Anda di halaman 1dari 93

CHAPTER ONE: INTRODUCTION

1.1 Background

Large scale industrialization schemes have been practiced in many parts of African and
the developing countries. Under this type of industrialization strategies, most of the
experiences, know how, equipments and inputs were imported form abroad similarly,
most of the profits also left the countries in different forms. The strategy left hardly a
sustainable effect on indigenous micro and small enterprises/informal organizations
(ECA, 1998).

In recent years the development of micro and small enterprises/informal sectors is getting
more and more attention in filling in the development process. MSEs in many developing
countries result in higher employment per unit of scarce capital that exceeds their large
scale counterparts. Similarly, output per unit of capital is also found out to exceed that
which is generated by the larger enterprises (Liedholm and mead 1999).

The extent to which these advantages of MSEs development are achieved depends on the
nature and degree of support they receive. These enterprises have lower prospects to
grow and play an important role in urban areas in general and small towns in particular
unless they are supported effectively. If these firms are supported with effective financial
and non financial services currently known as business development services (BDS),they
could play a significant role in addressing unemployment problem and poverty and
serving as springboards for large scale industrial development.

The government of Ethiopia designed MSEs development strategy in 1997, and set up the
Federal micro and small enterprise development agency (FEMSEDA). The regional
states also developed MSE promotion strategies based on their context, and in tandem
with the federal MSEs development strategy. The government of Ethiopia has also
launched the implementation of MSEs development by promoting all rounded supports.

According to Wolday and Gebrehiwot (2004) BDS provision for MSE is a new concept
and approach in Ethiopia. Therefore, the authors clearly denote that BDS services are
needed for viable MSEs development. However, BDS in Ethiopia is very limited, and

1
often services are less effective as they are not tailored to the needs of individual business
as (Zewede and Associates, 2002).According to Liedholm (1999) there are three
categories of constraints ; these include lack of capital , problem of market and access to
raw materials and intermediate inputs. Research findings of Wolday (2004) which
focused on MSEs in major urban centers of Ethiopia revealed that access to markets and
finance are the most dominant constraints of this sector. The report of Africa
Development Bank (AFDB) and Organization for Economic Cooperation and
Development (OECD) (2005) denoted entrepreneur and know how is also another
constraints in Ethiopia. This paper aims to review the nature and effectiveness
sustainability modalities challenges and problems of the BDS initiatives in Ethiopia in
promoting MSE development by under taking a case study in Mekelle city.

1.2 Statement of the problem


Ethiopia designed a Micro and small enterprises development program was designed in
2006 to be implemented across all the Ethiopian cities and towns. According to the
Ministry of Works and Urban Development ( MWUD:2006), there were about 1, 273,
408 unemployed people in urban areas and this figure is believed to reach 1, 501, 974
people by 2002 Eth.cal. The Ethiopian government to address this unemployment
problem through promoting the development micro and small enterprise. The micro and
small enterprise development program is therefore designed to expand employment
opportunities in cities and towns by providing support to micro and small enterprises.
Accordingly a full support package that contains organization, land supply, credit service
market, technology, training and other supports has been prepared for micro and small
enterprises operating in selected fields. This is provided in the form of a BDS with the
help of extension agents. In addition, a minimum support package is prepared to micro
and small enterprises engaged outside the selected priority areas (WUD: 2006).

In addition to the government various organizations and associations and engaged in


offering BDS in Ethiopia. These include Women Enterprise Promotion center (WEPC),
FeMSEDA, GTZ, International labor Organization (ILO), Enterprise Ethiopia, UNDO.
Although the BDS is still at low level in Ethiopia, the service has been growing on the
past few years. The range of services provided are also widen substantially from time to

2
time. The Trade and Industry, Office of Mekelle city has scaled up the interventions in
accessing business development services (BDS) for micro and small Enterprises since
2003.
The governments, donors and intermediary organizations involved in BDS delivery have
become increasingly concerned about the impact, effectiveness, out reach, efficiency and
sustainability of the BDS services provision. In light of the scaling up of the BDS and
MSE development program in Mekelle and in across all cities in the country, it is
essential to provide an assessment of the nature and effective ness of the BDS initiatives
experimented in Mekelle. Such an assessment could help to improve the design and
modalities with the effectiveness of BDS delivery .
But the number of researches that analyzed the issues of nature and effectiveness of BDS
programs is few. Little is known about the initiatives and their outreach in Ethiopia in
general and in Mekelle city in particular. Therefore, BDS has not been entirely analyzed
so far.

Thus this paper attempts to contribute towards the filling the knowledge gab about the
BDS outreach, nature and modality of delivery; and effectiveness in terms of employment
expansion ,asset creation and sales increase of BDS using enterprises. services.

1.3 Objectives of the Research

1.3.1 General objective

The general objective of this research is to assess the approaches, effectiveness,


outreach and sustainability of BDS provision by the government of Mekelle city.

1.3.2 Specific objectives

1. To assess the status of BDS program with regard to outreach to MSE operators.

2. To evaluate the modalities of BDS delivery.

3. To review the effectiveness of BDS in terms of improving the performance of MSEs.

4 .To review the sustainability of BDS services.

3
5. To identify the roles of MSEs operators, providers and facilitators in delivering the
BDS effectively.

1.4 The Research Questions

This research attempts to answer the following questions:

1. What is the level of BDS preprogram and outreach with the regard to MSE operators?

2 .What type of modalities has Mekelle city been pursuing to deliver BDS and what are
the experiences with these modalities?

3. What are the opportunities and challenges of BDS?

4. What are the roles of MSEs operators, providers and facilitators in promoting the BDS
market?

5. What are the main problems encountered in delivering BDS?

What has been the effectiveness of BDS on the performance of MSEs

7. What are the possible strategies available to improve the effectiveness of BDS?

1.5 Research Hypothesis

Null Hypothesis: Providing BDS (short term trainings, and technical assistance, access
to market, facilitation for inputs, technology and product development, infrastructure and
working premises, information and consultancy and financial facilitation) to MSEs have
not significant contribution in generating employment opportunities, asset creation and
sales increases This hypothesis would be tested by comparing to BDS users with non
users as well as before and after the BDS services provision within the enterprises
themselves.

Alternative Hypothesis: Providing BDS (short term trainings, and technical assistance,
access to market, facilitation for inputs, technology and product development,
infrastructure and working premises, information and consultancy and financial
facilitation) to MSEs have significant contribution in generating employment

4
opportunities, asset creation and sales increases as compare to BDS users with non users,
as well as before and after the BDS services provision with in the enterprises them selves

1.6 Significance of the Research

The research will help policy makers; BDS facilitators and providers as well s donors to
develop a sustainable program, and to clearly identify their roles on effective BDS market
in the future. The intention is that policy makers and implementers of MSE support
programs may use the research for designing more effective interventions on BDS.
Mekelle city is also expectedly to use the findings of this research to improve its BDS
delivery to its clients when they develop the strategic framework.

Moreover, the results of this research can be used as an input in understanding the status,
challenges and prospects of the new paradigm BDS in Mekelle city. On the other hand,
the findings of the research may contribute to the enrichment and development of MSE
strategies. The research may also solve as additional references for further research and
investigation on business development services for micro and small enterprises in the
major urban centers.

1.7 Scope of the Research

Though there are informal business development service providers, they were not the
focus of this dissertation. This research gave due attention to the BDS provided by the
government of Mekelle city. Trade, Industry and cooperative promotion office of Mekell
city has provided various supports for the MSEs. However this research is restricted only
to the special and business development services users. The research focused on
examining the practices, approaches, performance sustainability of marketing of BDS
delivered by the city administration of Mekelle.

1.8 Structure of the paper

There are five chapters in this research that include introduction, literature review, design
and methodologies, the discussion and findings of BDS and conclusion and
recommendation in that order. Even though the major chapters contain subtitles, they are
generally implicitly represented within the major titles of the chapters.

5
1.9 Limitations of the Research

Adequate data on micro and small enterprises in general and business development
services in particular was difficult to get in Mekelle city. Besides, there were
inconveniences to estimate and specify the numbers of operators who have been
supported and getting BDS by the government.

Since the current BDS delivery is supply driven, this research could not conduct an depth
BDS market and demand analysis. The paper rather evaluated the effectiveness and
outreach of BDS using indicators of employment asset creation and increased sales.The
thesis could not separate the impact of BDS from other economic growth effects on the
performance of MSEs. The overall manuals, periodic reports of the Mekelle Trade,
Industry and cooperative promotion office did not include any BDS services costs. The
costs and benefits of the BDS service was not explicitly recorded and estimated that
affected negatively the attempt to measure the efficiency of BDS and the MSE
development.

Similarly, some respondents of this research were not interested to spend more time and
to tell about sales and asset creation because all data related with business information
were concealed for fear of use of such data for other purposes (e.g to avoid government
taxes, charges and fee). Therefore the business enterprises are likely to have
underestimated their sales and asset creation. This undermined the objective of the paper
to examine the impact of the BDS on the performance of the enterprises.

1.10 Description of the Study Area

Tigray Regional National state (TNRS) is located in the Northern part of Ethiopia.
According to the central statistical authority, the total land area of the region is about 50,
780 km square with a total population of 4.23 million. The urban population is 18.5% of
the Regional population (Urban Instituted :2006). The urban population is fast growing at
4.6%.

6
Mekelle is the capital city of Tigray region. It is found at a distant of 783 km to the
Northern direction of Addis Ababa. The population of Mekelle is about 177090 and
annually increasing by 4.5% which is driven natural fertility and migration (CSA:2006).
The city has a total area of 74km square in 2004.

The city of Mekelle is found within the circumscribed boundary of Enderta Woreda
which is found in the southern zone of Tigray Region, Ethiopia. Geographically the city
is enclosed within the limit of 13o 18’ 3” _ 13 o 39’ 52” North latitude and 39 o 22’30” _
390 39’ 33” East longitudes. The altitude of Mekelle varies from 2150 to2270 meters
above sea level. This elevation makes the city under the category of Weinadega of agro-
climate zone.

Mekelle experiences mild climate condition with annual average maximum temperature
of 24.1 o c and annual average minimum 11.11 o c. There is one short rainy season, which
comprise months of June, July and August. This rainy season is characterized by erratic,
unreliable and unevenly distributed through out the year. The city has annual average rain
fall 618.3mm/year.As indicated in proclamation number 65/2002 of the Tigray National
Regional state, Mekelle city shall administer or follow the mayor-council system of
governance. In the new reform the city is divided in to seven one stop shop service
centers.

There is also a high rate of migration which doesn’t match with the socio-economic
growth and infrastructure service requirement of the urban population. This growth rate
is creating negative impacts on the country’s social and economic development at large.
It is there fore imperative to devise and implement strategies and programs that would
enable urban growth to contribute to the country’s social and economic development and
promote good business environment.

7
CHAPTER TWO: LITERATURE REVIEW

2.1 Theoretical Literature

2.1.1 Definitions of Business Development Services (BDS)

In the late 1990s enterprise development community were searching for a term to replace
non financial services, i.e. any business services that were not micro finance. BDS
emerged and become the standard terminology for what used to be as non-financial
services (Frank: 2004). The Donor Committee introduced the term BDS in 1997 into the
development glossary and initiated a process of substantial analysis and reflection among
the development community (Bear: 2003).

Business development services can be defined as the services that improve the
performance of the enterprise, its access to markets, and its ability to compete in the
market. BDS often includes seven categories of services that enable growth and
development of enterprises. These are training and technical assistance, access to
markets, input supply, technology and product development, infrastructure, policy and
finance resources accessed to address specific constraints to MSE growth and
development (GTZ,ILO,EC: 2001).

GTZ,ILO,andEC (2001) further identify distinction between operational (narrower) and


strategic (broader) BDS. Operational business development services are those needed for
day to day operations, such as information and communications, management of accounts
and tax records and compliance with labor laws and other regulations. Strategic services,
on the other hand, are used by the enterprise to address medium, and long term issues in
order to improve the performance of the enterprises, its access to markets, and ability to
compete. There is still a debate as to whether a narrower (in terms of knowledge, skills
or information services) or a broader interpretation of the term is preferable. Both the
BDS primer 2003 of International Labor organization (ILO) and the small enterprise
education and promotion (SEEP) Network distinguish between seven categories of
Business Development Services, namely; a) market access (e.g. marketing linkages
advertising packaging), b) infrastructure (e.g. storage and ware housing

8
telecommunications, couriers), c) policy/Advocacy (e.g. training in policy advocacy), d)
input supply (e.g. linking firms to input suppliers), e) Training and technical assistance
(e.g. management training), f) Technology and product development (e.g design
services), g) alteration financing mechanisms (e.g supplier credit).Many practitioners
adhere to the broader type of BDS because, according to their understanding, it relates
more to the demand of MSEs, and additionally permits to be the flexibility to respond to
the many constraints facing small business (GTZ eta,l: 2001).

There are also other ways of classifying types of BDS. A type of BDS varies based on the
hierarchy of intervention whether it is at macro, or micro level (Donor committee, 1998;
Gebrhiwot and Wolday, 2004). The guideline developed by Donor committee (1998)
defines the BDS instruments at each level. The micro levels of BDS are delivered to
MSEs by BDS organizations, but rarely directly by donors. The objective of MSEs level
interventions is to enhance the efficiency, effectiveness and sustainability of local or
national BDS organizations. The macro level BDS focuses on facilitating conducive
macro-level policy and regulation for the development of MSEs. BDS performance can
be measured through consumer acquisition of BDS: increased customer application of
BDS in the business and an increased business benefit from BDS. Outreach is another
concept that measures BDS performance by levels of expansion of the market for BDS:
development of high quality diverse, competitive market: and increase in BDS access to
under served groups.

Sustainability is also the measure of BDS performance which includes customer


willingness to pay, payment, program expenses, and sales to MSE operate as the result of
BDS.

2.1.2 Definition of Micro and Small Enterprise (MSE)

MSEs are defined both in terms of paid up capital and number of worker. These
definitions differ from country to country based on their relative situations. In Ethiopian,
micro enterprises are defined with paid up capital of less than Birr 20,000 and excluding
high tech-consultancy firms and other technology establishments. Small enterprises are
those business enterprises with a paid up capital of above Birr 20,000 and not exceeding

9
Birr 500,000 and excluding high tech consultancy firms and other technology
establishments (FeMSDA: 1997).

The researcher used the MSE working definitions of Ethiopian context that defines in
terms of paid up capital stated in the above paragraph.

2.1.3 Historical Development of BDS and MSE,s

The guidelines of Donor committee noted that provision of non financial services to
MSEs have been popular with donor since the mid 1970s and early 1980s.Additionaly the
provision of non financial services tended to be confined to training and technology and
often involved donor and implementing agencies working directly with MSEs. During the
1980s, the range of services, in addition to credit, widened substantially to include
individual counseling and the facilitation of market access (Eiling manm: 2005).The
development of net works and clustering the provision of information in a variety of
areas, such as equipment, technology and markets, as well as physical facilities and
shared services, led to a new and different focus on market development approach
(Gibsion: 2001).As the provision of publicly funded and publicly provided non financial
services to micro, small and medium sized enterprises (MSME) had in the past often
resulted in weak performance and low sustainability of donor interventions, in the late
1990s the focus moved towards promoting commercially oriented markets for Business
Development Services (Eiling manm: 2005).

The BDS field is now quickly adopting new high impact strategies that can reach large
numbers of business in a sustainable manner. The provision of some services like
communications and advertising are on fully commercial basis that have shown effective
markets for business services offer the opportunity to help many small enterprises
develop and compete.The BDS market development approach entails the essential
elements of competitiveness. It can be interpreted as an interface between macro and
micro requirements from an entrepreneurial perspective: first there is the market with
suppliers, workers and services, then institutions with additional public and private
services and last but not least there is the policy level with regulations, laws and the
potential to encourage or hinder the development of entrepreneurs and the market. The

10
approach therefore presents a transmission belt for interventions to promote innovative
support programs.

Researchers have always interpreted the BDS market development discussion and its
implementation into BDS facilitators’ approaches as a logical result of important
accumulated learning experiences in micro, small and medium enterprise (MSME)
promotion during the 1980s and 1990s. Its emergence can be seen as a process and move
towards a more market based approach with a continuous striving for more outreach,
impact and sustainability instead of a total rupture with earlier support approaches.
Nonetheless its breakthrough in the middle of the 1990s was the upshot of a general
perception that traditional support approaches lacked impact and sustainability (Waltring:
2006).

The BDS discussion started in 1995. It culminated in the so-called “blue book”,
published by the Committee of Donor Agencies for Small Enterprise Development,
which became a guideline of best practices and in a sense a catalogue of criteria for
comparing small and medium enterprise (SME) projects. More important than the
publication of the blue book itself were the intensive international discussions,
evaluations and reflections undertaken in numerous Projects, international working
groups and conferences and their identification of the key weaknesses of traditional
approaches. The donor approach followed mainly up to that point was supply-driven
approach. Although important project activities were implemented to improve
preconditions for a BDS market development approach (like developing human and
organizational activities and strengthening public and private support institutions) there
was insufficient understanding of the real demand side of MSEs and the functional logic
of markets. Instead of facilitating the development of service markets, donors and
governments often acted as direct providers of services and in some cases crowded out
private service opportunities. The emphasis on the support of public services or NGOs
encouraged an incentive logic in which the latter organizations reacted more to the
demands of the donors than to those of the business sector. Mainly standardized support
products and services were offered, frequently free of charge. Service delivery was

11
mainly regarded as a public good, rather than there being any differentiation between
public and private duties and responsibilities (Eilingmanm: 2005).

Especially in weak markets, where supply and demand are often mismatched, it became
increasingly important to rethink interventions from the donor and governmental sides.
The innovative aspect of the BDS market development approach was its emphasis on
analyzing the functioning of markets and strengthening them as a whole. Strengthening
the “market place” became the objective instead of strengthening isolated aspects within
the market that might distort rather than improve the economic situation.

BDS are primarily services for entrepreneurs, especially for MSEs, to improve their
productivity and competitiveness. In contrast to earlier MSE approaches, they should be
conforming to the market and be offered by competing providers. The 1st generation of
BDS projects therefore mainly focused on the support of private providers, the matching
of supply and demand of services and a very resolute interpretation of the blue book
guidelines in terms of subsidization, demand and private sector orientation. It soon
became obvious that BDS support is not enough to strengthen BDS markets, especially in
economically weaker countries.

The 2nd generation of BDS market development included additional elements, more
actors and integration of the BDS market development approach with private sector
promotion, value chains (VC) and an enabling environment. There is a trend towards a 3 rd
generation that this publication does not address. The present international discussions on
concepts like “Making markets work for the poor” and the trend to transfer a general
market development approach into other sectors (like health, agriculture, etc.) has been
influenced by lessons learned from the BDS concept, e.g. how to operationalise the
market development objective and relevant tools, indicators, processes, partners or
intervention mechanisms.(NGOs) should withdraw from direct delivery of potential
private services and become facilitators of the BDS service market and limit their
functions to more public good services such as demand stimulation, information, market
linkages and advocacy.

12
Project staff of donors and partners must become more business-like, applying more
flexible and demand-oriented tools instead of standardized models. This also includes the
need for new business skills beyond traditional project management skills.

Everything has to be commercial for a short while became the mantra of some BDS
experts. However, in recent years, this 1st generation BDS approach has been criticized
by some as being too rigid and fixed on commercially viable private service solutions.
Insufficient emphasis was placed on the weak institutional and market realities in many
developing countries. The roles of public entities were also not adequately incorporated
into implementation interventions. Private Service providers were predominantly
identified in urban areas, mainly oriented towards the demand of the more solvent
medium and large enterprises (Miehibrat, Mcvay, 2003).

2.1.4 The Role of BDS in Economic Growth

According the model of Halberg/Oldsman (2002), the logical chain of causality between
intervention and poverty reduction is developed. Further more we can see the example
presented in figure 2.1.1.

13
Poverty impact through Economic Growth Generated by participating Small Enter
through provision of the BDS services

Reduction in proportion
of population living
below poverty line

Net increase in
real income
among the poor

Net increase in
demand for production Reduction in prices
factors produced by for goods and
the poor, including services consumed
their own labor by the poor

Economic Growth

Participating Small Enterprises


Improved Increased
capabilities productivity
and out put

BDS Services

Implementing/intermediary
Organizations

Resource

MSEs
Supporters

Figure 2 .1.1

14
When the owners of participating small enterprise are poor;Some BDS programs target
specific groups for intervention such as poor farmers or petty traders in a particular area.
BDS programs help them to start or operate micro-enterprises. Because these programs
work with business owners that are poor, improved business performance may yield
sufficient income to lift these business owners (and unpaid family workers) out of
poverty. These programs aim to reduce poverty within these specified groups.
When participating small enterprises employ the poor: In deed, most BDS-programs are
not designed to address business owners who are themselves poor. Those that focus on
the development of BDS markets are not aimed at particular groups of poor People;
rather, these programs are intended to reduce poverty within the general Population. In
these instances, the links between programs and poverty reduction is more complex,
hinging to a great extent on induced labor demand within participating firms and the
broader economy.
Through economic growth generated by participating small enterprises: The improved
performance of participating small enterprises may spur economic growth leading to
higher real household income and a concomitant reduction in the poverty rate (figure
2.1.1). Small enterprises initiatives benefit the poor to the extent that they result in Pro-
poor economic growth, i.e., growth that provides greater opportunities for the poor to
generate higher real income. In this regard, numerous empirical studies have found that
economic growth is associated with poverty reduction with a reduction in the proportion
of the population living below the poverty line. This is based on the assumption that,
improved business performance reduces poverty to the extent that it raises the income of
the poor (Spath: 2004).
Measuring impact on poverty alleviation is difficult since the direct impacts of most
programs are limited, given the scale of the problem and the relative size of the
intervention, thus leading to problems of causality and attribution. BDS projects with
advanced monitoring systems work with clearly defined control groups in order to assess
their impact at company level. For example, turnover in 60% of the supported SMEs have
recorded a 30% higher growth rate than in a group of enterprises which received no
support based on a representative selection of 30 enterprises. (Eiligmanm: 2005).

15
2.1.5 Approaches of BDS Delivery

There are two approaches of delivering BDS: traditional interventions (supply driven
approach) and Market development interventions (demand driven approach), (GTZ eta,l,
2001; Gibson eta,l: 2001).

a) The Traditional Approach

In the traditional approach, donors and governments have tended to substitute for under
developed BDS markets, possibly crowding out existing or potential commercial
providers of services. Traditional approaches have failed to achieve high out reach.
Access to services by a large population of the target proportion of MSEs is low, since the
number of MSEs served is limited by the amount of subsidies available. In addition,
institutional sustainability has been low, since programs often cease when public funds
are exhausted (Miehibradt, eta,l, 2003).

Traditional Approach: Substitute for the market

Donor Government Private sector Providers


funding Agency Donor
program NGO

MSEs

MSEs

MSEs
Source: Donor committee (2001)
MSE

Figure 2.1.2
Figure 2.1.2 indicates traditional development approach to the delivery of BDS that has
been through intervention in the BDS. In other words, this approach involves the creation
of an organization to provide BDS directly to MSEs with excluding the private sector
providers. According to this approach public subsidies play important role in enabling
SMEs to obtain BDS either at no or very low cost. The expectation is that as the subsidies

16
are withdrawn, BDS providers will charge for those services in order to attain financial
sustainability (Sievers, Haftendorn & Bessler, 2003).

b) Market Approaches of BDS Delivery


With the increased global dialogue on Business Development Services has come
increased scrutiny and discussion of how BDS contributes to poverty alleviation,
economic growth, increased employment, and other development objectives. In general,
business development services are aimed at increasing small enterprises sales, or
reducing costs so that businesses can grow and become more profitable. This growth and
increased productivity leads to increased income for owners, increased employment for
people in the community, and economic growth for other businesses in the same market.
In addition, many BDS programs aim to achieve supplemental development impacts such
as environmental preservation, gender equity, empowerment and democratization,
livelihood security and stabilization, or improved health and HIV/AIDS mitigation.
Findings in recent analyses of high performance BDS programs show that BDS can
contribute to the development objectives outlined above. The research found that a clear
and specific strategy that links business services to well-defined outcomes for small
enterprises is an essential ingredient to achieving high impact.( Miehibrat, eta,l: 2003).
In order to provide small enterprises with access to BDS, traditional development
programs focus on one institution, providing subsidies to small enterprises that allow to
access services free or at very low cost. There is now agreement in the field that this
approach has had a limited impact because programs were generally short-term, small-
scale, and expensive. Some non-profit BDS providers, learning from the success of
microfinance institutions in sustainably reaching large numbers of people, began charging
fees for services and a few have become financially sustainable. Unlike microfinance
institutions, however, these programs have tended to remain small. This is perhaps
because microfinance is a mass-market product whereas the services these organizations
offer tend to be tailored to specific niche markets. The Market Development Paradigm is
a new approach to BDS design and delivery that has the potential to reach large numbers,
cost-effectively and sustainably by developing a broad market of BDS suppliers and
small enterprises that access services through mainstream, business-to-business
relationships.

17
The Market Development Paradigm proposes a new vision for success, one that looks
like a healthy, private-sector business services market-numerous, competitive BDS
suppliers who sell a wide range of BDS to large numbers and types of small enterprises.
Programs start by understanding the existing supply of BDS from the private sector,
donor supported programs and government, and the market failures that lead to a gap
between supply and demand for services. The goal of market development interventions
is to overcome these market failures and take advantage of opportunities to expand the
service market for small enterprises. The desired result is that numerous small enterprises
buy the BDS of their choice from a wide selection of products offered (primarily) from
unsubsidized, private sector suppliers in a competitive and evolving market. (“Buying”
can mean paying fees for services or procuring them through commercial relationships
with other businesses for small enterprises ( Miehibrat, eta,l: 2003).
The vision of the BDS market development approach is to develop a vibrant, competitive
BDS market in which large numbers of small enterprises use a wide range of business
services to improve and grow their businesses. They obtain these services through
business-to-business relationships with competing, private sector suppliers.
The BDS market development approach as an explicit development strategy is still
young and organizations are experimenting with a number of interventions to develop
BDS markets. There is agreement that the intervention should fit the market that it
should be designed to improve a particular market problem or take advantage of a market
opportunity. Practitioners are finding that there is often more than one way to address a
market issue and more experience and experimentation are needed before the field can
clearly outline which interventions address which market failures.
Because of the history of development programs telling small enterprises what services
they need, there has been some reluctance to aggressively pursue demand promotion
strategies. However, programs pursuing market development are often finding that
demand creation is an important part of market development. In fact, demand promotion
is often a key part of private sector marketing strategies as well. But, there are different
strategies for promoting demand. Some traditional BDS programs have provided small
enterprises with services that experts thought they needed, regardless of what the small
enterprises thought. Market development programs try to address specific demand side

18
problems in such a way that small enterprises want to purchase a service. For example, if
small enterprises are unaware of the benefits of a service, a program may develop an
awareness creation strategy aimed at increasing small enterprises understanding of what
the service can offer them (Miehibrat, eta,l: 2003). Then, small enterprises can make a
better informed decision about whether they want the service or not. If they generally
produce a service in-house, a program may subsidize supplier marketing efforts which
show why outsourcing a service can be a cheaper alternative. Again, this strategy helps
small enterprises make informed choices about purchasing services.
A variety of market development approaches are used in practice. Each approach aims to
address one or several weaknesses in a BDS market. Some address primarily demand-
side weaknesses, others the supply-side, but most approaches affect both sides of the
market. Usually the approaches are combined into an overall strategy. Approaches used
most commonly to date are described below, with examples (Miehibrat, eta,l: 2003).
1. Vouchers Program address small enterprises lack of information about services and
reluctance to try a service. The aim is to expand demand for BDS by providing
information and encouraging small enterprises to try services by subsidizing their initial
purchase(s).
2. Information to Consumers addresses small enterprises lack of information about
services and suppliers. The aim is to expand demand for BDS by making small
enterprises aware of available services and their potential benefits.
3. Collective Action: Clusters, Networks and Associations address small enterprises
lack of ability to pay for services and supplier inability or unwillingness to sell services in
small enough quantities for individual small enterprises. The aim is to help small
enterprises overcome diseconomies of scale in purchasing BDS by enabling them to
purchase services in groups.
4. Business Linkages and Promoting Embedded Services address small enterprises
isolation and inability to pay for services up front. Business linkages also address
supplier’s lack of knowledge about small enterprises. The aim is to create or expand BDS
embedded within business relationships between small enterprises and other firms.

19
5. Technical Assistance to Suppliers addresses suppliers’ lack of technical or managerial
skills. The aim is to build the capacity of new or existing BDS suppliers to profitably
serve small enterprises.
6. Product Development and Commercialization addresses a lack of appropriate
products for small enterprises in the market and supplier reluctance to target new
consumer segments. The aim is to commercialize new products through existing suppliers
by assisting with product development, market testing and initial marketing of new
products. New product commercialization can also be undertaken by promoting
franchising of appropriate service products or service businesses.
7. Social Enterprise addresses a lack of supply in the market. The aim is to increase the
supply of services by assisting suppliers in expanding or helping new suppliers to enter
the market.

Market circumstances not only change form country to country but also within countries
between regions and localities and sectors. Apart from understanding market functions
and failures in these different localities and identifying over all systemic considerations
new market insights demanded the renunciation of blue print approaches and the
development of new tools appropriate to local norms, skill and resources (Waltring:
2006).

As a revolution in delivery of BDS therefore, market development approach emerged in


the 1980s. The market development approach represents radical shift from the focus on
the supply driven and subsidized BDS given to limited MSE operators to the
development of demand driven vibrant BDS market to a large number of MSE,
(Gebrehiwot eta,l: 2004).

The goal of market development interventions is to overcome the market failures that
lead to a gap between supply and demand for services and take advantage of
opportunities to expand the service market for MSEs (GTZ eta,l: 2001).

20
Facilitating BDS market development BDS supply BDS demand

MSES
Figure 2.1.3
Provider

MSES
Donor/ Facilitator
Government
MSES
Provider

MSES

Direct provision of services MSES


Provider
Facilitation of demand and supply MSES
Source: Donor committee: 2001

Although there is broad support for the market development approach there is still debate
as to whether it is appropriate for the poorest entrepreneurs. The approach is particularly
questioned by those who serve MSEs in remote rural areas where markets do not function
well or who serve MSEs that are excluded from the market due to income, gender, ethnic
or other social barriers. These practitioners feel that market players have excluded or
exploited the poor, and that it is unrealistic to think that markets will work to benefit the
poor on a large scale.
Proponents of the market development paradigm argue that not integrating marginalized
entrepreneurs into markets will further exclude them from the benefits of economic
development. They point to progress made in learning how to reach these groups with
market development programs and cases in which commercial services have reached the
poorest. Additional action research and on-going program monitoring using common

21
performance measures may help increase understanding of how markets do, and do not,
serve the poor. There fore traditional approach supports for the poor.

2.1.6 Appropriate intervention and approaches

The goal of demand oriented interventions is not to impose external solutions but to
ensure that state and donor activities are shaped by an understanding of the “rules of the
game” in regard to the constraints that inhibit the local markets development (Miehibradt
eta,l:2003 ).

Figure 2.1.4

Alternative Approaches for Facilitation of BDS.

Stronger supply

Informing A Optimizing B
low

Demand low Supply embryonic Demand embryonic supply emerging


 More enterprises  Many enterprises
 Size of enterprise tiny ad small  Size of enterprise small medium
 Few private services providers  More senesces providers
Supply

C D

Stronger demand
Educating Stimulating
Demand very low supply inaccessible Demand existing supply inaccessible
 Fewer enterprises  Few enterprise
Very low_

 Size of enterprise  Size of enterprise medium/ large


 No private service providers  No credible service providers

Very low Demand low


Source:
According to the GTZ learning experiences:
A local situation like in quadrant C, where both demand and supply are very low, is
perhaps one of the more complex scenarios for market development. The focus should be
on education and awareness creation with an impact expectable only in the longer term.
Examples of these approaches can be found in very weak markets, especially in African
countries where basic capacity building towards business institutions, private service
providers and government entities is very important.

22
A situation such as quadrant A of a very low demand and low supply, the emphasis
should be on information and elementary capacity building of public and private service
providers. Impact will be in the medium-term.
The third situation (B) is that of low demand and low supply, a best-case scenario with a
relatively well-developed market. Interventions might aim at cost-recovery with private
service providers in the forefront and a clearer differentiation of the roles of the factors
(government, public service providers and business associations). The impact of such
interventions would be faster.Finally, Where the demand is low and the supply very low
or non-existent (D), as can be the case in export markets where appropriate service
providers are often located in the destination markets, there is a case for modest
interventions that highlight the need for a certain BDS and try to establish linkages
through demonstration. If BDS provision is very weak, but there is a willingness to
incorporate a market development approach in the long run, facilitators (or donors) might
sometimes act more as service providers to initiate the process (example GTZ Palestine)
but this needs caution. In very weak markets like in many African and other least
developed countries, basic capacity building of business associations, government entities
and service providers still play an important role. Following a market development
approach under these circumstances requires the consideration of gradual steps in which
capacity building is combined with demand orientation and matching of supply and
demand from the outset (Mcvay:2003).

2.2 Empirical Literature Review of BDS and MSE’s

2.2.1 BDS delivery Practices

a) BDS Delivery in Vietnam and Thailand


A study by the International Labour Organization in Thailand and Vietnam found that
BDS were delivered to MSEs in four ways; these are fee for service, commission basis,
through business relationships and through the business environment .
The study focused on services to micro enterprises and stated that 84% of the sample
businesses employed fewer than 7 people. It also found few services provided by service
companies on a fee for service basis. Sales services were typically provided on a

23
commission basis and the channel through which the widest variety of services was
delivered was business relationships. Services delivered through this channel included
training, marketing, product design, and market information. Some types of business
information were also offered through the media and customers. The study shows that
even the smallest businesses are currently obtaining business services through private
sector channels (Miehibradt: 2003).
b) Swisscontact and Business Centres
A Swiss NGO with major funding is helping to create business centers in several
countries including Indonesia, Philippines, Bangladesh, Colombia, Ecuador and Peru.
Some of these centers cater to a specific sub-sector and provide services, mainly to small
enterprises such as a retail outlet, bulk buying of inputs, common service facilities, and
marketing assistance. Others provide a range of services such as training, consulting, and
administrative services to small enterprises and often larger enterprises as well .Swiss
contact provides the centers with a package of start-up services including financial and
technical assistance. The objective of Swisscontact is that the development of
commercially sustainable centers takes place only if business practices are used from the
beginning. The business centers are selected through a bidding process that includes
detailed business plans and a financial commitment from bidders. The bidding is open to
any kind of organization, including business associations, private firms, and NGOs and
aims to build on existing business support institutions rather than creating new ones.
Swisscontact signs a contract with successful bidders that stipulate that financial
assistance is dependent on the achievement of agreed financial targets. Financial
assistance typically includes some start-up costs and covers up to 50% of operating costs
in the first six to twelve months. Financial assistance continues (if the center is meeting
its targets) on a declining basis for one to five years. Financial indicators include financial
sustainability, cost effectiveness, and gross margins for various services. Technical
assistance may include advice, market surveys, and new product ideas, networking with
other business centers, auditing services, and training. Swiss contact’s experience has
shown them the importance of business-like relationships with suppliers. Indeed, Swiss
contact is now more closely examining private sector models of business investment such
as venture capital companies (Miehibradt:2003).

24
2.2.2 BDS and MSEs Practices

An impact study on a World Bank program in Kenya shows that the BDS project
improved profits, sales and investment in a significant proportion of trainee businesses. It
increased the potential demand for businesses, many of which were women beneficiaries.
There is also some evidence of increased employment. A study on the effects of
management a three-day training course for women entrepreneurs in micro and small
businesses in Vietnam, which was based on findings in test group of 102 women and
control group of 43 women, concluded that the training showed a statistically significant
impact on increases in sales and personal income for the trained women within a time
period of four to six months. The training had stimulated innovation, product up grading
and had increased productivity. However it was impossible to confirm whether the
training had any direct employment creation impact, and the results regarding better
quality of life were similarly ambiguous (Waltring etal: 2006).

In Sri Lanka, systemic BDS intervention from the entrepreneur’s point of view the BDS
component of the Enterprise Strategy Support Program (ESSP) started with the support of
BDS providers and business linkages. After one year of experience the project changed
its approach because of the low demand on the part of entrepreneurs for services. ESSP
focused on the core approach with which it stimulates ideas of the model business group
members to improve their enterprise, motivates entrepreneurs to demand tailor-made
BDS products, influences changes in business environment and initiates organizational
development in chambers through the Nuclei (bottom-up approach). Activity of model
business is a working group of entrepreneurs from the same sector guided and facilitated
by a counselor employed by a chamber or association to define their problems and
service demands and upgrade their businesses(Waltring eta,l: 2006).

This approach tackles several demands at different intervention levels: 1) the model
business group creates awareness and information at the entrepreneurial level and
concrete demand for BDS which leads to increased demand for BDS. Several chambers
and associations use the model business group approach to strengthen and improve their
membership, their role as facilitator, their organizational capacity (meso level) and
therefore also their bargaining power on framework conditions (macro level, e.g. tax

25
regulations). The chambers are strengthened in their role as service provider as well as
effective lobbyists. Achievements: The model business group approach enables quick
results, encourages learning processes and mobilization with the different important
stakeholders and strengthens their own capacities.

At present six business chambers and associations run between 5 and 15 nuclei each. Of
the almost 1000 Nuclei entrepreneurs all have used BDS at least one time in the last year
which is a significantly higher BDS usage compared to non- model business group
members. The model business group approach has tripled its influence in the 2 years and
demand is increasing also in other regions. Subsidization is only giving indirectly and
along a performance -oriented strategy to disseminate the approach in many chambers
and associations (waltring eta,l: 2006). 39xample 30:
2.2.3 Review of MSE Development and BDS in Ethiopia

The GDP share of industry in Ethiopia remained stagnant, at about 11 percent in the last
decade. Within industry, the share of large and medium scale manufacturing also
remained stagnant at 40 percent while that of small scale industry and handicrafts stayed
at 18 percent between 1991 and 2001/2.About half of the urban work force is engaged in
the informal sector. The national wide urban informal sector survey by the CSA
conducted in January 2003 indicated that there were 997,380 persons engaged in 799,358
establishments (1.3 people per establishment), of which 60 percent were female. About
43.3 percent were involved in manufacturing and about 38.8 percent in trade, hotels and
restaurants (Wolday etal: 2005).In terms of start up capital, more than 87 percent of the
cottage/handicraft manufacturing industries started their operation with total capital of
less than 250 Birr while 2 percent had initial capital ranging from 251 to 5,000 Birr
(CSA: 2003).

Most MSEs in Ethiopia are young, the median, age being 5 years. It shows that a
significant proportion of the MSEs are emerged because of the advantage of opportunities
created by the reform process under going in the country: 79 percent of the sample MSEs
was established in 1993 or after and 45 percent established in 1999 or after, compared to
only 15.5 percent during the entire Derg period. Disaggregating by size, the survey data
reveals that 47.7 percent of the micro enterprises were established before 1999 (i.e. are

26
older than 5 years) while 21.4 percent were established before 1993.The latter is striking
since it shows that so many of them remained micro (i.e. did not grow) for such a long
time (Wolday eta,l: 2005).The MSEs are also owned/run by relatively young operators,
the mean age being 36 years and have 5.8 persons per enterprise (CSA: 2003).

People starting micro and small businesses are generally believed to face numerous
difficulties. During the survey, the MSE operators were asked to identify and rank the
three most important problems they faced in starting their business: capital constraints
(82.1 percent), in adequate premise (43.5 percent), shortage of demand 31.9 percent and
inadequate skill (28.2 percent).They also singled out capital constraints (37.9 percent),
inadequate skill (9.2 percent) and in adequate premise (8 percent) as the primary
problems (EDRE: 2003).

The industrial development strategy of the federal government of Ethiopia issued in 2003
explicitly recognizes the private sector as the engine of industrial development. It also
indicates that promoting MSEs is one of the important instruments to create productive
private sector and entrepreneurship and that the government will give due emphasis and
priority to promote this sector.The strategy also stresses that every effort will be made to
support his sector by providing infrastructure (working premises and land, financial
facilities, supply of raw materials training (Industrial Development Strategy:
2002).Federal and regional governments are expected to coordinate the support services
through the already established MSE development agencies at federal and regional levels.

There are two approaches to the emergence and expansions of MSEs and the increase in
the number of people engaged in such activities. One approach perceives this as an
outcome of improved opportunities for people (including the poor and disadvantaged) to
participate in “ways that empower and nourish” them. According the second approach,
on the other hand, it is an indication of failure of an economy to provide more productive
jobs, forcing people to “take refuge in activities that provide only minimal subsistence
support (Wolday eta,l: 2005).

According to the survey about 38% of the micro enterprises cited lack of alterative as the
reason for getting into their respective specific business activity compared to 25 percent

27
for small enterprises while profitability and skill factors were cited as the reasons by
about 49 percent and 43 percent of small enterprises compared to 40 and 35 percent for
micro enterprises.Additional

Table 2.2.1 Reason for Getting In the Specific Business

Reasons Micro Small Male Female Total


owned owned
Skilled in this activity 35.2 42.6 41.3 29.6 38.4
Parents/relatives in this 16.2 17.0 15.2 19.0 16.5
business
Thought would be profitable 39.9 48.5 46.8 32.7 43.6
Capital requirement match 15.2 17.0 16.5 15.5 16
what I had
Little/no regulatory 6.0 5.4 4.6 9.3 5.7
I had no alternative 38.3 24.6 30.9 38.1 32.3
Source: Micro and Small Enterprise Survey (2003)

The existing MSE strategy primary aims at creating enabling legal, institutional and other
supportive environments for the development of MSEs. The specific objectives include,
facilitate economic growth and bring about equitable development; create long term jobs;
strengthen cooperation between MSEs; provide the basis for medium and large scale
enterprises: promote exports: and balance preferential treatment between MSE and bigger
enterprises. The fundamental principles that guide interventions by stakeholders
(government, private sector, NGOs associations chambers and others, as stated in the
strategy include: support to the MSE operators will be based on the agricultural
development led industrialization (ADLI) and private sector development: all support to
the MSE sector should be designed to be all-round; support services should as much as
possible, be based on fees; addressing marketing problems of MSE operators will be
given due consideration emphasis will be given to the advancement of women and the
staff of the support institutions (Alemayahu : 2005).

The intended supports to promote the MSE sector include creating legal frame work,
improve access to finance, introduce different incentive schemes, encourage partnerships

28
provide training in entrepreneurship skills and management, improve access to
appropriate technology, information advice and markets, and develop infrastructure. A
number of institutions are expected to be involved in providing support to the MSEs. But
to what extent are these institutions delivering these on the ground?

International donor communities such as ILO, GTZ etc provided very limited financial
and technical support to the MSE sector. According to Zewdie (2002), the regional Trade
Industry and Tourism Bureau in addition to their regulatory role are involved in the
provision of business development services. They provide limited training on business
based on the ILO training packages, and delivered some marketing service by organizing
trade fair and providing market price information. Education and labor and social affairs,
which have regional structures throughout the country, are also involved in delivering
short term skill training and long term vocational and technical training to potential MSE
operators.

However, data from the present survey shows that availability of such service is far from
satisfactory. Since 1991, there has been recognition of the role of the MSE sector in
employment creation and economic growth. Yet, more than 95% of the MSE operators
surveyed indicated that they did not receive any support, what so ever, to promote their
activities (table 2.2.2).

Table 2.2.2 Institutions that Supported MSE

Did you receive support form Yes No


Number % Number %

29
Donors 1 0.2 972 99.8
International NGO’s 7 0.7 967 99.3
Local NGOs 4 0.4 970 99.6
Governments, projects/institutions 24 2.5 950 97.5
Training providers 7 0.7 967 99.3
Banks 45 4.6 929 95.4
Micro finance institutions 27 2.8 947 97.2
Cooperatives 3 0.3 971 99.7
Business Associations 20 2.1 954 97.9
Other institutions 28 2.9 946 97.1
Source: Ethiopian Economic Association, MSE survey (2003)

Micro and Small Enterprise Development program is one of the urban industry
development packages that have been implemented with in the major urban areas in
Ethiopia since 2006.Accordingly, a list of about 144 employments fields have been
prepared and full package that contains organization, land supply, credit services, market
technology, training and other supports (MWUD: 2006).

A range of Business Development Services that contributed to the efficiency,


profitability and expansion of the efficiency, profitability and expansion of the business
enterprises in the past years. The market for business development services is, however,
under developed in terms of effectiveness, efficiency, sustainability. In Ethiopia, the
demand driven for business services delivery (BDS) is adopted by GTZ and applied by
MSE facilitators from public, private, NGOs and self-help business support institutions.
These facilitators are trained in the application of the product. The product involves the
business operators in the situation analysis and problem identification of his/her
enterprise. An action plan to solve the problem of the operator is then prepared by the
facilitator or extension workers with the active participation of the enterprise owner.
Then, the facilitator links the business operators to BDS providers, training centers,
public agencies and financial intermediaries, marketing support, technology information
business planning, accounting, including on the spot advice.

30
Even though this approach is participatory, the BDS services were not sustainable,
effective and efficient as it is provided freely. Service delivery methods usually prescribe
blanket treatment like the provision of training, finance and technology whether needed
or not. In this approach MSEs are the main actors. If enterprises are willing and able to
pay for, the provision of such services have to be left to commercial providers and hence
the transaction becomes business to business (Yared: 2006).

Business Development services (BDS) has been introduced with great success in
Ethiopia since 2001 by about 30 public, private and commercial business development
institutions. A range of Business Development services that contributed to the efficiency,
profitability and expansion of the business activities have been delivered for many
business enterprises (Yared: 2006). Report of the third BDS cycle (1/2004-6/2004) in
selected Regions indicate that 98 facilitators in Amhara, Tigray and Addis reported that
they have paid visits to 1088 operators and carried out a situation analysis and action plan
for each of them. 3 public agencies and 8 NGOs participated on the third cycle.

Table 2.2.3 Report of the third BDS cycle (1/2004-6/2004


Organisation Number of Businesses Support % of
facilitators supported activities initial
achieved planning

Amhara ReMSEDA 14 160 346 68%


Amhara Women Entrepreneurs 3 40 87 69%
Tigray ReMSEDA 10 110 221 82%
Addis ReMSEDA 54 516 1 055 76%
Propride 8 78 269 74%
Progynist 3 90 298 87%
ENAB (Blind) 2 22 45 62%
ENAPH (Phys. Handicaped) 1 11 19 86%
ENAPD (Phys. Disabled) 1 8 21 95%
Alliance for Development 1 41 98 67%
Gasha Micro Finance 1 12 16 67%
Total 98 1 088 2 475 76%

31
Source: Mulatu Zerihun Consultant:(2004)

2 475 support activities of initially 3 282 actions identified have been achieved (76% of
the initial planning). More facilitators in the Southern and Oromia regions supported
more operators (Mulatu: 2004).

Sectors of Businesses Supported

The composition between trade, manufacturing and service enterprises is rather well
balanced in the program of BDS. All kind of businesses have been involved. Although
there is no limitation to any sector, trade businesses are the majority, followed by
manufacturing businesses and services.

The Following Fields Were Demand Oriented Intervention Made Part of BDS Support
Activities:

Types of BDS services provided

Association development 2% 45

Access to equipment 2% 51

Raw materials access 2% 56

Administrative procedures 3% 74

Product develop. / Techn. training 4% 100

Access to premises 5% 127

Business plan preparation 10% 241

Finance facilitation 14% 351

CEFE/SIYB/BBS Training 15% 377

Marketing service 21% 511

Management/Accounting 22% 542

0 100 200 300 400 500 600


Number of support activities (total: 2 475)
(Administrative procedures = Taxation, Registring, Licensing, other administrative problems)

32
Source:Mulatu Zerihun Consultant:(2004)
Figure 2.2.5
The approach has proved out to be effective, as it started to create successful MSEs.
Consequently, what started as a pilot initiative with 18 facilitators supporting 127 MSE,
has become a large net work of partner organizations which encompasses more than 500
BDS facilitators working in three major regions of Ethiopia (Addis Abeba, Amhara and
Tigray) with nearly 5000 MSE supported from 2003 to 2004 through first cycle to forth
cycle. Therefore, tables 2.2.3 and 2.2.4 show the increasing supports to MSEs in terms of
out reach and depth of the BDS by different organizations.

2.2.6 BDS and MSEs Development in Tigray


The regional gross domestic product of Tigray increased at an average rare of 2.2%
between 1987 and 1994. Agriculture, industry and service were growing at the rate of 2
%, 5.6% and 9.1% respectively during the above mentioned time. Between 1992 and
1994 the share of industry to RGDP was about 28.94% and the service was also 12.68%.
But the majority of the industrial outputs were produced from the small scale industries
and small services.

According to the survey of central statistics authority in 1997, there were 90, 793
informal enterprises and 36,096 handcrafts in Tigray National Regional State. The total
employment created by the MSE was 138,352 people out of which 66% were female in
the year 1997. The enterprises are established through out the region. Based on the above
survey of CSA, out of the total 106 889 enterprises 67340 (63%) were located in rural
areas, and 39,549 (37%) in urban areas. Micro and small enterprises have a significant
employment contribution and can operate successfully in the urban areas.The Majority of
the enterprises (51.5%) are engaged in food and hotels, followed by tailoring and clothes
(38.7%) while the remaining MSEs operators are engaged in leather, metal, wood works
and constructions.

About 77% of the enterprises were established with less than or 250 birr initial capital
and only 1.1% out of the total were established by more than 5000 initial capital. The
survey indicated, 42 million birr was invested in the fixed asset and the majority of the
enterprises were labor intensive. According to the survey of Tigray Trade, Idustry and

33
Transport Bureau in 40 towns by the year 2004, the number of MSEs were 49,392.
However, the large number of enterprises did not have any licenses. Further more,
20,612 enterprises were legally licensed and 64%, 26%, 5%, 4% engaged in retailers,
services industry and whole sellers respectively during the survey time. The above
enterprises invested about 380 million birr with 33, 714 total employment created
(Strategic plan of Trade and industry Bureau: 2007).
Mekelle city has been suffering from both poverty and unemployment estimated about
61% and 40% respectively (Mekelle strategic plan: 2007). This is the reason why the
poverty reduction strategy is designed to be implementing accordingly. Therefore, the
city has been trying to address the incident of poverty unemployment by providing
various supports to MSEs development which include, credit, training, consulting to use
appropriate technology with relevant information (BDS). The established and use of
incubation centers are also pursued to promote micro and small enterprise so that they
can contribute their own role to the process of economic development.

During the 3rd BDS cycle in 2004, 10 facilitators were deployed to provide support
services for 110 business operators in Tigray Region. Of the initially planned activities of
271, the facilitators managed to accomplish 221 support services, which is (82%) (See
table below). Here operators who are engaged in service rendering took the majority 56
(51%), followed by production and service sectors.

Table 2.2 4 3rd BDS delivery cycle for Tigray ReMSEDA (January to June 2004)

Organizati Business operators Gender Support


on activities
by facilitators
Trade Service Produ Total M F M/F Plan- Rea-
ction ned lized

Tigray 29 56 25 110 72 37 1 271 221


ReMSED (82%)
A
Source: Mulatu Zerihun Consultant :( 2004)

34
The major problems addressed through BDS intervention in the fifteen business operators
in Tigray were record keeping, market, production and technical issues, business skills,
finance and premises. These problems as expressed by the operators were serious
bottlenecks to their business activities ( Mulatu: 2004).

One of the top and serious problems was lack of record keeping. Out of the total fifteen
interviewees, twelve of them pointed out that record keeping and control of their financial
transactions were major limitations to their businesses. The operators did not have the
skill of keeping records of each stream of inflow and outflow, and thus were not properly
tracking their incomes and costs (Mulatu: 2004).

After BDS support and advice they obtained from the facilitators, they became well
aware of their financial transactions. They have now started to control their sales and cost
structure and analyze what steps to take in order to increase their profit margins. A
majority of them have put themselves and working members of their families on their
payroll just like employed wage workers in order to have full perspective of their costs. It
is also interesting to listen to the business operators that they have developed the culture
of saving as per the advice they got from the BDS facilitators. Some have reduced costs,
however, small it is. Of the surveyed fifteen operators nine requested continued support
from the facilitators as they would think that they would be better off with BDS.

The next principal shortcoming that was identified before the BDS support was,
marketing. Here the business operators considered themselves that they had a good
perception and understanding of marketing skills, but found out that they did not have
any. They say the facilitators have made them capture easy and practical techniques,
which they could use effectively. The facilitators have attempted to create the awareness
and cognition for better and more energetic approaches to marketing. One of these is the
business card concept and the other notable change comes with signboard posting. Of
these groups of operators, who are three male from production two female from trade,
one male and one female from service, about 70% of them have posted sign boards,
printed and issued business cards to customers and to the public during exhibitions or
trade fairs. These moves have increased the number of customers and increased sales
which thus boosted the income of the operators (Mulatu: 2004).

35
The third notable bottlenecks, which the operators were facing and is thought to be
solved as a result of the BDS intervention is production and technical problems. It has
been witnessed that the persistent follow-up and continuous support provided by the
facilitators in Tigray region particularly in Adigrat town has made a remarkable change in
the acquisition of materials and equipment by the operators. A spare parts shop owner
bought a computer and started to record and control his stocks with a computerized
catalogue system; a video and computer service operator bought a computer with a CD
writer facility. A metal workshop owner, a sweater producer, and an operator in mirror
making acquired equipment and working tools and a barber increased his barber seats all
as a result of intensive and concerted BDS support by the facilitators in Adigrat. Here
again the acquisition of the assets and equipment are enhancing and strengthening the
operation of the businesses and is thus leading to more sales and improved working
conditions.

BDS intervention is also witnessed as having brought a profound impact in improving the
businesses of 4 male operators of whom 2 are engaged in production and 1 each in trade
and service. Two female operators and 1 male operator from trade said the BDS support
has helped them in securing premises or have submitted request to receive land.

Working or selling premises is the other important factor that has positive or restraining
effect on business development. One of the operators who is from the service sector and
is a returnee from Eritrea is thankful that he got a relatively better selling place and is
also confident that he will receive land where he will construct modern dairy farm and
cattle fattening project. He gives more credit to the facilitator for these achievements.

On the other hand there are business operators who are undecided to give answers. For
example one female operator who runs a retail trade business says she is in desperate
need of working equipment like weighing balance; a sweater factory owner says that he is
not in a position to give positive or negative answers. He says the government must assist
in the provision of qualitative and fair priced raw materials and equipment to the micro
and small enterprises. Similar answers were obtained for lack of finance and premises.
An operator who maintains electrical equipment and two lady business owners in retail
trade said they are undecided with regard to this issue (Mulatu: 2004).

36
The third group of operators who are male operators from service sectors forthrightly
answered that BDS support has not helped in securing finance and premises. Both
operators of whom one is a shoe repairman and the other an electrical equipment service
provider said they have submitted their applications for land and better working places
and yet they have not succeeded in this attempt which they say is seriously hampering
their business activities. The latter also has grave problems with regard to taxes. He says
he is fade up with tax authorities that impose unbearable tax burdens.

Asked what the operators will say if asked by their friends about the BDS support all said
they would tell that BDS is important. Of the surveyed fifteen operators eleven (73%)
said their working conditions have improved after the BDS intervention. They said that
their products, sales and income levels have increased, bought equipment or built houses,
moved to other premises or better working place and created job opportunities for
additional workers.

8 business operators claimed that they have bought equipment for their businesses or
built houses or moved to better location, 10 had high sales, 7 increased their income, and
2 business operators asserted that they have created job opportunities (Mulatu:2004).

Table 2.2 5 Changes brought by type of business and gender


Issue Trade Service Production Total
changes
Purchase of 2 male, 2 male, 2 2 male 8
equipment/prem female
ise
More sales 1 female, 1 2 male, 3 3 male, 10
male female
Increased 1 female, 2 male, 2 2 male 7
income female
More - 1 male 1 male 2
employment
Total 5 14 8 27
Source: Mulatu Zerihun Consultant :( 2004)

37
The above consultant’s paper was more concerned on small number sample size (15
MSEs operators) drawn from the whole region of MSE to generalize about the large
population .However, there may be biases and errors created from purposeful data
collecting .But this paper will give due concern and limited study area to one city
(Mekelle) with relatively large sample size that minimize biases and errors. The current
theories and practices will be implemented to increase the quality of this paper. Further
more the sustainability and effective ness with clearly defined approaches and modalities
will also presented in this paper.

CHAPTER THREE: METHODOLOGY

3.1 Research Design


The research was designed to study by cross-sectional survey, focusing on BDS provision
by the government of Mekelle Trade, Industry and cooperative promotion office from
2003 to2007. Similarly, the trends and performances of business development services
were discussed with the target groups. Basically this research was the snapshot survey

3.2 Sources of Data


The sources of data were both secondary and primary collected and used by different
mechanisms. The main secondary information was collected from reports surveys,
studies, statistical written by the Bureau of Trade and industry as well as and other
institution like Mekelle Trade and Industry Office, Kebelles and one stop service
extension Agents. The collection of the secondary data emphasized more on the current
BDS providers. But the potential business development services providers were not
neglected, so they were included with in the survey. Specifically, Mekelle Sectoral
Association and women Entrepreneur Association governmental, and non governmental

38
training institutions and Dedebit micro finance were consulted about the over all
opportunities end challenges of the BDS services in Tigray region in general and in
Mekelle city in particular.
The source of primary data was from interview with samples of both consumers and none
consumers of BDS. In addition the implementing agency business association key
informants were conducted to get relevance information that is related with BDS
provision in the city. The source of primary data also was from the BDS services that
include all the seven one stop shop service centers. The current and potential BDS
providers contribute not only to provide the secondary data but also the primary data that
related with deep consultative discussions with experts and managers of the
organizations. Similarly, the primary data also collected from the non BDS beneficiaries
to compare whether the BDS performance is positive or not based on the current
beneficiaries. Relevance documents which related with the BDS success and failures
during the implementation were collected from all administrations both at federal and
regional levels.

3.3 Method of data collection

The researcher conducted survey based on the nature and performance of BDS from the
selected MSE operators and next followed focus group discussion questionnaire
interview with users and non users of the service to get additional and constructive ideas.
20 participants who represented the providers, facilitators and MSEs operators were
selected in the group focus discussions. The researcher also interviewed key informants
of the facilitating and providing BDS agencies by preparing check lists involving from
bottom to up organizations which they have directly or indirectly with the BDS provision
To achieve the maximum results of the data collection, the researcher used varies
mechanisms. Likewise, he used rough assessment of the BDS provision in all over the
Mekelle city to know the diversification and concentration of BDS users. Particularly, the
researcher identified that the BDS services have been provided to special MSE operators
who fulfill the criterion of Trade, Industry and Transport bureau.
According the rough and quick assessment of the researcher, the whole population of the
BDS users was both legally licensed and unregistered by the office of Mekelle Trade,

39
Industry and Cooperative promotion. Similarly the researcher also used proportional BDS
users form all the broadly categorized types of business which include food and drinks,
production or manufacturing, trade activities and services.
The BDS service has been delivered from one stop shop service centers through the
extension workers who go to business spots. And the process of BDS delivery was
observed by the researcher.
The researcher also, interviewed key informants from BDS facilitating and other BDS
providing institutions to generate information and view to supplement for the main source
of primary and secondary data. The specific engagement and addresses of the BDS
beneficiaries strictly assessed through quick rough assessment to know the size of each
stratified targeted BDS users population.
The researcher him self also tested primarily to the process of interviewing by filling the
questionnaires at the BDS provision area in order to give feed backs and takes corrective
measures from the experiences. Additionally critical monitoring and assistances to the
enumerators were commutated with help of telephone mobiles and taxi transportation to
all areas of the one stop shop service centers.
He interviewed the BDS users with equivalent proportion from all corners of city one
stop shop centers based on the number and distribution of BDS users.
In the other way round, the researcher use the method of comparison BDS users with non
users so that to produce valuable findings. But the way how to compare the BDS
beneficiaries with non users was challenging. However, the researcher tried his best by
grouping the BDS users’ businesses and categorizing in to four major engagements
(foods, and drinks, production, trade activities and service rendering). Therefore, the BDS
users were compared with the non BDS users based on their business engagement. Like
wise, the BDS users who engaged for examples in production were compared directly
with non BS users who engaged in production.
The researcher used various mechanisms to collect the relevant and valuable secondary
data which were compiled in different report and other files.
The formal and informal discussions with experts and managers as well as getting the
necessary information from the annual reports and periodic evaluation were useful.

40
In order to overview the business environment of the Mekelle city, the researcher
observed that the over all current conducive investment by visiting to all areas of the city.

To suggest and recommend ideas, the researcher assessed and used the current manuals,
directives and criterions that are related with the BDS users

3.4 Sample Design and Size

Based on the available data from the office of Trade and Industry and cooperative
promotion the number of MSEs in Mekelle city is estimated about 23,679 in 2007. Even
though, the total population of the supported MSEs operators large in number to be taken
as target groups for the sample, it is not the scope of this research. Because most of the
MSEs operators have not get BDS services. Thus sample was drawn form the formal
BDS user MSE operators. Likewise, to get representative sample size, selecting stratified
random sampling was appropriate; because the population of the inquiry has class
stratification or grouping horizontally. Therefore the sample was drawn from each
stratum based on the sample size. The selection in every stratum was done by pure
random sampling to get the total sample size of MSEs of BDS users and non users
The total MSE BDS user operators were 1028 out which 102 conducted by this
research. The researcher used grouping in to the major four BDS user business categories
and were engaged 223 in food and drinks 274 in production 340 in trade activities and
191 in services.
In the other way round, currently there are seven one stop shop services centers with
different level of BDS users. There fore, the researcher listed and arranged the number of
BDS users both in terms of business category and geographical location for each one stop
shop service centers. Likewise, he took 10% of the total targeted population by using
both stratified random sampling and systematic random sampling from each major
business group and one stop shop service centers. There fore 14 BDS users were drawn
from each one stop service centers of Hadnet, Addier, Addihaki and Kedamany weyane.
Similarly as compared among the one stop shop service centers, Northern part of one stop
shop service center provided to 207 BDS users. But Quiha served for only 115 BDS
users. Therefore the researcher took 20 and 12 BDS users from northern part and quiha
one stop shop service centers respectively. To analyze the nature, effectiveness,

41
performance, out reach, sustainability and out put of the BDS provision, it was better to
draw about 30 MSE’s operators who have not been targeted and for BDS so that to use a
control group for the comparison of BDS performances. Therefore, the researcher
conducted for the 132 interviewers both users and non users of the BDS. See table 3.1
below.

Table 3.1 Major Business Group by One Stop Shop Service Centers That Get BDS
and Sample Sized Taken.
Number of MSEs operators by sector Total
Name of One Stop shop Food and Trade Sample
S.N service centers drinks Production activities services size
1 Hawelti 136 68 25 20 149 15
2 Hadnet 40 30 49 18 137 14
3 Addihaki 36 19 52 37 144 14
4 Aider 26 38 42 34 140 14
5 Kedamayweyane 32 25 61 18 136 14
6 Quiha 18 29 47 21 115 12
Northern part of
7 Administration 35 65 64 43 207 20
8 Total 223 274 340 191 1028 102
9 Sample size 22 27 34 19 102 =
Source: Mekelle Trade, Industry and cooperative Promotion office Report Listed and
arranged by the researcher: 2007

3.5 Field work organization


The data collection and study area was in the boundary of Mekelle city with time
schedule from 28th march to 16th June 2008.
There were challenges that related with the unwillingness to spend time and give reliable
information, unavailable of documents and expectation of immediate benefits from the

42
researcher. Nevertheless, the researcher tried to solve by continuous discussions with the
help of BDS experts and extension workers so that respondents understood the objective
and relevancy of this research for the BDS delivery in general and for their business in
particular.

There fore this field work was organized through the continuous monitoring and
corrective measures with the help of my advisor and colleagues

3.6 Method of Data analysis


The research analysis included the performances of BDS consumers with the comparison
of non BDS users. The analysis also compared with existing theoretical and empirical
literature reviews that relate with business development services. The methods used for
the analysis of this research were basically both descriptive and hypothetical analysis
using different mechanisms. The over all analysis focused on the main research
questions which include out reach in terms of scale and access, modalities, sustainability
of the BDS service users effectiveness indicated by the individual BDS service users.
Because of the low level of BDS demands for the current services, this research focused
more on BDS supply driven that have been provided by the Trade, Industry and
cooperative Promotion office in Mekelle city. The analysis of effectiveness on BDS
performance can assist to improve the lively hood of the individual business household
families in terms of employment and asset creation increase over all business
management through proper application of BDS services based on the demand and
supply of the market. Therefore the out come of the BDS indicated and analyzed by
using sample BDS users from the total target group as well as comparing the BDS users
with similar non users was computed.

To explain more, the BDS users were compared with non BDS users in terms of
employment, sales, and capital changes, and the status of their business before and after
the BDS service provision. Like wise, the BDS users were also compared with non BDS
users by using the mean value sales of BDS users who engaged in food and drinks

43
directly compared with mean value sales of non BDS users who engaged in similar
business (food and drinks).

The sample size of BDS user are not equal to the non BDS users, this was the cause for
which the researcher used mean value of sales, employment and asset creation by
grouping the major business. Specifically, 102 BDS users can’t simply compare with 30
non BDS users with out any manipulation and calculation. Therefore, it was better to
take their, mean value of one major group of BDS users with corresponding and similar
business type of non BDS users.
The BDS users and non users were similar in terms of capital, location, and business
type, establishment age of the business and educational level of the enterprise owners.
The researcher analyzed by using various types of research techniques which include
testing through nonparametric hypothesis with special application of wilcoxon sign rank
test. This method and technique was chosen because the researcher more concerned with
the direction of BDS users changes either to the positive or negative directions in terms
of sales employment and asset creation.
Like wise, he also employed research techniques to analyze with tables, bar graphs, line
graphs and pie charts z-tests in this research.

44
CHAPTER FOUR: DISCUSSION AND FINDINGS
4. Performance and Nature of BDS Users in Mekelle City
4.1 Organizational Structure of BDS delivery in Mekelle City
Business development services (BDS) have been delivered to MSEs in Mekelle since
2003 initially by the Regional Micro and Small Enterprise Agency. Latter the
responsibility of the BDS services were transferred from the Regional Micro and Small
Enterprise Agency to Mekelle city Industry, Trade and Cooperative Promotion Office in
2004. Currently the office is structured into four teams that are the Industrial
Infrastructure Development, Business Development Services, and Trade License and
Inspection Cooperative Promotion. The city then decentralized its formers to the lower
administrative channels called sub cities. Mekelle has currently seven sub cities. Each
sub city has one stop shop service center that provides regulators and promotional
services to micro and small scale enterprises. The one stop shop service centers were
allocated in 2007.At the sub city level there are about two to four BDS extension
workers per one stop shop service centers .The one stop service centers have the
responsibility to organize and coordinate the government and non government stake
holders that support directly or indirectly to support MSEs development. Further more;

45
the office has responsibilities of facilitating creation significant employment opportunity
to increase income of the dwellers and reduce poverty through development of MSEs, by
promoting new start up MSEs. And they are implemented through the following
responsibilities and activities: The office facilitates the creation of employment
opportunities by providing or facilitating the following supports for MSEs:
a. Constructing open market spaces and shops to solve the problem of working
Premises.
b. Support the existing MSEs operators and individuals who are willing to start
MSEs and form associations
c. Promoting products of MSE operators and strengthen market linkage through
organizing exhibitions and bazaars.
d. Coordinating information.
e. Train MSE operators, experts and extension workers of sub cities on business
management skill, booking keeping product design and quality on manufacturing, food
processing textile and garment.
Further more, the Trade, Industry and cooperative promotion office provides BDS
through one stop service model to facilitate MSE operators making access for all type of
services. The one stop shop service centers were established near to BDS MSE users.
The services that are provided by one stop shop service centers include: mobilizing MSE,
facilitating access to appropriate technology and market premises, facilitating to get
information and consultancy in terms of supplying appropriate inputs and infrastructure
services. The office has identified to focus on target MSEs Sub-sectors to be beneficiaries
of its support.
4.2 Nature of the BDS users
4.2.1 BDS Users Distribution by sub city and sector
As table 4.2.1 shows the number of BDS user was concentrated in trade activities.
Because most of the businesses were engaged in trade activities. Specifically out of the
total 23393 MSEs 5042 (21.55%) engaged in trade activities in the Mekelle city.
However, the service sector had low BDS user compare to other sectors. But this seems,
focus was given to trade activity which is not out of its proportion. The BDS users were
almost equally distributed through out the one stop shop service centers of Hawelti,

46
Hadnet ,Addihaki and Aider.But Northern part of Administration has about 207 BDS
users because this administration is relatively large compare to other areas.
Table 4.2.1 Business Category of BDS by One Stop Shop Service Centers
Name of One Stop shop Number of MSEs operators by sector
Food and Trade
S.N service centers drinks Production activities services Total
1 Hawelti 36 68 25 20 149
2 Hadnet 40 30 49 18 137
3 Addihaki 36 19 52 37 144
4 Aider 26 38 42 34 140
5 Kedamayweyane 32 25 61 18 136
6 Quiha 18 29 47 21 115
Northern part of
7 Administration 35 65 64 43 207
8 Total 223 274 340 191 1028
Source: Mekelle Trade, Industry and cooperative Promotion office Report: 2007

Business catagory by One Stop Shop service that get BDS

80

70

60
Number of BDS users

50 Hawelti
Hadnet
Addihaki
40 Aider
Kedamayweyane
Quiha
30 Northern part of Adminisration

20

10

0
Food and drinks Production Trade activities services
Types of Business Catagory

Source: Mekelle Trade, Industry and cooperative Promotion office Report: 2007
Figure 4.2.1
As shown the in above table 4.2.1 and Figure 4.2.1, Quiha administration or one stop
shop services provided small number of BDS users as compare to northern part of
administration center or one stop shop services. This may be due to distance and later

47
inclusiveness of the Quiha wereda administration with in the administration of Mekelle
city. Because Quiha was administrated by rural wereda Enderta before the year 2006.
4.2.2 Initial Capital of BDS users
The survey of Mekelle MSEs impact assessment conducted in 2007 indicated, out of the
total 3076 MSEs 2237 or 73% were operated by one employee and out of the total 3416
MSEs 2682 or78% were established less or equal to birr 5000 during the establishment
period.
The survey of this research also indicate that out of the total 102 enterprises conducted,
they were initially established by the level of micro enterprises (1 – 20,000 Birr) and
about 55 MSEs enterprises employed only one employees and 47 MSEs enterprises were
established by two to five employees. This implies, most of the enterprises are originated
from the micro than small enterprises. There fore, this finding is also similar with other
previous MSEs census survey findings that explained about the initial capital of the
enterprises. We can see the sample (BDS users) in this research in table 4.2.2 below
which represents the initial capital during the establishment.
Table 4.2.2 Initial Capital during the Establishment of Enterprises

No. of Sample Respondents by Business Category


Initial Capital Per
Enterprise Food and Trade activities Services Total
S,N Drinks Production
1 1-500 5 3 13 1 22
2 501 -1000 3 1 9 6 19
3 1001 -2500 7 3 5 3 18
4 2501 -5000 5 6 5 6 22
5 5001 -10000 2 11 2 3 18
6 10001 - 20000 3 0 3 0 3
7 Total 22 27 34 19 102
Source: Own Sample Survey: 2008

4.2.3 BDS Operators and Enterprises by age


4.2.2.1 BDS Operators by age
The highest percent (46.68%) of the total 102 MSEs operator fallen between the age
group of 18 to 29. This is higher compared to (30.62%) of the total Mekelle city MSEs
Census. Thus the BDS users are mainly young MSE Operators.

48
Table 4.2.3 Age range of the sample BDS user Operators
S.N Age level of the sample Number of Respondents %
Respondents
1 Less than 18 years old 1 0.98
2 18-29 18 years old 47 46.08
3 30-40 18 years old 38 37.25
4 41-60 18 years old 16 15.69
Total 102 100
Source: Own Sample Survey: 2008

4.2.2.2 Enterprises by age


The sample MSEs operators have started operation in different time. Business with the
age of only five years (2003-2008) is 77.5%. And only 5.9% MSE businesses were
established before 1998.Thus most of the BDS users are young forms which they get
important supports. The young are more dynamic and lead to utilize the resources.
Table 4.2.4 Age range of the sample Enterprises
S.N Year Number of Respondents %
1 Before1998 6 5.9
2 1998__2002 17 16.66
3 2003_2008 79 77.5
4 Total 102 100
Source: Own Sample Survey: 2008

4.2.3 Legal Status of MSEs Sample BDS Users


Most of the MSEs BDS users that covered by the sample survey are legally registered.
Accordingly, 81 enterprises (79.41%) were registered legally and 21 enterprises (20.59%)
were not legally registered during the establishment time (See figure 4.2.2). This implies
the government is promoting MSEs who don’t have legal licenses. This discourages
directly to legal MSEs.

49
The legal status of the survey sample Enterprises

21, 21%

Legally Registered
Not Registered

81, 79%

Figure 4.2.2
Source: Own Sample Survey: 2008
As can be seen from figure 4.2.2, the unregistered BDS user enterprises may face
challenges when they are linked to and operate in the formal market. Therefore there is a
problem to deliver the BDS services because some of the BDS services providers may
place preconditions. So the enterprises should full fill the legal registration in order to
compete in the free market.
4.2.5 Level of Education
The majority of sample BDS user operators (60.8%) were between grade five and ten
during the survey. Enterprise owners who do not read and write were only 3.9%.
This is the highest number when we compare with total MSEs census of the city. We can
see the trend of the education level BDS users target groups, as indicated below in figure
4.2.3 below.
The Highest Education Level of Sample BDS user Respondent Enterprises

50
The Highest Education Level of the Respondents

40

35
Number of respondents

30

25

20 Number of respondents

15

10

0
ol

8)
ad

)
l
)
)

12
oo

e
ho

10
__
_4
re

ov
1_
ch
sc

9_
(5
(1

ab
d

lS

(1
an

(
d

ry
ry

ol
e

d
na
a
ta

or
nd

an
e

ho
nd
en
rit

io

at
tte

sc
co

12
w

at
lm

r
pa
a

se

oc
to

h
E

ig

re
er

V
e

P
o
bl
ev

ni
A
N

Ju

Level of Education

Source: Own Sample Survey: 2008


Figure 4.2.3

As the level of education go up it is obvious that contributes positively to the


development of MSEs by using modern way of business management and transferring
appropriate technology like BDS services.
4.3 Approach and Modalities of BDS Delivery
4.3.1 Modalities of BDS Delivery

51
In order to benefit MSEs over the long run, it is important for MSEs to have access to
high quality BDS services (MCvay et al: 2001). The market development thinking
supports the idea of not only increasing the availability and consumption of BDS services
but also help MSE access to increasing better services over time. The larger the
commercial BDS providers, the more the market options for the BDS user operators.
According to Zewede eta,l ,the government is involved as the main BDS provider in
MSEs in a market where it fails. The authors also emphasized that BDS services are
mostly government initiated and supply driven. According the consultative discussion
with BDS provider especially government, there were two ways of providing BDS that
practiced in the Mekelle city. These were partial and full supports. The partial support
concentrated on seasonal like providing trainings and credit (example for large number of
MSEs who included in the package).How ever, full supports refers to BDS.
Though in the last few years, BDS services have been grown significantly in accessing
and scaling up, there is almost no BDS services on the basis of market or commercial
basis that are determined by demand and supply. Likewise, almost all the Mekelle Trade,
Industry and cooperative promotion office was delivering BDS service with out payment.
Additionally, The BDS services in general and short term training in particular was
provided with the help of perdaim for BDS users. We can observe table 4.3.1 below to
know the level of availability of BDS services with payment mechanism
Table 4.3.1 Availability of BDS Services
Type of Services Free Paid Total
1 Short term training and assistance 76 76
2 Access to market 13 13
3 Input supply facilitation 4 1 5
4 Technology and product development 9 9
5 Infrastructure and working premise 20 1 21
6 Information and consultancy 95 95
7 Credit facilitation 85 85
Source: Own Sample Survey: 2008

52
According to census of MSEs conducted by Trade, Industry and Transport Bureau 2007,
there were 23,642 MSEs enterprises in which 25888 family, and 10,505 hired employees
in Mekelle City. The total employment created by the MSEs was 36,393 People.
The MSE operators were asked about their needs. As clearly stated in the census
document, there was about 10676 MSEs operators need training, 9772 MSEs operators
demanded for credit access, 12, 1122 MSEs needed working premises and 10,138 MSEs
need for market linkage. However the BDS providers in general and Trade, Industry and
cooperative in particular focus only on their annual plan with out considering the actual
demand of the MSE operators.
According to the impact assessment of MSEs Conducted in Mekelle city, out of the
total 3815 interviewees who were targeted and supported by the office of Trade,
Industry and cooperative promotion, only 2017 MSEs operators approved that they were
supported but the remaining 1798 MSEs were not.
In other way, the BDS market and program level of support indicators are used to
measure BDS and other support performance. Both an annual report figures and/or a
current status show, how ever, that BDS services were not delivered on the commercial or
market basis rather the services were delivering on the subsidy terms which were initiated
only from the side of the government as the survey and reports indicated. There are two
approaches of delivering BDS: traditional interventions (Supply driven approach) and
market development intervention (demand driven approach) (Gibson eta,l
2001).Traditional approach of BDS services are characterized and mostly delivered
through the government and donors. Such an approach of delivering BDS may crowd out
the existing and/or potential commercial providers of services.
Although there is broad support for the market development approach, there is still debate
as to whether it is appropriate for the poorest entrepreneurs. The approach is particularly
questioned by those inaccessible MSEs that are in remote rural area where market often
to deliver BDS effectively fails.
To achieve the integrated BDS for MSE operators the government promotion office has
designed various approaches and modalities to deliver the services continuously and
smoothly. The manuals and directives of the Bureau of Trade, Industry and Transport of
Tigray Region clearly indicate the criterion, steps and responsibilities of the government

53
extension workers .The government aims to provide BDS to MSEs through its extension
agents. The government also aims to support the private BDS providers. However, there
were no yet strong BDS providers in the city. Therefore the whole BDS services
provision is loaded on the responsibility of the government. So, the government has
placed necessary standards and criteria that must be fulfilled by the BDS beneficiaries.
These are:-
The MSEs BDS user candidate should have the interest to need BDS service.
• The MSE operator must provide reliable data and information about his/her
business.
• The BDS user candidate should take his own responsibility and share that are
agreed and given by the extension worker.
• The MSEs operator should have introductory experiences and exposures in the
business in which the it is engaged.
Any MSE operators these fulfill this criteria can be supported by the government.
Before delivering the BDS service, there are steps that have to be followed by the
government BDS extension workers.
• The BDS services should be promoted to the public in general and MSEs in
particular by using various mechanisms such as formal and informal medias.
• Based on the criteria given above the recruitment of BDS user candidates take
place accordingly. This is the directives but the implementation is done with
out the recruitment of BDS user candidates.
• The government extension worker should prepare the situation analysis of the
targeted enterprises.
• Based on the above situation analysis of the enterprise, there should be an
action plan designed to solve and implement predetermined duties and
responsibilities.
• The extension worker must provide appropriate BDS service twice per week
for about five months based on the agreed and shared responsibilities.
• The situation analysis and action plan should be implemented based on the
agreed program with in the scheduled.

54
• Finally the impact of the BDS services delivered with in the five months is
then assessed so that corrective measures can be taken.
In addition to these criteria, there are other factors that determine the recruitment of BDS
services users. The candidate should engage in sector of food and food processing, metal
and wood works, leather and leather products, construction or urban agriculture.
Further more, the BDS services that are provided by the government focused on human
development and management, preparation of business plan, market management, record
keeping, credit and saving facilitation, customer handling management ,selection of
appropriate technology and information with consultancy. These are directly integrated
with the BDS elements.
To deliver and provide the above types of BDS services, the office of Trade Industry and
cooperative promotion follows as indicated in figure 4.3.1 below.
BDS Approach and Delivery system in Mekelle City.
1st Step 2nd Step

MSEs BDS The gov.t of Mekelle Trade,


User operators Industry and cooperative
who fulfilled promotion office
criteria
3rd Step

• Training Institution
• Micro finance and banks
• Mekelle municipality
• Other government and non
government organizations. Figure 4.3.1

As explained that the BDS user operators can’t get all the services in one institution. In
the first step, the BDS users may need support of either one or all the BDS service, and
then next go to the office of Mekelle Trade, Industry and cooperative promotion office to
communicate with respected experts and managers. Thirdly the BDS operators were
pushed to go in order to get the services from various organizations like (Credit from
microfinance, working premises from municipality etc...). There fore the process of BDS
service delivery is time consuming. The GTZ approach of BDS service delivery adopted

55
by Mekelle Trade, Industry and Transport Bureau indicated that an extension worker
should provide only for 10 to 15 MSEs operators in one cycle (five months).According
the data collected from the Trade, Industry and Cooperative promotion, 10 BDS users
were served by 1 extension agents and 50 BDS users were served by 2 extension agents
in 2002/3, 2003/4 respectively. This shows the GTZ approach was followed during the
mentioned period. But starting from 2005/6 the BDS users were more than the extension
agents. This implies the GTZ approach, was violated. In addition, the implementation and
practices of the BDS service are different from the above criteria. The extension agents
did not go frequently as par the schedules. the consultative discussion with extension
workers and annual reports clearly indicated, there were many problems related with
BDS approach and delivery process that include trainings were not need based, credit was
not available and time taking and getting working premises was long process. Similarly,
the MSEs’ market was not linked with other organizations and private sectors because
MSEs operators are assumed inferior to other competitors.
In the same way, the extension workers who provide information and consultancy have
limited capacity and unable to solve the problems which are identified in the situational
analysis.
Even though the manuals, directives, standards and criterions of BDS delivery process
were available in the Regional Trade Industry, and Transport bureau, the administrators of
the one stop shop service centers along with their experts were not fully aware and
trained about the approach and delivery process of the BDS. The situation analysis and
action plans of BDS users were decided by the regional and Mekelle Trade, Industry
offices with out involvement and participating of the lower administration level like one
stop shop services centers. The extension workers seem less motivated because of low
salary, lack of transportation and unavailable training and appropriate careers. The sample
survey respondents were asked whether the BDS services were delivered continuously or
not, almost in all types of services (more than 50% of the BDS users responded that the
services were not delivered continuously as par the program. There fore the BDS delivery
services were not continuous and smoothly achieved as per the objective of the
government, because the written directivities, plans, criterions and standards were
decided with out participation of the BDS beneficiaries (See table 4.3.2).

56
Table 4.3.2 Are The BDS Services Delivered Continuously As Par The Program?
S.N Service type No Yes Total
1 Short term training and technical assistance 40 36 76
2 Access to market 12 1 13
3 Input supply facilitation 4 4 5
4 Technology and product development 6 3 9
5 Information and consultancy 50 45 95
6 Infrastructure and working premises 14 7 21
7 Credit facilitation 45 40 85
Source: Own Sample Survey: 2008
The BDS services were not properly delivered to the MSEs operators as per the action
plan because both the extension workers and MSEs operators were not motivated and
interested respectively. There fore need based with full involvement and participation of
the MSEs and extension workers is mandatory to implement the BDS service and market
development. The survey BDS users were also asked why the BDS services were not
delivered properly. The reasons were ranked as 50% unsatisfaction with BDS services of
government and 32.2% time frame for the services is too long.
The current BDS delivery problems that are related with Mekelle Trade industry and
cooperative promotion office are elaborated with the help of chart in figure 4.3.2 below.
The first rank problem of BDS was unable to delivery smoothly and continuously and
second poor on time delivery of BDS. See figure 4.3.2 below.

57
Figure 4.3.2

Probelms of BDs Delivery by ,Trade Industry and Cooperative Promotion Office in Mekelle

Other

Unable to Delivery smoothly and


continuously

Unprofessional behavior,
including lack of confidentiality
Types of problem

Lack of business experience and


Series1
knowledge

Failure to use current approaches


of BDS

Poor on time delivery of BDS

Poor ability to Identity customer


needs

0 5 10 15 20 25 30 35
Percentage of Respondents

Source: Own Sample Survey: 2008


4.3.2 Approach, Sustainability and Efficiency of BDS Delivery
4.3.2.1 Approach and Sustainability of BDS Delivery

58
Developing BDS market is one of the ensuring Sustainability of services delivery from
both an institutional and financial point view. The market development approach stresses
on the viability of individual services with respect to the commercial basis. Further more
if the BDS services are available, providers will carry out the delivery of the services
sustainability. BDS market approach clearly recommends that the government and non
government organization should focus on the facilitation of BDS a market development.
Sustainability may be perceived in many ways. The BDS services are sustainable if the
following questions are answered correctly.
1. Are BDS providers generating their revenues primary from MSEs?
2. What portion of BDS providers’ revenue come from MSEs or related commercial
and other subsidy sources?
3. Are BDS Providers profitable based on the MSE revenue?
4. How do the providers compare with each other in terms of quality and prices?
5. .Are Every BDS services profitable or how they compare each other?
6. To what extent the different services are helping to cover the providers’ costs?
Although the above questions are basic indicators for measuring the institutional and
financial sustainability, the final expenses and revenues collected from BDS services
are not available in the office of Trade, Industry and cooperative promotion because
the BDS services are delivered with the other services like trade licenses, inspection
and monitoring of the construction in one stop shop services centers. The Trade,
Industry and cooperation promotion office has only from the government budgetary
sources. Likewise, the Trade and Sectoral Association and Mekelle women
Entrepreneur Association provided insignificant BDS services and have not any
revenue generation from the services they provided. This is a major challenge for
continuing the services of the BDS, if the single and subsidy source of government
budget is cut unexpectedly.
We know that the government intervene his hands where the market is not operate
correctly but the degree of intervention should be limited and gradual transformation
of the delivery to overtake by the private providers in order to develop BDS Market
development. The sustainability of the BDS services is not achieved with out the alive
of the micro and small enterprise. On the other hand, MSEs are more unstable and

59
entry and exist are at high rate. As the impact assessment survey revealed, that the
MSE operators were asked whether their enterprises are sustainable or not. Out of the
total 3825 MSEs operator survey respondents about 81.5% (3120) MSEs operators
responded that their business will continue and sustainable . However 18.5% (705)
MSE operators were challenged by many problems like lack of market access
unavailable of credit, lack of skilled and working premises. See table 4.3.3 below.

Table 4.3.3 Is Your Business Or Enterprise Sustainable.


S.N Type of Answer Number of Respondents %
1 Yes 3120 81.5
2 No 705 18.5
3 Total 3825 100
Sources: Bureau of Tigray Trade, Industry and transport Impact assessment survey: 2007.

The sustainability of MSEs strengthened through the continuous skilled and


experienced expertise supports. The support services were not only provided during
the establishment of enterprises but also were important after the establishment in
order to be sustainable. Majority of the BDS users responded that BDS services were
not delivered continuously and smoothly as explained in the previous tittles. To
approve this idea and indicated in the MSEs assessment, out of the total 3818 (63%)
MSEs Operators responded that they did not get continuous supports from one stop
shop service centers in general and extension worker in particular.
Table 4.3.4 Are the over all Services provided by the Office of Trade, Industry and
Cooperative Promotion Continuous and Smooth.
S.N Type of Responds Number of Respondents %
1 Yes 599 16
2 No 2411 63
3 Some times 806 21
4 Total 3816 100%
Sources: Bureau of Tigray Trade, Industry and transport Impact assessment survey:
2007.
About 3816 sample, MSEs operators were asked from all kebelles of the city if they get
continuous supports. Even though continuous supports for MSEs operators were low at

60
city level, kebelle Quiha and Sewhinugus were better with compare to kebelle Addis
Alem and Aieder. We can see the level of continuous support distribution by each kebelle
in table 4.3.5 below.

Table 4.3.5 the Level of General Percentage Support Distribution for MSEs by
Kebelle
S.N Name of the Kebelle Are you supported continuously Total %
Yes in % No in Some times in %
%
1 Kedamay weyane 10 82 8 100
2 Hawelti 12 64 23 ”
3 Hadnet 13 79 7 ”
4 Industry 14 46 39 ”
5 Sewhinegus 27 66 6 ”
6 Aieder 9 78 12 ”
7 Quiha 33 38.5 28.5 ”
8 AddiHaki 16 84 - ”
9 Addis Alem 6 86 8 ”
10 Iynalem 20 65 15 ”
Sources: Bureau of Tigray Trade, Industry and Transport Impact assessment survey: 2007.

Most of the survey BDS users responded that the services were generally important for
start up business and expansions. As indicated below in figure 4.3.3 about 98.5% of the
total frequency respondents supported that the BDS services were important and very
important.
Even though the individual services were similar proportion with the degree of relevancy,
information and consultancy, credit facilitation and short term training assistance
dominate the BDS services See figure 4.3.3 below.

61
Number of Respondents to wards the Importace of BDs by Service Type

70

61
60
57

50 48
Number of Respondents

41 Short term training and technical assistance


40 38 Access to market
36 Input Supply facilitation
Technology and product development
Infrastructure and working premises
30
Information and consultancy
25 Credit facilitation

20
20 19
16
14

10 9
7

3 3
1 0 0 0 0 1
0
Not Important Important Very Important
Degree of importace

Source: own sample survey


Figure 4.3.3
In order to be the BDS services sustainable, the beneficiaries should pay for what
they received basically if the services are tailored to their demands based on the
identified problems.
As figure 4.3.4 below indicated the respondent’s proportion frequency for payment
for the BDS, services were not satisfactory. This implies most of the respondents were
not ready to pay for the BDS services currently. There fore it needs some adjustments
of the BDS services based the demands of the beneficiaries.
However the BDS services like technology and product development and short term
training and technical assistance slightly seems to have better degree of willing ness
to pay with compare to other services. See figure 4.3.4 below.

62
Availablity of BDS and payment

85
95
21
Total 9
5
13
76

Credit facilitation
Information and consultancy
1 Infrastructure and working premise
Paid 1 Technology and product development
1 Input supply facilitation
Access to market
Short term training and assistance

85
95
20
Free 9
4
13
76

0 10 20 30 40 50 60 70 80 90 100
Number of respondents

Source: own sample survey


Figure 4.3.4
4.3.2.2 Approach and Efficiency of BDS Delivery
The efficiency of the BDS delivery depends on the cost of services like expenses for
training, credit facilitation, and access to market, information and consultancy. Even
though the researcher did not get enough data that help to compute the cost of inputs and
resulted of output on BDS,The primary information revealed that about birr 97692
spending per each cycle in the seven one stop shop services .Each one stop shop services
consumed birr 13956 from the government budget. This implies, birr 290.75 was
spending for each BDS beneficiaries during the survey time. The researcher expected that
every expenses of the BDS was available in the one stop shop services but not.
4.3.3 Government versus Other Institutions in Delivering Of BDS
The role of the government in BDS intervention is early stated in the MSE development
strategy issued in 1997 and explained details as follow.
 Providing skill upgrading programs,

63
 Encouraging use of appropriate and modern technologies,
 Strengthen cooperation between small enterprises,
 Promote export (especially in areas where the country has a comparative
advantage)
 Provide necessary technical support to MSE operators
So far the supports services were highly dominated the government with out integrated
approach of delivering the BDS services at all levels. Likewise, the government of
Mekelle Trade, Industry and cooperative office was the only source of the BDS in the
city. The roles of private and non governmental organizations have so far minimal.
Though there are a number of NGOs, private organizations and donors that can be
involved in facilitating and providing BDS, their role have been very small. Thus the
level of integration and coordination among these stake holders was not strong enough in
shaping BDS towards market development.
In Mekelle out of the total (102) sample BDS users about 97 respondents or 95.1% have
received BDS from the government institutions, only 4 respondents or 3.92% got BDS
from Mekelle Trade and Sectoral Association( see Table 4.3.6).
Table 4.3.6 Sources of BDS Service Provision by Institution Type
S.N Source of BDS ( institutions) Number of Respondents %
1 Government 97 95%
2 Mekelle Trade and Sectoral Association 4 3.92%
3 Non government organization 1 0.98%
4 Other 0 0
Total 102 100
Source: Own Sample Survey: 2008

Yet there were potential BDS providers in the city including Mekelle Trade, and Sectoral
Association, women entrepreneur Association, government and private TVET training
centers. But their role in providing BDS services remains very low. In addition these non
government institutions provide only a limited range of services; In particular they
provide mainly shot term training services alone. This service is insignificant compared
to the services provided by the government. Table 4.3.7 below shows training delivered
by the Trade and sectoral Association and the women entrepreneur of Mekelle city
between 2003 & 2007.

64
Business Training Provided by Nongovernmental Institutions by Year
Table 4.3.7
S.N Year Trade & Sectoral Mekelle Women
Association Entrepreneur Association
1 2003 80 20
2 2004 1250 35
3 2005 220 50
4 2006 150 68
5 2007 80 60
Total 655 233
Source: Mekelle Trade and Sectoral Association, Women Entrepreneur Association:

Report from 2003 to008.


To elaborate about the roles of BDS providers more, we can see the extent of BDS
information distribution to the customers. As table 4.3.8 indicate below, most of the BDS
users have got from the government by Mekelle Trade, Industry and cooperative
promotion office extension workers. Yet BDS users have not come to use the services.
This implies the BDS services were not demand driven. There fore currently, the BDS
beneficiaries were not ready to come and get the services from the providers. See table
4.3.8 below.
Table 4.3.8 the Sources of Information for BDS Users
S.N Sources of information No of %
Respondents
1 From Advertisement 3 2.72
2 Recommendation by gov’t extension workers 97 88.2
3 Recommendation by friendly/colleagues 6 5.45
4 Recommendation by other type of business people 3 2.72
5 Other 1 0.91
Source: Own Sample Survey: 2008

4.4 Outreach and Scale of BDS to MSEs.


Mekelle Trade, Industry and cooperative promotion office has been provided BDS
services since 2003 up to 2007 for about 1028 MSEs operators. However, the Regional

65
Trade Industry and Transport Bureau has provided BDS for 4595 MSEs operators during
the same year. The coverage of the BDS in Mekelle city was about 4.34% where as
6.83% at regional level. Therefore Mekelle was ranked below the regional coverage. This
may be because of the large number of MSEs are located in the city. The number of BDS
user increased from 10 to 4595 MSEs and from 1 to 330 extension agents between the
year 2003 and 2007 in the region. Similarly, the number of BDS users increased from 10
to 1028 MSEs and from 1 to 28 extension agents in the same year. We can observe the
trends of BDS development services annually in table and figure 4.4.1 below
Table 4.4.1 Number of MSEs BDS Operators (2003 _ 2007).
Regional Mekelle
Year BDS users extension workers BDS users extension workers
2002|03 10 1 10 1
2003\04 317 17 50 2
2004\05 710 24 60 3
2005\06 1319 89 265 6
200\07 1150 92 350 10
2007\08 1089 107 293 21
Total 4595 330 1028 28
Source: Regional and Mekelle Trade, Industry and Transport Bureau Annual Report: 2007

66
Number of BDS users and extension workers Yearly

5000

4595
4500

4000

3500
Number of BDS and extension workers

3000
Regional BDS users
Regional extension workers
2500
Mekelle BDS users
Mekelle extension workers
2000

1500
1319
1150 1089
1000 1028

710
500
317 350 293 330
265
50 60 89 92 107 43
0 110 217 24
3 6 10 21
2002|03 2003\04 2004\05 2005\06 200\07 2007\08 Total
Year

Source: Regional and Mekelle Trade, Industry and Transport Bureau Annual Report: 2007
Figure 4.4.1
The over all trends of BDS users and extension workers gradually increased during the
year. The BDS users of the region increased sharply in 2005\06 but the rate of increment
in Mekelle seems constant as compare to the regional. However, the trends of the
extension workers increased smoothly in both Regional and Mekelle city.
Outreach and scale refers at the percentage of MSEs that have access to services. The
BDS market emphasized that reaching more MSEs with more services through
commercial transactions.
4.4.1 Partial Supports for MSEs
Table 4.4.2 presented that the number of MSEs using various types of business
development services has been increasing in the years. There are four major and
dominant supports which include Training, credit facilitation, and provision of working
premises and information and consultancy. Even though the Regional Micro and Small

67
enterprises Agency was established in 2002, various supports to MSEs operators were not
provided because the agency was not strong to provide all supports. However, the
supports were started strongly in 2004 in all over the major towns. Even though coverage
of the full supports (BDS) was low in Mekelle city,the partial supports were relatively
satisfactory. The office has provided partial supports for 4142 MSEs in 2004 but this
number increased to 23,652 in the year 2006.This implies, the total MSEs operators got
either one or more of the stated services .See table 4.4.2 below.
Table 4.4.2 Types of Supports Delivered by Mekelle Trade, Industry and
Cooperative Promotion Office from 2004 to 2007
Current unfilled
Types of supports Year Total needs by MSEs
N covere
o d

2004 2005 2006 2007


1 Training 1317 2305 7078 5736 16,436 10,676
2 Credit facilitation 2601 3768 6802 11,3 24478 9772
67
3 Working premises 14 20 478 1118 1630 12,122
Information and 210 3854 9293 - 13,357 -
4 consultancy
Total 4142 9947 23652 7134 55,901 32570
Source: Regional Trade, Industry and Transport Bureau Annual Report and Census Compiled By Researcher: 2008.

As table 4.4.2 indicated, the current needs of MSEs for training was 10,676. About 9772
MSEs demanded credit access 12,122 working premises. Therefore, there was about
32570 MSEs operators gab to be satisfied by partial service provider (especially
government).
4.4.2 Trends of BDS Sample Out Reach to MSEs( Full Supports)
The total population of MSEs operators were 23642 in the city. This implies the BDS or
full supports reach to MSEs operators is only 1028 (4.35%) of the total MSE enterprises
located in the city.
How ever, the BDS out reach or full supports is growing gradually in terms of quality and
diversification. Yet, all types of the services were not equally achieved as par the
objective of government. As table, 4.4.3 shows and frequently mentioned previously the

68
performance of BDS service delivered to the MSEs concentrated on information and
consultancy, credit facilitation and training provision.
Table 4.4.3 Number of BDS Users by Year and Types of Services
S.N Types of BDS services
Year
2003 2004 2005 2006 2007 total

1 Short term training and 3 6 9 8 55 81


technical assistance

2 Access to market 0 2 0 3 9 14
3 Input supply facilitation 0 0 1 0 3 4

4 Technology and product 0 1 1 1 7 10


development

5 Infrastructure and 2 1 6 4 8 21
working premises

6 Information and 3 6 7 9 75 100


consultancy

7 Financial facilitation 3 6 9 8 69 95

Total 11 22 33 33 226 335

Source: Own Sample Survey: 2008

All MSEs operators who had information about the BDS were not users in each type of
BDS services. Even supposing the BDS services were provided on the individual
enterprise needs, diversification with qualification of the services were not attained based
on their interests to all currently inaccessible MSEs operators. To explain more, the types
of service like input supply facilitation, technology and product development, access to
market and working premises should be used and promoted to all MSEs operators. See
figure 4.4.2 below.

69
Number of BDS Users by Type of Services

Number of BDS Users by Service Type

120

100 97
95
93
89
85
81
Number of Respondents

80 76

Yes
60
No

40

26
21
20 17
13
9
7
5

0
Short term traing Access to market Input Supply Technology aand Inrastreture and Information and finacial
and technuccal Facilitation product product consultancy facilitaation
assistance development development
Type of BDS services

Source: Own Sample Survey: 2008


Figure 4.4.2
4.4.3 Types of BDS Services and Awareness
The sample survey BDS users were asked whether they know about the various types of
BDS service or not. Most of them have more information about financial facilitation,
information and consultancy and short term training. In contrast BDS users have
relatively less information about technology and product development, input supply
facilitation and access to market. This is because Trade, Industry and Cooperative
promotion office has delivered BDS services concentrated on the above mentioned
services. The other BDS services were relatively forgotten through out the BDS users.

70
Table 4.4.2 the Level of Respondents’ Awareness to Wards the BDS by Service Type
Number of sample Respondents and awareness to wards the
BDS
Extremely Some what Some Extremely
Type of services not well not well what well well Total
Short term training and
technical assistance 0 2 15 69 86
Access to market 3 3 15 17 38
Input supply facilitation 3 3 12 13 31
Technology and product
development 4 5 6 15 30
Infra structure and working
premises 0 2 12 33 47
Consultancy and information 0 1 11 82 94
Financial Facilitation 0 2 13 81 96
Source: Own Sample Survey: 2008

4.5 BDS Effectiveness in Promoting MSEs Development


According to Frank Waltring 2004, the impact and effectiveness of the BDS services have
not been conducted because BDS is relatively new field that is still under going
innovation and experimentation and is thus evolving in terms of its approach and
paradigm. The author emphasized that most of the BDS evaluations have been more on
program design and implementation than the success and impact.
According to the conducted by World Bank in Kenya, BDS improved profits, sales and
investment (capital) in a significant proportion of BDS users. Besides, the BDS increased
the potential demand for business services. This research also shows that the BDS
services have enhanced sales, employment and asset creation significantly.
4.5.1 BDS and Sales of the Sample MSEs Operators
According the impact assessment of MSE conducted in 2007, out of the total 2699
sample respondents of MSEs operators 657 (24%) of them got monthly sales above birr
1000. And 613 (22.7%) MSEs Operators got below birr 300 sales monthly on average.
This implies the majority of the MSEs operators monthly sales concentrated on the
extremely high and low monthly sales of the range. Therefore the income equity or

71
distribution among the business enterprises is negatively affected we can observe the
details from table 4.5.1 below.

The Range of Monthly Average Sales by Number of respondents


Table 4.5.1
S.N Monthly average sales (Birr) Number of %
Respondents
1 Below 300 622 23
2 300-500 577 21
3 501-700 426 16.5
4 701-1000 417 15.5
5 Above 1000 657 24
Total 2699 100
Source: Bureau of Trade Industry and Transport Tigray Region: 2007

The sample MSE, operators asked whether the provision of BDS by the office of Trade,
industry and cooperative promotion have improved their business enterprise or not.
The respondents approved that the provision of the BDS service have improved, record
keeping systems, sales income, asset creation and increase the cash in the business
enterprise. Figure 4.5.1 shows that the number of respondents who agreed on the
respected improvement of the indicators stated below.

72
Other

Boosted house hold expenditure

Technological Improvement

Production Improvement

Organization and mgt

Production planning

Business Plan

Marketing ability
Types of Improvement

Analyzing of business environment Series1

Better Entreprenrial know how

Provided a better Project Idea

Created employment

Increased Cash

Increased asset

Improve equipment

Records Keeping

Improve Income

Improved Sales
73

0 2 4 Percentage
6 of the Responses
8 10 12 14
Source: Own Sample Survey: 2008
Figure 4.5.1

In addition to this idea, the sample BDS users responded that each of the BDS services
were more than partially important, however, the degree of relevancy to their business
differ from one type of BDS service to another. Most of the respondents replied about the
short term training, credit facilitation and information and consultancy. As table 4.5.2
indicated below the provision of information and consultancy followed by Credit
facilitation were more helpful to their business. This may be the reason why most of the
sample BDS users significantly improved their sales with out comparing the non BDS
users.
The Extent of Enabling Support Services to MSE Operator as the Result of BDS
Services Delivery by Type of Services
Table 4.5.2
S.N Types of BDS services Respondents Frequency
Did not help Partially Fully Total
at all
1 Short term training and technical 2 30 46 78
assistance
2 Access to market 1 14 19 34
3 Input supply facilitation 0 3 18 21
4 Technology and product development 2 7 18 36
5 Infrastructure and working premises 3 10 26 39
6 Information and consultancy 2 36 58 96
7 Credit facilitation 5 34 50 89
8 Total 15 134 235 393
9 % 3.81 34.1 59.7 100
9
Source: Own Sample Survey: 2008

Most of the BDS services users have been changed their sales positions after the
application of the BDS service. The respondents were asked if the BDS services
improved their sales or not, when we compare the sales amount before and after the BDS
services. The large number of respondents approved that the nominal sales increased

74
from the previous low range to the next high ranges. To explain more as figure 4.6.2
indicated, 23 sample BDS users were selling monthly average between birr 1 and 250.
How ever, after the provision of BDS 20 of 23 respondents have changed their sales
position to next high ranges. The significant change after the BDS service is more
observed at the low level of sales as compare to high level of sales. Further more, out of
the total 102 respondents only 29 of them were selling above birr 1000 average monthly
sales but after the provision BDS the number of MSEs who sale above birr 1000 become
49. There fore we can say that the BDS services have significant improvement on the
BDS users. See 4.5.3 table below.

Table 4.5.3 Average Monthly Sales of Sample Enterprises before and after the BDS Service
N Average monthly sales level No. of respondents
o. (Birr) Before BDS After BDS
1 6000_5000 17 21
2 4000-5000 3 2
3 3000-4000 0 3
4 2000-3000 2 5
5 1000-2000 7 18
6 500-1000 26 29
7 250-500 24 21
8 1_250 23 3
102 102
Total
Source: Own Sample Survey: 2008

The change of the sales from one opposition to another can be statistically tested through
wilcoxon signed ranks tests. The researcher used the SPSS program to calculate whether
the BDS users improved their sales position or not. We can see the out put of wilcoxon
signed rank test results from table 4.5.4 below.
Table 4.5.4 Wilcoxon Signed Ranks Tests
Sale category Status N Mean Sum of Calculated Tabulated
or formula rank Ranks Z-Value Z-Value
Sale 2-Sale 1 Negative ranks 1(a) 10 23 -6.877 1.96
Positive ranks 64(b) 70 12645
Ties 37©
Total 102

75
Remarks
a. Sale 2 < Sale 1 b Sale 2> Sale 1 c Sale 2= Sale 1
- Sale1 means the average monthly sales of each and every sample BDS users before
the provision of BDS services.
- Sale 2 means the average monthly sales of each individual sample enterprise after the
BDS service provision.
As the above table 4.5.4 indicated, out of the total 102 MSE BDS users only 1 MSE BDS
user changed to the negative direction while 64 MSE BDS users improved their average
monthly sales to the positive direction and 37 MSEs BDS users remain unchanged as the
result of BDS services. This was tested for statistical significant by comparing the Z-
value of calculated and tabulated. To follow the hypothesis testing procedures, it is
assumed that the average monthly sales in the sample MSE, and BDS users is normally
distributed. Therefore the Z-value calculated can compare with Z- value tabulated based
on Wilcoxon signed ranks test. The absolute value of Z-calculated is -6.877 which is
greater than 1.92 the Z-value tabulated shown on table-above. Therefore, we can
conclude that the difference is the level of monthly average sales pre and post BDS was
statistically significant at the level of 95% confidence interval. To explain more, we are
95% sure that the sample MSEs BDS users have changed their position to wards the
positive direction. So there is statistically significant change when we compare before
and after the BDS service provision. The researcher also measured the level of sample
MSE BDS user’s sales change with the compaction of non BDS users. The wilcoxon
signed rank test shows that the major sample business type of four BDS users which
include food and drinks, production, trade activities and services moved to the positive
direction with relation to the non BDS users. Even though most of the major mean value
of business category changed their position, the improvement of the business category in
sales was not so much statistically significant when we compare the BDS user and none
BDS users.
4.5.2 BDS and Capital of the Sample MSEs Operators
According the census of MSEs that was conducted in major forty towns of Tirgray
Regional state in 2007, There were the total of 67,187 MSEs operators, out of which
36512 (55.2%) were established with initial capital of less or equal to birr 1000. The

76
census also indicated 97.5% of the total MSEs operators were micro enterprises in Tigray
region.
Similarly out of the total 23609 MSE operators 13474 (57.1%) were established with
initial capital of less or equal to birr 1000 in Mekelle city. And 98.5% of the total MSEs
were micro enterprise during the establishment of the enterprises.
A study on the impact assessment of MSEs conducted by the Bureau of Trade, Industry
and transport in Mekelle city, revealed that 1238 (47%) of the 2610 MSEs operators had
a capital between birr 1000 and 5000. There fore the previous studies approved that most
of the MSEs operators were categorized under the micro enterprise in Tigray region in
general and in Mekelle city in particular.
The sample MSEs BDS operators were asked if the BDS supports affected their capital.
The sample survey shows that there is an improvement from low level of capital position
to the higher. As table 4.5.4 depicted, 9 BDS user operators were in the position of
between birr 1 and 500 initial capitals before BDS provision. How ever, 8 of them
improved to the higher position capital interval and 1 MSE operator remained unchanged.
See table 4.5.4 below.
The Level of Asset (Capital) Created in the Sample Enterprises Before and After the
BDS Service Delivery by Number of Respondents
Table 4.5.5
Asset (capital) before & After BDS(birr)
Before BDS After BDS
1 250,001_500,000 0 1
2 100,001-250,000 1 0
3 50,001-100,000 0 6

4 20,001-50,000 6 14

5 10,001-20,000 14 20

6 5001-10,000 27 35

7 2001-5,000 29 19

8 501-2,000 16 6

9 1_500 9 1

102 102
Total

Source: Own Sample Survey: 2008

77
The researcher applied wilcoxon signed test ranks to measure; the statistical significance
of the change. As indicated on the table 4.5.6 below, none of the sample MSE BDS users
remained unchanged after the BDS service provision. Out of the total 102 MSE BDS
users conducted in this sample survey, 86 (84.3%) MSE BDS users changed their capital
position to the positive direction. And 16 MSE BDS users remained unchanged (See
table 4.5.6).
Table 4.5.6 Capital Out Put of Each Sample MSE BDS Users Analyzed Based On
Wilcoxon Signed Ranks Test.
Capital category or Position of Number Mean Sun of Z-value Z-value
formula movement rank ranks calculated tabulated
Capital 2-capital 1 Negative 0(a) .00 .00 -8.092 1.96
Ranks
Positive 86(b) 43.50 3741.00
Ranks
Ties 16©
Total 102
Remarks: a Capital 2 < capital 1 b capital 2> capital 1 c capital2 = capital 1

The wilcoxon signed rank test showed that the change of sample MSEs BDS users’
capital position after the BDS service is statistically significant, because the absolute Z-
value calculated is greater than the Z-value tabulated. There fore, we are more than 95%
sure that the sample MSE BDS users improved their capital position.
Even though the sample MSE BDS users changed their capital to the positive direction,
when they were compared before and after the BDS provision, we have not yet discussed
about status of BDS user with relation to the non BDS user. As the out put of wilcoxon
signed rank test revealed, the mean value capital of foods and drinks, production trade
activities and services were compared to know the degree of capital change between BDS
users and non BDS users.
As the Wilcoxon signed rank test shown the major 4 category of businesses which
include foods and drinks, production trade activities and services were compared. Out of
the total four major business categories only one major business category went to the
negative direction. This implies one of the major business categories of the BDS users
was lagged behind the non BDS users. But three of the major business category BDS
users were improved to the positive direction as compare to non BDS users. Even though

78
most of the major mean value of business category changed their position, the
improvement of the business category was not so much statistically significant when we
compare the BDS user and none BDS users. This implies the cause to change the capital
was the over all economic growth than BDS services
4.5.3 BDS and Employment Creation of the Sample MSE Operators
As the census of Tigray regional MSES conducted in 2007 clearly stated, out of the total
92,424 employment created by the MSEs Enterprises 68,249 (73.8) employees were
family to the enterprise owner at regional level.The census also showed that from the
total of 36393 MSEs employment generation, 25888 (71.2%) were employed from the
family of owner enterprise at Mekelle city level. Likewise, the MSEs impact assessment
conducted in 2007 in Mekelle city indicated, out of the total 2495 respondents of sample
survey MSEs 480 (59%) enterprises were operated by one person who was family based
employee. And 509 (23%) MSEs respondents approved that their enterprises employed
between 2 and 4 people. But only 206(9%) MSEs employed above four people per
enterprises.
As figure 4.5.2 and table 4.5.7 shown below, there were 67 enterprises with only one
person before the provision of BDS.After the provision of BDS 33 of the enterprises
expanded to employ between 2 and 5 persons per enterprise. Therefore a total of 62
MSEs BDS users employed between 2 and 5 people after the BDS services as compare to
35 MSE BDS users were before the service provision.
There are 6 MSE BDS users that employed above 6 persons per enterprise after the
provision of BDS services but no one existed before the BDS supports made for.

79
The level of Employment created in the sample Enterprises Before and after the
BDS Service Delivery by Business category
Table 4.5.7
Only 1 2_5 6_10 Total
Business
S.N Before After Before After Before After No. Average%
category
change
1 Food and 14 5 8 15 0 2 22 117
Drinks
2 Production 14 7 13 17 0 3 27 126.6
3 Trade 29 17 5 17 0 0 34 93
activities
4 Service 10 5 9 13 0 1 19 64.6
Total 67 34 35 62 0 6 102
Source: Own Sample Survey: 2008

Figure 4.5.2

Employment Created After and Before the BDS Services

80

70

60
Number of Respondents

50
Food and Drinks
Production
40 Trade activities
Service
Total
30

20

10

0
Before After Before After Before After
Only 1 2_5 6_10
Number of Employment created

Source: Own Sample Survey: 2008


As table 4.5.7 above shows Production industry grew at faster rate followed by food and
drinks with compared to trade activities and service sectors. This may directly related

80
with process of economic development theory that stated production grow first then
services.
The researcher has applied here also the wilcoxon signed test ranks to measure whether
the employment created by the MSE BDS users is statistically significantly acceptable or
not. The result shows that out of the total 102 sample MSEs BDS users 39 enterprises
changed their position to the next category of employment interval, however, there were
about 63 sample BDS users remained of the same size before and after the BDS services
provision.
The researcher has tested change of employment before and after by the help of Z-value
based on the wilcoxon signed test ranks. As the result indicates, the absolute -5.891 Z-
value calculated is greater than 1.96 Z- value tabulated. There fore, we are more than
95% sure that the sample MSEs BDS users improved their employment generation status
when they were compared before and after the BDS services provision. See Annex 6.
The researcher also compared the BDS users with those who did not use the services
based on wilcoxon signed rank test. Out of the total four major grouped business types
which include food and drinks, production, trade activities and services, three of them
changed to the positive direction in terms of employment generation as compare to the
non similar BDS users located with in the same kebelle. How ever one major category of
business lagged behind the non BDS users.
Even though sample MSE BDS users changed in employment generation to the right
position with relation to the non BDS users that is not much significant. There fore the
change is not statistically significant. Correspondingly the magnitude of improvement is
not so strong. The statistical calculated out put is attached in annex 6.
To summarize the above discussion and findings, BDS appears effective in improving
sales employment and asset of operators. However, the results of employment and
capital, improvement are not as such satisfactory when the researcher compare between
BDS users and non BDS users.
4.6 Problems and Challenges of BDS in Promoting MSEs
4.6.1 Challenges of BDS and MSEs
Even though there are improvements and changes of the BDS performance like delivery,
scale and out reach, effectiveness in terms of employment and capital creation to develop

81
the private sector in general and micro and small enterprises in particular, it is not with
out challenges and problems of high quality diverse competitive and sustainable BDS
delivery. The government is the only BDS provider that implies, BDS service provision
is not market oriented and demand derived. Because the private sector has not developed
to provide fee based BDS services. The government with some non government
organization involved in all provision of training, consultancy and information,
facilitation of credit and input, making of market access and preparing working premises
for the MSEs operators with fully subsidized and free of changes. As the consultative
discussion with the BDS provider experts indicated, almost all training program are either
highly subsidized or fully funded by the government, donors and NGOs. There fore there
is a crucial problem of BDS services to deliver continuously and sustainable to the MSE
operators in general and to the poor business operators in particular.
In this research the findings revealed that the only BDS provider is the government and
focus on the survival of MSE rather than reinforcing local BDS market development in
Mekelle city. The challenges and problems of the BDS include market distortion and
highly dependent on government with no alternative private provider, little innovation
and low out reach and with no sustainable. The market economies show that the
superiority of the market system which can be trusted up on still the government needs to
observe and if needed intervene to secure equal chances for market players. How ever
there are challenges and problems of BDS market which excluded the poor MSEs from
the mainstream of the market.
This research identifies that the over all supports are not sector specific with longer-term
commitment to address well market failures in the case of Mekelle city. As indicated in
the previous of this research almost all the respondents are not ready to pay for the
services of BDS and the level of entrepreneurial awareness is low in the MSEs in general
and in the BDS users in particular.
As the consultative discussion with current and potential BDS provider also indicate that
the role of information is neglected, by those who could offer it and those who would
need it. This leads to restricted access to necessary information on all levels of BDS.
There fore the key to a success full for BDS service market development approach is the
broad use of professional information.

82
The more information people have on a situation, the more competent they can be to find
solutions for themselves with out further interference of the state. How ever the
government has great role on the BDS market facilitating and setting up the frame works.
The approaches and BDS delivery is supply driven and traditional approach characterized
by government sources with full subsidy unsustainable service provision.
The government of Mekelle Trade, Industry and Cooperative promotion has a strong
position to deliver and monopolize with no space for private MSE-BDS development.
Equally, BDS services are not embedded and clustered based on the win-win situation.
4.6.2 Problems of BDS and MSEs
As the census of MSEs conducted by Trade, Industry and Transport Bureau indicated
45.5% respondents out of the total have approved that they have the problem of credit
facilitation followed by 18% working premises. Similarly, according the impact
assessment of supports for MSE survey in 2007, out of the total 3716 MSE respondents
41 %( 1510) MSEs also approved that they have credit and finance problem in their
business. As table 4.8.1 indicated lack of skilled manpower ranked the least problem as
compare to other. See table 4.6.1 below.
Table 4.6.1 Mekelle MSEs Respondents By Business Problem Categories
S.N Types of the MSE problem Number of %
Respondents
1 Lack credit 1510 41
2 Lack of market 668 18
3 Unavailable of working premises 911 24
4 Lack of inputs 80 2
5 Unavailable of skilled manpower 15 0.4
6 Lack of skill and technology 86 2
7 Lack of equipment and furniture 55 1.5
8 Inflation 336 9
9 Other 55 1.5
10 Total 3716 100
Source: Tigray Regional Trade, Industry and Transport Bureau: 2007.

In the same way, the sample MSE BDS users conducted by this research responded that
out of the total 102 sample BDS users 78 (77.5%) have the problem of credit facilitation
and availability.

83
As the frequency of the problem show, majority of MSEs have the problems of finance,
market, working premises and ability to manage the business. Observe figure 4.7.1 below

Mian Problems Of Sample Enterprises

Other 0

High taxes 21

Time consuming regulation 12

Lack of working 37

Lack of credit 79
Types Problems

Lack of infrastructure 11
Frequency
High (material)costs 25

No qualified staff 7

Lack of record keeping 61

Production technical problems 13

Lack of business skill 41

Lack of market access 75

0 10 20 30 40 50 60 70 80 90
Frequency

Source: own sample survey


Figure 4.6.1
In general, the status of BDS service provision in Mekelle city can currently rated as very
low demand and supply. There fore appropriate BDS interventions are very necessary so
that to involve and strengthen the BDS provider and stimulating demand and supply of
the services.

84
CHAPTER FIVE: CONCLUSION &RECOMMENDATIONS
5.1 Conclusions
The over all tends of BDS services have been growing during the five years (2003-2007).
The office of Trade, Industry and Comparative Promotion has tried to enhance the skills
and performance of MSEs by providing them with a variety of BDS services typically
short tem training, credit facilitation, information and consultancy market linkage
services. Consequently, these services have been regarded as public goods which require
public delivery and public subsidy. These research findings indicated, the BDS services
have been based on a narrow view of MSEs requirements, that is supply driven rather
than informed by business requirements (demand driven).
The objective of this research was to assess approach and modalities out reach and scale,
sustainability and effectiveness with identifying the current challenges and problems and
successes of BDS in Mekelle city. Despite the achievements of growing trends of out
reach and effectiveness of sales increase, capital creation and employment generation,
there were problems related with reliance on supply driven approach and government
subsidy. The BDS services were not sustainable because of the dependency on the public
funds and delivery mechanism has seen service provision cease once finding is with
drawn. Moreover, the provision of public business services has not been linked to the
broad strategy of creating conducive business environment. Unfavorable regulatory
frame work and poor over all the BDS services delivery modalities and approaches
constitute perhaps the biggest constraints to BDS market development.
As the research findings indicated the source of BDS has been gradually increasing in all
over the region in general and in Mekelle city in particular. Even though the distribution
of the BDS to the one stop shop service centers is relatively faire, the coverage and out
reach of full supports or BDS services minimal. However, the partial supports like
training, credit provision and information and consultancy services were provided at high
rate as compare to the capacity of the Mekelle Trade, Industry and Corporative promotion
office.

85
Most of the MSEs BDS users covered by the sample survey were legally registered
however that of 20.59% of them were not legally registered that discourages the legal and
faire competition in the free market.
Generally, the findings of this research revealed that current approaches and
performances of BDS for MSEs in Mekelle city have not achieve at high level of
impact, expanded out reach, and sustainability. Even though sample MSE BDS users
changed in employment generation, capital creation and sales increase, to the right
position with compare to before and after the BDS services with in their enterprises, the
that was not statistically significant when it was compared with non BDS users. Like
wise, the improvement was not as such satisfactory.
The capacity of the MSEs operators in terms of capital, level of education, exposure to
business management was minimum. These problems aggravate to the poor management
of business and incapable to use the proper demand driven BDS services from the
market.
We can conclude that partial supports have been growing starting from 2004 to 2007.
How ever, the quality and diversification of the services are limited. Specifically most of
the MSE operators were supported only by the credit facilitation, short tem training and
working premises. In addition, the Trade, Industry and Cooperative promotion office has
delivered BDS services only for 1028.
Even though there are criterion of the Bureau that should be followed by the extension
agents, the practices of BDS provision services were different from the directives
criterion and highly suffered with unable to involve the interest of extension agents BDS
beneficiaries.
The provision of BDS services has not publicized through out the city of Mekelle.
Therefore, MSE operators were not aware about the BDS services. This contributes to
low level of coverage and out reach of he services. Likewise, almost all the BDS users
have not paid any thing for the services provided.
Even though the government of Mekelle in general and Trade, Industry and comparative
promotion office in particular have tried to decentralize their forms to the lower level of
one stop shop services, the results and intended objectives were not achieved
significantly.

86
Similarly, the extension agents were pushed to provide and include more operators than
they can. There fore the approach and delivery of the BDS were worsened because of not
only low level entrepreneurial capacity of the MSE operators but also the incapable of
implementing agencies.
One can conclude that BDS services have improved, record keeping systems, sales,
income, and asset creation and increase the cash in business. But the Bureau of Trade,
Industry and Transport in general and Mekell office in particular were incapable with the
new approach of BDS Market development. As the result of this research revealed, there
were other factors that causes for the change and effectiveness of the individual
enterprises.
The supports of the BDS more focused on the micro and newly established enterprise
than enterprise stay long in the business. The reason may because of the challenge in
reducing chronic unemployment rate which deteriorate the income of urban poor people.
The start-up young, established businesses need a broad variety of individual services for
their development. There fore government has the role to provide services for the newly
established micro enterprise.
However, strong position, some times monopoly of the state on BES services doesn’t
leave space for private BDS market development. Incentives for the facilitators and
potential BDS providers were neglected, at all levels of the stages.
The government has not clearly separated poor from rich MSEs to provide BDS services
for the enterprises who were poor and able to pay fees based on the current demand and
supply. And BDS supports were provided generally with out set up high selection
standards and criteria.
The crucial problem of BDS delivery was providing continuously and as par the objective
of program.
The market economies stated that the superiority of market system which can be trusted
up on still the government needs to observe if needed intervene to secure equal chances
for market players. How ever there were challenges and problems of BDS market which
exclude the poor MSES from the main stream. And this research identified that the

87
partial supports in general and full supports (BDS) in particular were not based on the
principle of subsidy for the poor MSEs.
In addition, the services provided to the MSEs were not initiated from the need
assessment and sector based supports. Trainings and information for example were
provided with out watching of the real ground and problem analysis of individual
enterprise.

5.2 Recommendations
As the research findings indicated, BDS promotion experience has been prompted by
general was not been successful in terms of out reach, sustainability and impact. A key
priority has to be given identifying and transfer of lessons from wider experience.
Therefore, the objective of intervention seems to be BDS markets with more providers
offering different types of services for businesses and offers a means of reaching more
people on sustainable basis. The government seems to intervene with specific purpose
that is to address the constraints of BDS markets from functioning effectively. Like wise,
public supports and interventions should offer with explicitly picture of how
sustainability and efficiency are achieved.
This means, for example, the issues, such a cost control, payment for services and
performance measurement and evaluation have to be considered from the outset rather
than as an after through. Additionally, the BDS interventions should be also offered with
a clear view of how broad impact and out reach will be achieved. The provision of BDS
services are the duties and responsibilities of many stake holders and actors that leads to
integrated themselves in order to provide diversified and quality BDS services for the
MSES operators.
Most of the MSES operators are not aware about the benefit of the BDS service. There
fore, services provided by government should bet shifted to the private sectors with the
total awareness creation and involvement of the beneficiaries. This can be done through
the integration of entrepreneurship awareness in to mainstream education and other
communication channels and strengthening net works with private BDS providers,
chambers, associations, and research and industry institutions. The more information
people have on situations the more competent they can be to find solution for them
selves.

88
The MSEs Operators are pushed to take training and related BDS service with out their
full involvement. This leads to fruitless use of resources. There fore, it is better to let
space for individual development with out force every one in to the same scheme.
The major role of the government can be achieving the equity by creating access to
services and investing more on public benefits. However, the market should not be
distorted. Therefore, the government has to withdraw from an achieve role in the market.
Only services are to be offered, that can not be done in better way in competitive market.
Similarly, the government should concentrate setting up the frame work (rules and
regulations, infrastructure, standards etc…).
It is not better to look at individual enterprises, but on the inter dependencies of the
market (where do which people exchange, how do they come together).this means that
the government has to aware how the actual market works and where it does not function
well.
After this analysis, a specific BDS supports and intervention might be helpful to bring
market players together. It is the market players, who can best match demand and supply.
The way it works for normal goods, it also works for services, such as BDS. Efforts to
develop private BDS markets should be complemented with a reduction and
rationalization of public sector involvement. Reducing the traditional government role in
service provision can be encouraged by requiring steady increase in cost recovery to
achieve financial and institutional sustainability which the private sector to deliver
publicly funded services and more regions impact evaluation tied to budgeter allocations.
Rationalization of public expenditure on BDS can be accompanied by privatization of
programs that have achieved full cost recovery.
The BDS services supports should be capitalize on their strengths as they are performing
well in achieving the partial support of training, credit facilitation and information and
consultancy. The government is better to introduce cost sharing mechanisms gradually
specially for the BDS services such as advertising, market research, training or
consulting, business plan or record keeping and auditing.
Similarly embedded services with in a trading relation ship in physical goods such as
design quality and market information to a producer from intermediary buyers should be
provided on the fee basis in order to achieve efficient and effective BDS service delivery.

89
The organization and potential private BDS providers need to diversity the services to
enable MSEs operators to choose and gain maximum benefit to wards growing their
business, as intended by the programs.

The education level of every individual BDS users should be upgraded to introduce
appropriate technologies that contribute to expand their business. The current BDS MSEs
supports are mixed up with the other services which are carried out in all over the city
according to the annual plan of the Trade, Industry and cooperative promotion office.
Therefore, criterion and standards, for the selection of BDS users should be clearly
placed in order to reduce over lapping full supports (BDS) with partial supports.
The directives and manuals of the BDS services did not promote to operators who have
not legal licenses but this research finding indicated that about 20.59% were none legally
registered. There fore, government subsidy and supports of BDS should be match with
the concepts and systems of the free market competition. The laws and legal trade should
be maintain and respected with according to the BDS promotional activities.
The BDS delivery approach is not clearly understood by all level of implementing
experts, managers and extension agents. Continuous and consistent training and
information exchange with monitoring and evaluation that contribute to the maximum
results and achievements.
There are some improvements of business enterprises as the result of BDS services but it
is not significant change as compare to BDS users with non users therefore, more
researches to wards the impact of BDS with corrective measures should be expected from
the supporter institutions.
To promote BDS services based on the need assessment of individual operators problem,
establishment of competency profile for the staff experts managers and extension agents
is very necessary in order to provide incentives for these who perform maximum results
and changes.

90
List of Figures
Figure 2.1.1 Poverty impact through Economic Growth Generated by participating Small
Enterprises through provision of the BDS services
Figure 2.1.2 Traditional Approach: Substitute for the market

Figure 2.1.3 Facilitating BDS market development


Figure 2.1.4 Alternative Approaches for Facilitation of BDS
Figure 2.1.5 Types of BDS activities achieved

91
List of Tables

Table 2.2.1 Reason for Getting In the Specific Business

Table 2.2.2 Institutions that Supported MSE


Table 2.2.3 Report of the third BDS cycle (1/2004-6/2004
Table 2.2.4 3rd BDS delivery cycle for Tigray ReMSEDA (January to June 2004)
Table 2.2 5 Changes brought by type of business and gender
Table 3.1.1 Major Business Group by One Stop Shop Service Centers That Get BDS and
Sample Sized Taken
Table 4.2.1 Business Category of BDS by One Stop Shop Service Centers
Table 4.2.2 Initial Capital during the Establishment of Enterprises
Table 4.2.3 Age range of the sample BDS user Operators
Table 4.2.4 Age range of the sample Enterprises
Table 4.3.1 Availability of BDS Services
Table 4.3.2 Are the BDS Services Delivered Continuously As Par The Program
Table 4.3.3 Is Your Business or Enterprise Sustainable
Table 4.3.4 Are the over all Services provided by the Office of Trade, Industry and
Cooperative Promotion Continuous and Smooth.
Table 4.3.5 the Level of General Percentage Support Distribution for MSEs by Kebelle
Table 4.3.6 Sources of BDS Service Provision by Institution Type
Table 4.3.7 Business Training Provided by Nongovernmental Institutions by Year
Table 4.3.8 the Sources of Information for BDS Users
Table 4.4.1 Number of MSEs BDS Operators (2003 _ 2007
Table 4.4.2 Types of Supports Delivered by Mekelle Trade, Industry and Cooperative
Promotion Office from 2004 to 2007
Table 4.4.3 Number of BDS Users by Year and Types of Services
Table 4.4.2 the Level of Respondents’ Awareness to Wards the BDS by Service Type
Table 4.5.1 The Range of Monthly Average Sales by Number of respondents
Table 4.5.2 the Extent of Enabling Support Services to MSE Operator as the Result of
BDS Services Delivery by Type of Services
Table 4.5.3 Average Monthly Sales of Sample Enterprises before and after the BDS
Service
Table 4.5.4 Wilcoxon Signed Ranks Tests

92
Table 4.5.5 the Level of Asset (Capital) Created in the Sample Enterprises Before and
After the BDS Service Delivery by Number of Respondents
Table 4.5.6 Capital Out Put of Each Sample MSE BDS Users Analyzed Based On
Wilcoxon Signed Ranks Test.
Table 4.5.7 the level of Employment created in the sample Enterprises Before and after
the BDS Service Delivery by Business category
Table 4.6.1 Mekelle MSEs Respondents By Business Problem Categories

93