Theoretical Framework for MSMEs Mapping: Mobilizing Resources for Business Chain

Identification of Strategy
MSMEs Development

Business Chain Mapping the

Analysis Business Chain

Resource Implementation
Mobilization and Monitoring

The first step in this framework involves identifying and categorizing MSMEs based on their
industry, size, and location. This process helps to understand the distribution and diversity of these
enterprises. Then resource mobilization, this stage involves identifying the resources required by
MSMEs, which could include financial resources, human resources, technological resources, and raw
materials. The process also involves determining the sources of these resources, such as banks,
investors, government programs, and supply chains. The third step is Business Chain Analysis, wherein
this involves examining the value chain of the MSMEs, from the procurement of raw materials to the
delivery of the final product or service. This analysis helps to identify the key players in the chain, their
roles, and the flow of resources. The fourth one is Mapping the Business Chain, this stage involves
creating a visual representation of the business chain, showing the flow of resources and the
relationships between the different players. This map can help to identify bottlenecks, inefficiencies, and
opportunities for improvement. Then Strategy Development, based on the business chain map,
strategies can be developed to improve the flow of resources, enhance efficiency, and increase the
competitiveness of the MSMEs. These strategies could involve improving access to resources, enhancing
business processes, or strengthening relationships with key players in the chain. For the final stage, it
involves implementing the strategies and monitoring their impact on the business chain. This process
should involve regular reviews and adjustments based on feedback and changing circumstances.

This theoretical framework provides a systematic approach to understanding and improving the
resource mobilization and business chains of MSMEs. It emphasizes the importance of a holistic view of
the business environment and the interconnections between different elements.
Chapter 2 Review of Related Literature

The global economy is experiencing an unusual surge, largely attributed to the impact of small and micro
businesses. These enterprises are significant contributors to job creation, wealth generation, and
income production (Aphu & Adator, 2018). Unlike the traditional benefits offered by multinational
corporations, micro, small, and medium-sized enterprises (MSMEs) are more equipped to address the
developmental needs of impoverished nations in Africa, Asia, and Latin America (Chaokromthong &
Sintao, 2021). Current data from Africa suggests that 90% of all private businesses are MSMEs,
employing 50% of the workforce and making a substantial contribution to the productivity of many
African economies.

Ethiopia is actively pursuing various development strategies with the aim of becoming a middle-income
nation by 2025 and is taking comprehensive steps to drastically reduce poverty. A significant part of
these efforts is focused on entrepreneurship development, particularly among the youth, with over 2
million young people entering the workforce annually (Endris & Kassegn, 2022). The 2021 Job Creation
Commission report indicates that while SMEs play a crucial role in the Ethiopian economy, these
enterprises employ approximately 2.2 million and 2850 individuals. The 2020 report revealed that 1.5
million MSMEs in the country employed 4.5 million workers and generated a monthly income of 40.7
billion birr (Ababiya, 2018; Kassa, 2021).

However, the contribution of MSMEs to the Ethiopian economy has seen a decline compared to the
previous year due to workforce reductions. This has resulted in millions of people losing billions of
dollars in monthly sales, with 37% of businesses already closed. Given Ethiopia's low per capita private
enterprise and the lowest entrepreneurial activity in Africa, this issue requires urgent attention.
Consequently, MSMEs have become a focal point for researchers, with numerous studies conducted by
international organizations and academic researchers (Berhanu et al., 2022).

For MSMEs to operate sustainably and profitably, they require business acumen, skills, and an
entrepreneurial mindset (Buli, 2017). However, personal factors such as lack of business vision, risk
aversion, and limited business contacts pose challenges for MSME members (Endris & Kasegn, 2022).
Efforts to grow existing businesses and establish new ones have a more significant impact on small
businesses than on micro enterprises (Amha, 2015).

Furthermore, market linkages allow MSMEs to supply products and access inputs in the commercial
value chain, thereby creating jobs and enhancing business efficiency. However, the current connections
between MSMEs and large firms are minimal, with limited access to raw materials (Mohammed and
Beshir, 2019) and high raw material costs, posing a significant challenge for Ethiopian MSMEs (Seifu et
al., 2017). The misalignment with the market has exposed a major issue for businesses (Tamene & Daba,
2020). Additionally, the lack of clear guidelines for starting new businesses, limited access to finance,
low managerial skills and knowledge, poor infrastructure, and entrepreneurship are significant
challenges for Ethiopian MSMEs (Endris & Kassegn, 2022).

The development of micro and small enterprises is a key strategy of GTP II, aimed at increasing
employment and reducing poverty, with a particular emphasis on women and youths (NPC, 2016). The
Ethiopian government has identified MSEs as a vehicle for creating jobs for millions of young people and
achieving sustainable development goals. As a result, policy support has led to SMEs creating more jobs
compared to large firms (Ashenafi, 2014). Consequently, the employment contribution of MSEs is
significantly higher (99%) than that of medium and large enterprises (1%) (Abera et al., 2019). A
considerable number of individuals find employment in small-scale tourism enterprises, earning a
decent average monthly income that enhances their living standards in Hawassa City (Tamene &
Wondirad, 2019). Similarly, the MSEs program has positively impacted the income and livelihood of
beneficiaries in Bahir Dar City (Melese, 2017). In terms of sector contribution, manufacturing and
construction enterprises are the leading job creators in Kolfe-Keranio Sub-City, Addis Ababa (Tafa, 2019).
The manufacturing and urban agriculture sectors significantly contribute to reducing food insecurity
among operators in the Mecha district (Yimesgen, 2019).

References:

https://link.springer.com/article/10.1186/s13731-023-00339-3

https://innovation-entrepreneurship.springeropen.com/articles/10.1186/s13731-022-00221-8