Award-winning project Micro and Small Enterprise Development Program

Addis Ababa, Ethiopia

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

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. Through the Micro and Small Enterprise Development programme, Addis Ababa has reduced poverty and unemployment.

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 help from NGOs, training institutes, and micro-credit financial institutions. These organizations help provide training, disbursement of loans, and technical assistance.

Addis Ababa experienced a decrease in poverty and unemployment as a result of this programme. Some micro or small enterprises even developed into middle or large scale enterprises. Women also received a boost in employment. 37% of participants in the business training classes are women. Women Job Creation Teams (WJCT) were also developed.

The MSE programme serves as a good practice of new financial arrangements, a new integrated steering body and government body, and capacity building of administrators.

Award-winning project

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


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City information
City
Addis Ababa

Size and population development
2011: 2,979,000; 1990: 1,791,000; 2025: 4,705,000; 2010-2015: +2.33% / year

Population composition
Amhara (47.04%%), Oromo (19.51%), Gurage (16.34%), Tigray (6.18%), Silt'e (2.94%), and Gamo (1.68%). Languages spoken include Amharic (71.0%), Oromiffa (10.7%), Gurage (8.37%), Tigrinya (3.60%), Silt'e (1.82%) and Gamo (1.03%) (2007)

Main functions
Capital City, seat of African Union

Political structure
Mayor appointed by City Council for a 5 year term, city council elected by city residents

Administrative structure
10 sub-cities and 99 wards

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Background and objectives
In 2004 the government of Addis Ababa began 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.
 
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. The sector gives special attention to loan requests in the small scale industries of textile and garment, wood and metal works, food processing, construction, and municipal activities.
 
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.
The Micro and Small Enterprise Development Programme proved to be successful in achieving its goal of poverty and unemployment reduction, but experienced conflicts and challenges.
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 enterprises wishing to develop 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 capabilities, 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 technical and vocational school graduates, school drop outs, unemployed women and youth, existing micro and small enterprises, the disabled who are unable to work, 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 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 Teamsexist 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 other unemployed women about 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)
 
Unemployment and poverty were reduced in Addis Ababa
 
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 reacted to the refusal of some loaners to repay the loans. People seeking to develop their own enterprise will have to cover 20% of the costs themselves. Candidates will also be screened to see if they show signs of success. This creates a problem of limiting the access to the MSE programme. The programme is aimed at the poor and unemployed. Most of who 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. No other information exists about the transfer of this programme internationally.

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)

 


External links / documents