Micro and Small Enterprises (MSE) Development in Ethiopia: Strategy, Regulatory Changes and Remaining Constraints

Abstract

This paper gives some detailed information on the profile of the MSE operators/MSEs and examines the current business environment for the MSE sector. It is based on primary data collected by the authors through a survey of 974 MSE operators using a structured questionnaire. Although there have been attempts by the government to liberalize and improve the policy, regulatory and institutional support environment for MSEs, which resulted in increase in investment and competition and improvement in the licensing procedures, information from the survey data indicates that there is divergence between stated policies & directives and the outcome on the ground. Capital shortage, inadequate business premise, inadequate/uncertain market and high taxes still remain major constraints to expand MSEs. Moreover, the data revealed that policy predictability is quite low. Much more remains to be done to create an enabling business environment. Concrete and coordinated regulatory and institutional support (infrastructure facilities like business premises, water and power; financial services; extension services; assistance in the transfer of technologies; promotion of marketing facilities; and provision of training on sustainable basis) has yet to be provided by the government and other stakeholders.