Single support service model for SMEs (SME House) - Observatory of Public Sector Innovation

SME Houses are one-stop-shop centers providing comprehensive services and support tools to SMSs during planning, starting, running and developing businesses. It is a unique initiative that allows mobilization and coordination of resources of all public and private stakeholders to contribute to development of SME sector. It makes it easier for those who often don’t know from where to get specific services to just go to one facility and get consultation, guidance, services and support.

Innovation Summary

Innovation Overview

SMEs and especially, people willing to start up their own business are more susceptible and in many cases disadvantaged compared to large and mature businesses and require dedicated approach and attention to realize and develop their business activities. Surveys conducted at national and regional levels by the Small and Medium Business Development Agency indicated the lack of information and challenges in access of SMEs to different business support services. People who wanted to start their own business were hesitant about where to go, how to realize his/her business idea, how to get support and etc. SME development initiatives were fragmental and an institutional coordination mechanism between government agencies lacked. SMEs needed specialized support infrastructure, strategic support for innovative development in the face of global challenges, and modern integrated G2B services. SME Policy Index reports revealed similar shortcomings in the country.
In order to overhaul the mentioned deficiencies, the Government decided to establish a single support service model for SMEs – SME Houses. The strategic objectives were to strengthen the role of SMEs in the economy and improve enabling SME environment by delivering flexible, tailored and sustainable public services and support mechanisms. Coming to SME House, an entrepreneur or people willing to start up his/her own business can get comprehensive support and services provided by up to 30 government institutions and up to 20 private entities. The uniqueness of the initiative is that it is totally SME centric and takes into account peculiarities and needs of SMEs over the different stages of business activities. SMEs are able to participate at different business related trainings, get advice from professional business experts, are guided to other different government service providers which are also present at the same place. Start-up Development Center, co-working spaces, meeting rooms, conference hall and mediation centre is also at the disposal of SMEs. Support tools are delivered for improving access of SMEs to finance, markets, knowledge and innovations. SME Friends answer questions, advise about and explain how to use existing services and support tools, direct and accompany people in the process of getting services from other agencies at SME Houses. One of the important features of the initiative is that it promotes inclusiveness in business activities. Hence, SME House hosts special events and support programs aimed at women, young and people with disability.
Currently, there 3 SME Houses in different regions of the country. In the future, their scope will be further increased and all services will be made available online, allowing transformation of operation of the SME Houses from one-stop-shop to non-stop-shop regime. It is also planned to establish specialized export-import oriented SME Houses in frontier region of the country to facilitate overseas operations of local SMEs.

Innovation Description

What Makes Your Project Innovative?

Previously, there wasn’t a single place where SMEs could address for all their needs. They often applied to one government agency incorrectly, only to be redirected to another. This process consumed a lot of time and resources away from core business activities. There was a lack of coordination among government institutions when combined services/support tools were required.
SME House concept introduced a comprehensive business support ecosystem tailored for SMEs. Its infrastructure includes training rooms, meeting spaces, conference hall, co-working spaces and cozy areas for private business discussions. By strengthening coordination among public agencies, SME Houses contributed to more frequent public-private cooperation for solving challenges of SMEs.
The EU Business Climate Report Azerbaijan 2021 based on surveys conducted among foreign companies operating in Azerbaijan, ranked the SME House concept among others at the top 5 effective reforms, considering it useful and efficient.

What is the current status of your innovation?

Currently, there are 3 SME Houses operating in different areas of the country.
Khachmaz SME House was established in February 2020.
Yevlakh SME House was established in April 2021.
Baku SME House was created in January 2023.
In 2023, within the SME Houses more than 371,304 "G2B" and "B2B" services were provided to business entities by 59 governmental and non-governmental organizations.
Instant exit surveys are conducted by SME volunteers at SME Houses to gauge the satisfaction level among users. According to the figures, the overall satisfaction level with the services provided to entrepreneurs is 99%.

Innovation Development

Collaborations & Partnerships

The single support service model for SMEs ensured participation from both public and private sectors. A Coordination Group covering more than 30 state institutions was formed with the Decree of the Cabinet of Ministers.
For private sector involvement, a Public Council consisting of 15 business associations was established. Moreover, surveys are conducted, field meetings held and sectoral discussions arranged. SME Friends networks in 45 regions are actively raising awareness about SME Houses.

Users, Stakeholders & Beneficiaries

SME owners: 378000 SMEs have access to one-stop-shop services
Startups: have access to dedicated services
Citizens: business mindset promoted via trainings, guidance in setting up business
Government institutions: by relocating front offices to SME House, they organize activities more effectively in collaboration with other agencies and reduce operational costs
Civil society organizations: SME House hosts Public Council meetings and sectoral discussions with public-private participation.

Innovation Reflections

Results, Outcomes & Impacts

Impact can be measured through outcome and output indicators.
Over 2020-2022, number of SMEs increased by 20% from 316000 to 378000. Value added created increased from 10.9 bln. AZN to 17.2 bln. AZN (57% growth). Number of employees in SMEs grew from 349000 to 370000. Turnover of SMEs rose from 25.8 bln. AZN to 38.8 bln. AZN.
In 2023, 370,000 services were provided at SME Houses, of which 345000 G2B and 22000 B2B services.
The initiative contributes to SDGs supporting creation of decent jobs and growing SMEs (SDG8), providing startup incentives, increasing access of SMEs to finance, integrating them into markets (SDG9), ensuring transparency and easy access to public services (SDG16).

Challenges and Failures

The primary concern revolved around securing stakeholder commitment and effectively organizing activities of various state institutions in a single space. For this purpose, a standing high-level Coordination Group was established.
Another concern centred on the efficient provision of services to meet public expectations. In this regard, staff of SME Houses regularly conducts third-party observations of the service provision process. SME volunteers carry out exit surveys among users. Additionally, various rules regulating the arrangement of work at SME Houses were developed.
Other potential risks included sustainability of the work of SME Houses. Expansion of SME Houses was integrated to the Socio-economic Development Strategy for 2022-2026.

Conditions for Success

Two major aspects were instrumental in the successful implementation of the initiative.
The first one is the engagement of future users in development and implementation process. The single support service model for SMEs was established based on needs and preferences of the SMEs. Feedbacks from businesses was crucial to best meet the expectations of SMEs.
The second factor contributing to success was the mobilization of a large number of different government institutions through high level decrees and documents, as well as incorporating the initiative into the national strategy. Moreover, Law "On the Development of Micro, Small and Medium Enterprises" adopted in 2022 ensures a legal basis and continuity for the SME support ecosystem.

Replication

The initiative can be replicated across a wide geographic area, and scaled up and down according to regional specialization as needed.
In general, SME House concept is easily replicable and currently relevant centres exist in 3 different regions. Plans are underway to increase their number in the coming years.
Considering the needs of entrepreneurs, peculiarities of business operations and to facilitate prompt access of local producers to international and neighbouring foreign markets, the concept of deeply specialized service Centers in frontier regions (Khudat-developed and ready for operation, Samur, Khanoba-planned) is being developed. These Centers will primarily focus on export-import operations for SMEs.

Lessons Learned

The main lessons learned from operating SME Houses in Azerbaijan:
- integration of the initiative into high level national documents ensures sustainability and availability of government resources;
- involvement of all stakeholders in the development process and reflection of needs of future users are essential for success;
- collaborative work of representatives of different institutions helped achieve things much faster;
- the principles of openness will increase transparency, justice and professionalism, and trust in the ecosystem;
Based on feedbacks from users, as well as both output and outcome impact assessment figures, it is clear that the model’s results are quite efficient and successful.