ALLEVIATING POVERTY BY ENGAGING IN
MICROENTERPRISE: HOW CAN INGOS IN
VIETNAM HELP MICROENTERPRISES
OVERCOME MARKET CONSTRAINTS?

Vien Thi Thanh Chu
MBus (Applied Finance)
Queensland University of Technology

Supervisors:
Associate Professor Josephine Barraket
Dr Belinda Luke

Submitted in fulfilment of the requirements for the degree of
Master of Business (Research)
Faculty of Business
Queensland University of Technology

2011


Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
microenterprises overcome market constraints?

Keywords
Demand driven, INGOs, market constraints, micro business, microenterprise, poverty,
supply driven, Vietnam

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Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
microenterprises overcome market constraints?

Abstract
Microenterprise programs (MEPs) that aim to help poor communities engage in micro
businesses have contributed significantly to poverty reduction in developing countries.
However, a review of the literature suggests that the current approach adopted by MEPs
has mainly provided services to microenterprises (MEs) based on what MEPs can supply
rather than on what MEs actually need and what the market demands. Therefore, MEPs’
approaches are more likely to be supply driven. Yet when there are market constraints,
such as high competition or low demand, this approach has been linked to the failure of
MEs in their infancy. The alternative is a demand driven approach, in which MEPs
provide MEs with support based on what MEs need, and what markets demand.
However, research examining the application of this approach is limited.

In order to gain an understanding of the approaches of MEPs, to identify whether these
approaches are demand or supply driven, and to discover how these approaches are used
to help MEs operate under market constraints, this study examined the operation of
International Non-Government Organisations (INGOs) operating in Vietnam. This
exploratory study involved in-depth interviews with senior executives from 10 INGOs.
Thematic analysis was used to analyse data collected from the in-depth interviews. The
results were further verified with publicly available data from the INGOs.

The findings of this research indicate that the demand driven approach is dominant in
most approaches of INGOs in Vietnam, and has become a key approach in helping MEs
deal with market constraints. Further, rather than explaining the demand and supply
driven dichotomy, the findings highlight that MEPs’ approaches can be viewed in two
dimensions: a participant-demand driven approach focusing on the basic needs and
capabilities of the extremely poor, irrespective of market demands; and a marketdemand driven approach focusing on the capabilities of poor communities, while also
accommodating market demands. This research provides contemporary and practical

insights into the DD and SD approaches, and a better understanding of MEPs’
approaches to MED in Vietnam.  
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Table of Contents

Keywords ...................................................................................................................... i 
Abstract ........................................................................................................................ ii 
Table of Contents ........................................................................................................ iii 
List of Figures ............................................................................................................ vii 
List of Tables ............................................................................................................ viii 
List of Abbreviations .................................................................................................. ix 
Statement of Original Authorship ................................................................................ x 
Acknowledgments ....................................................................................................... xi 
CHAPTER 1: INTRODUCTION ............................................................................ 1 
1.1  INTRODUCTION .............................................................................................. 1 
1.2  BACKGROUND ................................................................................................ 2 
1.3  CONTEXT FOR THIS STUDY......................................................................... 5 
1.4  PURPOSE OF THE RESEARCH AND RESEARCH QUESTIONS ............... 7 
1.5  SIGNIFICANCE ................................................................................................ 9 
1.6  THESIS OUTLINE .......................................................................................... 10 
CHAPTER 2: LITERATURE REVIEW .............................................................. 11 
2.1  INTRODUCTION ............................................................................................ 11 
2.2  UNDERSTANDING POVERTY..................................................................... 11 
2.3  MEPs IN DEVELOPING COUNTRIES ......................................................... 15 
2.3.1  Microenterprise program definition ........................................................ 16 

2.3.2  Available evidence on the performance of MEPs ................................... 16 
2.3.3  Limitations of MEPs ............................................................................... 18 
2.3.3.1  Alleviating poverty via self-employment ................................ 18 
2.3.3.2  Simulating economic development in impoverished areas ...... 21 
2.3.3.3  Promoting individual self-sufficiency ...................................... 24 
2.3.3.4  Providing seedbed for microentrepreneurs .............................. 24 
2.3.3.5  The effectiveness of MEPs ...................................................... 25 
2.4  DEMAND DRIVEN VERSUS SUPPLY DRIVEN ........................................ 27 
2.4.1  Understanding of demand driven and supply driven approaches ........... 28 
2.4.2  Demand driven versus supply driven MEP approaches in practice ........ 30 
2.5  THE INFLUENCE OF DIFFERENT SECTORS ON MEPS .......................... 32 
2.6  MICROENTERPRISE PROGRAMS IN VIETNAM ...................................... 34 
2.6.1  Background about Vietnam..................................................................... 34 
2.6.2  Overview of MEPs in Vietnam ............................................................... 36 
2.7  SUMMARY...................................................................................................... 40 
CHAPTER 3: RESEARCH DESIGN ................................................................... 42 

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Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
microenterprises overcome market constraints?

3.1  INTRODUCTION ............................................................................................ 42 
3.2  RESEARCH APPROACH ............................................................................... 42 
3.3  THE SAMPLE .................................................................................................. 46 
3.4  PREPARING THE INTERVIEW PROTOCOL .............................................. 47 
3.5  DATA COLLECTION ..................................................................................... 49 
3.5.1  Conducting in-depth interviews .............................................................. 49 
3.5.2  Collecting data from publicly available sources ..................................... 54 

3.6  DATA ANALYSIS .......................................................................................... 54 
3.7  ETHICS ............................................................................................................ 55 
3.8  VALIDITY AND RELIABILITY.................................................................... 56 
3.9  LIMITATIONS ................................................................................................ 57 
CHAPTER 4: FINDINGS – COMMON APPROACHES TO MED ................. 59 
4.1  INTRODUCTION ............................................................................................ 59 
4.2  INTEGRATED APPROACHES TO POVERTY ALLEVIATION ................ 60 
4.3  UNDERSTANDING THE LOCAL COMMUNITY ....................................... 62 
4.4  FORMING GROUPS FOR WORKING OR LENDING................................. 63 
4.4.1  Required characteristics of groups .......................................................... 64 
4.4.2  Generating benefits from group activities ............................................... 67 
4.4.3  Forming cooperatives for wider long-term benefits................................ 70 
4.5  MICROENTERPRISE DEVELOPMENT ....................................................... 71 
4.5.1  Implementing MED projects in Vietnam: opportunities and costs ......... 72 
4.5.2  Encouraging participation in MED projects: Non-monetary support ..... 74 
4.5.3  Step-by-step approach to MED ............................................................... 75 
4.5.4  Connecting MEs with supply chains via output market linkages ........... 77 
4.5.5  Value chain development ........................................................................ 78 
4.5.6  Challenges of MED support .................................................................... 82 
4.5.7  Developing non-farm MEs ...................................................................... 84 
4.6  SUMMARY OF COMMON APPROACHES ................................................. 86 
CHAPTER 5: FINDINGS – IMPLEMENTING COMMON APPROACHES
TO MED.................................................................................................................... 87 
5.1  INTRODUCTION ............................................................................................ 87 
5.2  BENEFICIARIES OF INGOs’ PROJECTS..................................................... 88 
5.2.1  Identifying participants for projects ........................................................ 88 
5.2.2  Working with local authorities ................................................................ 92 
5.3  APPROACHES TO PROVIDING CREDIT ................................................... 94 
5.3.1  Not providing credit ................................................................................ 95 
5.3.2  Providing livestock or grants .................................................................. 98 

5.4  APPROACHES TO PROVIDING TRAINING............................................... 99 
5.4.1  Training approaches ................................................................................ 99 
5.4.2  Training courses and location ............................................................... 100 
5.4.3  Underlying training principles .............................................................. 101 
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Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
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5.4.4  Encouraging households to participate in training ................................ 102 
5.5  APPROACHES TO PROVIDING TECHNICAL SUPPORT ....................... 104 
5.6  APPROACHES TO PROVIDING JOB OPPORTUNITIES ......................... 106 
5.6.1  Connecting households with labour market demands ........................... 106 
5.6.2  Underlying principles in providing job opportunities ........................... 107 
5.6.3  Engaging in Social Enterprises ............................................................. 108 
5.7  INCOME OF INGOs ...................................................................................... 111 
5.8  THE ROLE OF GOVERNMENT IN MED ................................................... 112 
5.9  CULTURAL INFLUENCE ON MED ........................................................... 114 
5.10  SUMMARY.................................................................................................... 115 
CHAPTER 6: DISCUSSION ............................................................................... 116 
6.1  INTRODUCTION .......................................................................................... 116 
6.2  APPROACHES TO MED .............................................................................. 116 
6.2.1  A comprehensive approach to poverty alleviation ................................ 117 
6.2.2  Implementing different approaches....................................................... 118 
6.2.3  Building bridging social capital ............................................................ 118 
6.2.4  Having a strong focus on agricultural activities .................................... 124 
6.2.5  Using different income sources to fund INGOs’ operations ................. 125 
6.2.6  Providing non-monetary support........................................................... 126 
6.2.7  Developing bonding social capital ........................................................ 127 

6.2.8  Using pilot farmers to encourage participation ..................................... 130 
6.3  DEMAND DRIVENAPPROACHES IN MED ............................................. 131 
6.3.1  Demand driven approach in grouping beneficiaries ............................. 131 
6.3.2  Demand driven approach in providing non-monetary capital............... 132 
6.3.3  Demand driven approach in providing training .................................... 133 
6.3.4  Demand driven approach in providing technical support ..................... 134 
6.3.5  Demand driven approach in providing job opportunities ..................... 135 
6.3.6  Demand driven approach in dealing with market issues ....................... 136 
6.4  SUPPLY DRIVEN APPROACHES IN MED ............................................... 139 
6.4.1  Supply driven in choosing beneficiaries ............................................... 139 
6.4.2  Supply driven in providing support....................................................... 140 
6.5  LEARNING TO OPERATE WITHIN MARKET CONSTRAINTS ............ 143 
6.5.1  Approaches in dealing with market constraints .................................... 143 
6.5.2  The role of the government ................................................................... 146 
6.5.3  The impact of culture ............................................................................ 147 
6.6  SUMMARY.................................................................................................... 147 
CHAPTER 7: CONCLUSIONS .......................................................................... 149 
7.1  OVERVIEW OF THE STUDY ...................................................................... 149 
7.2  SIGNIFICANT FINDINGS ........................................................................... 150 
7.2.1  New perspectives on MEPs’ approaches .............................................. 151 
7.2.2  Emergent findings ................................................................................. 153 
7.3  CONTRIBUTIONS FROM THE STUDY..................................................... 154 
7.3.1  Contributions to the existing literature .................................................. 154 
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Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
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7.3.2  Contributions to practice ....................................................................... 156 

7.4  LIMITATIONS OF THE STUDY ................................................................. 157 
7.5  AREAS FOR FURTHER RESEARCH ......................................................... 158 
REFERENCE LIST ............................................................................................... 160 
APPENDICES ........................................................................................................ 170 
APPENDIX 1: SEMI-STRUCTURED INTERVIEW PROTOCOL:
MICROENTERPRISE .......................................................................... 170 
APPENDIX 2: INFORMATION FOR PARTICIPANTS ............................. 174 
APPENDIX 3: CONSENT FORM................................................................. 176 

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Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
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List of Figures
Figure 5.1 INGO’s use of social enterprise funding arrangements ........................ 110 
Figure 6.1 Common approaches in ME ................................................................... 144 

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microenterprises overcome market constraints?

List of Tables
Table 2.1 Dimensions of a supply driven and demand driven approach ................... 30 
Table 3.1. Topics covered in the interview protocol .................................................. 48 
Table 3.2. Participant profiles ................................................................................... 51 
Table 4.1 Issues considered before designing projects.............................................. 63 

Table 4.2 Group characteristics ................................................................................ 67 
Table 4.3 Group activities .......................................................................................... 70 
Table 4.4 Levels of INGOs’ approaches .................................................................... 84 
Table 5.1 Key characteristics of INGOs’ beneficiaries ............................................. 91 
Table 5.2 Key roles of stakeholders ........................................................................... 94 
Table 5.3 Key reasons for not providing credit ......................................................... 98 
Table 5.4 Aspects of training under a demand driven approach ............................. 104 
Table 5.5 Technical support..................................................................................... 106 
Table 5.6 Aspects of vocational training provided by INGOs ................................. 108 
Table 5.7 Funding arrangements of INGOs ............................................................ 112 
Table 6.1 Dimensions of a demand driven approach .............................................. 138 
Table 6.2 Dimensions of a supply driven approach................................................. 141 
Table 6.3 Dominant approach reveal in each INGO ............................................... 142 

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Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
microenterprises overcome market constraints?

List of Abbreviations
ADB

Asian Development Bank

DD

Demand Driven

FFS


Farmer Field School

INGOs

International Non-Government Organisations

MDG

Millennium Development Goals

MED

Microenterprise Development

MEPs

Microenterprise programs

MEs

Microenterprises

SD

Supply Driven

TOT

Training of Trainers


VBARD

Vietnam Bank for Agriculture and Rural Development

VBSP

Vietnam Bank for Social Policies

VCD

Value Chain Development

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Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
microenterprises overcome market constraints?

Statement of Original Authorship
The work contained in this thesis has not been previously submitted to meet
requirements for an award at this or any other higher education institution. To the best of
my knowledge and belief, the thesis contains no material previously published or written
by another person except where due reference is made.

Signature: _________________________

Date:

_________________________


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Alleviating poverty by engaging in microenterprise: How can INGOs in Vietnam help
microenterprises overcome market constraints?

Acknowledgments
I thank my supervisors, Associate Professor Josephine Barraket and Dr Belinda
Luke, who always supported me in transforming my life’s passion into this thesis,
and guided me through a journey during which I have gained great knowledge and
experience in undertaking research generally, and in my chosen field specifically.
With love I acknowledge the support of my partner Mike Bartlett, who always gave
me a hand when I felt down, and supported me throughout my research journey.
Also, love and thanks to my big family, in particular my sisters Luc Thi Thanh Ha
and Luc Thi Kim Tuyen, who always encouraged me to follow my passion.
I would like to thank the individual interviewees, who gave their time and the benefit
of their experience to this study.

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Chapter 1: Introduction

CHAPTER 1: INTRODUCTION
1.1

INTRODUCTION

Poverty is a growing problem and became a worldwide focus after the formulation of

the Millennium Development Goals (MDGs). The goals were agreed to in 2000 by
189 world leaders to help more than 1 billion people get out of extreme poverty by
2015 (Endpoverty 2015, 2011). Amongst the different approaches adopted to achieve
the MDGs, microenterprise programs (MEPs) are one type of intervention. These
programs provide standardised training, technical support and credit to poor
communities via local agencies, and have been recognised as an efficient way to help
people living in poverty engage in micro businesses (Green, Kirkpatrick, & Murinde,
2006; Vargas, 2000). This support enhances the growth of microenterprises (MEs),
presenting a source of employment and income generation for poor communities and
presenting a way out of poverty, particularly in developing countries (Choudhury,
Hossain, & Solaiman, 2008; Kamal, 2011; Strier, 2010).

While MEPs are recognised as a valuable approach to poverty alleviation, they give
rise to a number of issues. One of the key concerns regarding MEPs cited in the
research literature is that they are often supply driven (SD) (that is, based on what
MEPs can provide), rather than demand driven (DD) (that is, based on what poor
communities actually need and what the market demands) (Hoque, 2004; Moyo,
2003). This suggests that MEPs’ support is often not suitable for poor communities,
and that MEs supply to markets what they have available, rather than what markets
require. Another concern relates to dealing with market constraints which act to

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Chapter 1: Introduction

prevent MEs from surviving and growing. These constraints are one of the most
challenging aspects of MEs and the available research suggests that this challenge
has not yet been addressed effectively by MEPs (Mead & Liedholm, 1998; Moyo,
2003; Shaw, 2004). The DD approach has been examined conceptually by

researchers (Goldmark, 2001; Sinclair, 1993; Tendler & Amorim, 1996), but there
has been limited empirical work done and findings are quite dated.

Accordingly, this study aims to gain an understanding of the common approaches of
International Non-Government Organisations (INGOs) in helping people living in
poverty to engage in MEs, with a specific focus on MEPs in Vietnam. The existing
literature on approaches in poverty reduction via MED in developing countries, and
the characteristics of DD and SD approaches were reviewed to develop a framework
for analysis. This framework was then used to examine the practices of NGOs
focusing on MED in poverty alleviation. Semi-structured in-depth interviews were
conducted with senior executives of 10 NGOs. The findings from interviews were
verified with data collected from publicly available sources. The deductive and
inductive processes of comparing and reflecting on the findings of this study within
the scope of its purpose and research questions uncovered findings that refine
existing understandings of SD or DD. The study seeks to contribute to the
contemporary understanding of successful approaches of MEPs in poverty alleviation
via MED, and to identify issues for further research.

1.2

BACKGROUND

As noted above, MED plays a key role in poverty reduction programs in a number of
regions in the world, yet challenges remain with respect to making MEs sustainable

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Chapter 1: Introduction


and operating MEPs effectively. MEPs claim success in stimulating income sources
for poor communities via self-employment, developing the economy in poor areas,
building individual self-sufficiency, and creating the conditions needed for people
living in poverty to start new businesses or expand existing businesses (Green et al.,
2006; Jurik, 2005; Midgley, 2008; Strier, 2010). However, researchers note that the
benefits of MEPs have not yet reached the poorest of the poor (Jones et al., 2004;
Midgley, 2008; Mosley & Hulme, 1998; Nawaz, 2010). Credit is mainly provided to
the less poor, yet credit is not the only major constraint for poor communities
(Aworuwa, 2004; Ghate, Ballon, & Manalo, 1996; Tinker, 2000). Further, training
delivered by MEPs to poor communities is provided at a high cost, but is often not
useful for MEs as it is not based on the poor communities’ actual needs (Servon &
Bates, 1998; Sievers & Vandenberg, 2007). Importantly, as people living in poverty
commonly have low skill levels and capabilities, products from MEs are often of low
quality, and are produced with insufficient quantities of stock to be viable (Hoque,
2004). As a result, in the highly competitive markets in which they usually operate
(Karnani, 2009) MEs suffer from a high failure rate during their infancy (McPherson,
1996; Midgley, 2008). Poor people whose micro businesses fail are likely to face
livelihood challenges that are more severe than those faced by the non-poor when their
businesses fail (Midgley, 2008). Therefore, improving skills and capabilities, and

helping MEs deal with market issues are still challenging problems for MEPs under a
traditional SD approach.

Regarding the available research on the DD approach, researchers (Goldmark, 2001;
Sinclair, 1993; Tendler & Amorim, 1996) have reported on practical cases of
demand driven MEPs. Under this approach, MEPs mainly help MEs deal with

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Chapter 1: Introduction

market issues and provide support based on MEs’ actual needs. In terms of dealing
with market issues, MEPs group MEs into activity categories and work directly with
reliable customers via product development and marketing, to provide stable markets
for MEs. They train people living in poverty in production techniques based on MEs’
activities at the MEs’ premises. They oversee quality control to fulfill customer
requirements, and reject defective goods at the MEs’ cost (Goldmark, 2001; Sinclair,
1993; Tendler & Amorim, 1996). Under the DD approach, researchers (Ghate et al.,
1996; Tendler & Amorim, 1996) also suggest that MEPs can operate sustainably
once they generate income from services provided, rather than fully relying on
donated funds. Ultimately, this helps to ensure that MEPs provide services that fit the
needs and capacities of poor communities, so that the micro businesses of people
living in poverty can survive and grow.

Sievers and Vandenberg (2007) argue that every MEP should adopt a demand driven
approach, as it involves providing training and technical support based on the
practical needs of MEs charging reasonable fees to build capacity and improve
production capabilities. In addition, this approach provides inter-firm cooperation
between small firm suppliers and larger firm customers via intermediate parties –
either support agencies or MEPs (Tendler & Amorim, 1996). Additionally, this
approach enhances MEs’ bargaining power not only in purchasing raw materials but
also in sales transactions, and provides access to new markets. It potentially
improves productivity, resulting in efficient use of resources and provides better
quality products to the community (Goldmark, 2001; Hoque, 2004). Ultimately, it
provides poor communities with opportunities to generate sustainable incomes. This
leads to an increase in the sustainability of MEPs through ongoing support for

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Chapter 1: Introduction

successful operations in poverty alleviation (Sievers & Vandenberg, 2007). While
theoretical support for a demand driven approach has grown, little examination of
this approach has been undertaken in practice (Goldmark, 2001). Accordingly, this
study considers the presence and nature of the demand driven approach through an
examination of International NGOs (INGOs) operating MEPs in Vietnam. Section
1.3 describes the context for this research, and how the context chosen helped the
researcher in gaining an understanding of the different approaches of MEPs.

1.3

CONTEXT FOR THIS STUDY

This research investigates the role played by INGOs in alleviating poverty in
Vietnam by examining INGOs’ approaches. It does so in order to gain an
understanding of how the demand and supply driven approaches are being used in
practice. Vietnam is a low-income developing country, yet it has achieved an
impressive record in poverty reduction (AusAID, 2010) and macroeconomic stability
by any measure since the economic renovation (Doi Moi) in 1986 (ADB, 2005;
World Bank, 2007). Doi Moi reforms shifted Vietnam’s economic priority from
heavy industry to three major economic programs: production of food, production of
consumer goods, and production of exports. It encouraged foreign and domestic
private investment while reducing government participation in business, resulting in
a dramatically improved business climate (AusAID, 2010; CIA, 2012; World Bank,
2007). Agriculture production has increased significantly with exported agricultural
products growing by 16.8% per year (Powell, Swartling, & Ha, 2011). The economic

growth has resulted in significant increases in domestic consumption. The retail sales

index, an indicator of household expenditure, rose by 20.5 per cent during 2005
(World Bank, 2007), and is expected to increase around 24% during 2011–2012

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Chapter 1: Introduction

(RNCOS Industry Research Solutions, 2011, Vietnam Business News, 2011). This
increase has supported accelerated international integration, market liberalisation,
private sector job creation, and better livelihoods (AusAID, 2010; World Bank,
2007), resulting in poverty reduction. The poverty rate fell from 58 per cent of the
population in 1993 to 14.7 per cent in 2007 (AusAID, 2010) and reached 10.6 per
cent in 2010 (NationMaster, 2011). This remarkable record is in part attributable to
the support provided by INGOs, which disbursed more than US$800 million for the
period from 1993 to 2003 (Khadka, Price-Thomas, Khanna, & Hughes, 2004).
Furthermore, foreign donors pledged nearly eight billion US dollars in new
development assistance for 2011 (CIA, 2012). Funds donated by foreign
governments are spent more on business development programs at the
province level with the assistance of different NGOs and agencies, Local authorities
also assist with implementation and improvement of laws and regulations to provide
useful and transparent information, and clearer legal frameworks in order to develop
the private sector as a foundation for the development of household businesses and
microenterprises (ADB, 2005). The level of partnership between the Government
and the donor community has greatly improved (AusAID, 2002). However, the
majority of projects (69%) are still concentrated in urban areas. Less than 10 per cent
of all projects have been located in the most poor and remote areas (ADB, 2005), and
rural non-farm businesses and microenterprises are often overlooked.

INGOs in Vietnam focus mainly on poverty reduction, increasingly directing their

assistance to remote areas which are the homes of the poorest and most vulnerable
communities. Other areas of focus include improving social equality, decreasing
vulnerability, and increasing participation – “the voices” of poor communities

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Chapter 1: Introduction

(Khadka et al., 2004). These objectives provide a good foundation to gain an
understanding of INGOs’ activities in poverty reduction in Vietnam, and in particular
the approaches adopted for MEPs.

1.4

PURPOSE OF THE RESEARCH AND RESEARCH QUESTIONS

This study aims to gain an understanding of the common approaches of INGOs in
Vietnam in helping poor communities engage in business under market constraints.
This is particularly important, given that MEPs often help people living in poverty
start up small businesses, yet many of the businesses do not survive in competitive
markets. This understanding will then be used to examine whether these approaches
are supply driven (the traditional approach of MEPs) or demand driven, or a mix of
both. The findings will contribute to an understanding of whether the demand driven
approach has been used to create sustainable MEs and if so, how this has been done.
This study focuses solely on INGOs because the local NGOs in Vietnam are
governed by different legal regulations and are subject to political influences
(Aschhoff, 2008; Bach, 2001; Lux & Straussman, 2004; Ngo, 2007) which may
affect their activities, making comparisons with INGOs difficult.


Given the lack of available information on the approaches of INGOs operating MEPs
in Vietnam, and the lack of practical cases examined involving a demand driven
approach, a number of research questions have been formed to gain a practical
understanding of MEP approaches. The research questions also aim at providing an
insight into whether DD or SD approaches emerge from INGOs’ operations, and how
these approaches help MEs to operate within market constraints. The research
questions developed for this study are detailed below:

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Chapter 1: Introduction

1. What approaches do INGOs in Vietnam use in helping poor communities
to engage in MEs?
Answering this question is designed to provide a broad understanding of different
forms of assistance provided by INGOs to help people living in poverty engage in
business.
2a. How is the demand driven approach being used?
Answering this question will help to identify whether the demand driven approach is
commonly used, how INGOs are using it, and whether this approach helps people
living in poverty engage in business which survive and grow sustainably.
2b. How is the supply driven approach being used?
Answering this question will help to identify reasons why a supply driven approach
has been used rather than a demand driven approach. Understanding both demand
and supply driven approaches will provide a more comprehensive understanding of
INGOs’ operations in Vietnam, and the benefits and limitations of each approach.
3. How do these approaches help MEs grow in areas where there are
market constraints?
Answering this question will help to investigate INGOs’ focus, which has assisted

MEs to overcome market constraints such as high competition, and low or no
demand. Answering this question will aid in understanding whether INGOs facilitate
sustainable growth for MEs or are merely providers of donated services or funds with
temporary benefits. In addition, issues relating to this question may help to reveal
any new approaches adopted by INGOs in Vietnam.

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Chapter 1: Introduction

1.5

SIGNIFICANCE

The available literature suggests that MEPs which adopt demand driven approaches
are more effective than supply driven approaches, but that most MEPs are supply
driven. However, empirical evidence to support this suggestion is limited and
outdated, and documented knowledge of MEP developments in Vietnam is scarce.
Accordingly, this research contributes to both the existing literature on the role of
MEPs in poverty alleviation, and to the practical approaches used by MEPs. The
outcomes of this study will contribute to an understanding of the support provided by
INGOs in alleviating poverty in Vietnam, to an appreciation of how the demand and
supply driven approaches are being used, and to an understanding of how these
approaches can help MEs grow in areas where there are market constraints. These
outcomes will provide updated findings on MED, based on practical cases (INGOs
operating in Vietnam) for the implementation of DD and SD approaches in MEPs.
Further studies can be undertaken based on the knowledge acquired from this study
to raise the level of understanding of demand and supply driven approaches. The
understanding gained from such research could be used to develop a suitable model

to assist MEPs or INGOs to achieve more sustainable growth for MEs.

Regarding the contributions to practice, this study will provide a detailed account of
the practice of MEP approaches in alleviating poverty in Vietnam. Given that more
than 1.1 billion of the world’s population live on less than one US dollar a day, and
poverty has continued to increase due to natural disasters in recent times (for
example earthquakes in New Zealand, earthquakes and resulting tsunami in Japan,
floods in Australia) fundraising for MED will face challenges in the future. Hence
there is a need for research that provides an understanding of what underlies cases of

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Chapter 1: Introduction

success in poverty reduction (such as Vietnam). Based on findings and insights from
this study, an improved understanding of the factors contributing to success can be
applied in MEPs in order to better help MEs survive and grow sustainably, and to
help INGOs operate more effectively. Donors may provide more support to INGOs
that adopt more efficient approaches in poverty alleviation. Ultimately, poor
communities will hopefully benefit from successful MEPs to progress out of poverty.

1.6

THESIS OUTLINE

The following chapters of this thesis examine the approaches of MEPs, and their
successes and limitations in both theory and practice. Chapter 2 reviews the literature
on MEPs in developing countries. An understanding of poverty as a basis for
implementing MEPs is addressed. This chapter also provides an overview of the

successes and limitations of MEPs argued by different researchers, featuring demand
and supply driven approaches, and an understanding MEPs operating in Vietnam.
Chapter 3 outlines the research design used to investigate the actual practices of
INGOs operating MEPs in Vietnam, and to explore gaps in the knowledge provided
by the literature. Chapter 4 presents the findings (through deductive and inductive
analysis) mainly related to the first research question on the common approaches of
INGOs. Chapter 5 discusses the findings mainly related to the remaining three
research questions on the DD and SD approaches to helping MEs deal with market
challenges. Chapter 6 discusses the findings, and how these findings address the
research questions. Chapter 7 presents the conclusions of the study, highlighting
significant findings, literature gaps, limitations of the study, and areas for further
related research.

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Chapter 2: Literature review

CHAPTER 2: LITERATURE REVIEW
2.1 INTRODUCTION
Chapter 1 briefly introduced the background, research setting, and significance of
this study. This chapter reviews the existing literature on MED in developing
countries and proposes a framework for analysis on which this study builds. MED is
widely accepted as an effective and sustainable way to fight poverty. In order to
understand the reason for this perspective, Section 2.2 outlines the existing literature
on poverty, its roots, and approaches to poverty alleviation including MED. As MED
is not the only alternative to fight poverty, Section 2.3 reviews the successes and
limitations of MEPs in developing countries. As noted in Chapter 1, the literature
argues that the current approach of MEPs is more likely to be SD than DD. Section
2.4 examines the DD and SD approaches to provide a foundation for investigating

the approach of INGOs in Vietnam. Alleviating poverty by MED cannot be done by
MEPs alone. Hence, Section 2.5 reviews the role of coordinated action involving
three sectors, government, private, and civil society, in contributing to the successes
of MED programs. As the theoretical framework of this study is developed by
investigating INGOs’ MED operations in Vietnam, Section 2.6 provides a
background to Vietnam and MEPs in Vietnam.

2.2 UNDERSTANDING POVERTY
Microenterprise programs are implemented as poverty alleviation strategies, so
understanding the nature of poverty provides a foundation to investigate approaches
of INGOs in Vietnam. The “understanding of what constitutes poverty” has changed
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Chapter 2: Literature review

significantly over the last 15 years, shifting from poverty understood and measured
by direct outcomes of “hunger or under nutrition”, to the causes of those outcomes,
such as “lack of income, assets, civil and political rights, voice, and rule of law and
services, including safety nets” (Bass et al., 2005, p.11). Focusing more on the direct
causes of poverty, Townsend (1979) defines poverty as the experience of lacking
resources to obtain basic needs, participation in basic social activities and access to
amenities of life in a particular society. Rather than focusing on a lack of material
resources, Sen (1986, p. 163) looks at the roots of poverty in order to identify its
causes, in which Sen views poverty as limited access to basic needs, and considers
poverty in terms of dignity versus “living without shame”. Similarly, Ridge and
Wright (2008, p. 1) consider poverty to be inextricably linked to inequality of access
to “resources, opportunities, assets, income, and wealth”; and being unable to afford
better living conditions which are normal for other members of a particular society.
Therefore, Ridge and Wright (2008) argue that poverty is not only about material,

social and economic resources, but also about social relationships, social possession,
and the control and exercise of power. When these resources are missing, they cause
a lack of confidence and a fragility of self-identity and social identity. These are seen
as the roots of poverty (Ridge & Wright, 2008). However, the perception of what
constitutes poverty can be different in different social circumstances (Sen, 1986). For
example it is different in developed and developing countries. This needs to be
understood when implementing anti-poverty programs in different regions.

Poverty is a complex problem, so a better understanding of the factors that cause
poverty is important in poverty reduction. From this viewpoint, Bass et al. (2005,
p.11) identify eight different aspects of poverty:

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Chapter 2: Literature review

-

inadequate and often unstable income;

-

inadequate, unstable or risky assets;

-

poor quality, often insecure, hazardous and overcrowded housing;

-


inadequate provision of public infrastructure;

-

inadequate provision of basic services;

-

limited or no safety net to mitigate risks;

-

inadequate protection of poorer groups’ rights through the operation of the
law;

-

poorer groups’ lack of a voice and their powerlessness within political
systems and bureaucratic structure.

In identifying these eight aspects, Bass et al. (2005) argue that sustainable poverty
alleviation should be integrated with environmental management (e.g. of extreme
weather events); and a good governance system which not only involves good
performance of government institutions (political, bureaucratic, or legislative), but
also a good relationship between these government institutions and civil society
(citizens, community organisations, NGOs), as well as private enterprises. Such
relationships provide people with improved access to public services and
opportunities in society, ultimately addressing the causes of poverty.


As can be seen from the first three aspects of poverty identified by Bass et al. (2005),
inadequate and unstable income is just one of the major causes of poverty. Therefore,
looking at poverty in terms of income alone is inadequate (Cabraal et al., 2006;
Lohmer, 2008). Rather, income should be considered in terms of whether it provides
a sufficient and sustainable source of finance for poor communities to accumulate
savings and build assets. Lohmer (2008, p. 37) comments that an asset-based
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