Given the fact that Micro and Small scale enterprises (MSEs) are high on the Ethiopian
government’s agenda for mid-term growth and transformation plan (GTP), this study aims to
investigate the major contributions and the potential of this sector to the Ethiopian economy.
Using a CGE modeling approach, we assess the role of MSEs towards the major development
goals of the government: unemployment and poverty reduction. Three simulation scenarios were
designed based on the current MSE development plan but with different implementation
strategies. The strategy that the government is currently following to implement the MSE
development plan was found to be performing the best on expanding overall production, but
failed to tackle the critical issues of poverty and unemployment reduction. However, other
alternative strategies were found to give the country the best solutions to these development
concerns as well as investment. Female unemployment also reduced the most in these
alternative scenarios. This shows that the MSE sector has the potential to meet the envisaged
developmental goals in Ethiopia, but strategy adjustment is needed.
