set of skills and implicitly
reinforces the restriction of women’s participation to very small businesses providing a very limited
range of goods and services.

Non-government organizations provide women with a range of support for livelihood or business
activities:

 Livelihood skills. The Ministry of Women, Youth and Children’s Affairs (MWYCA), Women’s
Development Division, the Soroptimists, and Church groups provide women with livelihood
skills in sewing, cooking, flower arranging, and second hand fabric dying. This type of skills
training has provided a low risk opportunity for many women in the country to make money,
albeit small amounts, periodically on an as needs basis.
 Business mentoring. Australian Business Volunteers (ABVs) provide business mentoring
services, which have been accessed by some women entrepreneurs. The ABV model appeals
to many women in business, with volunteers able to transfer a broad range of useful skills
over a period of three to four months. The matching process for volunteers, however, is
lengthy and there is no guarantee that a suitable candidate will be identified.
 Technical advice. Staff from Kastom Gaden Association and the Agriculture Livelihood
Program have been called upon by a few women to provide technical or business assistance
or advice. The resources of these organizations are stretched, however, and only limited
assistance was able to be provided.

Government provides various subsidies and regulatory support for Solomon Island
entrepreneurship:

 Reserved list. The Foreign Investment Act 2005 and the Foreign Investment Regulations
2006 provide a list of business opportunities that are not open to foreign investors.13 The list
includes: operating public transport such as buses and taxis, fast food, handicrafts, marketing
and cleaning services including hotel cleaning and domestic help. Although the Ministry for
Commerce no longer monitors this list, women entrepreneurs continue to use it to identify
potential business opportunities.
 International scholarships. The Government promotes skill acquisition, including for private-
sector development outcomes, through provision of international academic scholarships
 Business “incubation”. The Honiara City Council (HCC) is promoting women’s
entrepreneurship through the “business incubation shops” at the Honiara Central Market
and Kukum. The business incubation program offers cheap rent to at least two shops in the
market for women entrepreneurs for a period of two years.14 Women reported difficulty in
accessing information about the program, and believed that a business incubator needs to
offer more than subsidized rent.
13
Pacific Islands Trade and Investment Commission (2008) Doing Business in Solomon Islands.
14
A total of 24 shops are available for rent at the two sites, however only two of these are reserved for women. This does not prevent
women from applying for and being awarded more tenders.
27
Women who already have business ideas can access training and support from education
institutions and business associations including the Small-Medium Enterprise Council (SMEC),
Solomon Islands Small Business Enterprise Center (SISBEC), Solomon Islands Women in Business
Association (SIWIBA), and MASE Business Center. SMEC and SISBEC provide basic information on
financial literacy and developing a business plan and MASE provides specific information and
training on business development and operations. These groups operate across the country and
courses are offered at a subsidized rate. Women comprise a large number of the enrolments.

SIWIBA is also moving in the direction of being able to offer women business advice, however, they
do not have a permanent staff or premises. All executive members of SIWIBA are businesswomen
themselves and contribute to the association on a voluntary basis. They provide a vital source of
information regarding the activities of women entrepreneurs and a potential coordination point for
future initiatives in this area. Solomon Islands Chamber of Commerce and Industry (SICCI) also
provides a useful point of contact and coordination between Government, donors, and Solomon
Islands businesses.

The analysis suggests several issues within existing support arrangements:

 Programs are subject to fragmentation and lack of coordination. The existing range of
support programs has evolved on an ad hoc basis over time. There is no overriding strategy
guiding the provision of assistance to women entrepreneurs, and existing support programs
show gaps and overlaps.
 Assistance can be difficult to access. Awareness of existing programs is limited among
entrepreneurs. No women in this study were taking advantage of the various subsidy and
assistance schemes provided by the Government because they either did not know that such
assistance was available, or did not know how to apply. There is no single point at which
prospective entrepreneurs can be connected with those providing available assistance or
provided with help in preparing applications.
 Business mentoring assistance is scarce. Accessing business mentoring assistance is difficult
and there are not enough mentors to meet demand. This appeared to be of particular
concern to women entrepreneurs, with men involved in this research having less need for
this type of assistance. ABV is the only current mentoring program, and it cannot always
match entrepreneurs with appropriate volunteers. The process of accessing assistance is
often time-consuming.
 There are gendered barriers to women accessing scholarships. At present there are no
scholarship schemes designed to increase the number of women studying business.
Government scholarship programs do not attract large numbers of female applicants. The
disproportionate burden of family and childcare responsibilities placed on Solomon Islands
women is an important reason for the small number of female applicants, given that 1)
scholarships do not always provide visa or stipend support for spouses or children; 2) NZAID
is the only donor offering visa and stipend support for accompanying spouses; and 3) uptake
of Government scholarships (with the exception of in-service scholarships), requires
applicants to resign from their jobs and surrender entitlement to Government housing.

28
 Existing support may reinforce culturally-based perceptions regarding appropriate roles for
women entrepreneurs. Current emphasis on rural livelihoods and very small-scale service
business operations may foster a continued reliance on the same business ideas, models and
customer base, and inhibit development of more innovative business ideas and strategies.
 Entrepreneurialism is impeded by a lack of technical skills required for maintaining
competitiveness and reducing the costs of doing business. Women entrepreneurs reported
a lack of options for gaining specific skills and familiarity with technology required to operate
certain businesses without travelling overseas. The women in the study repeatedly
mentioned courses offered by the Australia Pacific Training Centre (APTC) as a vital source of
training for their businesses and noted the absence of a domestic equivalent as a key
constraint. The costs of overseas training are clearly prohibitive for many entrepreneurs.
Donor and Government-funded scholarships provide a scarce opportunity to observe
overseas practices and absorb foreign skills, but these programs tend to concentrate on
academic courses at universities in donor countries, rather than skills and practices directly
relevant to entrepreneurial activity in developing countries.

Box 4.1: Does “wantokism” impede entrepreneurialism in Solomon Islands?

Collective social dynamics of the “wantok” system are often cited by international observers as an
impediment to business activity. International commentators have argued that expectations that profits
will be shared reduce incentives to start businesses or engage in other entrepreneurial activity, and
pressures from wantok members to distribute resources and cash can impede the accumulation and
reinvestment necessary for successful business development.

None of the businesses consulted by the World Bank during this and other research considered such
pressures to be insurmountable, or even the most important of the barriers to entrepreneurialism.
Entrepreneurs described a number of strategies for successfully dealing with wantok pressures.
Entrepreneurs often located business ventures away from geographical areas where such pressures were
strongest, distributed only a predetermined and commercially feasible proportion of profits to meet
social obligations, or incorporated reciprocity into social arrangements – with those receiving assistance
from entrepreneurs being expected to contribute labor or other assistance.

Many women entrepreneurs also mentioned benefits to entrepreneurialism arising from customary social
arrangements, including:

 Improved availability of cash and resources to start businesses;

 Availability of trusted labor, at low cost or with payment delayed; and
 Sharing of risks associated with entrepreneurial activity.

29
 4.4 Procurement practices

Procurement practices of donors and Government often constrain, or could be better used to
facilitate, opportunities for participation by women entrepreneurs.

 Sole-sourcing reduces transparency and restricts the number of women who can
participate as suppliers. The common donor practice of consistently approaching a single,
established sole-source supplier for small contracts reduces opportunities for entry of new
participants, and may also increase costs for donors by inhibiting competition.
 Donors are not making best use of social responsibility provisions in procurement
guidelines. While almost all donor procurement policies promote the participation of small
business, only two promote principles of gender equality and social inclusion. Inclusion of
gender considerations in procurement processes could be considered by donors that do not
currently have such provisions. Donors that already have gender provisions could make
greater use of them to create opportunities for women entrepreneurs and women more
generally. AusAID provides no clear instructions on how gender clauses in procurement
policies can be operationalized. NZAID requires all tendering businesses to provide a
justification of how they will address principles of gender equality. It is not clear, however,
that NZAID is currently able to accurately monitor compliance with this requirement.
 Women lack experience in applying and preparing tenders. New entrepreneurs often lack
familiarity with standard contracting processes and do not have sufficient knowledge to
complete tender documents to the standards required by donors.
 Liquidity requirements and international standards impose unnecessary barriers. For some
contracts, donors require businesses to be registered and able to demonstrate financial
capacity to cover the cost of the contract. For most of the small businesswomen involved in
this research, demonstrating this kind of financial cover was not possible given difficulties in
acquiring credit and time costs of working with commercial banks. For female entrepreneurs
to win large contracts through tenders they also needed to comply with a range of
international standards (health and safety, certification of organic produce etc.). Many small
businesses lack the capacity and financial resources to acquire necessary certification.
 Government procurement practices are not always transparent and sometimes seem
arbitrary. Solomon Islands Government tenders are perceived as arbitrary and non-
transparent by both women and men entrepreneurs, and entrepreneurs are seldom aware
of the criteria used by the Government in awarding contracts. This discourages investment of
time and effort in pursuing contracts and makes it difficult for entrepreneurs to change
products/services to increase chances of success in tendering.

30
 4.5 Business environment issues

Women entrepreneurs face general business-environment barriers

“Getting my company name approved
in establishing businesses within the aid economy. A full appraisal
was the hardest thing which naturally
of the Solomon Islands business environment is beyond the scope you think would be the easiest. I
of this report, but key business-environment issues raised by wanted to give up on a number of
participants in this study included: occasions. I couldn't believe how
difficult it was to get simple things
 Regulatory barriers, although not binding, are often time done. The only thing that kept me
consuming and difficult. Women entrepreneurs are seldom going was how far I had come
required to pay bribes or make other illicit payments. But already.”
rules and regulations are often non-transparent, and – Woman entrepreneur
personal connections and lobbying are often required to
acquire necessary permissions and approvals, as well as to
access available Government business-support programs.
The businesswomen included in this research described the
importance of the elite business owners in Honiara. Most
women talked about the value and significance of
establishing good relationships with Government officials
and politicians in order to “make things happen”. Successful Box 4.2: The IFC Gender and
entrepreneurs often had connections to senior officials, Investment Climate Reform
politicians, or expatriates with business experience. One Assessment
woman explained the measure of a successful
The International Finance Corporation
businesswoman is someone who can knock on the door of a
(IFC) recently conducted an
Minister to get information. Realistically, most women do assessment of the Solomon Islands
not have the time, gumption, or necessary relationships to investment climate from a gender
make this happen. This creates difficulties for new entrants perspective. While serving different
without personal connections, and requires a substantial purposes and often reaching different
investment of time and effort from all entrepreneurs. conclusions, the IFC emphasizes the
importance of Government working
 High rents and land registration processes restrict the
with women to improve the business
expansion of women’s businesses and the ability to use
environment and remove important
land as collateral. High rentals and a lack of access to constraints to investment. IFC
finance are both key issues cited by women entrepreneurs. suggests the Business Law and
Costly, time-consuming, and risky process for land Administration Reform (BLAR)
transactions, including the registration of customary land, Steering Committee, established by
both increase the costs of land in Honiara, and impede the the Ministry of Commerce,
Employment and Industry, as an
use of customary land as collateral by prospective women
appropriate forum for progressing
entrepreneurs. Limited availability of rental space constrains necessary improvement.
opportunities and means that businesswomen pay a lot for
space from which to operate their businesses. During focus Source: Hedditch, S. and Manuel, C. (2009)
Solomon Islands Gender and Investment
group discussions women described being unable to find
Climate Reform Assessment, International
rental properties large enough to accommodate growing Finance Corporation, Sydney.
businesses, while others could not afford to remain in their
current locations.

31
 Access to financial services is limited for women wanting to start a business. The women in
this study cited limited access to finance and the high cost of finance as two key barriers to
doing business. Women entrepreneurs have trouble acquiring access to finance for start-up
or business expansion. Only a few of the women met accessed start up loans for business,
while an even smaller number have bank loans to expand already established businesses.
Commercial banks are averse to lending to support innovative business activities, and are
also generally unable to provide loans of small amounts, as often required by small-scale
woman entrepreneurs. Women entrepreneurs also call for flexible and less time consuming
banking options, especially for deposits.
 Immigration policies are irrational and restrict the participation of expatriates in the
creation and development of new markets and opportunities. Current Solomon Islands
Government policy deters people from retiring in Solomon Islands. Acquiring a working visa
can also be difficult and time-consuming, preventing entrepreneurs from easily accessing
overseas labor markets.

Box 4.3: Are there gendered differences in factors constraining access to opportunities within the
Solomon Islands aid economy?

In order to test whether men and women experienced differences in barriers to accessing opportunities,
a control workshop was held with men entrepreneurs. Because of the small sample size, and the
differences in age and experience between men and women involved in this research, comparisons
should be viewed with caution. While there were many similarities, the following table summarizes some
potential differences in the experiences of men and women entrepreneurs in Solomon Islands arising
from this research.

Barrier Possible gendered difference in perceptions and experience

Security concerns Considered a major concern and disincentive to investment by women, but
dismissed by men entrepreneurs as irrelevant.
Regulatory barriers Women found to be very difficult to negotiate, requiring the right personal
connections. Men considered only a minor impediment.
Exchange rate policy Mentioned only by men, possibly reflecting higher representation of male
entrepreneurs within the tradables sector.
Skills barriers Basic financial literacy and business sense mentioned as a constraining skill
gap by women, whereas men considered the primary gap to be in access to
training in more technical areas.
Both men and women shared similar perceptions regarding:

 Current inadequacy of information regarding the extent and nature of local donor procurement;
 Current inadequacy of information regarding opportunities to supply donor agencies and
subcontractors; and
 The importance of improving access to capital if businesses are to grow.

32
 SECTION 5:
What can be done to Address Existing
Constraints?

33
 5. What can be done to address existing constraints?

Pursue arrangements that promote confidence in ongoing peace and security

Provide greater transparency regarding donor intentions and policies, and strengthen business mentoring programs
available to women entrepreneurs
Broaden existing training programs and scholarships, and ensure that gendered barriers are addressed

Make greater use of social responsibility provisions within donor procurement guidelines, reduce compliance burdens
where possible, and increase the transparency of processes and requirements
Address general business-environment issues, including those relating to land, access to finance and immigration

Box 5.1: Gender equality is good for business

HK Logistics is committed to ensuring equal benefit to women and men in their work. HK Logistics employs
around 70 percent women and has identified several opportunities to increase the participation of women
entrepreneurs. HK Logistics are looking for women entrepreneurs to provide cleaning, laundry and tailoring
services. In an effort to develop sustainable business opportunities, HK Logistics is exploring ways of
supporting women with materials, regular orders and possibly subsidized rent. For HK Logistics increasing
the number and quality of Solomon Island suppliers makes it easier to do business in Honiara, but it also
enables them to contribute to the broader RAMSI development mandate.

Actions by donors and Government could go a long way to addressing many of the constraints to
greater participation of women entrepreneurs in the Solomon Islands economy. Possible actions
are presented in two following tables.

Prioritization analysis identifies five actions as immediately implementable and likely to have a high
impact in improving the participation of women entrepreneurs in the Solomon Islands aid
economy. These priorities are outlined in Table 5.1.

Table 5.1: Top five actions

1 Donors update external website and produce other communication materials to ensure that accurate
information on procurement practices is easily accessible.
2 Government and/or donors provide additional financial support to existing training institutions or
business associations to strengthen business mentoring services.
3 Donors support business associations in establishing an online publicly accessible database, listing:
a. All upcoming donor procurement opportunities;
b. Relevant donor processes, links, and contacts; and
c. All Solomon Island businesses that have previously supplied, or would be interested in
supplying, donors on a sole-source basis.
Donors support business associations in disseminating this information in hard-copy to businesses
that cannot access the internet.
4 Donors offer training to businesses in preparing tenders for their contracts.
5 Donors and Government commission and support a gender review of existing scholarship and
business training programs, and implement recommendations arising from the reviews.

A complete set of possible actions is outlined in Table 5.2 under five headings: security and stability
concerns, information problems, skills gaps, procurement processes, and business-environment
issues. The recommendations are categorized using a “traffic light” system in terms of their ease of
implementation and likely impact.

34
 Table 5.2: Detailed recommendations

General Recommendation Specific Actions Gendered impact?

Ease

Impact
5.1 Security and Stability Concerns
Build confidence in ongoing peace and security. Progress in this  Government and donors enter into an explicit and well Women
direction would provide security for investment, and clarity -publicized agreement regarding the nature and entrepreneurs may
Hard

regarding the likely duration of the donor presence. duration of an international security guarantee. be
Medium

disproportionately
impacted by
security concerns.

5.2 Information Problems

35
Address confusion regarding donor intentions and policies. Better  Donors update external website and produce other –
Easy

High

communications regarding current procurement practices would communication materials to ensure that accurate
bring opportunities for local economic development, and increase information on procurement practices is easily
opportunities for donors to procure locally at lower cost. accessible

Provide integrated and ongoing business mentoring to  Government and/or donors provide additional Social attitudes and
High

entrepreneurs. Experienced business people, providing a financial support to existing training institutions or expectations may
consistent stream of advice over a sustained period might help business associations to strengthen business mean women have
Medium

overcome the lack of financial literacy and familiarity with mentoring services. less exposure to
entrepreneurial practices experienced by some Solomon Islands information
women. The demonstration effects of successful new businesses provided through
provide an important public good, justifying some form of mentoring
subsidization. programs.
 Strengthening brokerage services between suppliers and  Donors support technical advisory programs run –
potential buyers. Improving knowledge of produce and service through the Government or NGOs to facilitate
standards and quality requirements would allow more producers communication of the needs of purchasers to rural

Medium
Medium
to participate in aid-economy opportunities. and urban suppliers, while providing technical
assistance and extension services to assist producers
meet those needs.
 NGOs or business associations establish informal
platforms – such as newsletters or regular meetings –
for sharing information on potential areas of unmet
demand and available goods and services between
expatriate families and Solomon Island women
entrepreneurs.

5.3 Skills Gap

Offer new courses to meet key skill gaps. Addressing constraints  Training institutions broaden business training –
arising from an inability to access specific technical skills would courses to include entrepreneurial skills and more

36
enable a broadening of plausible business activities for Solomon specific technical skills such as market analysis, and
Medium
Medium

Islands women to participate in. research and development.

 Government and donors shift the balance of existing
scholarships towards technical and vocational training,
possibly in environments more similar to Solomon
Islands.
 Donors offer scholarships for apprenticeships or study
-tours to businesses operating in developed or other
developing countries.

Undertake gender review of scholarship and training programs.  Donors and Government commission and support a Would be intended
High

Such a review may assist in increasing the accessibility of these gender review of existing scholarship and business specifically to address
programs to Solomon Island women, facilitating increased training programs. existing barriers to
Medium

participation by women entrepreneurs through reconsideration of  Donors and Government implement women’s participation.
policies regarding dependents. recommendations arising from reviews.
 5.4 Procurement Practices
Establishment of a database for all procurement and suppliers.  Donors support Business Associations in –

Easy

High
This would allow donors to increase awareness of potential establishing an online publicly accessible database,
suppliers, while suppliers would be able to approach donors if listing
they wished to be considered for any particular contract. The  All upcoming donor procurement
database would provide greater transparency and competition in opportunities;
low-value procurement.  Relevant donor processes, links and
contacts; and
 All Solomon Island businesses that have
previously supplied, or would be interested
in supplying, donors on a sole-source basis.
 Donors support business associations in
disseminating this information in hard-copy to
businesses that cannot access the internet.

Greater use of socially responsible procurement through  Donors review existing procurement procedures and Gender clauses could be
activation of gender or social clauses in procurement guidelines. processes with the intention of maximizing local used to encourage
This would ensure that full advantage is being taken of provisions economic impact, promoting improved gender participation by women
Medium
Medium

37
relating to local economic impact, gender equality and non- outcomes and increased opportunities for women entrepreneurs or
discrimination. entrepreneurs. businesses employing
female staff.

Tender-writing training. This would remove the existing bias  Donors offer training to businesses in preparing –
Easy

against new-entrant Solomon Island businesses, and potentially tenders for their contracts.
lead to cost-savings for donor agencies through being able to
Medium

access a broader range of suppliers.

Improve Government procurement practices, and more  Donors support Government in establishing Women may face
consistent application of formal standards. Better procurement programs to improve capacity and systems within particular disadvantages
Hard

practices could allow greater transparency and open new procuring ministries to increase the extent to which in navigating currently
Medium

opportunities for participation. Government procurement guidelines are applied, opaque existing
and improve transparency and understanding of processes.
requirements for suppliers.
 Consider alternatives to and relaxation of international  Donors review the necessity of currently applied –

High
standards, and room for flexibility in their application. The international standards, with consideration of the

Hard
economic costs to Solomon Islands of existing standards may not relative risks and potential development impacts of
always be justified. Relaxing these standards could improve relaxing these standards to facilitate participation by
economic impact and reduce costs. Solomon Island suppliers.
5.5 Business Environment Issues
Give priority to regulatory and business environment reforms  Government ensures representation of women Reforms could be

High
that will have a major impact on women entrepreneurs business owners during ongoing regulatory reform designed to focus on

Hard
attempting to access aid economy opportunities. High priority processes, including the Business Licensing and addressing gendered
policy and institutional reforms identified in this analysis include: Administration Reform Committee. barriers as a priority.
 Easing inward migration restrictions;  Donors ensure that a gender perspective is taken in
 Improving timeliness of land transactions within Honiara; ongoing assistance to the Government in improving
 Take policy or communications measures to mitigate the business enabling environment.
perceived and/or real risks to land-owners, accompanying
registration of customary land; and
 Update employment laws to include provisions relating to
sexual discrimination.

38
 APPENDICES

39
Appendix A: Detailed Methodology
The research was conducted using qualitative and quantitative methods, including focus group
discussions, survey, interviews, quantitative analysis, and business modeling and desk review with
a number of different stakeholders in Honiara (see Table 1).

Table 1. Research methods by stakeholders

entrepreneurs
Women

entrepreneurs
Men

holders
Contract

Donors

initiatives
Programs and

Government

Banks

associations
Business
Focus group
discussions

Interviews

Survey

Desk review

Quantitative
analysis of
business
ideas

1. Stakeholders

The total sample of stakeholders engaged in the research exceeds 80 men and women, living and
working in Honiara. The stakeholders include women entrepreneurs, contract holders, donors,
Government officers, banks, business associations, and representatives from programs and
initiatives aimed at promoting business. Stakeholders were selected randomly based on their
willingness to participate in the research. Different aspects of the research were addressed with
each stakeholder groups (see Table 2).

 Women entrepreneurs. The process of recruiting women entrepreneurs to participate in the

research led to the identification of 90 female business owners in Honiara. Basic information
on these women business owners has been compiled into a matrix as part of this study,
however, this research does not provide a quantitative analysis of women owned businesses.
Most of the findings presented in this report are drawn from an analysis of data from a
smaller sample (43 women). The actual participants in the research are the 43 women who
completed the survey, and especially, the 28 women who participated in the focus group
discussions. This study does not distinguish between women in business and women/female
entrepreneurs. Women who hold a 50 percent share, or more, in a business, whether it is
registered or not, have been included in the sample. The sample of entrepreneurs includes
10 expatriate women and 80 indigenous Solomon Islander women. Although the study
identified 90 women in business, this does not include women who sell fresh produce at the

40
 market, street vendors or domestic helpers. These women comprise a highly visible and
mobile group on the Honiara landscape and as such studies of women in Solomon Islands
tend to focus on these women.15 This study has attempted to highlight businesswomen who
may be able to access contracts within the aid economy or who are already participating. The
list of 90 female entrepreneurs should not be considered as a comprehensive list of all
businesswomen in Honiara. The final sample is not representative in an academic sense.
However, considering the size of Honiara and the number and range of stakeholders who
made this research possible, assessing the strict representativeness of the sample seems
unnecessary.
 Men entrepreneurs. To provide comparative information regarding the gendered
experiences of women entrepreneurs, a workshop was held with a small group of male
entrepreneurs, and survey data collected from participants. Workshops and surveys used the
same format to aid with comparison.
 Contract holders. Six contract holders were selected to participate in the research based on
the size and the type of contracts held. GRM, Sinclair Knight and Mertz (SKM), and HK
Logistics were selected based on size of the their contracts. Silentworld and BJS were
selected to illustrate the different types of aid economy contracts available. Bemobile was
selected as an example of a private sector company contracted by the Solomon Islands
Government.
 Business associations and non-government organizations. The research team interviewed
two business associations, three business development groups, Solomon Islands Small
Business Enterprise Center (SISBEC), Small and Medium Enterprises Council (SMEC), MASE
Business Services Centre and several non-government organizations promoting women’s
entrepreneurship. Information on the training and initiatives provided by the groups has
been collated into a matrix and is available as part of this research.
 Government. Representatives from the Ministry for Commerce, Ministry for Finance and
Treasury, Ministry for Women Youth and Children’s Affairs (MWYCA) and Ministry for
Education were consulted as part of this research.
 Banks and financial institutions. The three commercial banks operating in Honiara were
included in the sample along with the Central Bank, Solomon Islands Credit Union (SICU) and
Solomon Islands Women in Business Association Credit Union (SIWIBACU). Information from
the interviews with the banks and financial institutions has been collated into a matrix on
financial products services for women in business available as part of this research.
 Donors. The research team interviewed ten donors and high commissions based in Honiara.
Donors were asked to describe their procurement practices and report on any programs or
initiatives designed to support women in business. Where relevant, the research team
followed up with staff from specific programs and initiatives targeting women in business.
The information on initiatives and programs was used to develop a matrix, which is available
as part of this research.

15
Union Aid Abroad – APHEDA (2010) Stayin’ Alive: A study of Livelihoods in Honiara.

41
Table 2. Stakeholders by research objectives

entrepreneurs
Women

entrepreneurs
Men

holders
Contract

Donors

initiatives
Programs and

Government

Banks

associations
Business
Information
about
procurement

Assess
business
regulations
and barriers
Identify and
evaluate
potential
business
ideas
Evaluate
existing
programs and
initiatives

2. Research methods

 Quantitative analysis and business modeling. The research team used Excel to create simple
financial models of four potential business activities. The models assess the likely viability
and profitability of these businesses under a range of possible levels of demand. The
business models are presented and analyzed in Section 4.
 Focus group discussions. A total of three focus group discussions were conducted with 28
women entrepreneurs working in Honiara. The discussions focused on the experiences of
women entrepreneurs, barriers affecting their participation in the aid economy, and new and
unmet business opportunities. Some, but not all, of the focus group discussion participants
were members of the SIWIBA. Focus group discussion participants were organized into three
groups of women with similar backgrounds and experiences to promote discussion. The
groups were: 1) Expatriate women entrepreneurs and women who have more than one
business or who employ more than 10 staff; 2) Honiara-based Solomon Island
businesswomen who own and operate small businesses from a rented or owned premises;
and 3) Honiara based Solomon Island businesswomen who operate businesses from home or
from a temporary location. Each focus group discussion was conducted at the World Bank
office and lasted at least two hours.

42
 Interviews. The research team conducted more than 40 interviews with businesses, aid
contract holders, banks, donors, Government officers, business association representatives,
and managers of programs and initiatives targeting business owners. Each interview was
conducted within the workplace, and lasted for approximately one hour.
 Survey. With support from SIWIBA, the research team surveyed 43 respondents. The short
answer survey gleaned information from women entrepreneurs in Honiara, almost all whom
are members of SIWIBA. The questions included personal data necessary to provide a profile
of SIWIBA members and business information relating to start up capital, sector and
ownership structure of the business. Some financial information was also included but no
respondents provided this information. The survey was self-administered.
 Desk review. The team analyzed a number of relevant reports and publications as part of this
research. A complete list of the documents reviewed is included at the end of the report.

43
Appendix B: Financial Analysis of Potential Business Opportunities
Despite persistent regulatory and economic conditions, there are viable business opportunities in
Honiara that are not being exploited by female entrepreneurs. An important reason for this is a lack
of knowledge regarding the likely profitability of potential business ventures that have not so far
been demonstrated as viable within the Solomon Islands.

This appendix presents financial analysis of several possible business opportunities that could be
pursued by women entrepreneurs in Solomon Islands. This analysis has two purposes. Firstly, it
helps to establish the likely viability of specific opportunities that entrepreneurs – with the possible
assistance of donors or Government – may be able to pursue. Secondly, it provides a more general
illustration of the existence of currently untapped business opportunities, therefore demonstrating
the potential benefit of information provision and other interventions which may encourage the
pursuit of such opportunities.

1. Approach

An Excel spreadsheet was used to model likely revenue, operating and fixed costs for each business
at various levels of output. Price and cost information is drawn from a variety of sources, including
interviews with business people and banks, Solomon Islands-specific research and international
reports on cost structures of particular industries.

The following assumptions were applied:

 50 percent bank financing of initial investment at an interest rate of 18 percent (interest rate
reflects reported commercial borrowing rates at main banks);
 The expatriate market will be willing to pay prices equal to prices charged in Australia for
similar goods;
 First-movers into these activities may be able to sustain prices in excess of marginal cost in
the absence of competition for some time, especially in the presence of natural-monopoly
conditions;
 Wages of SBD5.00 per hour for unskilled staff, and SBD15.00 per hour for administrative or
store-manager level staff (these wages reflect information from interviews with Honiara
entrepreneurs and contents of the Solomon Islands Chamber of Commerce and Industry
wages and salary survey);
 Rental price of SBD300 per square meter per month;
 Constant returns to scale over modeled production range;
 Straight line depreciation of capital equipment (including vehicles) at 10 percent; and
 Overall business tax on profits of 35 percent.

2. Key results

This analysis demonstrates that:

 Viable opportunities exist. All of the opportunities that were analyzed appear feasible under
a range of plausible input assumptions.

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 Scale matters. A key variable in determining the likely profitability of identified opportunities
is the scale that these businesses would be able to achieve. Achieving comparatively large
turnover and volumes within the small Honiara market appears vital for business
sustainability, emphasizing the importance of investment in market research, marketing, and
good choice of business location.
 Capital constraints are not binding. Even for comparatively capital intensive businesses such
as dry cleaning, capital costs accounted for only a very small proportion of overall costs. This
suggests that high costs of finance in Solomon Islands are unlikely to be the binding
constraint on this type of business venture (although problems with accessing finance may
be very important).
 Rental prices are a key cost. Rental prices are a core cost and account for the greatest
proportion of costs for three of the four opportunities identified. Resolving current land
issues in Honiara may play an important role in reducing business costs and facilitating
women’s investment in the aid economy. Also, identifying mobile businesses (such as
services rendered in your own home), street selling or internet based businesses, which do
not incur rental expenses should be seriously considered by budding women entrepreneurs.

3. Example opportunities

Key results and input assumptions from the financial modeling of specific potential business
opportunities are outlined here.

a. Dry cleaning

For the hypothetical dry cleaning business, the following assumptions are applied:

 A small, central commercial dry-cleaner, catering to the expatriate market at prices similar to
those in Australia;
 Use of second-hand equipment, imported from Australia at standard freight rates;
 Electricity consumption equal to the average for US dry-cleaning businesses; and
 Employment of one store manager and two unskilled staff.

The following chart shows the revenue, cost and profit at different levels of turnover using these
assumptions.
Figure 1: Revenue, Costs and Profit of Hypothetical Dry Cleaning Business

Breakeven

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Key results are:

 Substantial initial investment of around SBD140,000 is likely to be required.

 Dry cleaning business is likely to break even at any throughput over 150 items per week.
While not unachievable, such high turnover would require investment in marketing. Market
research regarding likely demand for such services would be advisable prior to any
investment.
 Throughput of 300 units per week would generate annual profit of around SBD150,000,
equivalent to reported salaries of high-earning managers, and allow a pay-back period on
initial investment of less than a year.

b. Juice stand

For the hypothetical juice stand business, the following assumptions are applied:

 A small, central juice-stand, selling pure fruit juices, catering to the expatriate and local
markets at prices similar to those for similar products in Australia;
 Use of second-hand equipment, imported from Australia at standard freight rates;
 Procurement of fruit from the Honiara market; and
 Employment of two unskilled staff.

The following chart shows the revenue, cost and profit at different levels of turnover using these
assumptions.

Figure 2: Revenue, Cost and Profit of Hypothetical Juice Stand

Breakeven

Key results are:

 Required capital investment is minimal (around SBD65,000), and this represents a

comparatively low-risk investment opportunity.
 Juice stand business is likely to break even at any throughput over 300 items per week. As
with the dry-cleaning business, such high turnover would require investment in marketing
and a good store location.
 Throughput of 670 units would generate annual profit of around SBD170,000, equivalent to
reported salaries of high-earning managers in Honiara, and allow a pay-back period on initial
investment of around 5 months.
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 c. Centralized cleaning service

For the hypothetical centralized cleaning service business, the following assumptions are applied:

 A small business, providing house- and business-cleaning services to business and the
expatriate market on a medium to large scale. Demand would be based on the appeal of a
dependable and quality-assured service, without the need for individual negotiations with
cleaning staff. A demand for this service has already been articulated by one of RAMSI’s large
contract holders, HK Logistics;
 Employment of one administration officer; and
 Business can be operated from home.

The following chart shows the revenue, cost and profit at different levels of turnover using these
assumptions.

Figure 3: Revenue, Costs and Profit of Hypothetical House-Cleaning Business

Breakeven

Key results are:

 Required capital investment is minimal (around SBD66,000), and this therefore also
represents a low-risk investment opportunity.
 The business is likely to break even if providing more than 220 hours of cleaning services per
week. This seems very achievable, and turnover is unlikely to be a major constraint.
 Provision of around 640 hours of cleaning services per week would generate SBD140,000,
equivalent to reported salaries of high-earning managers in Honiara, and allow a pay-back
period on initial investment of around 6 months.

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 d. Phone credit on-selling

With the establishment of new telecommunications operators in Solomon Islands, opportunities

are likely to exist for individuals to on-sell cellular phone credit on behalf of the new provider at a
small margin. New technologies will allow vendors to load credit onto their own cell-phones, and
transmit this credit to others’ phones while retaining a small margin (8 percent has been
suggested). This presents opportunities for:

 Small scale entrepreneurial activity in Honiara and provinces, with individual retailers on-
selling credit; and
 More sophisticated business operations, with sellers diversifying into the sale of related
goods and services on behalf of the telecommunications service provider, and potentially
employing staff to on-sell credit at a smaller margin (i.e. individual seller retains 4 percent,
and business that provides the credit retains 4 percent).

The diversity of opportunities associated with this kind of business, and uncertainty regarding the
likely structure of any associated contracts preclude detailed financial analysis at this stage. The
chart below, however, shows the income-generating potential of on-selling credit for independent
female entrepreneurs operating at a small scale. Those able to sell $2,500 worth of credit within a
week would be able to earn an income roughly equivalent to the average unskilled wage in
Honiara.
Figure 4: Income from pre-paid credit sales

Key results are:

 Required capital investment is minimal (around SBD400), and this therefore also represents
an extremely low-risk investment opportunity;
 The business opportunity is low risk; and
 The business is ideal for women looking for flexible income-generating opportunities.

4. Key Results

This analysis has highlighted that high inflows of aid and expatriates provides unmet business
opportunities. These opportunities have been analyzed as viable options. While some of these
opportunities are being seized many are not. Rather than exploring new and innovative areas and
markets, women entrepreneurs continue to replicate the same types of businesses serving the
local market.
48
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