Micro and Small Enterprise Development Program

Women of the MSE - © UN Women/Carolina Sjolander

Executive Director Michelle Bachelet observes a MSE - ©UN Women/Carolina Sjolander

Participant of the MSE program - ©UN Women/Carolina Sjolander

A beneficiary of the MSE program - ©UN Women/Carolina Sjolander

Micro and Small Enterprise Development Program

Status

ongoing

City

Addis Ababa

Main actors

Supranational / Intergovernmental Institutions, Private Sector, other

Project area

Neighborhood or district

Duration

Ongoing since 2004

This programme uses micro-credit loans and provides business training to alleviate poverty and unemployment in the city of Addis Ababa.

In 2004 the government of Addis Ababa implemented the Micro and Small Enterprise Development Programme with the objective to reduce poverty and unemployment to less than 20% in the urban area. The MSE programme aims to fund micro and small business enterprises to provide people with an income and employment. One of the key focus areas of the programme is to increase employment for women who make up 51% of the population.

The Micro and Small Enterprises sector administers the programme through collaborations with NGOs, training institutes, and micro-credit financial institutions, which help finance, conduct training courses, and provide technical assistance. The MSE department disburses loans to new and existing micro and small enterprises to create job opportunities for the unemployed and increase people’s incomes. Special consdieration to loan requests in the small scale industries of textile and garment, wood and metal works, food processing, construction, and municipal activities.

For further information about the case study, click here.

Sustainable Development Goals

Metropolis Award

This project was awarded the 'Metropolis Award' in 2011 in the following category: 3rd Prize.

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City information

City

Addis Ababa, Ethiopia

Size and population development

According to the most recent census in 2007, Addis Ababa had a total population of 2,739,5551. The 2017-2018 census was delayed due to security concerns and in 2019 has yet to be conducted. The city covers an area of 527 square kilometres with a density of 5,165 people per square kilometre.

Population composition

The 2007 census records the largest ethnic groups in Addis Ababa as: Amhara (51.04%%), Oromo (19.5%), Gurage (16.34%), Tigray (5.18%), Silt'e (2.94%), and Gamo (1.68%). Languages spoken include Amharic (51.0%), Oromiffa (18%), Gurage (16.37%), Tigrinya (3.60%), Silt'e (1.82%) and Gamo (1.03%). The Ethiopian Orthodox religion comprises 74.7% of the population, while 16.2% identify as Muslim, 7.77% as Protestant and 0.48% as Catholic.

Main functions

Addis Ababa is the capital and largest city of Ethiopia. The city is between 2,200 and 2,500 meters above sea level at the foot of the 3,000 meters high Entoto Mountains. Addis Ababa is the diplomatic capital of Africa. More than 92 embassies and consular representatives cluster in the city where the Organization of African Union and the UN Economic Commission for Africa have their headquarters. Addis Ababa is the hub of the nation’s transportation network. The city is also served by an international airport.

Main industries / business

The city of Addis Ababa manufactures textiles, shoes, food, beverages, wood products, plastics, and chemical products. Most of Ethiopia’s service industries are located in the city, including the banking and insurance services. Ethiopia’s major newspapers are published in Addis Ababa and tourism is a rapidly growing industry.

Political structure

Addis Ababa is a chartered city and as such is considered both a city and a state. As part of the Federal Government, the federal legislature enacts laws that are binding in Addis Ababa. The city is comprised of 10 sub-cities and 99 wards.

Administrative structure

The administration of Addis Ababa city consists of the Mayor, who leads the executive branch, and the City Council, which enacts city regulations. Members of the City Council are directly elected by the residents of the city and the Council, in turn, elects the Mayor among its members. The term of office for elected officials is five years. The executive branch under the Mayor comprises the City Manager and various branches of civil service offices.

Website

http://www.addisababacity.gov.et/

Background and objectives

The Micro and Small Enterprise Development programme began in 2004. A new city department, Micro and Small Enterprises, was created within the Trade and Industry Development Bureau. The Micro and Small Enterprise Development department administers the programme with support from NGOs, training institutes, and micro-credit financial institutions. These organizations provide training, disbursement of loans, and technical assistance.The Micro and Small Enterprise Development Programme (MSE) uses a loan system to disperse government support to micro and small enterprises. It also offers business training programmes and counselling.

The MSE programme serves as a good example of new financial arrangements, administered by an integrated steering body and government body.

The objectives of the Micro and Small Enterprise Development Programme sector are:

To create job opportunities for the unemployed and increase their income by expanding and supporting micro and small enterprise in order to reduce poverty.
To identify the problems of the existing and newly created micro and small enterprise and provide them with support to enable them to flourish, develop, and strengthen job creation.
To create and expand new enterprises by organizing them into cooperatives and by providing various support in order to create new job opportunities and reduce poverty.

Implementation

The MSE programme is conducted through the Micro and Small Enterprise sector of the Trade, Industry, and Tourism Bureau. The city of Addis Ababa places great importance on micro and small enterprise support and therefore created a sector specifically for the MSE programme. The MSE sector is divided into three departments: Micro and Small Enterprise Development, Marketing Research and Promotion Development, and Cooperatives Promotion and Controlling Department. 10 branches of the MSE sector are administering the programme at district levels. At the kebele level, the smallest administrative unit in Ethiopia similar to a neighbourhood, there are 116 sub branch offices each with its own kebele chief to carry out the MSE programme.

The MSE department defines a micro enterprise as one with few employees and assets not exceeding 20,000 birr ($2,326). A small enterprise has more employees and assets between 20,000 birr and 500,000 birr ($58,140). The MSE gives preferential treatment to the development of enterprises in the textile and garment, wood and metal works, food processing, construction, and municipal activities industries. Two types of support are provided to micro and small enterprises: maximum and minimum. Maximum support is given to enterprises in the preferred industries that show a large market size for their product, large employment opportunities, short period of loan return, use of local materials, and the opportunity for growth.

Maximum support involves eight provisions:

Work sites with an inexpensive lease
Product display areas for an inexpensive price
Technical and business management training
Counselling services
Loan provision
Market linkage possibilities with government development programmes (e.g. housing development)
Ability to participate in exhibitions and trade fairs
Access to technology

Minimum support involves four benefits:

Loan provision
Ability to participate in exhibitions and trade fairs
Technical and business management training
Counselling services

The MSE beneficiaries are technical and vocational school graduates, unemployed women and youth, existing micro and small enterprises, the disabled and the extreme poor.

The government of Addis Ababa works with NGOs, training institutions (e.g. GTZ for skills training, business development), and micro-credit finance institutions to carry out this programme. A steering committee has also been created. The steering committee is made of the three main supporting organizations (MSE department, micro finance institutions, and technical and vocational education and training) and stake holders (MSE business owners or interested business owners). The steering committee is tasked with solving problems faced by MSE owners and evaluating the of the MSE programme.

The MSE programme includes a special measure to increase the employment for women. 51% of the residents in Addis Ababa are women. In 2010 37% of the jobs created were given to women. Women Job Creating Teams have also been established. The Women Job Creating Teams exist on the kebele level. They are tasked with creating jobs specifically for women and bringing the advantages of the MSE programme to women. The Women Job Creating Teams train unemployed women how to find employment, start a micro or small enterprise, and how to face and overcome challenges in the business world. The government of Addis Ababa has also set aside 50% of jobs in sectors like car parking services and waste collection for women.

Financing and resources

The MSE programme is financed by the government with assistance from the GTZ, other financial institutions, and NGOs.

Results and impacts

The MSE programme is an ongoing programme. Between the beginning of the programme in 2004 and 2010, unemployment and poverty were reduced in Addis Ababa. However, in 2010 unemployment was at 21.4%, above the 20% goal.

Results from 2004 to 2010 include:

Creation of a steering committee
Government cooperation with created enterprises
New employment opportunities created jobs for 686,083 people
Increased employment for women

250 small enterprises rose to medium enterprises

295,084 people received business and technical training (32% are women)

22,000 new enterprises were created (37% owned by women)

Barriers and challenges

Although the MSE programme had many positive results, barriers and conflicts were experienced. Many enterprises failed due to lack of counselling and business knowledge despite the training classes. The loans from the failed enterprises remain unpaid, and some successful enterprises are unwilling to repay the loans. Due to the large government support for MSEs, some enterprises rely completely on government support and provisions, and only sell their product at government organised markets. Contracts were also violated, and unsuitable material for housing development was used.

As of 2011 the government has put in place new regulations due to the refusal of some enterprises to repay the loans. People seeking to develop their own enterprise will have to cover 20% of the costs themselves. Candidates will be screened to see if their enterprise shows signs of sustainability and growth. This creates a problem of limiting the access to the MSE programme. The programme is aimed at the poor and unemployed, most of whom cannot provide 20% of the investment themselves. Experts believe this loan protection policy will in fact prevent people will good enterprise ideas from applying for funding from the MSE programme.

Lessons learned and transferability

The MSE programme has been transferred to other cities in Ethiopia, and a similar form of the programme has been implemented by the national government.

References

- Integrated Urban Governance Manual (see the link below)

- Growth determinants of women-operated micro and small enterprises in Addis Abada, Journal of sustainable development in Africa, Vol.12, n°6, p.48 (see the link below)