Figure 6 : SME weaknesses as perceived by FIs

Discussion of FI perceptions

FIs see weaknesses of the entrepreneurial mind set as well as lack of important business skills, but do not question adequate sector knowledge (see Figure 6Erreur ! Source du renvoi introuvable.).

Sectorknowledge

Entrepreneurial Mindset Business Skills Planning (for growth)

Marketing/ market linkage

Financial department/ accounting system

Figure 6 : SME weaknesses as perceived by FIs

The entrepreneurial mindset includes a separation of the enterprise from the family, the search for opportunity to grow the enterprise, and the durability of the enterprise; as in ‘sticking with it’ rather than giving it up quickly. The latter is often observed (by some of our FI-respondents) when another economic activity, or in the case of female entrepreneurs, pressing demands of the household come up. Some respondents explicitly referred to youth-group-enterprises that a programme of the Ethiopian Government supports and at times, apparently, creates. These youth-group-enterprises have a bad reputation. One respondent said that this programme damaged the credit culture in urban Ethiopia. This is mirrored by feedback of at least one SME operator who observed that these groups receive many resources but do not work for them, nor intend to.11 The largest proportion of SME-weaknesses12 is taken up by business skills. Here, financial institutions– including the investment funds– see gaps in the accounting systems and set-up of financial departments in the SMEs. For instance, if an SME applies for a loan to finance an investment plan, it cannot convince the lender without producing financial reports that show profits and profitability in past periods of operation, as well as showing how these profits relate to using its current equipment to full capacity. Business skills also include the understanding of how to work with investors/ lenders, i.e., to comprehend the difference between a loan (or investment) and a grant. FIs also see the need of SMEs to improve marketing and planning (for growth) skills.

11 The authors did a quick follow-up research on development programs that target youth entrepreneurship in Ethiopia. Several have been or are operating, funded by various donors, but we can not specify to which of these our respondents refer. 12 By mentions. In total 6 FIs gave feedback on this question.