It has been well attested so far that Micro and small scale, middle or large enterprises have emerged as one of the most important tools for addressing economic and social issues and achieving development goals a given country, like Ethiopia, set to conquer. Yes, these enterprises have been acknowledged as critical components of national development across both developing and developed nations of the world.
Cognizant of the fact that enterprises of all sorts are of significantly useful in meeting two goals, creating many more jobs of a number of citizens and meaningfully backing the economic development, The Ethiopian Herald had a stay with Melaku Gobena, an agro economist graduated from Addis Ababa University, to have a piece of information about the contribution of micro and small or small and middle or middle and large enterprises for economic advancement.
He said, “In some countries, micro and small enterprises are categorized based on the capital that is invested and in some countries based on the employment opportunity they provide. In many nations, especially in developing ones micro and small enterprises are small informally organized commercial operations owned and operated mostly by the poor. They account for a substantial share of the total employment and gross domestic products (GDP) contribute significantly to the alleviation of poverty and income creation.”
As to him, the government of Ethiopia has formulated a policy to mitigate the overwhelmed problem by fostering micro and small enterprises. True, micro and small enterprises can create employment opportunities and income increase in the nation. These enterprises have great contribution to the effort geared towards in reducing unemployment and in providing income to those owners and employees of enterprises. Providing them with access to credit, giving them work place and business development service would help the enterprises to produce and sell products easily.
He further said that academicians, politicians and development economists and even operators themselves are expected to support the promotion of micro and small business enterprise towards job creation, poverty reduction, innovation etc. as either micro and small or small and medium enterprises are often the chief economic defense of the most vulnerable households in high-risk environment, such as civil conflict and natural disasters. The enterprise would potentially lay the foundation for economic development.
“With the increasing unemployment and poverty, micro and small enterprises come to the front in employment creation and income generation. The sector is believed to be able to fill the gap that exists between the poor and the rich regarding boosting income generation and, mitigating unemployment rate. Successful small businesses are the primary engines for economic development such as income growth and poverty reduction. These businesses can also build foundation for stable communities and gender equality. However, poor infrastructure, weak public service, inadequate mechanisms for dispute resolution and lack of markets to their product and formal financing remain major impediments to small business growth,” he said.
In most cases, in Ethiopia, a number of new jobs creations are attributable to small business enterprises.
He said although savings are one of the means of accumulation of capital, often savings alone cannot be sufficient for running and expanding business operations, thus, there is a need for creating lines of credit. The support of enterprises of all sorts should be encouraged through varying methods, such as widening the kind or range of collaterals, providing credit by making longer repayment, increasing the amount of loan provided for group based lending.
The construction of market sheds and common facility centers at suitable locations by assistance of the government, donors and private sector could help address this problem. In this regard, the Ethiopian government should provide certain incentives for private investors such as tax relief for some time and availing of lease-free land, etc. Creating work premises would benefit MSEs in reducing costs of high rent, reducing displacement, reducing closures of an enterprise. In addition, if MSEs have a constant work place, they can draw long year strategic plans regarding expansion of the business, Melaku opined.
With regard to marketing support, the following measures need to encourage MSEs by the government he said linking them with medium and large firms to serve as market outlets, providing actors with training on quality improvement and cost reduction modalities, providing them also with information on market opportunities and appropriate technologies.
Improving the educational and training system on trade and industry would also help youngsters to be innovators and self employed. The unemployment rate and low income can be reduced highly if there is a good educational policy, which encourages creating job and high productivity there by increases income.
The major challenges and problems compromising the small and medium scale enterprise in due course of smoothly running and properly operating their business like lack of access to finance, lack of infrastructure, lack of training in entrepreneurial and management skills, lack of information on business opportunities, lack of access to premise, lack of access to capital, inefficient financial market, problem of skilled manpower, lack of clear and pragmatic national policy have to be well met, indeed!, he stated.
“A dynamic and growing sector of MSEs can contribute to the realization of a wide range of development objectives such as the attainment of income distribution and poverty reduction, employment generation, mobilization of savings and production of goods and services that satisfy the basic needs of the poor,” he added.
As learnt from Melaku, the micro enterprises’ sector has been instrumental in bringing about economic transition by providing goods and services that are of adequate quality and affordable cost to a large number of people in rural areas, and by effectively using the skills and talents of these people, without requiring high-level training, large sums of capital or sophisticated technology.
The importance of MSEs in general and new businesses in particular, he elucidated, makes a significant contributions in addressing socio economic problems such as unemployment, poverty, income inequalities, political stability and economic growth, among others.
As to him, the role of micro and small enterprises in Ethiopia is of paramount importance in generating job opportunities; improve living standards, adoption of appropriate technology, development of a pool of skilled and unskilled labor, macroeconomic stability, technology and innovation, capital and wealth creation, increasing revenues and promotion of gender empowerment.
He said, “Micro and Small scale enterprises are generally regarded as the engine of economic growth, poverty reduction and equitable income distribution in the country. They are viable means for employment generating and economic development. Besides, it has been playing an important role for achieving its development goals. It is also important for their greater utilization of local raw materials, increase tax revenue of the government, adoption of appropriate technology, increasing revenues, increase saving or income to the individual, promotion of gender empowerment, increasing socio-economic growth.”
Besides, he said enhanced standard of living, macroeconomic stability, quick production response, innovation, lowering costs, take part in rural and urban development, development of entrepreneurship, mobilization of local savings, linkages with bigger industries, provision of regional balance by spreading investments more evenly, provision of avenue for self-employment and provision of opportunity for training managers and semi-skilled workers have to be well consolidated to help the enterprises be much more competitive.
In a nutshell, lack of access to start up finance, lack of working capital, lack of availability of input on time or lack of raw material, lack of experience, inadequate support from government, lack of access for training, problem of skilled man power, inadequate credit assistance, lack of production/market place, lack of adequate infrastructure, lack of access for training, lack of appropriate information, lack of proper institutional support, multiple tax and levis or unaffordable tax, corruptions, mismatch between jobs available and larger number of new graduates, inadequate managerial skill, policy inconsistency and government bureaucracy, high interest rates for borrowing, unfavorable conditions from MSE facilitators and lack of access to appropriate technology have to be prettily addressed to come up with reliable economic growth.
These days, MSEs are widely recognized as the most reliable economic development and growth, poverty reduction, income generation and employment creation. They also occupy prominent position in order to achieve country’s objectives of attaining economic progress.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD THURSDAY 25 APRIL 2024
