Combining Credit and Training to Support Micro and Small Enterprises in Ethiopia

Over the last two decades, the government of Ethiopia, in collaboration with other development actors, has implemented various programs to develop the Micro and Small Enterprises (MSE) sector. Developing the MSE sector aims to promote inclusive growth, create sustainable employment (especially for youth and women, for whom the unemployment rate is over 40%), and provide a foundation for larger manufacturing businesses and increased exports. These programs include training, technology transfer and access to finance for MSEs in urban areas. In particular, they encourage youth and women to start small businesses. A team of local PEP researchers set out to assess whether government support programs (access to credit, training, and a combination of both) increase the monthly revenues of MSEs in urban Ethiopia. Additionally, the team sought to establish whether these programs have a different impact on MSEs owned by men compared to those owned by women. The team also investigated the risk preferences of Ethiopian entrepreneurs and factors that influence risk preference.