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

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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

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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.

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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

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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.

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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%.

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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.

.

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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

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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

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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

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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

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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.

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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.

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Poverty impact through Economic Growth Generated by participating Small Enter

through provision of the BDS services

Figure 2 .1.1

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MSEs Supporters

Implementing/intermediary Organizations

Participating Small Enterprises

Improved capabilities

Increased productivity and out put

Economic Growth

Net increase in demand for production factors produced by the poor, including their own labor

Reduction in prices for goods and services consumed by the poor

Net increase in real income among the poor

Reduction in proportion of population living below poverty line

BDS Services

Resource

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).

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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

Source: Donor committee (2001)

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

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Donor funding

Government Agency Donor program NGO

Private sector Providers

MSEs

MSEs

MSEs

MSE

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.

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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

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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

Figure 2.1.3

Direct provision of services

Facilitation of demand and supply

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

Donor/Government

Facilitator

Provider

Provider

Provider

MSES

MSES

MSES

MSES

MSES

MSES

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.

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

22

Stronger supply

Informing ADemand low Supply embryonic More enterprises Size of enterprise tiny ad small Few private services providers

Optimizing BDemand embryonic supply emerging Many enterprises Size of enterprise small medium More senesces providers

Educating CDemand very low supply inaccessible Fewer enterprises Size of enterprise No private service providers

Stimulating DDemand existing supply inaccessible Few enterprise Size of enterprise medium/ large No credible service providers

Very low Demand low

Ver

y lo

w_

Su

pp

ly

low

Str

onge

r d

eman

d

countries where basic capacity building towards business institutions, private service

providers and government entities is very important.

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 .

23

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

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

24

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).

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

25

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

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).

26

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

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,

27

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

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 owned

Female owned

Total

Skilled in this activity 35.2 42.6 41.3 29.6 38.4

Parents/relatives in this business

16.2 17.0 15.2 19.0 16.5

Thought would be profitable 39.9 48.5 46.8 32.7 43.6

Capital requirement match what I had

15.2 17.0 16.5 15.5 16

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

28

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

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).

29

Table 2.2.2 Institutions that Supported MSE

Did you receive support form Yes No

Number % Number %

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

30

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.

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 facilitators

Businesses supported

Support activities achieved

% of initial 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%

31

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%

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:

32

542

511

377

351

241

127

100

74

56

51

45

0 100 200 300 400 500 600

Management/Accounting 22%

Marketing service 21%

CEFE/SIYB/BBS Training 15%

Finance facilitation 14%

Business plan preparation 10%

Access to premises 5%

Product develop. / Techn. training 4%

Administrative procedures 3%

Raw materials access 2%

Access to equipment 2%

Association development 2%

Types of BDS services provided

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

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%.

33

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

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.

34

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)

Organization

Business operators Gender Support activities

by facilitators

Trade Service Production

Total M F M/F Plan-ned

Rea-lized

Tigray ReMSEDA

29 56 25 110 72 37 1 271 221 (82%)

Source: Mulatu Zerihun Consultant :( 2004)

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

35

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).

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.

36

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).

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.

37

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 equipment/premise

2 male, 2 male, 2 female

2 male 8

More sales 1 female, 1 male

2 male, 3 female

3 male, 10

Increased income

1 female, 2 male, 2 female

2 male 7

More employment

- 1 male 1 male 2

Total 5 14 8 27

Source: Mulatu Zerihun Consultant :( 2004)

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.

38

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

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

39

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,

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

40

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.

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

41

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,

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.

42

Table 3.1 Major Business Group by One Stop Shop Service Centers That Get BDS

and Sample Sized Taken.

S.NName of One Stop shopservice centers

Number of MSEs operators by sector TotalSample size

Food and drinks Production

Trade activities services

1 Hawelti 136 68 25 20 149 152 Hadnet 40 30 49 18 137 143 Addihaki 36 19 52 37 144 144 Aider 26 38 42 34 140 145 Kedamayweyane 32 25 61 18 136 146 Quiha 18 29 47 21 115 12

7Northern part of Administration 35 65 64 43 207 20

8 Total 223 274 340 191 1028 1029 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

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

43

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

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

44

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.

45

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;

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.

46

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,

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

S.N

Name of One Stop shop Number of MSEs operators by sector

Totalservice centersFood and drinks Production

Trade activities services

1 Hawelti 36 68 25 20 1492 Hadnet 40 30 49 18 1373 Addihaki 36 19 52 37 1444 Aider 26 38 42 34 1405 Kedamayweyane 32 25 61 18 1366 Quiha 18 29 47 21 115

7Northern part of Administration 35 65 64 43 207

8 Total 223 274 340 191 1028Source: Mekelle Trade, Industry and cooperative Promotion office Report: 2007

47

Business catagory by One Stop Shop service that get BDS

0

10

20

30

40

50

60

70

80

Food and drinks Production Trade activities services

Types of Business Catagory

Nu

mb

er

of

BD

S u

se

rs

Hawelti

Hadnet

Addihaki

Aider

Kedamayweyane

Quiha

Northern part of Adminisration

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

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

48

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

S,N

Initial Capital PerEnterprise

No. of Sample Respondents by Business Category

Food and Drinks Production

Trade activities 

Services 

Total 

1 1-500 5 3 13 1 222 501 -1000 3 1 9 6 193 1001 -2500 7 3 5 3 184 2501 -5000 5 6 5 6 225 5001 -10000 2 11 2 3 186 10001 - 20000 3 0 3 0 37 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.

Table 4.2.3 Age range of the sample BDS user Operators

S.N Age level of the sample Respondents

Number of Respondents %

1 Less than 18 years old 1 0.982 18-29 18 years old 47 46.083 30-40 18 years old 38 37.254 41-60 18 years old 16 15.69

  Total 102 100Source: 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

49

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 5.92 1998__2002 17 16.663 2003_2008 79 77.54 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.

Figure 4.2.2

The legal status of the survey sample Enterprises

81, 79%

21, 21%

Legally Registered

Not Registered

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

50

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

The Highest Education Level of the Respondents

0

5

10

15

20

25

30

35

40

Level of Education

Nu

mb

er

of

res

po

nd

en

ts

Number of respondents

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.

51

4.3 Approach and Modalities of BDS Delivery

4.3.1 Modalities of BDS Delivery

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 Total1 Short term training and assistance 76   76

2 Access to market 13   133 Input supply facilitation 4 1 54 Technology and product development 9   9

5 Infrastructure and working premise 20 1 21

6 Information and consultancy 95   95

7 Credit facilitation 85   85Source: 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

3rd Step

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

55

MSEs BDSUser operators who fulfilled

criteria

The gov.t of Mekelle Trade, Industry and cooperative

promotion office

Training Institution Micro finance and banks Mekelle municipality Other government and non

government organizations.

service delivery is time consuming. The GTZ approach of BDS service delivery adopted

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

56

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).

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 1 133 Input supply facilitation 4 4 54 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 85Source: 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

0 5 10 15 20 25 30 35

Poor ability to Identity customerneeds

Poor on time delivery of BDS

Failure to use current approachesof BDS

Lack of business experience andknowledge

Unprofessional behavior,including lack of confidentiality

Unable to Delivery smoothly andcontinuously

Other

Typ

es o

f p

rob

lem

Percentage of Respondents

Series1

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

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.

58

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

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.

59

Table 4.3.3 Is Your Business Or Enterprise Sustainable.

S.N Type of Answer Number of Respondents %1 Yes 3120 81.52 No 705 18.53 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 599 162 No 2411 633 Some times 806 214 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

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.

60

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 1002 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

1

38

48

0

14

20

0

3

19

0

7

16

3

9

25

0

41

61

1

36

57

0

10

20

30

40

50

60

70

Not Important Important Very Important

Degree of importace

Nu

mb

er

of

Re

sp

on

de

nts

Short term training and technical assistance

Access to market

Input Supply facilitation

Technology and product development

Infrastructure and working premises

Information and consultancy

Credit facilitation

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

76

76

13

13

4

1

5

9

1

9

20

1

21

95

95

85

85

0 10 20 30 40 50 60 70 80 90 100

Free

Paid

Total

Number of respondents

Credit facilitation

Information and consultancy

Infrastructure and working premise

Technology and product development

Input supply facilitation

Access to market

Short term training and assistance

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

64

by the Trade and sectoral Association and the women entrepreneur of Mekelle city

between 2003 & 2007.

Business Training Provided by Nongovernmental Institutions by Year

Table 4.3.7

S.N Year Trade & Sectoral Association

Mekelle Women Entrepreneur Association

1 2003 80 202 2004 1250 353 2005 220 504 2006 150 685 2007 80 60

Total 655 233Source: 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 2.722 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.

65

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

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).

YearRegional MekelleBDS users extension workers BDS users extension workers

2002|03 10 1 10 12003\04 317 17 50 22004\05 710 24 60 32005\06 1319 89 265 6200\07 1150 92 350 102007\08 1089 107 293 21Total 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

10

317

710

13191150 1089

4595

1 17 24 89 92 107

330

10 50 60

265350 293

1028

1 2 3 6 10 21 430

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2002|03 2003\04 2004\05 2005\06 200\07 2007\08 Total

Year

Num

ber

of B

DS

and

ext

ensi

on w

orke

rs

Regional BDS users

Regional extension workers

Mekelle BDS users

Mekelle extension workers

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

No

Types of supports Year Totalcovered

Current unfilled needs by MSEs

2004 2005 2006 20071 Training 1317 2305 7078 5736 16,436 10,6762 Credit facilitation 2601 3768 6802 11,3

6724478 9772

3 Working premises 14 20 478 1118 1630 12,122

4Information and consultancy

210 3854 9293 - 13,357 -

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 servicesYear

2003 2004 2005 2006 2007 total

1 Short term training and technical assistance

3 6 9 8 55 81

2 Access to market 0 2 0 3 9 14

3 Input supply facilitation 0 0 1 0 3 4

4 Technology and product development

0 1 1 1 7 10

5 Infrastructure and working premises

2 1 6 4 8 21

6 Information and consultancy

3 6 7 9 75 100

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

76

13

59

21

95

85

26

89

9793

81

7

17

0

20

40

60

80

100

120

Short term traingand technuccal

assistance

Access to market Input SupplyFacilitation

Technology aandproduct

development

Inrastreture andproduct

development

Information andconsultancy

finacialfacilitaation

Type of BDS services

Nu

mb

er

of

Resp

on

den

ts

Yes

No

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

Type of services

Number of sample Respondents and awareness to wards the BDS

Extremely not well

Some what not well

Some what well

Extremely well Total

Short term training and technical assistance 0 2 15 69 86Access to market 3 3 15 17 38Input supply facilitation 3 3 12 13 31Technology and product development 4 5 6 15 30Infra structure and working premises 0 2 12 33 47Consultancy and information 0 1 11 82 94Financial 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 300 622 232 300-500 577 213 501-700 426 16.54 701-1000 417 15.55 Above 1000 657 24

Total 2699 100Source: 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

0 2 4 6 8 10 12 14

Improved Sales

Improve Income

Records Keeping

Improve equipment

Increased asset

Increased Cash

Created employment

Provided a better Project Idea

Better Entreprenrial know how

Analyzing of business environment

Marketing ability

Business Plan

Production planning

Organization and mgt

Production Improvement

Technological Improvement

Boosted house hold expenditure

Other

Ty

pe

s o

f Im

pro

ve

me

nt

Percentage of the Responses

Series1

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

73

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 FrequencyDid not help at all

Partially Fully Total

1 Short term training and technical assistance

2 30 46 78

2 Access to market 1 14 19 343 Input supply facilitation 0 3 18 214 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 50 898 Total 15 134 235 3939 % 3.81 34.1 59.79 100

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

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

74

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 ServiceNo.

Average monthly sales level (Birr)

No. of respondents

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

 Total

102 102

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

or formula

Status N Mean

rank

Sum of

Ranks

Calculated

Z-Value

Tabulated

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

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.

75

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

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.

76

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 BDS1 250,001_500,000 0 12 100,001-250,000 1 03 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

 Total

102 102

Source: Own Sample Survey: 2008

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

77

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 formula

Position of movement

Number Mean rank

Sun of ranks

Z-value calculated

Z-value tabulated

Capital 2-capital 1 Negative Ranks

0(a) .00 .00 -8.092 1.96

Positive Ranks

86(b) 43.50 3741.00

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

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

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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.

The level of Employment created in the sample Enterprises Before and after the BDS Service Delivery by Business categoryTable 4.5.7

S.NBusiness category

Only 1 2_5 6_10 TotalBefore After Before After Before After No. Average%

change1 Food and 14 5 8 15 0 2 22 117

79

Drinks 2 Production 14 7 13 17 0 3 27 126.63 Trade

activities29 17 5 17 0 0 34 93

4 Service 10 5 9 13 0 1 19 64.6Total 67 34 35 62 0 6 102

Source: Own Sample Survey: 2008

Figure 4.5.2

Employment Created After and Before the BDS Services

0

10

20

30

40

50

60

70

80

Before After Before After Before After

Only 1 2_5 6_10

Number of Employment created

Nu

mb

er

of

Resp

on

den

ts

Food and Drinks

Production

Trade activities

Service

Total

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

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

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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

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,

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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.

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.

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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 412 Lack of market 668 183 Unavailable of working premises 911 244 Lack of inputs 80 25 Unavailable of skilled manpower 15 0.46 Lack of skill and technology 86 27 Lack of equipment and furniture 55 1.58 Inflation 336 99 Other 55 1.510 Total 3716 100Source: 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.

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

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Mian Problems Of Sample Enterprises

75

41

13

61

7

25

11

79

37

12

21

0

0 10 20 30 40 50 60 70 80 90

Lack of market access

Lack of business skill

Production technical problems

Lack of record keeping

No qualified staff

High (material)costs

Lack of infrastructure

Lack of credit

Lack of working

Time consuming regulation

High taxes

Other

Typ

es P

rob

lem

s

Frequency

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.

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

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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.

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

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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.

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

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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

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

87

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.

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.

88

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.

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

89

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.

List of FiguresFigure 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

90

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 (1/2004-6/2004Table 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

91

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 EnterprisesTable 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 ProgramTable 4.3.3 Is Your Business or Enterprise SustainableTable 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 TypeTable 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 _ 2007Table 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 ServiceTable 4.5.4 Wilcoxon Signed Ranks Tests

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 categoryTable 4.6.1 Mekelle MSEs Respondents By Business Problem Categories

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93