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MSEs Instrumental in Alleviating Poverty

MSEs Instrumental in Alleviating Poverty

Fekadu W. 03-09-17

The implementation of Micro and Small Enterprises (MSEs) strategy has helped mushrooming of thousands of petty businesses being run by young and enthusiastic entrepreneurs. Among thousands of young and ambitious entrepreneurs, Aster and Frehiwot, both young college graduates, may best epitomize entrepreneur individuals nation-wide who are striving to create jobs and alleviate poverty.

They said they had gone through bumpy   and mazy roads when they decided to pursue their own business rather than looking for employment and high-salaried posts. Though their engagement in hand crafts making and artisanship needs great skill and talent of arts and crafts, their work is considered as drudgery with least payment.

Both established embroidery and costume production enterprise using semi-traditional weaving machine around Shiromeda, Gulele Sub-city of Addis Ababa. They started operation two years ago, by contributing 10,000 birr each to make up 20 percent of the 100,000 birr loan they obtained from local credit and saving institution. After many ups and downs to obtain loan and shades to start their business, they had managed to put their enterprise in to operation some months ago, with obsolete weaving machines and supply of hand-woven thread.

Currently, they had been reorganized with eight other youngsters to venture into their weaving and costume production business. Contributing 10,000 birr individually to start their business, the group had managed to secure over 300,000 birr credit from same credit institution. Their enterprise is looking for new market opportunities and is assessing possible ways that could help them to turn out profitable.

They said their produce has started to attract many foreign and local consumers and they have no marketing problem. However, they said they are faced with supply crunch as their machines are out dated. The prospect of their enterprise is rosy, according to them, so far as they keep on production of quality material.

The government has been committed towards expanding private-owned small and medium enterprises. It is continuously encouraging individuals towards self-employment and development through private ownership, particularly through participation of the youth. Even though, some skeptics are unknowingly lambasting the government and characterizing it as heavy-handed regulatory machine in the economy, the government has been playing pivotal role in executing mega projects, including the GERD and industry parks, which can employ thousands of job-seeking citizens. Above all, it is pushing the youth to establish its own enterprise and participate in poverty alleviation and development endeavors.

The government is discharging its responsibility to shake up development through participation of individuals. It has chosen to take the initiative and fill the gaps of development activities   which have not been covered by other private investors. Likewise, the government is proud of and takes full responsibility for the emergence of many industry parks and various kinds of job opportunities.

MSEs are one of the development dynamisms fully initiated and incubated by the government’s own policies and strategies. It is geared towards enhancing awareness of people about self-employment and running petty businesses, job creation, increasing incomes of participant individuals and contributing to poverty alleviation and overall economic transformation of the country.

The promotion of micro and small enterprises has been a centerpiece of the Ethiopian government’s strategy to alleviate urban unemployment among the youth since 2004. Since then, the government has adopted twin strategies of creating a business environment conducive to start and operate MSEs while at the same time actively triggering the establishment of new MSEs.

The strategy ushered in an era of booming small enterprises in Ethiopia, targeted to lift millions out of abominable poverty and improving incomes in the house hold level, particularly changing the lives of poor citizens and generating supplementary incomes to them. To this end, thousands of enterprises have been organized in rural and urban areas.

The strategy requires participant individuals to organize themselves at least in fives (for the sake of convenience to give loans, training and technical assistance) and form enterprises in job-creating tasks and engagement sectors of their choice. It enables to access loans from credit facilities at local microfinance institutions, without stiff collateral requirement. In this regard, the government has gone a long way to provide shades, offer basic technical and managerial skill trainings and create market linkages with immense projects.

According to the Federal MSEs Agency, as much as 700,000 new enterprises were created by the government’s support program during the first Growth and Transformation Plan (GTP I).Most importantly,best experiences have been gained and formulated from the GTP-I.

GTP II had targeted to create 2.1 million additional jobs and 160,000 extra enterprises in various urban centers across Ethiopia. The Agency says it has assisted to create 56,000 new enterprises which were translated into 940,000 additional jobs that enabled lots of citizens to become bread winners.

Indeed, creating and nurturing MSEs is one strategy of poverty alleviation to which so much hope and resources have went into. Both the federal and regional states have been pouring billions of birr to strengthen MSEs. The effort has evidenced booming of MSEs and considerable improvement in the livelihood of millions.

Strengthening MSEs and cooperatives has been witnessing inclusive focus being given by the government to the rural and urban poor as well. Currently, MSEs in rural and urban areas are considered as potential contributors to poverty alleviation and transformation of the national economy. The government has attached prime significance in small enterprises to thoroughly transform the technical and production capacity of manufacturing sector through time.

According to research conducted and large dataset collected from 13 major cities by Ethiopian Development and Research Institute(EDRI), consistent with the government strategy, MSEs productivity levels are largely comparable by enterprise type but differ widely by gender and levels of education of the entrepreneur.

EDRI growth calculation also indicates that while growth rates of self-initiated enterprises are higher, it is conditional on positive rates of growth, the likelihood of transition into larger size category appears to be larger among cooperatives. The research also suggests that the government should provide more customized support system that responds to the unique sets of binding constraints faced by MSEs.

Mean while, as part of the effort to level wider job opportunities to the youth, the government is poised to embark up on a program of mass job creation and entrepreneur incubation. The government has allocated 10 billion birr revolving fund which will be administered by regional governments and the Commercial Bank of Ethiopia (CBE).

The news of big money allocation has so far increased enthusiasm of the youth in urban areas and different corners of the country. According to budgetary statement publicized by the Agency, 3.4, 2.6 and 1.8 billion birr will be earmarked to Oromia, Amhara and Southern regional States respectively. The fund will be loaned to the youth for the purpose of establishing enterprises that enable to devise job creation and productivity.

Although the details are on the process of being made clear,  the project-based financing facility is expected to make breakthrough improvement to allay frustration over unemployment in urban areas. Nevertheless, the challenges of the previous MSEs support program would be alleviated eyed at making the new financing facility effective and bringing meaningful stride on employment and poverty alleviation.

Regarding enterprise development and enhancement of domestic productivity, nation has planned in the GTP-2 to promote 62, 500 MSEs from micro to small level and to upgrade 10,000 enterprises to medium level operators. Besides, entrepreneurship excellence centers will be established in 35 universities and MSEs participants would be offered trainings related to boosting productivity, work culture and skills.

Regarding assistance of the government and facilitation, over 2200 qualified one-stop shopping centers which include provision of working space, credit, and training and market linkages would be established(about 1,500 of them had been established across the country so far, according to the Agency). These centers would be instrumental in boosting productivity of enterprises and facilitating development of the manufacturing center. In this regard, 9,000 hectares of developed land will be provided. In addition, some 15,000 shades and 600 buildings will be readied to this purpose.

Despite the numerous problems, according to the Agency, MSEs have enabled to provide desperately needed jobs to thousands of citizens. In fact, problems related to quality and productivity of MSEs is palpable. And, hence, ongoing efforts are being exerted to iron out their problems and enhance quality and quantity of their produce. To this end, tremendous activities are being undertaken to provide ample finance, training and injection of new skills and creation of reliable market link.

Nation believes that MSEs are instrumental in creating job opportunities and improving the income and livelihoods of millions of poverty-stricken families. Accordingly, as ever, unreserved effort will be exerted to strengthen MSEs and help them employ as much young generation as possible and produce quality product very much needed in the local and global market.

Aster and Frehiwot said currently they had managed to refund their loan to creditors and they are striving further to add more values to their produce. They said things may not become bed of roses at the beginning. Young entrepreneurs should courageously and patiently try to solve problems and decide to turn out productive and profitable in the long run.

 


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