New Framework Examines Enterprise Resilience in Ethiopia

RTI-funded research on agrodealer enterprise resilience provides a framework and insights for assessing and understanding the resilience of micro-, small-, and medium-sized enterprises

Market system resilience is increasingly recognized as critical for household resilience to shocks in developing countries. However, research is limited on the resilience capacities of micro-, small- and medium-sized enterprises (MSMEs) like agrodealers.

With the aim of increasing understanding of enterprise resilience, RTI conducted an internally funded study to better understand the resilience capacities of these critical market actors and determine if lessons learned from their resilient behaviors and characteristics could be applied to future development programming.

The study consisted of a desk review, the development of a framework for enterprise resilience, and a survey of agrodealers in Ethiopia.

Findings yielded insights on the resilience characteristics and behaviors of these agrodealers, the shocks they face, and how they adapt and recover.

The importance of agrodealers in promoting enterprise resilience

Agrodealers link households to broader agricultural market systems as these businesses sell inputs such as seeds and fertilizer to rural, smallholder farmers. During shocks like COVID-19, the resilience of agrodealers is critical for sustaining customer access to inputs so that they can continue growing food.

During the pandemic, agrodealers had to contend with immense challenges to their supply as well as demand, from disruptions in input imports and supplies to reduced purchasing power and shifting demand among their customers. In addition to representing a major shock to food systems, COVID-19 also compounded pre-existing shocks such as climate change and unrest in developing countries.

Developing a framework for enterprise resilience

Much of the global understanding of enterprise resilience has centered around large companies in well-functioning markets, typically in western countries. RTI set out to define and explore enterprise resilience in development settings, which are dominated by MSMEs.

The study started by identifying two key questions:

1. What characteristics and behaviors of MSMEs support resilience to shocks such as COVID-19?
2. Can assessing the resilience of agrodealer MSMEs in Ethiopia provide useful information for agricultural development programming in shock-affected contexts?

To answer these questions, RTI developed an enterprise resilience framework based on the activities and characteristics that make a MSME resilient. The framework includes five domains – four of which were adapted from the USAID Market Systems Resilience Framework and one additional domain that is unique to enterprises.

The five domains are:

• Connectivity: the degrees and ways in which an enterprise is connected to other actors, such as governments and businesses, that can provide support and information. 
• Cooperation: the ways in which an enterprise collaborates with an array of other market actors on shared goals, such as participation in policy advocacy or industry groups. 
• Business Strategy: the approaches and tactics an enterprise uses to achieve its objectives, such as plans for generating revenue and/or adding value to customers. 
• Evidence-Based Decision-Making: the use of fact-based information to solve problems and make decisions. 
• Entrepreneurial Orientation: the characteristics and actions of an enterprise that are considered entrepreneurial, particularly innovation, risk-taking and proactiveness. 

Read more about the framework.

Adaptive strategies help enterprises recover

RTI used this enterprise resilience framework to develop a survey to evaluate the resilience capacities of agrodealer MSMEs in Ethiopia. Frontieri Consult, a local partner, administered the survey in August and September 2021 to business leaders from 385 agrodealer MSMEs in the Amhara and Oromia regions to understand the shocks they had faced in the past year and their responses, as well as their behaviors and characteristics associated with the five domains of MSME resilience.

The survey targeted and compared two types of agrodealer MSMEs: private businesses (like small agrodealers, larger “one stop” shops, and veterinary drug retailers) and cooperatives (which are considered enterprises in Ethiopia and distribute inputs like fertilizer).

The survey found that cooperatives and private businesses impacted by the pandemic experienced similar effects and recovered at similar rates. Notable insights from the survey include:

• Cooperatives were less likely to experience any shocks in the past year than private businesses. Additionally, COVID-19 impacted cooperatives less, and to a lesser degree than private businesses.

• Neither cooperatives nor private businesses surveyed held an obvious advantage for recovery from the pandemic over the other type of business.
• Cooperatives and private businesses both cited high prices and inflation as the most impactful shock they faced in the past year, followed by COVID-19 and insecurity (e.g., Ethiopia was experiencing internal conflict during this time).
• Both cooperatives and private businesses employed strategies across the five domains of MSME resilience that enabled them to adapt. However, they operationalized behaviors and characteristics within those domains in different ways from one another.

Implications for development and resilience

These findings point to a couple key implications for future market systems resilience interventions:

• Efforts to support farmers’ access to inputs during shocks should focus on both cooperatives and private businesses. Both types of businesses demonstrated adaptive strategies to meet the needs of their farmer customer base. They also require support to grow more resilient and improve recovery during future shocks.
• The types of shocks that most impacted agrodealer MSMEs over the past year challenge assumptions about which shocks agricultural programming should focus on when building resilience. The largest percentage of MSMEs surveyed stated that their most impactful recent shock was high prices and inflation, rather than weather-related shocks (often the focus of resilience programming, given their impact on farmers). Different agricultural market system actors can be affected by different shocks, and program interventions should take this into account.