Diagnosing the MSME development challenge in four countries

Micro, small and medium enterprises (MSMEs) are a critical source of employment creation in Africa. This is particularly so for young people because Africa’s youth bulge will see an unprecedented number of young people entering the labour market in the coming years.

Solving the MSME development challenge – how to grow productive MSMEs that can employ more people – is critical to harnessing the demographic dividend of Africa’s growing young population.

This is one of the tasks of a prominent private foundation working on youth employment creation in Africa. Genesis partnered with the foundation to diagnose the MSME landscape in four countries of interest: Ethiopia, Ghana, Senegal and Nigeria. The foundation was new to the area of MSME development and required guidance on how best to diagnose the key growth constraints and programming opportunities for MSME development.

We applied our framework for analysing MSME markets in each country, beginning with a review of MSME definitions and concepts such as firm size, formality and survivalist vs. opportunity-driven entrepreneurs to segment and size the MSME market.

We then determined the key constraints and opportunities for MSME growth in each market by analysing five elements of the MSME ecosystem: skills and training, access to finance, infrastructure, market dynamics, and the MSME support landscape. Lastly, we prioritised the sectors with the greatest potential for MSME programming impact by assessing each sector’s growth, youth employment creation potential, and MSME presence.

Our work provided the foundation with a firm evidence base on which to build their MSME support strategy in each country. We placed an emphasis on collecting and synthesising available data to assist the foundation with a view of what is known and what still remains to be investigated regarding MSME development in each market.

Since MSME development was a new area for the foundation, we also positioned ourselves as a learning partner during the project. This included providing the foundation with thought leadership on how to diagnose MSME ecosystems, providing an in-person briefing to foundation staff on MSME development issue and developing a case study learning tool on diagnosing MSME markets.