How Effective Are the New ‘MSE Services’ Catalysed by RIPA-North?

An entrepreneur sitting down and rolling dough.
Ifrah Ibrahim, female entrepreneur in Somali Region who accessed new local business development services.
April 26, 2024 • UPDATED April 29, 2024

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This evidence brief summarises the outcomes from the Mercy Corps Ethiopia led Resilience in Pastoral Areas (RIPA-North)’s ‘Annual Micro and Small Enterprises MSE Survey’, conducted in September 2023, which interviewed 359 MSEs who have accessed one of four new ‘MSE services’: Local BDS; MicroMentor; Digital loans; and technical skills training. The findings reveal high levels of improvements in MSE business practices, a dramatic impact on business profitability (average 62% increase per MSE), and more than 10,000 new jobs created. The survey also highlights gaps in service provision that RIPA-North can focus on addressing, for example the limited impact that BDS and mentoring are having on MSEs’ ability to access loans.  

 

Selected findings and recommendations:

  1. Working at a systems level has enabled RIPA-North to reach impressive scale: By working to catalyse an ecosystem of services supporting MSEs, RIPA-North has reached more than 8,000 MSEs, which is far more than RIPA-North could have reached through direct support. Although this evidence brief does not assess the sustainability of the services, the positive perceived utility of services by MSEs suggests the services have a good chance of being sustainable.
  2. Access to the new MSE services is driving business growth, profitability and job creation: The evidence brief validates RIPA-North’s program logic, that unlocking key underlying constraints for MSEs (access to finance, business development support and technical skills) will stimulate improved business performance and job creation. MSEs accessing the services achieved a dramatic average increase in profits of 62%, and more than 10,000 jobs were created.
  3. Direct marketing and outreach is most effective in reaching female-owned MSEs: Rays MFI (provider of new digital loans) and local BDS providers both primarily rely on door-to-door marketing to find their clients, and these services have been very successful at reaching female entrepreneurs (64% and 58% of MSEs, respectively). By generating cross-learning about successful direct marketing approaches between BDS providers and across different services, RIPA-North can generate useful learning and continue to improve access for women.
  4. MSE services (with the exception of digital loans) have not yet been transformative in enabling MSEs to access credit: 21% of MSEs accessing local BDS services and 9% of MSEs using MicroMentor said that the services helped improve their access to financial services in general, but this appears to be related to savings and/or Mobile Money services not loans (only 5% and 8% of these service users, respectively, have loans). Given the huge importance of credit for business growth, RIPA-North should identify ways to further strengthen the ability of local BDS providers and MicroMentor mentors to better support MSEs to access loans.
  5. DRM training is a key resilience service for MSEs: The findings revealed that 72% of MSEs who received DRM training had adopted new business practices to cope with shocks, compared with only 33% who didn’t receive DRM training. Similarly, businesses who received training were more confident in their ability to handle future shocks (91% ‘very’ or ‘somewhat’ confident) than those who didn’t receive DRM training (78%). RIPA-North’s DRM training is an innovative approach, and these findings should give the team confidence to continue to scale the approach and foster sustainable systems for the training.
  6. Cross-service promotion of MSE services could be an effective way of scaling up the services: The MSE services catalysed by RIPA-North are highly complementary: MSEs receiving digital loans would benefit hugely from BDS support and mentors, and MSEs accessing local BDS are highly in need of loans. This suggests the various channels could become an important source of marketing and information for MSEs (e.g. financial institutions promoting MicroMentor and local BDS providers). The survey revealed that this is already starting to happen, for example 19% of digital loan recipients heard about the service from their local BDS provider, and the RIPA-North team could do more to foster this cross-service promotion.
  7. The services catalysed by RIPA-North are largely for existing businesses not aspiring entrepreneurs: Local BDS, MicroMentor and digital loans are all currently designed exclusively for existing businesses and not suitable for aspiring entrepreneurs who want to start their own business. Only the technical training through TVETs contributed to the ability of youth to start their own business. RIPA-North has some ‘direct’ interventions supporting youth enterprise start-ups (e.g. Bruh). However, given the huge challenge of youth unemployment in the lowlands, future programming should also focus on additional sustainable services that support youth business start-ups, through entrepreneurship training and access to credit.