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] 91

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