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T
HIS PAPER PRESENTS
a framework for understanding the roles
of information and communication technology (ICT) across
a range of micro, small and medium enterprises (MSMEs)
applications and the implication for poverty reduction through
ICT. It provides practical guidelines and guidance from United
Nations Industrial Development Organization (UNIDO) for the
future development of projects involving ICT and MSMEs.
MSMEs and poverty reduction
Expansion of MSMEs has the potential to contribute most
directly to Millennium Development Goal 1 (eradication of
extreme poverty and hunger) in three main ways:
• Creation of income generation and diversified livelihood
opportunities for the poor in developing countries
• Provision of more secure employment opportunities for
the poor in developing countries
• Provision of other socio-economic benefits to the poor –
i.e. enhancement of skills, increased self-confidence,
increased participation of women, empowerment, and
security against income loss.
In general, enterprises in developing countries may be catego-
rized in two different types:
Livelihood enterprises
– micro-enterprises that form the majority
in rural and urban areas delivering benefits in terms of livelihood
assets. In rural areas, micro-enterprises are largely founded on
direct sale, trading or processing of natural resource inputs. In
urban areas, livelihood enterprises are predominantly informal
and service-based. Livelihood enterprises depend primarily upon
informal and social networks to provide the information needed,
which can be unreliable, inaccurate and lack timeliness. Only a
few livelihood enterprises have direct access to digital ICT. They
possess radio, and a small minority utilizes telephony.
Growth enterprises
– small and medium enterprises (SMEs) that
show a greater business focus and which deliver broader/longer-
term benefits regarding competitiveness, innovation, exports,
etc. They are concentrated mainly in urban areas, and are active
in a broad range of sectors covering manufacturing, services
(including ICT) and trade. Growth enterprise needs for infor-
mation will reflect a greater degree of business maturity, and
many of them already utilize ICT.
ICT, poverty reduction and the role of micro,
small and medium enterprises
United Nations Industrial Development Organization
1
Livelihood
Enterprise
Growth
Enterprise
Value chain core
Limited application
(e.g. mobile phones)
Computer hardware
production, Tele-
communications products
Software/digital products
ICT-based business
services and training
Productivity improvements
and production control
Value chain boundaries
Faster & more timely
communications. Lower
transaction costs
Facilitating and conducting
transactions (e-commerce)
e-marketing
Value chain support
Access to business
development services/
information via
infomediaries
(e.g. telecentres, BICs, etc)
Information access via
Internet/e-mail
Internal processing of
information
Support for decision-
making (e.g. e-appraisal)
Networking support
e-networking for enterprise
support structures (e.g.
MFIs)
Building social capital
e-advocacy
e-networking for business
support structures
Cluster development
e-advocacy
Table 1: ICT applications in the value chain