Microenterprises play a significant role in the economy, contributing to job creation, women’s empowerment, and local economic growth. These small businesses have fewer than ten employees, and typically have low startup costs. In Ghana, they constitute the majority of businesses and contribute significantly to the country’s GDP and employment. In Northern Ghana, microenterprises are prevalent in agrifood sub-sectors such as retail, production, aggregation, and processing.
Despite the great economic value they bring, these microenterprises face many challenges. They often lack the capacity to engage in formal markets and financial services, primarily due to limited resources and barriers to entry.
As inclusive market systems facilitators, how do we address these key obstacles and what strategies do we use to integrate these microenterprises into agricultural market systems? Below, we highlight a few of the key challenges confronting microenterprises and integration strategies.
Key Challenges Microenterprises Face
Access to Financing
Microenterprises struggle to access finance from traditional banks due to a lack of collateral and credit history, low financial literacy, high-interest rate, cumbersome loan processes, and particularly women-led microenterprises not recognized as a viable market segment, thus excluding them from savings, credit, insurance, and transactions. To address this, financial literacy training coupled with a credit de-risking mechanism (Loan Guarantee Fund) has been adopted to incentivize market actors and catalyze change in the financial services market system by demonstrating the creditworthiness of women-led microenterprises as a viable new market segment. Options such as cashflow-based lending, Technical Assistance (TA) to Financial Institutions to mainstream psychometric evaluation tools where a loan applicant’s creditworthiness is assessed by asking questions that reveal personality traits (attitude about success) relevant to willingness to pay gauging trustworthiness, the likelihood of repayment, gratification, and impulsivity, among other characteristics including Angel investors and crowdfunding platforms are being explored to provide timely access to finance and build credit history.
Access to Production Resources
Microenterprises, especially those led by women, face challenges accessing and paying for production and processing technologies upfront. A financial incentive strategy is employed where a maximum of 50% discount is provided for women-led microenterprises to experiment and experience the value and benefits of production technologies who will continue to pay beyond the incentive cover. This strategy is expected to lead to commercially viable and sustainable business relationships between technology suppliers and women-led microenterprises in the market system. In addition, Patient Capital (CP), a long-term investment (debt or equity), and a relationship-building strategy, where sustainable growth is prioritized alongside financial returns and agricultural leasing models that don’t require collateral can facilitate better access to these resources and promote market participation are being explored to deepen and widen the impact.
Market Linkages and Business Management
Weak market linkages and limited business management skills hinder microenterprises’ market integration. Facilitating the development of sustainable supplier relationships between lead firms and microenterprises; adopting micro-franchising models, and promoting access to business development services (BDS) through market clinics, Business-2-Business (B2B) sessions can enhance market linkages, capacity, and profitability are being promoted.
Access to Market Information
Microenterprises in rural areas often lack critical market information, affecting their decision-making and competitiveness. Enrolling microenterprises on business network platforms and leveraging tech-enabled marketplaces are critical strategies employed which can provide sustained access to vital market information.
Business Management Skills and Compliance
Many microenterprises lack essential business management skills and struggle with policy compliance. Entrepreneurship and business management training programs, mentorship support, and facilitating formalization/compliance with regulations are being implemented to enhance the growth and integration of microenterprises in the market system.
Organization and Coordination
Fragmented activities of microenterprises hinder their engagement with market system actors. Encouraging organized group systems, bulk technology procurement, fair trading systems, and circular economy practices can enhance the efficiency and quality of microenterprises’ operations.
Strategies to address challenges
The integration of microenterprises into agricultural market systems requires facilitators and interventions that support inclusive growth. Strategies include promoting BDS, demonstrating sustainable business models, hybrid market-based interventions, financial inclusion models, behavioral change communication, and fostering linkages with lead firms and business associations. By implementing these strategies, microenterprises in Northern Ghana can better participate in market systems, driving economic growth and empowering local communities.
MEDA’s work in Ghana
The Greater Rural Opportunities for Women 2 (GROW2) is promoting access to finance, gender-responsive and environmentally sustainable production and processing technologies, market access, facilitation of linkages with lead firms, and Business Development Services for agribusinesses and women entrepreneurs. GROW2 is a five-year (October 2021 – September 2026) project implemented in Northern Ghana, with the overall objective of contributing to increasing economic and social empowerment of women smallholder farmers (WSHFs), agribusinesses particularly women-led and women entrepreneurs. Funded by Global Affairs Canada (GAC), GROW2 is being implemented by MEDA in Ghana. GROW2 aims to reach a total of 40,000 women smallholder farmers cultivating soybeans, groundnuts, and vegetables. The project will enhance the business capacity of 50 agribusinesses (at least 50% women-led) and 5,000 women entrepreneurs.
MEDA builds on its 70 years of experience contributing to economic and social growth and innovation in frontier and emerging markets. With its headquarters in Ontario, Canada, MEDA has built a ten-year legacy in Ghana with projects such as the Farmers’ Economic Advancement Through Seedlings (FEATS) and the Greater Rural Opportunities for Women (GROW) project. MEDA’s strategic plan Towards an Equal World is focused on creating and sustaining decent work for 500,000 people by 2030.