Overview of MSE promoters and service providers

GTZ-MSE PROGRAMME STUDY FOR THE ESTABLISHMENT OF NETWORK OF MICRO AND SMALL ENTERPRISE SUPPORT INSTITUTIONS IN TIGRAY Final Report Desta Solomon February 2002 OUTLINE INTRODUCTION I. MICRO AND SMALL ENTERPRISE DEVELOPMENT -BDS PARADIGM II. OVERVIEW OF STAKEHOLDERS 2.1 Types of Supports/Services Page 2 5 7 8 15 18 20 20 20 20 21 21 21 22 22 26 27 28 28 29 III. EXPERIENCE IN NETWORKING AND EXISTING GAPS IV. ESTABLISHING SUSTAINABLE NETWORK 4.1 Existence of Common Purpose and Clarity of Vision and Purpose 4.2 The Process of Establishing a Network 4.3 Offering Concrete Benefits to Members 4.4 Leadership and governance 4.5 Accountability and Transparency 4.6 Conflict Management 4.7 Sharing of Common Resources V. RECOMMENDATIONS FOR MSE NETWORK OF TIGRAY 5.1 Defining the Purpose of the Network(Vision, Mission, Goal, Purpose, OutputsandActivities) 5.2 The Process of Establishing the Network 5.3 Membership 5.4 Network Structure and Management 5.5 Cost of Network and Source of Finance VI. CONCLUSION ANNEX Terms of Reference for the Study REFERENCES 1 INTRODUCTION In Ethiopia the MSE (Micro and Small Enterprise) sector is the second largest employment-generating sector following agriculture. A National survey conducted by CSA in 1997 and covering 48 major towns indicates that nearly 750,000 people are engaged in informal sector and small manufacturing businesses. This is a contribution of 3.4% to GDP and 33% of the contribution of the industrial sector and 52% of the manufacturing sector's contribution to the GDP of the year 1992/93. (MSE Strategy, Ministry of Trade and Industry 1997) Regarding Tigray, the same survey done by CSA indicated that 7,793 informal sector operators exist in Mekelle town alone. Types of businesses that MSEs are engaged in are highly diversified. The survey indicated that 51% of micro enterprises in Tigray are engaged in manufacturing, 32% in Trade and 16% in Hotel and Restaurant activities. Manufacturing sector is mainly grain mills (77 % of manufacturing, metal and wood work17% and non-metallic products 3% and others 3%.). Although MSEs are concentrated and more visible in the urban centers the growing number of landlessness and youth unemployment has forced many to join informal sector activities in the rural areas as well. The MSE operators face a lot of problems. The major ones include lack of access to finance, working premises, infrastructure, information and technology. According to the above survey the following are the key problems of MSEs in the region.        Low level of entrepreneurship development Lack of finance for start-up and expansion Lack of suitable premises for working and marketing Lack of infrastructural facilities such as water, electricity, roads, Inadequate production and distribution channels and therefore limited market for products and services Lack of access to technological information Lack of proper policy and strategy for the development of the sector Micro & Small Enterprises caught the attention of development practitioners and policy makers recently not only because of its importance in terms of generating employment also because of various other attributes. Some of these are: Micro and Small Enterprises are breeding ground for entrepreneurs. The sector has high employment generating capacity, and is less capital intensive. It is highly competitive, flexible, innovative, Having recognized the importance of the MSE sector to the economy, the Federal Government of Ethiopia has issued an MSE Development Strategy in 1997 followed by the proclamation for the establishment of the Federal Agency for Micro and Small Enterprises Development in 1998. 2 The regional government of Tigray also developed a regional strategy and set up Tigray Regional Micro and Small Enterprise Development Agency in 2001. The overall objective of the MSE strategy of the region is to create an enabling environment for the development and growth of the MSE sector in Tigray. The specific objectives include:       Facilitate economic growth and equitable development Create long-term jobs Strengthen cooperation between MSEs Provide basis for medium and large scale enterprises Promote export Balance preferential treatment between MSEs and bigger enterprises The main areas of focus of Tigray remised include:  Research on policy formulation (using the research capabilities of different institutions),  Strengthening the capacity of service providers and stake holders  Developing market for Business Development Services  Facilitate networking among service providers  Provide information for business start-up The regional agency is considered the key actor in formulation, coordination and monitoring of national policies related to the MSE sector in the region. Other key actors in the region include the Bureau of Trade , Industry & Transport, NGOs, Chambers of Commerce and Industry, Trade and Industry Associations, the Private Sector; the latter in the provision of commercialized services, co-operation, partnership, subcontracting, etc. The objective of this study is to look into the feasibility and modality of establishing a network among the different actors involved in the MSE promotion and development in Tigray so as to ensure the provision of effective and efficient services to MSE operators through co-operation and networking of different actors. (Please see Annex 1 for details on the TOR). Desk review on network and network experiences as well as field assessment on the basis of interview checklist forms the basis for this study. In addition to the organizations in Tigray that are included in the report the interview included other organizations like FeMSEDA (Federal Micro and Small Enterprise Development Agency), TVET (Technical and Vocational Educational Training) office of GTZ, CRDA (Christian Relief and Development Association) and ECC (Ethiopian Chamber of Commerce). The draft was then discussed in a one-day workshop with potential stakeholders and further developed and incorporated in this report. The key limitation for the study has been the engagement of some of the organizations in a series of own meetings, which deterred the consultant from meeting them. These 3 important stakeholders include Investment Office, DECSI, Women's Association of Tigray and Food Security Office. The lack of sufficient time for discussion was also a problem with Tigray ReMSEDA. The first part of the paper tries to give an overview of the key stakeholders covered by the study and the relevance of these stakeholders to the MSEs. The second part discusses findings with regard to the gaps in networking and establishes the need for one. The third part tries to draw experiences of networking and highlights the key issues for consideration. The fourth part provides recommendation on proposed network. 4 I. MICRO AND SMALL ENTERPRISE DEVELOPMENT -BDS PARADIGM Recognition of the importance of MSEs in development led many countries (government, NGOs, private sector) to proactively support and facilitate their growth and development. The objective for their intervention varies. Some see it as a means for poverty reduction, others see it as a means for achieving gender equality among poor households (as the informal sector/micro enterprises are dominated by women), and others see it as a means for reducing unemployment. Most of these different actors design their own programmes and implement them directly with their target MSEs. These programmes range from micro credit to non-financial or Business Development Services (BDS) such as training, counseling, information provision, business incubation, etc. Some engage in facilitation of access to certain services such as infrastructure for production and marketing, facilitation of credit and other services through networking, use of voucher system, etc. Only few consider providing services to MSEs a business on its own right. Most of the services provided by government and NGOs are free of charge or are highly subsidized. The only exception is the micro credit activity, which in many countries is now operating as a financially sustainable development activity. Experiences around the world suggest that the provision of different services to MSEs cannot be sustained if it is not done on commercial principles. Studies have also shown that these services do not necessarily have to be subsidized or given free of charge as MSEs are usually willing to pay for it. It is also difficult to reach any significant number of MSEs through a limited number of public or NGO outlets. These and other challenges led to a revisit to the strategies of governments, NGOs and donors with regard to MSE development and led to a new approach in delivery of Business Development Services known as the New BDS Paradigm. 5 BDS MARKET –DIAGRAM The BDS Market Services BDS Providers Payment Small Enterprises Supply-Side Intervention BDS Facilitators Demand-Side Interventions Donors The BDS paradigm identifies three actors namely donors, facilitators and providers. The role of donors is mobilizing resources for facilitators and support to research activities. Business associations, chamber of commerce , government MSE promotional institutions, NGOs, bi-lateral & multilateral MSE development programs are the key facilitators who play the role of creating conducive environment for BDS providers and MSE operators, supporting research and information, capacity building of service providers, product development etc. This is termed as supply side intervention. " They can also engage in awareness raising and employing different instruments such as voucher system, and matching grant to MSEs to access services (which is called demand side intervention) to increase demand for BDS. The key actors in the actual provision of services are the commercial and the not-for profit providers. They are the direct providers of services to MSEs. Any interference in the market for BDS between the sellers and the buyers of such services will be distorting the market. In the new BDS paradigm government and donors crowd out commercial BDS providers if they provide subsidized services. The issues of outreach and 6 sustainability are also the points of argument against BDS supply by donors and /or government. In general the current thinking on BDS is that commercializing of BDS increases outreach, encourages improvement in the quality of services because of competition and there is little worry about financial sustainability. The implication of this paradigm shift for current and future BDS intervention by noncommercial providers is that services that are currently provided on non-commercial basis should be commercialized where it is possible. It also means making services that can not be easily commercialized in the short run as market oriented as possible and plan for gradual commercialization. Regarding the future Government and donors should focus on their facilitative role by creating enabling environment for active participation of commercial providers and expanding their interventions on demand and supply side. In the new BDS paradigm, the facilitators' intervention is recommended at the pre-transactional and post-transactional levels. Any transactional intervention would result in crowding out of the private providers. Although these are the general principles it is also clear that this cannot be achieved within a short period of time. The current situation around the developing world is that governments and NGOs remain important actors in MSE development both as facilitators and providers of business development services. Given the level of BDS in the region and in the country as a whole it is not surprising to find that these same actors play dominant role in Tigray. 7 II. OVERVIEW OF STAKEHOLDERS There are a range of organizations that are directly or indirectly linked to Micro and small enterprise development in Tigray. This study covers 14 organizations including Tigray ReMSEDA. The composition is as follows:  4 are government offices,  one is academic institution,  3 are non-governmental organizations  one is private sector organization and  5 commercial ones. Government is a key actor in MSE development in Ethiopia in general and in Tigray in particular. The MSE strategy issued in 1997 and the subsequent proclamation regarding the establishment of federal and regional MSE development agencies form the basis for the active engagement of government in MSE development. The private sector institutions and commercial providers play only a marginal though growing role. Government and NGOs (mass organizations) have comparatively better capacity, wider outreach and resources. For example TDA runs two training centers with capacity of graduating 4000 trainees a year others have a capacity of less than 200. Some of these NGOs (mass organizations) are key actors in some of the training services provision such as skills training and have significant experiences. They have long history, recognition and linkages with government, the general population and different public offices. On the other hand commercial providers are new comers with little experience and capacity. They provide services on commercial basis while others do it for free. Training (skills and business) and micro finance are the dominant services. Other services such as information, market linkages, subcontracting, etc are insignificant. Potentially important actors like chamber of commerce, which has a direct contact with some of the MSEs, are under resourced and weakened. There is a general lack of focus on MSEs. Most have much wider and integrated objectives among which MSE related services and support form a part. Service provision to MSEs is considered within a wider and diversified objective of the organizations involved. All of the organizations contacted are based and are operational in Mekelle although some are active in different zones outside Mekelle including Adigrat and Axum. The two 8 commercial centers outside the capital. Why is this sentence a fragment? Others cover the whole of the region including the rural areas. Some are in fact rural focused. 2.1 Types of Supports/Services The three major services related to MSEs are in the field of micro credit skills and business training. Other services are only at the rudimentary stage. The category of support and services provided by the different stakeholders are regulatory role, training, credit, capacity building, sub contracting, and linkages. 2.1.1. Legal Framework Support a) Bureau of Trade , Industry and Transport The regulatory role is of course that of the various government offices especially the bureau of Trade and Industry which is responsible for business licensing and registration, identifying drawbacks in the existing laws and regulations and making improvements. Decentralization of the licensing (renewal and issuance) underway to lower administrative levels could save time and money required for obtaining and renewal of business licenses. The lifting of licensing requirement for micro business operators up to a capital level of birr 5,000 can also be cited as a positive legal framework improvement by the bureau. The bureau of trade and industry is an also source of information and data on various aspects of business that could be useful for MSE development and operation. b) Technical and Vocational Education and Training (TVET) Another important stakeholder regarding the regulatory environment is TVET office. The office is responsible for the TVET strategy of Tigray that aims at ‘improving and increasing the supply of TVET in the region through the creation of a coordinated, integrated, yet diversified training system.’ (TVET Strategy of Tigray). The strategy puts emphasis on training in agriculture, training for rural development and training for and in the micro and small enterprise sector. Its main objective is to develop employment oriented training for different target groups by developing competencies required in the market and those for economic potential The key principles of the strategy include the following:      Demand driven Dynamic and relevant Stake-holder driven Open and accessible Broad and inclusive 9     Integration Competency-based Modular Vertical and horizontal mobility/progression Currently there are 70 skills training centers with a capacity of enrolling 4000 trainees a year. This does not include the various skills training centers run by NGOs Churches and others such as TDA and private/commercial skills training centers. One other feature of the TVET is the establishment of a council that is composed of different stakeholders in the private, non-governmental and government sector that oversee the overall policy and implementation of the strategy. 2.1.2 Training Support There are three categories of training provided to mainly potential MSE operators. These are technical and vocational skills training, business training and computer skills training. Technical, Vocational, Construction, Agriculture, c) Tigray Development Association (TDA) Tigray Development Association is a one of the key actors in skills training. Currently it runs two skills training centers located in Mekelle and Axum. The technical schools were established 7 years ago for the post-war reconstruction and employment generation of ex-fighters and school dropouts. Training initially was in the field of construction, wood and metal works while later diversified to carpet making, wood and metal works, bee keeping and post harvest training (mainly for women). In addition to these the Axum skills training center have facilities for horticulture, livestock training and trains development agents for Bureau of Agriculture. The training programmes are donor funded and are free of charge while occasionally workers from industries are trained on fee basis. The decline in funding of the centers has put a lot of pressure on the sustainability of the centers. Other problems facing the centers include increasingly low demand for trainees (especially for women trainees), inadequate access to credit for self -employment and high default rate and problems with selection of the target beneficiaries (the poor) which is done by partners and community. d) DON BOSCO Established as skills training center 25 years ago DON BOSCO Technical School is another important actor currently engaged in training middle level technicians (12+3). The school provides high quality training both academic and technical (Chemistry, physics, biology, computer science, industrial drafting, workshop and theory. Students 10 are also provided with one semester course on business skills. It accommodates 120 students a year with 40 students graduating each year. The school is funded by donors and therefore charges nominal fee of birr12/month. While 50-60% of the students joins higher education in technological fields the rest get job placement, which sometimes are not relevant to their training. Despite the quality of training received by the trainees getting job has increasingly become a problem. The center has the capacity to train more students if sponsored by other organizations. e) Merha Tibeb Technical Training Center The center is currently the only registered commercial technical training center that started this Ethiopian Calendar. It grew from a workshop to a training center. The capacity of the center is to train 20 students in each of the streams namely woodwork, electronics and auto mechanics. Currently it has enrolled 20 students in general mechanics some sponsored by a boarding school (11) and others private individuals. The center uses the national curriculum as required by the bureau of education. The center adopts production-oriented approach and hopes to cover part of its cost by selling the products made in the workshops. It is optimistic about the growth of demand for training in Mekelle given the current TVET strategy and the revised education system. The key challenges faced are the lack of proper orientation and information for trainees in understanding and choosing between different types of skills training and the lack of awareness regarding the market/demand for different skills. Vocational Training f) Global Hotel and Catering Training Center Established two years ago, the center is the first and so far the only training center for catering in Tigray. It has graduated two batches of 40 students for diploma (10 +2) or certificate courses out of which 9 were sponsored by a boarding school. It also provides tailor made training for different organizations. The center is working much below its capacity the major barrier being awareness and cultural attitudes. Business Training g) Mekelle Chamber of Commerce The Mekelle Chamber of Commerce was established in 1992. The Chamber has over the years been weakened due to decline in membership on whose contribution its services depend. The decline in income has in turn affected the capacity to retain existing membership and recruit new ones. As a result despite its potential the chamber has remained a weak institution. The key services that the chamber provides on adhoc basis include basic training in accounting, IYB (Improve Your Business) and Entrepreneuership and Business 11 Development Programme. The problem of appreciating training even when offered free has been a problem in the past. Potentially the chamber is also a good forum for reaching small businesses. h) Mekelle University The Faculty of Business and Economics of Mekelle University started as a college with diploma programmes in accounting, management, banking and finance, secretarial science and office management. Since 1989 E.C it started degree programmes in management, accounting and economics. The university would like to develop a curriculum that responds to the market. Some effort has been made so far in delivering courses on entrepreneuership and small business agri-business management for management students and micro financing and rural development for students of economics. The university in collaboration with others is in the process of realizing the plan for establishing a micro finance-training institute. The future plans of the faculty include develop the short-term micro-finance training courses to regular programmes. Introduce business training courses and development of entrepreneuership skills, initiate practical attachment and internship programmes. i) Sheba Info-Tech Sheba Info-Tech provides diploma and certificate in information technology and business training. It provides business counseling, project and feasibility studies and short training for business operators. The training center is optimistic regarding the demand for information technology skills in the future because of the following reasons:      Information technology is becoming a necessary skill for employment Current education curriculum requires that vocational and technical schools receive computer skills as well Globalization demands such skills where business have to be able to modernize computer based management and accounting There is a clear demand for computerization of the public utilities providers and effective utilization of computers in government offices The need for media people to acquaint themselves with the increasingly computerized media j) Millennium Institute Established in 1992 under Millennium Institute is another commercial enterprise engaged in education, research and Consultancy and short-term training. The college runs six programmes in accounting, management, supplies management, marketing, secretarial service and office management and computer science. Short-term courses include Book keeping, Data Entry and other tailor made training. Currently 1000 students attend 12 regular and evening classes. They are recent high school graduates. The college provides additional courses in entrepreneuership and computer skills. 2.1.3 Subcontracting k) Mesfin Engineering Mesfin Engineering is a large-scale industry engaged currently in the business of automotive assembly, body and construction and factory equipment. The factory employs 40 graduate engineers. The longer-term objective of the factory is to be engaged in hightech industry and coordinate subcontracted works by allowing small businesses to get the share of the market. The factory's interest in small businesses is based purely on business grounds. When demand for its products grows the factory instead of expanding itself prefers to subcontract some of the product units. The advantage of such arrangements is  Delivery time will be kept  Quality will be better because of specialization by small businesses  Increased sales volume by using the resources and capacities of others Although limited the factory has some experience of sub-contracting some of the work to small businesses in Mekelle. In the future the factory would like to strengthen such linkages with small businesses and the following parts can easily be sub-contracted to small workshops.         Tire Carriers Internal Structure Stiffeners Tool Box Casino/board Foundry Electroplating Painting In addition to sub-contracting some components of the products the factory has attempted and has the capacity to provide the following services to small businesses in the sector:     Design service (Gig) Shop service such as rolling, cutting, etc Testing and x-ray services Electro plating and others The key problems with regard to MSEs that are engaged in sub-contracted work is the problem of costing and pricing, quality and standards, planning, lack of confidence, insufficient capital and capacity, and inability to cooperate among small businesses for bigger market share. Currently the factory is operating way below its capacity. 13 2.1.4 Market Linkages and Hire Purchase l) Relief Society of Tigray (REST) REST has broad intervention areas that include relief, soil conservation, environmental rehabilitation, agriculture, health, irrigation, etc. REST is also engaged in MSE development through enhancement of on and off farm economic diversification activities in the rural areas that include livestock, horticulture development through irrigation and micro-enterprise. The coming five-year plan for REST includes:    economic diversification within and outside the agricultural sector, inter-linkages between rural and urban economies (diversification in the rural areas is possible if there is increase in the purchasing power in the urban sector and vice versa) using the existing centers to train farmers in skills and micro enterprise (demand assessment for types of skills required by farmers in different areas should be identified) Apart form this REST is also considering the provision of support to farmers in areas of Hire Purchase scheme for farmers who are unable to access credit through MFI (e.g. Purchase of water pumps) and twining of rural and urban micro enterprises (i.e. looking at both sides of the MSEs). 2.1.5 Counseling and Advice m) Cooperative Organization and Promotion Bureau The office is charged with organizing and supporting cooperatives both in the rural and urban areas. The aim falls in the broader aim of poverty reduction, food security and employment generation in the rural areas. So far the cooperatives establishment focuses mainly on rural areas and handicrafts, workshops for farm implements, distribution of agricultural inputs and the like. The cooperative activities in the rural areas are mainly in saving and credit cooperative among public sector employees. The counseling and advice by the cooperative office includes awareness raising about types and forms of business and market opportunities, identifying individuals sharing similar problems or doing similar activities, supporting the process of by-law formulation and legal registration, follow-up and post establishment technical support, audit service, training on basic business management skills, and conduct promotional work. The cooperative office is currently in the process of realizing a plan for establishing a training institute for cooperatives. 14 2.1.6 Information n) Tigray Micro and Small Enterprise Development Agency Tigray ReMSEDA is currently in the process of establishing business centers that provide simple but useful information for MSEs those helps to develop their market share and facilitate their operation. Such information include procedures and processes for licensing and accessing different public services, as well as information that could assist MSEs participate in bids and public tenders. The cooperative office also collects and disseminates market information for cooperatives. 2.1.7 Outsourcing Tigray ReMSEDA is currently exploring opportunities for outsourcing of some of the services provided by government office such as the municipality. 2.1.8 Micro Credit o) Dedebit Credit and Saving Institute The biggest micro finance institution in Ethiopia/ in Africa Dedebit CSI is operational in Tigray mainly in the rural area. There are also other credit schemes operating in urban centers. The bureau of trade and industry Bureau in Mekelle runs one such credit scheme in urban centers. 2.1.9 Facilitation and Networking Some of the organizations like TDA in addition to providing training act as facilitators for obtaining job placement or self employment through creation of linkages with others such as Sur Construction, REST, DEDEBIT, etc. The bureau of Trade , Industry & Transport as a responsible institution for the promotion of medium and large industries has a potential for creating partnership between these and the small enterprises. 15 III. EXPERIENCE IN NETWORKING AND EXISTING GAPS Stakeholders have expressed the different challenges they face as a result of their work with MSEs. Some of the challenges are internal to the stakeholders others are external related to the MSEs (or trainees) and the other to the general business environment. Problems related to the MSE sector and the trainees are listed below.           General lack of entrepreneurial skill and dynamism Traditional and underdeveloped business sector Low diversification of businesses/ domination of petty trading Dispersed fragmented and unorganized micro and small operators Lack of capital and financial resources Lack of basic business management skills Insufficient skills and skilled workers Absence of collaboration and cooperation among MSEs Socio-cultural attitudes and low awareness towards quality, standard, safety, etc Low demand for training, consultancy, etc services even if provided free Like the MSEs most of the support organizations mentioned above also face problems and challenges internal and external. With regard to the internal challenges faced by the stakeholders include:       limited capacity (financial and organizational), low financial sustainability and dependency on donor funded training, low quality of training, no market assessment and systematic feedback, monitoring and evaluation lack of access to training materials and resources. Limited capacity to influence policies and practices of others such as in setting standards and requirements for training or influencing of credit policies of MFIs. The external environment has also affected the work of these organizations. Some of the adverse factors are listed below.       Lack of access to regular and up to date information on needs for skills training and other services Lack of forum for discussing problems and challenges with stakeholders Inconducive regulatory environment and insufficient support for the sector Low recognition for equally trained women Lack of employment opportunities for trainees Policies and practices of one actor adversely affecting that of others 16 Some of the challenges mentioned above are clearly related to networking and communication. The stakeholders do not have a system of feedback from the users of the services and the market. Although most of them share similar problems with regard to their work with MSEs they are unable to address them in a coordinated manner. Generally there is limited networking among the different stakeholders. Networking efforts are weakest between the commercial service providers and the NGOs or government. The culture of working in isolation is common practice in both private and government offices. In the absence of any significant level of networking between these different stakeholders it was not surprising to find that most have little or no awareness about the existence and mandate of the ReMSEDA. It has also been observed that there is a general lack of awareness regarding the MSE sector and the MSE strategy and the duties and responsibilities of different actors. Some of the organizations interviewed were able to identify some of the missed opportunities because of the lack of networking.     Complementarity between different support services for MSEs such as linking skills training with micro finance and business training. Effective use of services and capacities available for use such as technological support services that could be provided or tailor- made skills training Market information on market needs and economic potentials Regular forum for awareness raising, to strengthen complimentarity and remove obstacles, lobby regarding regulatory environment, for discussing quality and standards for products and services and for creation of awareness among the MSEs. There are more reasons why network is considered necessary at this stage.  The importance of the MSE Development in the ADLI strategy of the country and in the poverty reduction process  The increased need for forging strong collaboration among different MSE promotional stakeholders in the private or commercial government and nongovernment sector inorder to realize the strategy for MSE Development in the region. 17 The network of MSE stakeholders is of importance to others as well. One such body is the TVET/network or council which considers such a network important for achieving its own objective by accessing information and feedback on training needs of existing and emerging MSEs and collaboration on monitoring and evaluation activities. The network can also be instrumental in forging collaboration within and outside the region and the country for experience sharing and acquiring new technologies and information. The network enables MSE promoters to enjoy the synergy effect as reflected in streamlining services, making optimal use of resources for the sector's efficiency and avoiding duplications and conflicting actions. 18 IV. ESTABLISHING SUSTAINABLE NETWORK Many of the stakeholders as indicated earlier are engaged in similar activities. Few examples were also sighted on how the work of one organization complicates or facilitates that of others. The organizations operate in the context of significant gap on who is doing what in the MSE sector. Most have expressed the need for a forum where they learn from each other. The need for networking is obvious because of the following major reasons:      Lack of information on the existence, roles and responsibilities of different actors Lack of understanding and information on the overall MSE sector and the problems faced Existing gaps in coordination between different interventions Lack of communication between different actors Little overall impact on MSE development Networking is a means through which organizations with common interest or goal learn from each other and support each other. It is a means for better use of resources and bringing about bigger impact. Networking can be defined as 'a process of establishing and maintaining communication and linkages amongst individuals and organizations, in a non-structured informal and ongoing manner’. Capacity Building of Networks in South Asia Report of Workshop March 17-19 1998 New Delhi PP 13) Paul Starkey defined network as the following: A network is any group of individuals or organizations who on a voluntary basis exchange information or undertakes joint activities and who organize themselves in such a way that their individual autonomy remains intact. ( Paul Starkey, Networking for Development pp.) It should be noted here that there is a difference between networking and network. While networking is a lose form of association where group of people /organizations come together for a certain common purpose the network is more structured form of association with its own identity defined by its members. 'Networking is integral in maintaining and running an effective network but does not necessarily have to have a concrete form and structure as a network does'. (Capacity Building of Networks in South Asia Report of Workshop March 17-19 1998 New Delhi PP 13) 19 Networking is the main element in networks. It evolves over time and does not necessarily happen because organizations form a network. Ranges of formal and informal networks exist in Ethiopia in the private sector (such as the chambers of commerce, and various business associations, iddirs, iqquibs, mahbers, etc.) among NGOs and in the public sector. Different levels of success have been achieved in establishing and running sustainable networks. The following SWOT (Strength, Weaknesses, Opportunities, Threats) summarizes some of the pertinent lessons. STRENGTH  Bring diverse people and experiences together  Have the potential of pooling resources for greater Impact  Can bring about better coordination and efficiency  Good opportunity for policy dialogue  New ideas are generated in such forums  Help to increase understanding and clarify ambiguities WEAKNESS  May bring diverse people with no common vision  May be dominated by the more strong/elite  Could be used by vested interests, dominant institutions groups or individuals  May be too ambitious and without impact  May suffer from lack of resources  May become donor driven and collapse when donors lose interest  Members become inactive  Network secretariat could become bureaucratic and centralized  Secretariat acting independent of members  Expectations of direct benefit cause some to lose interest Threats  Legal registration may prove difficult  Informal networks may not attract donors  End up creating another dysfunctional institution Opportunities  Can attract donors and other stakeholders  Can easily link up with other networks  Visibility and collective strength Based on lessons learned universally certain principles and practices seem to have contributed for successful networks. These principles and practices include the following: 20 4.1 Existence of Common Purpose and Clarity of Vision and Purpose Networking should be based on a clear definition of common interest or purpose. This is fundamental to a sustainable networking. It is important to clarify the interests and expectations of each member and identify common grounds on which the networking could be based. This process should start from availing information and conducting series of discussions on the roles, capacities, problems and challenges of each organization. Having a clear vision and objective for a network is an essential element for its sustainability. A network with diverse membership will have difficulty of developing a clear common vision and objectives. Lack of clarity in these will cause problems in effective coordination of the network at latter stage. Members of network should be able to define their interest and decide what the outcome of the networking should be. Network should focus on core issues that interest all stakeholders. 4.2 The Process of Establishing a Network: Network should evolve and should not be imposed. Increased awareness, communication and networking, development of common interests around issues and initiatives of joint work and collaboration for a significant period of time may finally lead to the establishment of a formal network. The process is usually gradual and starts informally within few organizations and grows over time. Therefore it should not be rushed. Most networks usually starts with a handful of organizations that are able to develop common purpose and vision. As the network develops others who share the vision join. Starting a network with a small group of organizations has the advantage of working more closely and intensively with less difficulty in coordination. It is also easier to reach consensus and agree on initial purposes and functions which can and should be reviewed and changed as the network expands. 4.3 Offering Concrete Benefits to Members A network will not be sustainable if it is not offering concrete benefits to its members. If members do not feel they are benefiting from being a member of a network their commitment will disappear. Therefore the work of the network should focus on what it can do for its members in facilitating their work, building their capacities, lobbying on their behalf or publicizing their work etc. 4.4 Leadership and governance Good quality leadership is critical for successful networks. There should be critical mass of members who are able to create dynamism in the network. Leadership should be participatory and transparent. Tasks and responsibilities have to be shared. Each member should feel responsible and important for the network’s success. Each member should contribute to the network in different forms and also benefit from the contribution of others. 21 4.5 Accountability and Transparency Network facilitator should be member driven, accountable to the members and transparent. Institutional membership brings with it power. It is possible that network could be dominated by strong institutions and become a major source of conflict in networks. This should be avoided by making sure that all members of the network participate and benefit equally from the network activities. 4.6 Conflict Management Networks are bound to face conflicts among members. However it needs good leadership to mange it and uses it skillfully for allowing space for the members to articulate their needs, air their grievances and frustrations. Differences of opinions could be a source of learning and should not be discouraged. Networks with members of diverse capacity need to assist the weaker members to become articulate and negotiate and contribute equally. 4.7 Sharing of Common Resources Networks create opportunity for members to contribute to the strengthening of the network by making their resources available. The network should be able to use regularly the resources of its members to achieve its goals instead of developing parallel capacities that compete with its members. A good network relies on the resources of its members. 22 V. RECOMMENDATIONS FOR MSE NETWORK OF TIGRAY Based on experiences and the principles for sustainable networking the following recommendations are made for an MSE network in Tigray. 5.1 Defining the Purpose of the Network-(Vision, Mission, Goal, Purpose, Outputs and Activities) Vision generally describes the aspiration of the net work or what it would want to see happen with regard to its members and the MSEs in general. Different organizations interviewed came up with their own vision of what the network should be about. The following are the views of the stakeholders regarding the vision of the network.       Aim for developing integrated approach to MSE development in rural and urban areas Aim at addressing key problems of MSEs such as entreperneuership development Focus on how to reach the poorest communities Aim at creating the dynamism within the MSE/informal sector Focus on rural development and improving the wellbeing of the poor Fill in gaps in market for MSE services The following could approximately represent the above suggestions; Vision: A vibrant/dynamic MSE sector in both rural and urban areas playing key role in economic development of the region. The mission defines what the network is why it exists and what it does. The following could be a fair representation of the ideas of potential members. Mission The network will work for increased and sustainable service provision to MSEs. The network will be engaged in research and communication, capacity building of its members and promote dialogue and forum to create conducive environment for MSEs in general and for effective functioning of its members. 23 Overall Goal of the network is to contribute to the realization of its vision. It can therefore be put as: Goal: Contribute to the development of dynamic MSE sector in Tigray. The purpose/purposes of the network describe what the network would have achieved within a reasonable time frame. While the overall goal of the network should be related to the contribution that it could make to the MSE sector, the purpose should have to do with the members of the network itself and what they can do together as opposed to what they can individually. The network purpose should be distinct from that of its members. It should capitalize on the potential strength of bringing together different stakeholders engaged in MSE service delivery, promotion and development. Any overlap between the mandates of the different potential members of the network (like ReMSEDA ) or other networks has to be managed carefully. . The following are proposed to be the two key purposes of the network. Purpose:  Members are capable of providing extensive efficient better-integrated and coordinated quality services to MSEs.  Enabling policy and regulatory framework are in place for development and expansion of the MSEs and providers of services. Outputs Output describes the results that are obtained from the activities of the network inorder to ensure the realization of its purposes. These are the concrete results of the network that can be easily measured. Therefore they have to be as concrete as possible. The most important outputs for the network should be the establishment of a regular forum for sharing of experiences, for coordination and collaboration, for learning and for lobbying for an enabling regulatory environment. The second key output should be the capacity building interventions for members. This could be done through networking development of joint projects within the members or through identification of opportunities outside the network. 24 The third important output is to serve as a focal resource centre for members and nonmembers in MSE related areas. This can be supported by the different research activities that the network might be doing in collaboration with its members. The research results in turn can be used in the achievement of the first two outputs described earlier. The following could form key outputs for the network. Awareness Creation  Create awareness within its members and the public (on the MSE development strategy, the respective roles of different stakeholders and the New BDS Paradigm, on the different MSE services and providers, the network, etc) through participation/organizing events such as workshops, exhibitions, etc.  Establishing a sustainable regular forum for cooperation exchange of experiences and information within and outside the network (, workshops, joint projects, working groups, exchange visits Forum for Dialogue  Serve as forum for policy dialogue for creation of enabling environment through organization of forums with MSE operators, Service providers/facilitators, public utility providers, administrative bodies, policy and regulatory bodies, etc Capacity Building of members  Identify capacity needs of members to provide quality and demand driven services and design programmes for capacity building  Solicit training opportunities, technical and material assistance within the network members and outside  Develop systems for monitoring quality and standards of services Facilitation of Cooperation and Joint Work  Initiate joint projects and programmes involving network members and forge increase collaboration and complementarity among service providers  Facilitate resource sharing among network members Information Gathering and Dissemination  Collect and disseminate information on technologies services resources etc from within and outside the network and serve as focal point for MSE related information  Maintain data base on MSE support organizations, consultants, business associations,  Create channels (websites, newsletter, etc) for disseminating MSE related events and activities  Create networking and linkages with other networks 25 Research  Identify and Conduct research on issues related to MSE development. Some of the areas suggested include:        Develop market for existing and new services to MSEs Identify opportunities for enhanced MSE participation Identify gaps and develop new services/products or modify existing ones Identify new technologies, ways of working etc Develop integration between rural and urban MSEs Identify constraints related to the regulatory environment for MSEs and Service Providers and propose solutions Develop monitoring and evaluation systems and conduct regular review and evaluation of network activities jointly with members Resource Mobilization  Identify and mobilize technical and financial resources for undertaking network activities (develop project proposals, TORs etc and fundraise) Activities Assessment were made of expectations of individual organizations from the network and what they might be able to contribute to it so as to determine what will interest members and engage them actively and what capacities it can mobilize from its members. As is typical of many networks, members expect more from the network than what they can contribute to it. 26 Expectations Forum for knowing who is doing what Acquiring new technology and information, Identify sources or acquire books and other resource materials Forum for sharing new and experiences and innovative ideas Opportunity to receive feedback (e.g. From employers of trainees) Access to the resources of other organizations Opportunity for learning from others on marketing, financial sustainability Access training opportunities and other capacity building support Opportunity for promoting services Inputs that help develop entrepreneuership at grassroots level Forum for awareness raising Access for training opportunities of direct relevance to MSEs Help to develop business ethics and regulations for removing obstacles to MSEs Forum for promoting entreperneeurship Form for quality control and standardization of services Possible Contributions Availing Training and other facilities for network members with reasonable terms Share experience Membership fee Workshop facilitation and hosting meetings Information and resource materials that can be shared Can assist in developing computer network/website Contributing to articles Development of curricula and training modules These expectations as well as potential contributions which could give some guidance as to the short-term activities of the network and for the prioritization of the longer term activities and outputs. This study will not pre-empt to give detailed list of activities for the coming years. Instead it will be advisable that activities of the network be drafted on the basis of establishing clear agreement on the key outputs for the network. 5.2 The Process of Establishing the Network Potential members of the network members are not fully aware of the overall MSE strategy of the region, what others are doing and what common issues they share with others. This is basic information lacking in order to establish the network. The first 27 agenda for the networking should therefore be creating a clear understanding of the stakeholders involved and articulation of their needs and the purpose of the network. Once this is clarified decisions have to be made about how the network is going to function and who should be leading the process. The study recommends Tigray REMSEDA to lead in the process of establishing the networking process. (Networking and working through intermediaries is one of the strategies of Tigray ReMSEDA for effective promotion of MSEs in the region).However Tigray ReMSEDA should be assisted by a steering committee that represents other stakeholders. The key function of the focal point or facilitator is to serve as secretary for the network. It should be responsible for recording, documenting and sharing network proceedings. It should be responsible for follow-up of decisions made by the network and facilitate the establishment and functioning of different working groups by the network. TMSEDA can propose the themes for network agenda that has to be shared and agreed by all members before the network meetings. Contact person should be assigned in ReMSEDA with a sole responsibility of facilitating the network activities. This will also make communication easier. In order to increase sense of ownership and participation the regular network meetings can be rotated and hosted by different members. The chairing of these meetings can also be rotated periodically. The network members should be given opportunity to participate actively not only by attending meetings but by also taking responsibilities and tasks. Therefore the facilitator of the network/ Tigray ReMSEDA should take the responsibility of coordinating the works of different working groups or task forces. The strength of the leadership to sustain the enthusiasm and support of all its members and the creativity efficiency and 'focusedness' of the network facilitator are key determinants for a successful network. Although some organizations like Tigray ReMSEDA suggested the possibility of establishing a formal institutionalized network this according to the findings of the study can only be realized in the long term depending on the strength and achievement of the network. The suggestion here that such formalization of network should evolve out of clear need. Priority should be given for making the already existing institutions effective. 5.3 Membership Organizations both government and non-government as well as commercial which are directly or indirectly working with MSEs could be members of the network. Institutional membership when supported by individual interest in the new work will be the ideal situation. 28 The network should include Key stakeholders of MSE development. It should however be open and inclusive of different actors; government, NGOs/Mass Organizations/, Private sector and commercial providers or even individuals. The following could constitute the key stakeholders to start the network.       ReMSEDA TVET DECSI SHEBA Info-Tech Mekelle Chamber of Commerce Tigray Women's Association Given the fact that there are significant differences in resources, capacities and visibility it will be very important to ensure that institutions do not bring their own hierarchy into the network. Instead the network should work hard to articulate the needs and opinions of the less articulate members so that it will be rich and dynamic. Size of membership should be manageable however the danger of having small membership is that the network could face difficulty if a few of the members become inactive. Even absence of the few members in a small member network could hinder the work. The optimal number is suggested to be between 10-12 organizations and expand over time. These ten should be among those who show the strongest interest and are key stakeholders and are representatives of facilitators and service providers. In the context of increased recognition of the role of the private sector and commercial organizations in the provision of sustainable services to MSEs in the future the membership composition change over time and be able to reflect this trend. It is important that gender balance is maintained in the network and that gender issues are well addressed. 5.4 Network Structure and Management The network will have a loose structure with a facilitator and steering committee. The network members could organize quarterly forum bringing all members together. Working groups can be established on the basis of themes or major outputs. They have the responsibility of mobilizing members and non-members to accomplish tasks assigned to them by the network. The steering committee including the network facilitator/ Tigray ReMSEDA will be the driving force behind the network. It should coordinate and guide the activities of the network 29 The network should conduct at least quarterly meetings. However the different task forces or working groups should meet more regularly. Different forums, workshops and meetings that could be organized by the network as part of its activity. Although there is some potential for other similar networks to emerge at zonal levels (Axum and Adigrat) it was felt that the network should be first established in Mekelle and at a latter stage in the different zones. Meanwhile as some of the network members are likely to have physical presence in those areas the network in Mekelle will not be confined to benefiting those in Mekelle. 5.5 Cost of Network and Source of Finance The envisaged network should at the beginning be hosted and facilitated by Tigray ReMSEDA. It should take the initiative to organize the series of meetings that are necessary to start of the process. As most of the members are from Mekelle the cost of the network should be very minimal and be born as much as possible by the individual network members. In the longer run the network members could decide on how to finance this minimal costs by introducing membership fee or charging for certain services and making occasional contribution to finance certain activities of the network. It is also possible to look for possible funding from outside for specific network related activities. 30 VI. CONCLUSION Networking is a necessary aspect of our daily life and work. Obviously there are clear gaps in networking among the MSE support organizations and service providers. These gaps are also recognized by many of the participants in the study. However only few made effort to overcome the barriers and try to network with others. These are those who have real problems and could not solve them without interacting with others. The objective of networking is therefore to bridge the gap in information. It is a means through which organizations working towards similar objective try to coordinate their work so that the work of one does not undermine that of the other and more importantly in order to bring about greater impact with limited resources and capacities. Other objectives of the network include to serve as a forum for influencing the policy and regulatory environment, opportunity for improving the capacity of members and serving as a focal point for MSE related information. Experiences in the country do not provide shining examples of network. Although it is easy to initiate and start network it is not always easy to sustain them. Some networks begin to fall apart before they are firmly in place. Others start with a lot of energy and enthusiasm and fade away quickly afterwards. In order for the regional network to be effective and sustainable there should be a critical number of members who need the network. The study has identified five core institutions that are the major stakeholders for the MSE network in the region which are ReMSEDA, TVET, DECSI, SHEBA Info-Tech, Mekelle Chamber of Commerce and Tigray Women's Association. The network in order to be effective and efficient and dynamic should remain small i.e., between 10-12 members. Although the network is suggested to be open for all it will eventually crystallize into a network of few institutions which show the strongest commitment and interest. . The network should be able to produce tangible benefits for the members. The facilitation of the network should not be synonymous with ownership. The network is recommended to organize a quarterly regular forum for members. The network members should own the network and participate in hosting and leading network meetings and events. Network meetings should be innovative, practical and relevant. Certain activities could be organized with regular network meetings so that they are interesting and enhance learning. One such session could be forum with the MSE operators. The network should not venture into activities without ascertaining the interest and commitment of members. The network should as much as possible use the resources and 31 capacities of members to do its work. The network should be part of the duty of the individual organizations and not an annex. Regular review of the activities of the network will help to generate more interest among members and non-members. As a learning forum the network should be used for discussing concepts and practices around MSE development and promotion. The role of the Tigray ReMSEDA in laying the ground for effective network is very important. It should be the leading organization that should facilitate the first series of meetings and closely follow-up and ensure that decisions of the network are implemented. The agency should also be flexible enough to engage other members in its work so that the overall responsibility for the network is not left for ReMSEDA but is shared among all. Member organizations should see the network as an opportunity and contribute to it. It should be a forum for enhancing their understanding and capacity to do their work better. In the end the success of any network depends on the success of its members. The less effective the members the less effective the network. 32 ANNEX-1 Terms of Reference for the Study 33 ANNEX -2 REFERENCES:     Capacity Building of Networks in South Asia Report of Workshop March 17-19 1998 New Delhi Paul Starkey, Networking for Development (ITDG, 1998) Solomon Bellete (Ph.D) Study on the Establishment of Network of Micro Finance Institutions in Ethiopia (August 1999) Ezra Mbogori and Aklu Girgire- The Future Direction of CRDA Working Groups (CRDA unpublished document -June 2001) 34