Yaa Asamoah Boateng
Communication and Knowledge Management Specialist
"I have been struggling with digital marketing. Currently, I use Telegram, and I have not seen much impact. With this programme, I have a dedicated digital marketing specialist who will hand-hold me and provide technical support, so I am excited." Solome Kiflu, Owner of Shadez Wear, an e-commerce fashion store, said this during the launch of the UNCDF-Google MSME Digitalization Pilot Project in Ethiopia.
MSMEs like Shadez Wear are the backbone of most nations' economies, contributing to job creation, economic growth and poverty reduction. According to the World Bank, SMEs contribute about 90% of businesses and 50% of employment worldwide. Formal SMEs contribute around 40% to the national GDP in emerging economies. However, the COVID-19 pandemic forced many to close, and those still in business remain vulnerable and could close shop soon.
Digitalization of MSMEs can be one of the ways to make them more resilient and expand their customer base. Digitizing MSMEs’ operations also help to provide them access to finance. Similar reports by the World Economic Forum and MSC (MicroSave Consulting) while underscoring the benefits of digitization, also highlight the potential risks that could arise, some of which include data breaches, cyber-attacks, technology failures and disruptions.
Through a strategic partnership, UNCDF and Google aim to digitize MSMEs in the Eastern and Southern Africa Region by providing technical assistance, training, and business advisory support. The MSMEs will be onboarded online and provided with access to a suite of digital tools and online learning content to boost their efficiency and expand their reach.
In Ethiopia, where the pilot has taken off, the project is being delivered through an ecosystem of global and local partners to reach 100 MSMEs and create awareness of the services for over 2,000 MSMEs through different stakeholder engagements. The Association of Ethiopian Microfinance Institutions (AEMFI), is UNCDF's key implementing partner responsible for convening MSMEs interested in participating in the programme. Of the targeted 100 MSMEs, 50 percent should be women-led or owned. Other considerations include MSMEs impacted heavily by the COVID-19 pandemic, MSMEs at various levels of digitalization that possess some level of digital skills and MSMEs that have access to digital financial services but are unable to utilize them effectively.
Google, on the other hand, is joining hands with Africa 118 as its implementing partner on the project. Africa 118 will leverage various Google products and services to onboard the MSMEs online and provide them access to a suite of online learning content. Africa 118 will also create a digital profile for the MSMEs, validate their business data, provide digital skills and literacy training, and offer them one-on-one business advisory support services on digital and financial skills.
Evance Rabere, Project Lead, Ethiopia, for Africa 118, reiterated the project's significance to MSMEs in the country, "In Ethiopia, most SMEs do not have an online presence, and this is due to a lack of awareness of business improvement technology, affordability of the digital tools and lack of expertise. This UNCDF-Google Digitalization Pilot has been designed to address these challenges and can significantly impact the resilience of these MSMEs and open up a world of opportunities for them."
Through this strategic partnership and under the broader multi-stakeholder initiative "Digital Catalysts – MSME Support in the Digital Era: Accelerating Growth and Unlocking New Forms of MSME Finance”, this pilot will deliver;
- Digitalization of 100 MSMEs in Ethiopia through creating an online Google Business profile and related technical assistance support services.
- Increased access to and usage of Google online digital learning content explicitly created for MSMEs in Africa to grow businesses and build COVID-19 resilience.
- Enhanced awareness and participation of women-led or owned MSMEs in digitization, technical assistance, training and support services activities.
- Create digital data for the MSMEs from their online presence and increase the use of digital financial services, which may help improve the creditworthiness of the MSMEs.
To help the MSMEs increase their use of digital financial services and improve their creditworthiness, Hibret Bank, a local financial service provider, is joining this pilot. Hibret Bank will provide digital financial education to the MSMEs, monitor their economic growth and assess their creditworthiness for the possibility of extending loan facilities to expand their business.
During a panel discussion at the launch, Mr. Abel, a representative of Hibret Bank, spoke about the Bank's commitment to MSMEs' growth, indicating that "the Bank is committed to helping MSMEs expand their businesses, having already made available 2 billion Birr in loans for MSMEs in the country under different programmes."
Participating MSMEs at the launch emphasized their readiness to embrace the value that technology brings to their business operation and growth. They appreciated this initiative's opportunities indicating that the possibility of accessing loan facilities because of their digital presence or profile will be a significant boost for their businesses. However, they were quick to point out that financial service providers should seek their input in designing loan products to avoid the current challenges where their needs and what the FSPs provide vis-à-vis eligibility requirements are at variance.
Teshome Kebede, Executive Managing Director of AEMFI, speaking during the panel session, emphasized the fact that MSMEs are one of the strongest drivers of economic development and employment and, as such, should have more of these digitalization opportunities. He stressed that in Ethiopia, currently, "Microfinance institutions are servicing the financing needs of MSMEs in a greater capacity than the banks-whilst MFIs have over 5 million customers under their loan portfolios, the banks are doing less than 400,000.”
He expressed optimism about Hibret bank being a partner on the project, stating further that "banks rather than the MFIs have the financial capacity to reach a sizeable portion of the MSME market. However, a key barrier for the banks is MSMEs' inadequate business skills and financial literacy. Thankfully, this project will address that by further equipping them with digital skills and literacy and giving them a digital presence that should make it practical for the banks to lend more to them."
UNCDF has already conducted a baseline survey as a crucial step to understanding and addressing the challenges the MSMEs face. Also, to strengthen the MSMEs through digitalization and help them unlock new forms of finance, UNCDF is providing technical assistance throughout the pilot. AEMFI, its implementing partner, has also received financial assistance to support operational and training-related costs. By digitizing the MSMEs, they can expand their reach beyond Ethiopia, acquire new customers, increase their profitability, run their business cost-effectively and have better chances at accessing finance.