Who Benefits From Promoting Small And Medium Scale Enterprises Some Empirical Evidence From Ethiopia

Abstract: The Addis Ababa Integrated Housing Development Program aims to tackle the housing shortage and unemployment that prevail in Addis Ababa by deploying and supporting small and medium scale enterprises to construct low-cost housing using technologies novel for Ethiopia. The motivation for such support is predicated on the view that small firms create more jobs per unit of investment by virtue of being more labor intensive and that the jobs so created are concentrated among the low-skilled and hence the poor. To assess whether the program has succeeded in biasing technology adoption in favor of labor and thereby contributed to poverty reduction, the impact of the program on technology usage, labor intensity, and earnings is investigated using a unique matched workers-firms dataset, the Addis Ababa Construction Enterprise Survey. The data are representative of all registered construction firms in Addis and were collected specifically for the purpose of analyzing the impact of the program. The authors find that program firms do not adopt different technologies and are not more labor intensive than non-program firms. There is an earnings premium for program participants, who tend to be relatively well-educated, which is heterogeneous and highest for those at the bottom of the earnings distribution.

In this book the authors have designed comprehensive empirical studies and identified the impacts of access to finance on the Small and Micro Enterprises (SMEs) performance. The authors applied a mix of different methodologies ranging from developing a conceptual framework to an empirical study to investigate how, and to what extent, access to finance influences Small and Micro Enterprises (SMEs) performance. The motivation for the study was that the link between SMEs performance and use of bank credit is inconclusive. The study helps to understand the developed world financial theory and developing countries actual situation; thus, it helps to bridge the gap between theory and practices and strategically inform business decisions.

In many countries, there is now a wide recognition of the contribution of micro and small enterprises (MSEs) to economic growth. Within the Ethiopian context, despite the potential contribution of the MSEs to poverty reduction and employment creation, the Government had not, until very recently, extended adequate support to the development of the sector. To date, there has not been an independent assessment of the contribution of the MSE development strategy to poverty reduction, job creation and business growth either at the federal or Regional levels. To fill the gap, the Forum for Social Studies (FSS) commissioned this study in 2009 to assess the benefits and long-term sustainability of the strategy as well as the businesses/enterprises that have been set up by the large number of entrepreneurs. The aim is to provide policy inputs that can help create a vibrant and dynamic MSE sector and enhance its potential contribution to the countryís overall development.

This paper investigates the economic rationale for intervention in support of small and medium scale enterprises, on both theoretical and empirical grounds. It argues that the justification for SME interventions lies in market and institutional failures that bias the size distribution of firms, rather than on any inherent economic benefits provided by small firms. The role of the state is mainly to provide an enabling business environment that opens access to markets and reduces policy-induced biases against small firms. Governments can accelerate the development of markets for financial and non-financial services suited to SMEs by promoting innovation in products and delivery mechanisms, and by building institutional capacity. Improving the development impact of SME strategies will require much more attention to the monitoring and evaluation of intervention outcomes.

This book, originally published in 1989, studies both the growth and the barriers to growth of small firms. It examines market and industrial structures, also the role of investment institutions and their handling of small business accounts. There are chapters on management attitudes and ability considered as a potential barrier to development, and other problems such as lack of finance and of a suitably qualified workforce. The book stresses the importance of communicating the latest advances in technology to small firms, and urges the need to re-think government tax and procurement policies.

The African Development Bank's (AfDB) Addis Ababa Forum in June 2003 focused on the role of women entrepreneurs in private sector development, poverty reduction, and sustainable growth and development. It provided an opportunity for the AfDB and the International Labour Office (ILO) to join forces using their complementary expertise in support of women-owned businesses in Tanzania, Ethiopia and Zambia. This report is based on the country assessment for Ethiopia, where the ILO has been researching and supporting women's entrepreneurship. Examining such issues as the economic context, micro-fina.