DEVELOPMENT RESPONSE TO DISPLACEMENT IMPACTS PROJECT (DRDIP) Study on Nonfarm Livelihoods in Refugee-Hosting Regions in Ethiopia Nonfarm Livelihood Subcomponent Assessment and Recommendations for DRDIP Phase II Contents Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v 1 Background, Research Objectives, and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 The Ethiopian Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 DRDIP in Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Refugees in Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Nonfarm Livelihoods in Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Impact of COVID-19 and the Conflict on Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3 National-Level Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Assessment of the Nontraditional Livelihood Subcomponent . . . . . . . . . . . . . . . . . . . . . . 15 4  Implemented Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Strengths and Successes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Challenges and Gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Recommendations for Phase II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 5  Access to Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Access to Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Integration with Other DRDIP Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Technical Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Women’s Economic Empowerment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Refugee Inclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 i Support to Urban and Rural Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Regular Monitoring and Measuring Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Appendixes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 A Lessons from Recent Studies Pertaining to Nonfarm Livelihoods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 B Regional- and Woreda-Level Assessment of Nonfarm Livelihoods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Boxes 4.1 Business Creation and Women’s Economic Empowerment Case Study: Oduni (Gambella)— “Let Us Make a Difference in Life” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.2 Business Creation and Women’s Economic Empowerment Case Study: Lucy Goat Association— A Women-Only Common Interest Group in Afar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4.3 COVID-19 Impacts on Common Interest Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Figures ES.1 Priority Sectors/Economic Activities by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi 1.1 Study Activities Conducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Fieldwork at Regional and Woreda Level in Afar, Benishangul-Gumuz, Gambella, and Somali Regions (January–March 2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.1 Nonfarm Sector and Actors in Refugee-Hosting Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.1 Community-Based Organizations Supported by DRDIP’s Nontraditional Livelihoods Subcomponent, 2016–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 5.1 Priority Sectors/Economic Activities by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Map 2.1 Ethiopia’s Main Refugee-Hosting Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Table 2.1. DRDIP Intervention Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ii Abbreviations and Acronyms CIG common interest group LED local economic development COVID-19 coronavirus disease 2019 NGO nongovernmental organization CS case study RuSACCO rural savings and credit cooperative CSO civil society organization SME small and medium-sized enterprise DRDIP Development Response to Displacement UN United Nations Impacts Project UNDP United Nations Development Programme FGD focus group discussion UNHCR United Nations High Commissioner for KII key informant interview Refugees iii Acknowledgments This study was undertaken by a World Bank team led We would like to thank the enumerators, translators, and by Ashutosh Raina, Social Development Specialist, and research assistants in the field who made this research pos- comprising Mathew Stephens, Senior Social Development sible, and we would like to specifically thank the numerous Specialist; Esayas Nigatu Gebremeskel, Senior Livestock people interviewed—members of the host community and Specialist; and Aditya Sarkar, Consultant, Social regional- and woreda-level officials alike who, regardless of Sustainability and Inclusion Global Practice. The vision for their situation, generously shared their knowledge, experi- the report came from Varalakshmi Vemuru. Samuel Hall ences, attitudes, and hopes with us. conducted the field assessment used in the preparation of Laura Johnson was responsible for copy editing and the report. The team would like to especially acknowledge design of the paper. the contributions of Eleonore Thenot, Herve Nicolle, and For discussions and support on the study, the team is grate- Lisa Pfister, without whom the assessment could not have ful to Awena Lebeschu, Senior Consultant, International been completed. Ronald Leo Sullivan Jr., Graduate Intern, Finance Corporation; Erina Iwami, Operations Officer, contributed to the literature review. The team would Fragility, Conflict and Violence Group; and Fikru Tesfaye, also like to acknowledge contributions of Nigatu Bogale, Consultant, Social Sustainability, and Inclusion Global DRDIP Project Coordinator; Wondifraw Woldesemayat, Practice. Nontraditional Livelihoods Specialist, DRDIP FPCU; and We acknowledge funding provided by the Multi Donor DRDIP Regional Livelihood Specialists. Trust Fund for Forced Displacement as part of the Prospects Program, which made this report possible. iv Executive Summary The Development Response to Displacement Impacts livelihoods. Specifically, this review was conducted with Project (DRDIP) is a World Bank-supported regional pro- the Ethiopian nonfarm economy in mind in an effort to gram in the Horn of Africa (Ethiopia, Uganda, Djibouti, support and inform the next phase of DRDIP’s nonfarm and Kenya), which aims to improve access to social services, livelihoods interventions for women and youth in refugee- expand economic opportunities, and enhance environmen- hosting areas. tal management for host and forcibly displaced communities. This study offers the following recommendations for It was initiated in 2016 for a five-year period with US$100 improving and strengthening the nontraditional livelihoods million total funding for Ethiopia provided by the govern- subcomponent under Phase II of DRDIP. ment of Ethiopia and the World Bank. DRDIP has been implemented in 15 woredas (districts) across the five main Access to Markets refugee-hosting regions of Ethiopia: Afar, Benishangul- DRDIP has not been able to adequately engage the private Gumuz, Gambella, Somali, and Tigray. sector, and its approach may not be sufficiently market-based. DRDIP has been supporting target communities through The extremely heterogeneous state of private sector devel- multiple interventions/subcomponents. One subcomponent opment in many of the refugee-hosting regions as well as in focused on the nonfarm livelihoods,which include value chain the contexts in which the program operates makes tackling activities, such as agro-processing, transport, distribution, these concerns quite difficult, but the following potentially marketing, and retail; tourism; manufacturing; construction; helpful approaches could be built into Phase II. and mining, as well as self-employment operations such as handcrafting, bakeries, mechanics, and kiosks). For Phase II, FOSTER PUBLIC-PRIVATE DIALOGUE DRDIP aims to improve and strengthen the nonfarm liveli- Inadequate public-private dialogue was flagged as one of hood interventions, focusing on women and youth. the program’s major constraints. Under Phase II, DRDIP This study assesses the activities implemented under should work to create synergies and linkages through DRDIP’s nonfarm livelihood subcomponent and provides effective public-private exchanges involving a range of an analysis of the nonfarm economy in Ethiopia’s refu- stakeholders, including government and nongovernmental gee-hosting regions and woredas to shape future DRDIP actors, community representatives, enterprises, and sectoral interventions. The study also assesses findings from associations, to address market challenges more systemat- recent studies around the world pertaining to nonfarm ically and to improve coordination. The program could v collaborate with development partners who are active in engagement with the private sector without the need to the space, such as the United Nations High Commissioner reach out to individual actors. for Refugees (UNHCR) and the International Finance Corporation. FOCUS ON VALUE CHAIN DEVELOPMENT In numerous assessed regions, respondents point to the need COLLABORATE WITH THE PRIVATE SECTOR TO SUPPORT for more focus on regionally relevant value chains, such as MARKET-DRIVEN ACTIVITIES agro-processing and agro-packaging in Gambella and the The assessment revealed that market-based approaches leather and livestock industries in Somali and Afar. Phase II were not systematically adopted or used. In Beninshangul- could emphasize the development of value chains and iden- Gumuz, market assessments were conducted prior to imple- tify priority sectors. To ensure that program strategies are mentation and influenced program activities; in other areas, appropriately context-specific, a sectoral focus will require this was not the case. Activities were therefore inconsistently the development of different strategies for rural and urban informed by a thorough assessment of existing business areas, for each region, and even for the relevant woredas opportunities, did not involve private sector actors, and did within a region. not build on the local ecosystem. Engaging with groups like Figure ES.1 illustrates community organizations assisted the Amaharo Coalition—a network of private sector actors under the nonfarm livelihoods subcomponent. operating in refugee-hosting areas—could foster DRDIP Figure ES.1. Priority Sectors/Economic Activities by Region Afar Benishangul-Gumuz Gambella Somali • Milk processing • Apiculture • Fish processing • Milk processing RURAL • Salt production and • Soybean production • Milk processing • Apiculture processing • Milling and grinding • Briquette production • Apiculture • Waste management • Agro-processing of fruits • Leather processing • Manufacturing parts for URBAN and recycling • Bamboo processing • Grocery retail water irrigation • Cheap material production • ICT centers • ICT centers • Glass production for construction • Leather processing • Tourism vi Access to Finance Integration with Other DRDIP Financial access is a serious challenge to all businesses and Components private enterprise in Ethiopia, and particularly critical for micro, small, and medium enterprises headed by women, LEVERAGE DRDIP-SUPPORTED ECONOMIC young adults, and others who struggle to provide needed INFRASTRUCTURE collateral. Lack of supporting productive infrastructure is a main bar- rier to the development of nontraditional livelihoods. The INCREASE SEED MONEY FOR COMMON INTEREST poor conditions of the roads that connect refugee-hosting GROUPS (CIGs) areas to regional and national markets profoundly hinder Several respondents noted that CIG seed finance amount was the ability of enterprises to access supplies and sell their insufficient for some of the more market-linked and profit- products; the lack of electricity and water makes it extremely oriented businesses that members were intending to start. challenging for many business activities to be fully opera- Given this, DRDIP should explore the possibility of increas- tional and/or remain profitable; and a deficient Internet ing the amount of seed finance for CIGs from ETB 150,000 connection limits the introduction of technology and to ETB 250,000. hampers the development of digital businesses. While such structural challenges cannot be addressed by the nontradi- PILOT REVOLVING FUNDS FOR SUSTAINABLE FINANCING tional livelihood subcomponent, DRDIP’s first component To address stakeholder concerns about the lack of account- could improve the most-needed local infrastructure, and ability among CIG members in terms of the use of DRDIP linkages among DRDIP’s components could be fostered. A funds, revolving credit funds could be piloted in select coordination mechanism could help create potential syner- regions, particularly Tigray and Benishangul-Gumuz as the gies between subcomponents. security situation permits. The regional livelihood specialists in these two regions have had several interactions with the Technical Assistance Uganda DRDIP livelihoods team learn about the Uganda’s Engage technical assistance partners to support business advisory community revolving fund approach and experience. Based services and value chain development, strengthen market and financial on this, these two regions have already prepared a proposal access, support the aggregation of CIGs, and strengthen livelihood for piloting the community-level revolving fund approach, implementation support teams which can be implemented in Phase II. Many stakeholders complain of their consistent struggle to access a variety of business support services. Improving PARTNER WITH MAJOR BANKS TO IMPROVE FINANCIAL access to such services, providing technical support around ACCESS FOR SUCCESSFUL CIGs access to markets and finance, and strengthening livelihood Partnerships with major banks could facilitate access to implementation support teams could bolster the overall credit and digital financial services to successful businesses implementation process. The project could engage relevant started by CIGs. DRDIP could build on broader efforts technical assistant partners to support this. being undertaken by the Ministry of Finance and the Job Creation Commission in Ethiopia to encourage additional private financing for micro, small, and medium enterprises. vii Use community business agents trained by technical assistance Refugee Inclusion partners for last-mile support Several research pieces on Ethiopia’s refugee-hosting areas A major gap in DRDIP is the provision of business devel- show that, in some regions, refugees are already contribut- opment and advisory services at the local/community level. ing to local economic development through the introduc- During Phase II, community business agents with prior tion of new skills and innovation in some sectors. Phase II entrepreneurial experience could be recruited to support of DRDIP could therefore consider both populations and community groups and entrepreneurs through the provision include a percentage of refugee beneficiaries in the nontra- of range of services, including identification of business ditional livelihood subcomponent. Further, and more specif- opportunities, preparation of business plans, offering basic ically, DRDIP could support refugee CIGs based in camps business management training to entrepreneurs and CIGs, as well as mixed CIGs, in collaboration with UNHCR and liaising with financial institutions for enterprise loans, facili- the Refugees and Returnees Services, who could help iden- tating backward and forward market linkages, and creating tify appropriate economic activities. linkages between entrepreneurs/group enterprises and local government. Support Urban and Rural Beneficiaries Ethiopia’s urban and rural areas have developed very dis- Women’s Economic Empowerment tinct nonfarm economies. Phase II of DRDIP could develop differentiated strategies for the two areas, keeping in mind COLLABORATE WITH DEVELOPMENT PARTNERS TO the specific challenges and opportunities of each. Figure LEVERAGE WOMEN-LED CIGs TO PROMOTE WOMEN’S ES.1 identifies potential areas of focus, which could serve as ECONOMIC EMPOWERMENT (WEE) a starting point for further refinement. Based on the assessment, an early notable success of DRDIP’s nonfarm livelihoods subcomponent is its support Regular Monitoring and Measuring of the inclusion and empowerment of women in economic Impact activities. Phase II could build on this success by specifically Another gap in DRDIP is the lack of consistent monitoring focusing on women-led CIGs and improving WEE out- and the failure to use insights generated during monitor- comes. Such an effort could be undertaken in conjunction ing to inform and adapt program design. Introducing a with partners already active in the country, such as the Gates streamlined management information system and regular Foundation. and rapid assessments to measure the outcomes and impact of the nonfarm livelihood interventions could help address these concerns during Phase II. viii 1 Background, Research Objectives, and Methodology The Development Response to Displacement Impacts study assesses the activities implemented under DRDIP’s Project (DRDIP) is a World Bank-supported regional pro- nonfarm livelihood subcomponent and provides an analysis gram in the Horn of Africa (Ethiopia, Uganda, Djibouti, of the nonfarm economy in Ethiopia’s refugee-hosting areas and Kenya), which aims to improve access to social services, to shape future DRDIP interventions. Promising nonfarm expand economic opportunities, and enhance environmen- livelihood options for refugee and host communities, partic- tal management for host and forcibly displaced commu- ularly women and youth, are identified. The study findings nities. It was initiated in 2016 for a five-year period with offer actionable recommendations with clearly identified US$100 million total funding for Ethiopia provided by the entry points for increasing the effectiveness and impact of government of Ethiopia and the World Bank. For Phase II, DRDIP’s nonfarm livelihood activities on the targeted refu- DRDIP aims to improve and strengthen the nonfarm live- gees and host communities. lihood interventions, focusing on women and youth. This Figure 1.1. Study Activities Conducted October 2020 November–December December–March March–April April–June Study launch Inception Data collection Analysis and reporting Follow up interviews July Inception report Draft report Revised report Consultation November 2022 meetings Final report 1 Figure 1.2. Fieldwork at Regional and Woreda Level in Afar, Benishangul-Gumuz, Gambella, and Somali Regions (January–March 2021) Interviews Woreda-level Woreda Regional Woreda with community validation overview consultations consultations actors workshops The study was conducted using both primary and sec- community actors, and NGOs. Interviews and focus group ondary data. The study team conducted fieldwork in the discussions revolved around DRDIP and other interventions woredas (districts) where DRDIP has been implemented— on nonfarm livelihoods, including questions about the local except Tigray1—using the following qualitative methods: business environment and local economic actors. Validation local consultations, in-depth interviews, focus group discus- meetings were held at the end of the data collection process sions, and case studies. Data on local context were collected to present the findings, which were then synthesized into from woredas and informed the sampling strategy through regional case studies. a series of rapid interviews with local actors (local govern- This study is organized in five sections, including this ment, enterprises, and nongovernmental organizations one. Section 2 briefly introduces DRDIP and outlines the [NGOs]) on the main characteristics of the local economy context within which it operates. Section 3 outlines the key and existing interventions. Consultations were conducted themes emerging from the study; and section 4 explores with regional DRDIP livelihood specialists and implemen- those in greater detail. Section 5 summarizes the recom- tation support teams, followed by woreda consultations mendations that emerge from the findings. Detailed case with relevant government offices, private sector actors, studies presenting the findings from each surveyed region (Afar, Gambella, Benishangul Gumuz, and Somali) are pro- 1. The ongoing military confrontation between the Ethiopian National Defense vided in the appendix. Force and the Tigray People’s Liberation Front did not allow the research team to conduct fieldwork in Tigray. This study therefore covers 12 out of the 15 woredas where the program has been implemented. 2 2 The Ethiopian Context DRDIP in Ethiopia represent the project’s primary target, the interventions are The Development Response to Displacement Impacts Project also expected to provide indirect benefits to refugee commu- (DRDIP) has been implemented in 15 Ethiopian woredas nities by improving infrastructure, service delivery, natural (districts), spread across the country’s five main refugee- resource management, and economic opportunities. A key hosting regions: Afar, Benishangul-Gumuz, Gambella, marker of DRDIP is its focus on the poorest and most vul- Somali, and Tigray (see map 2.1). While host communities— nerable of community members, as reflected in the selection areas within in a 20 kilometer radius of a refugee camp— of beneficiaries for the livelihood interventions. Map 2.1. Ethiopia’s Main Refugee-Hosting Regions Sudan Eritrea Tigray Dijibouti Addis Ababa Afar Somalia South Sudan Ethiopia Amhara Benishangul- Kenya Gumuz Addis Ababa Gambella Oromia Southern Nations, Somali Nationalities, and People’s Region 3 DRDIP comprises four components, each of which has Table 2.1. DRDIP Intervention Areas subcomponents: Region Woredas l Component 1. Social and economic services Afar Asayita and infrastructure Berhale Subcomponents Benishangul-Gumuz Bambasi Homosha 1. Community investment fund Mao-Komo 2. Capacity building for local planning and Gambella Abol decentralized service delivery Dimma l Component 2. Sustainable environmental Gog Itang management Somali Aw Barre Subcomponents Dollo Ado 1. Integrated natural resources management Kebribeyah 2. Small-scale, micro, and household irrigation Tigray Asgede-Tsimbla Tahtay Adyabo schemes Tselemt 3. Supply of alternative energy sources DRDIP = Development Response to Displacement Impacts Project. l Component 3. Livelihood program Subcomponents Refugees in Ethiopia 1. Support for traditional livelihoods Ethiopia is among the largest refugee asylum countries in 2. Support for nontraditional livelihoods the world, reflecting the region’s ongoing fragility and con- 3. Capacity building for community-based flict. As of August 31, 2021, the country was host to 795,108 organizations for livelihoods refugees.2 And while Ethiopia provides protection to refu- 4. Project management and monitoring and gees from 26 countries, the vast majority are from South evaluation Sudan, Somalia, Eritrea, and Sudan, living at camps located along the border in Gambella, Somali, Tigray, Benishangul- The Ministry of Agriculture and Natural Resources Gumuz, and Afar. Except for Tigray, these regions are leads the coordination and overall management of DRDIP among the nation’s least developed, lagging according to implementation. Governance includes national-, regional-, all human development indicators. In addition, Ethiopia and woreda-level steering committees, which convene the has experienced significant internal displacement over the relevant line ministries. The project has been implemented past few years: there are currently about 4 million internally using a community-driven approach, with robust grass- displaced persons living in the country. roots-level participation by host communities. The planning Ethiopia’s history of hosting refugees is long. Over the process for implementing the activities was conducted at past 50 years, Ethiopia has been the country of origin for sig- the subkebele (subward) level through consultations with nificant numbers of refugees3 and a country of destination the community to ensure inclusiveness, accountability, and learning. 2. Data are available at the Operational Data Portal for Ethiopia at https://data2. unhcr.org/en/country/eth. 3. Ethiopia was not a country of origin for significant numbers of refugees from the early 1990s until the outbreak of conflict in northern Ethiopia in late 2020. 4 for the region’s displaced. Each wave of displacement the right to work, although uncertainties remain around is closely connected to periods of political turmoil in the implementation. Importantly, the proclamation gives ref- country, regional instability and conflict, or climatic crises. ugees who have been in Ethiopia for at least 20 years the In 1969, the Ethiopian government established its first ref- right to local integration. Other major policy improvements ugee camp in Itang to accommodate people fleeing Sudan’s include the adoption of the Global Compact on Refugees first civil war; the number of camps has been growing since, and a 10-year National Comprehensive Refugee Response now housing asylum seekers from South Sudan, Somalia, Strategy aimed at enhancing self-reliance and resilience and Eritrea. There are 25 refugee camps in Ethiopia. In among refugees and host communities. 2010, Ethiopian authorities introduced a new policy per- The terms refugee and host community are complex in the mitting refugees to live outside of the camps if they have a Ethiopian context. Research conducted by the World Bank sponsor who will enable them to be self-sufficient. In prac- has observed how difficult it can be to distinguish refugee tice, this scheme has mainly benefited Eritrean refugees. In from host due to cross-border connections and common subsequent years, a reduction of humanitarian aid coupled ties of language, kinship, and ethnicity. All of the refugee- with growing numbers of protracted refugees has led the hosting regions in Ethiopia have a long history of mobil- Ethiopian government to revise its refugee policy. In 2016, ity and cultural connections to other communities across at the Leaders’ Summit on Refugees in New York, Ethiopia regional borders and a relatively fluid or flexible attachment committed to improving the lives of refugees and responding to national identity (Vemuru, Sarkar, and Woodhouse to their needs in a more comprehensive manner by increas- 2020). Further, some host communities have emerged only ing access to basic services and employment opportunities. in response to the arrival of refugees and related humani- Its nine pledges include expanding its existing out-of-camp tarian operations. Finally, in many contexts—the identity of policy; issuing work permits to refugees, especially in areas an individual as either a refugee or a host is subsumed under open to foreign workers; increasing the enrollment of refu- other identity markers, which includes gender and ethnic- gee children in education; expanding the provision of basic ity. It is in this complex sociopolitical context that DRDIP services to refugees; and allowing for the local integration operates. of refugees. In 2017, Ethiopia adopted the Comprehensive Refugee Nonfarm Livelihoods in Ethiopia Response Framework, which serves as a vehicle for the Ethiopia has experienced rapid growth, at an average annual implementation of the nine pledges. Implementation of the rate of 9.4 percent from 2010/11 to 2019/20, along with framework was initiated in February 2017, and the Ethiopian improving human development outcomes in education, government has since outlined a strategic approach aimed health, and other dimensions, which is largely attributable at improving rights and enhancing services to benefit both to growth in the agricultural sector and public-investment- refugees and host communities. A new refugee proclamation led growth in urban areas (Ronnas and Sarkar 2019). (no. 1,110, adopted in February 2019) has been widely hailed This rapid economic expansion has led to a reduction in as one of the most progressive on the African continent. The the poverty level from about 30 percent of the population law grants refugees access to a wide range of rights and ser- in 2011 to 24 percent in 2016, and an increase in per vices and to improved socioeconomic integration, including capita income. The reduction in poverty levels has been 5 particularly pronounced in urban areas (World Bank 2020). growth does not appear to have been associated with a com- From 2005 to 2015, the number of productive jobs (i.e., jobs mensurate productive and structural transformation of the that allow people to sustain themselves above the poverty economy and labor market. Despite very rapid agricultural line) increased from 20 to 33 million. growth, economic diversification outside the large cities has Despite such progress, Ethiopia continues to be home to progressed slowly. The growth of nonagricultural enter- an extremely large population of very poor and vulnerable prises has been disappointing so far, at least in rural areas. people. With an estimated per capita annual income of The development of small and medium-sized enterprises US$790 in 2019, Ethiopia remains one of the poorest coun- has been lackluster, hindering vertical economic integration. tries in the world and, more crucially, despite decreasing lev- This “missing middle” also contributes to an increasingly els of overall poverty, the poorest have not benefited equally fractured economy, with a large-scale, capital-intensive, and from growth (e.g., the consumption levels of the poorest has often foreign-funded and export-oriented modern sector remained nearly unchanged), and shock-induced vulnera- on the one hand and a traditional sector of very small or bility levels are high. nano enterprises on the other. This divide has a distinct The labor market remains a challenging one, especially geographic dimension: the large-scale modern sector is for youth and women. With nearly two million new entrants confined to large cities and large commercial farms (Ronnas to the Ethiopian labor market every year, job creation and Sarkar 2019, n3). remains a key challenge, made even more difficult by the lim- In short, the Ethiopian economy is still characterized ited size of the private sector and the lack of diversity in the by a lack of diversification and an underdeveloped private Ethiopian economy, which continues to predominantly rely sector, partly due to the predominant role of the public on agriculture. In fact, if Ethiopia’s ambitious Sustainable sector in some subsectors, including telecommunication, Development Goal of achieving productive employment financial and insurance services, transportation, and retail, and decent work for all by 2030 is to be achieved, job cre- and partly due to national regulations protecting specific ation needs to increase rapidly to an estimated 2.8 million economic sectors from foreign investment. Enterprises also annually—double the rate between 2005 and 2015. Levels of suffer from foreign exchange shortages, lack of access to unemployment and—more crucially for such a low-income finance capital, difficult access to inputs and bureaucratic country—underemployment and vulnerable employment delays, lack of energy, and low skill levels in the workforce. are high, while the cost of living has risen exponentially over Further, Ethiopia’s economic growth has been concentrated the past few years. The Ethiopian lowlands, characterized in the highlands and in urban areas; the lowlands have expe- by an arid or semiarid climate, limited resources, a lack rienced very little livelihood diversification. of infrastructure, and significant remote areas, have faced The contribution of the industrial sector to the country’s repeated natural hazards in recent years, endangering liveli- gross domestic product is modest but expected to grow. It hoods and triggering displacement. currently relies primarily on food processing, beverages, Although the service and manufacturing sectors have textile and garments, leather, chemicals, metals processing, shown signs of development in recent years, agriculture and cement production. The tertiary sector is strategically remains a key contributor to livelihoods in Ethiopia, important because it brings with it foreign exchange earn- accounting for 65 percent of employment. In fact, economic ings, mainly through the successful state-owned company 6 Ethiopian Airlines. Tourism and telecommunications are in low productivity services (Ronnas and Sarkar 2019 also developing at a rapid rate. However, while COVID-19 supra n3). The Ethiopian government is aware of these has had a limited impact on agriculture, the pandemic has challenges and has established a Jobs Creation Commission strongly affected the tourism, hospitality, air transport, and to spearhead its employment creation agenda. manufacturing sectors. Successive growth and transformation plans have outlined Impact of COVID-19 and the Conflict Ethiopia’s strategy for becoming a middle-income country on Economic Growth by 2025, and a 10-year development plan for 2021–30 is In addition to the COVID-19 pandemic, social and political under preparation. Among the government’s priorities is 4 unrest, as well as the associated internal displacement, com- private sector development through foreign investment and plicates the context on the ground and hampers Ethiopia’s industrial parks, with the aim of improving productivity in ability to achieve its development targets. The pandemic has the agriculture and manufacturing sectors. Nonfarm activ- exacerbated existing inequalities in the labor market as job ities, along with entrepreneurial promotion and micro and losses have been concentrated among the disadvantaged, small enterprise manufacturing development, are identified that is, among self-employed and casual laborers. Gender as key areas to address in the structural transformation of inequalities have also intensified: more women than men Ethiopia’s economy. It is generally accepted that nonfarm have lost their jobs. Such broad patterns also exist in refu- livelihoods can positively impact welfare and that they are gee-hosting areas. A study conducted by the International associated with higher per capita expenditure (Adjognon Labour Organization and Samuel Hall on the impact of and others 2017). Further, nonfarm livelihood development COVID-19 on labor markets in refugee-hosting areas in in rural areas has a demonstrably positive affect on economic Somali and Tigray shows that the pandemic deepened development and resilience because it improves household inequalities both between hosts and refugees and between income diversification, increases rural employment, reduces men and women. Enterprises led by male hosts were found poverty, and fosters a more spatially balanced distribution to fare better than those led by displaced groups or by of the population. For most rural households, however, non- women, and women were more likely to have experienced a farm economic activities still only represent a small source loss of income (Adjognon and others 2017). of employment and income. While some evidence suggests In this broader context, nonfarm livelihood strategies an opportunity-driven shift of labor from agriculture to will be vital to Ethiopia’s addressing its developmental chal- more productive economic pursuits in nonagricultural sec- lenges. Nowhere are challenges starker than in the country’s tors, other evidence suggests a parallel distress-driven shift refugee-hosting areas, mostly situated in historically under- of labor out of agriculture as rural households are forced developed peripheral regions. The local economies in these to turn to casual agricultural wage work or self-employment areas, hindered by limited access to markets and inputs, low education levels, and lack of access to finance, are domi- 4. See “Ethiopia 2030: The Pathway to Prosperity. Ten Years Perspective nated by informality and agricultural activities. Development Plan (2021–2030).” PowerPoint presentation. Federal Government of the Republic of Ethiopia, Addis Ababa. https://phe-ethiopia.org/ the-tenth-year-perspective-plan-ethiopia2030-pass-way-to-prosperity/. 7 3 National-Level Findings This section synthesizes the findings that emerged out of Refugee-hosting areas in Ethiopia are often in remote the assessment of the four regions of Afar, Benishangul- woredas with limited market infrastructure, a challenging Gumuz, Gambella, and Somali, all of which have similar business environment, and a high degree of aid depen- local economies, including their agricultural, service, and dence, which hinders the expansion of nonfarm economic retail sectors, and to varying degrees, tourism, natural activities. The economy in some refugee-hosting woredas, resource extraction, and cross-border trade. This section notably in Somali and Afar, are highly dependent on both first outlines the contours of the main nonfarm sectors and illicit and legal cross-border trade, particularly in remote actors in the refugee-hosting areas of the selected regions areas close to the border, such as Dollo Ado (Betts and oth- and then explores common challenges and opportunities ers 2019). Nonfarm relevant actors in the regions include related to the expansion of such sectors. (The context-spe- government representatives, development and humanitar- cific economic conditions of the regions and project-affected ian agencies, financial service providers, civil society orga- woredas are outlined in section 4.) nizations (CSOs) and associations, and Ethiopian diaspora, Agriculture remains the backbone of Ethiopia’s econ- each discussed in turn below. omy despite the government’s stated policy goals of achiev- ing structural transformation of the economy by focusing GOVERNMENT ACTORS on nonfarm activities, particularly the promotion of entre- Relevant public agencies for nonfarm livelihoods include the preneurism and manufacturing development for micro Ministry of Agriculture and Natural Resources—the main and small enterprises. On-farm and agricultural economic partner for the Development Response to Displacement activities represent an essential livelihood for most people Impacts Project (DRDIP); the Agricultural Transformation in the surveyed areas, but nonfarm economic activities have Agency; the Job Creation Commission; the Ministry of also become increasingly important. Strengthening non- Women, Children and Youth Affairs; the Micro and Small farm livelihood is important for livelihoods diversification; Enterprises Development Agency the Ministry of Urban improving the coping mechanisms; and providing addi- Development and Housing; the Ministry of Innovation tional income sources to communities, especially women and Technology of Ethiopia; the Ministry of Mines and and youth. In addition, the nonfarm activities are direct Petroleum of Ethiopia; the Ministry of Labor and Social income sources for landless people. Affairs of Ethiopia; the Ministry of Culture and Tourism of 8 Figure 3.1. Nonfarm Sector and Actors in Refugee-Hosting Areas In Afar, livestock farming and agriculture are the main economic activities, re ected in the high prevalence of pastoral communities. The region is famous for its salt extraction sector, its tourism industry has the potential to grow, and it could become a central trade corridor connecting Ethiopia to the port of Djibouti. While mining is an important sector in Benishangul-Gumuz in terms of earned revenues, most people’s livelihoods revolve around agriculture. However, there is an e ort by government stakeholders to move toward small-scale, o -farm and nonfarm activities, such as agro-processing, handcrafts, and trade. Gambella’s economy is largely dominated by agriculture. The underdevelopment of the nonfarm sector is aggravated by structural factors that hamper business creation, especially the state of infrastructure: the lack of roads, electricity, telecommunication, and nancial institutions present major barriers. On one hand, most people in Somali live in peripheral areas, engage in pastoralism, and depend on livestock. On the other hand, the region has thriving urban and semiurban areas with important trade routes to neighboring countries, and rates of technology use, particularly digital nance, are much higher than in other regions. Ethiopia; the Ministry of Peace; and the Federal Technical Nations (UN) agencies such as the World Food Programme, and Vocational Education and Training Institute. The the Food and Agriculture Organization, and the UN High Ministry of Peace is of particular importance as it houses Commissioner for Refugees (UNHCR); international the Administration of Refugee and Returnee Affairs, which nongovernmental organizations (NGOs) such as Mercy is responsible for refugees in Ethiopia. Corps, CARE, Save the Children, Oxfam, International Rescue Committee, and Norwegian Refugee Council; and DEVELOPMENT AND HUMANITARIAN ACTORS Mekane Eyesus—the Ethiopian Evangelical Church, which Many of the surveyed locations are in lagging areas with a is a member of the Lutheran World Federation. Many high degree of aid dependence and a high concentration of these agencies are relevant to livelihood programming of international development and humanitarian actors who for both refugees and host community members. Unlike have become essential in filling the gaps in the local market DRDIP, Mercy Corps and the Regional Development and systems. Some of the most important actors include United Protection Programme (RDPP) are conducting integrated 9 programs for refugees and the host community. RDPP, in DIASPORA particular, was cited as a successful example of an interven- The economic engagement of the Ethiopian diaspora tion contributing to social cohesion and the integration of varies by region and woreda. General reports suggest that refugees. In a similar vein, Mercy Corps is implementing a the diaspora is involved in infrastructure development, con- market systems development program to contribute to LED struction, and the extraction of natural resources. Findings in both Gambella and Somali. The essential market infra- from the Somali region align with previous studies of the structure in these regions is often provided by development area by Samuel Hall that reveal how important remittances and humanitarian actors. In Dollo Ado, Somali, for exam- and investments by the diaspora are to the region (ILO/ ple, an important infrastructure facility is the slaughterhouse Samuel Hall 2020a). Respondents in Somali also noted that constructed by UNHCR, which supplies fresh and safe beef the diaspora is engaged in philanthropic activities like build- to households and restaurants and is the first of its kind in ing schools and assisting the community during COVID-19. the area. Other essential market services provided by these The most cited challenges in attracting diaspora investment actors include providing grants or loans for small businesses, were an uncertain political situation in the country (for vocational training, and business skills development. example, local conflicts in Gambella), challenging market conditions that discourage investments, a lack of awareness LOCAL CSOs AND ASSOCIATIONS of diaspora-related investment policies, and insufficient While the central role of development and humanitarian facilitation of investments by local government actors. actors in the local market systems may suggest weak local ownership of nonfarm livelihood programs, many local FINANCIAL SERVICE PROVIDERS CSOs and associations are providing meaningful help to All surveyed areas have a low concentration of financial ser- communities in response to socioeconomic, cultural, and vice providers, and the banks and microfinancing services environmental challenges. During the COVID-19 pan- that do exist are often only accessible in urban and semiur- demic and its accompanying economic recession, for exam- ban areas. Most of the population cannot access financial ple, the salt association in Berhale, Afar, stepped in and services because of burdensome formal requirements, such provided loans and food items at discounted prices to the as high collateral and loans with interest, which Islam pro- local community. Another notable example is from Somali, scribes. Due to such limited access, most respondents use where Save Ethiopian Environments (SEE) is focused on traditional savings groups or enterprises to buy goods on environmental rehabilitation and the sustainable provision loan from suppliers—a finding in line with previous research of energy and livelihoods in areas hosting refugees and (Bezu and Barrett 2012), which concluded that local savings internally displaced persons. In fact, several respondents in and credit associations in Ethiopia positively contribute to Somali referred to numerous local CSOs and associations poverty reduction in rural populations engaged in nonfarm that foster women’s empowerment, such as the Garbage and livelihoods in that they provide a way to gradually accumu- Sanitation Association, which is creating jobs for women in late assets, diversify economic activities, and access high-re- Kebribeyah, and Umul-gargaar, a local women’s association turn activities. in Aw Barre, which is raising awareness to reduce harmful gender practices. 10 Challenges face are infrastructure challenges, particularly electricity The transition of Ethiopia’s economy into one that gener- water supply, telecommunications, roads, and technology ates more nonfarm jobs and activities will likely be difficult. for modernizing nonfarm economic activities and for utiliz- It will require addressing multiple social, cultural, political, ing natural resources. Common interest groups (CIGs) and and infrastructure challenges. Most livelihoods in the pri- enterprises also frequently complained of a lack of available marily rural refugee-hosting areas remain characterized by training facilities and support to improve their business and traditional activities. While the regions and woredas face financial proficiency. different context-specific challenges regarding the transition “The facilities or the infrastructures that support the from on-farm livelihoods to more nonfarm economic activ- livelihood activities are either not existing as a whole or ities, the main barriers are limited expertise and experience poorly functioning in most of the targeted areas.” in nonfarm activities; a challenging business environment; (WC11, DRDIP staff, Dollo Ado) cultural barriers for women; and conflict and lack of social The lack of economic infrastructure to connect business cohesion. Each are discussed below. hubs as well as onerous cross-border trade policies also contribute to illicit cross-border trade. In some remote bor- LIMITED EXPERTISE AND EXPERIENCE IN NONFARM der areas in Somali and Afar, in fact, the local economy is ACTIVITIES heavily dependent on such trade. The limited access to legal Because agriculture, especially traditional agricultural activ- cross-border trade coupled with the border closings caused ity, is the primary livelihood for most Ethiopians, the popu- by COVID-19 has affected businesses in the woredas and lation has limited expertise in nonfarm activities. Nomadic has led to inflation and products being available. Enterprises communities in Somali, for instance, who have been encour- that legally import goods from neighboring countries find aged by government programs to adopt sedentary lifestyles, obtaining authorizations and exchanging money challeng- are still largely dependent on livestock. ing, and they are unable to compete with the lower prices “The community also lacks adequate knowledge and of contraband. experience of nonfarm livelihoods because it is a remote area, and the community grows up as a nomadic pastoral. Their CONFLICT AND LACK OF SOCIAL COHESION life always related to livestock production and cultivating A significant challenge in developing local market systems seasonal agriculture.” (FGD3, male participant, and attracting investment is the uncertain political and secu- Aw Barre) rity situation in many parts of Ethiopia. Ongoing internal displacement and conflict also lead to the continuous need A CHALLENGING BUSINESS ENVIRONMENT for humanitarian interventions even as the development of Limited access to business development services, inadequate market systems is disrupted. For example, insecurity within avenues for and onerous regulation of legal cross-border Gambella was cited as the main challenge to nonfarm live- trade, and limited economic infrastructure have hindered lihoods. Similarly, Berhale in Afar has been completely cut the growth of local businesses and employment. Most off from telecommunication services, and is only poorly con- entrepreneurs said that the most significant constraints they nected to electricity due to its proximity to the conflict in the 11 Tigray region. There are also ongoing ethnic conflicts and Nonfarm activities available to women and men vary, with border disputes between Afar and Somali, including intense women usually being engaged in petty trade or in tradition- recent fighting (Oxford Analytica 2021). Such insecurities ally assigned roles, such as a worker in a restaurant or tea in the assessed woredas and other locations in Ethiopia are shop. potentially reversing prior gains in poverty reduction and “No woman is engaged out of the cultural or the development and hindering possibilities for further invest- traditional gender roles assigned to her because it would ment and entrepreneurial development. look like she is cursing her families or degrading their “The deteriorating security situation in the region is the personalities or the identities of their families.” main barrier. Besides, lack of business enabling environment, (CS8, male youth, Dollo Ado) weak commitment from the government offices to support Many women also raised the issue of the double burden nonfarm livelihoods, and lack of affordable credit access of participating in the private market while they are still for the active poor are among the main barriers.” expected to fulfill their domestic duties. (RC8, DRDIP staff, Assosa) “But still, the women are carrying the double burden and CULTURAL BARRIERS FOR WOMEN that is putting an extra heavy load on their shoulders. Gender-based discrimination in accessing economic oppor- They have housework (nonproductive) responsibilities at tunities was the most-cited challenge among female respon- home and are expected to contribute to the shop equally. So, dents. Despite significant improvements toward gender they have to manage their houses and do all the heavy tasks equality in all social, political, and economic dimensions over in addition to working in the shops equally with the men.” the past few decades in Ethiopia, women are often not seen (FGD19, female participant, Asayita) as central participants in the private market. Furthermore, as boys have often been favored in terms of accessing edu- Opportunities cation, and girls often marry early and shoulder the burden Despite the varied socioeconomic challenges in the assessed of housework, women are disadvantaged in the labor mar- refugee-hosting locations, the roll out of ambitious eco- ket. Women who do engage in economic activities outside nomic and refugee integration policies means that oppor- the household are often assigned traditionally acceptable tunities exist to promote nonfarm activities in Ethiopia. At economic activities, and those who try to be entrepreneurs the same time, demands from communities to oversee their may encounter stigma and discrimination. Women entre- own development means that humanitarian and develop- preneurs also struggle more than their male counterparts in ment actors are under increasing pressure to diverge from accessing financing to expand their businesses. “business-as-usual.” “They may be discriminated against based on social and religious aspects. For example, when they do have access to LIBERALIZATION OF THE TELECOM SECTOR AND finance, women typically face more rigid loan processes. DIGITALIZATION One would expect women who choose to be entrepreneurs to In 2019, the government of Ethiopia announced the open- be at least treated the same as men.” (PKII15, DRDIP ing of its telecommunication market to private-sector com- staff, Asayita) petition and foreign investment, laying the foundation of 12 digitalization for economic development. The World Bank LOCAL OWNERSHIP AND EMPHASIS ON SUSTAINABILITY is currently supporting the government by investing US$200 OF LIVELIHOOD INTERVENTIONS million to build a digital economy through the newly founded In line with the need for a new approach to integrated Ethiopia Digital Foundations Project (Dione 2021). interventions, and in the face of increasing public criticism The findings of this study demonstrate the potential for about the sustainability of aid programs, communities and using digitalization for nonfarm livelihoods, particularly local actors are demanding that they be viewed as partners digital finance. Access to telecommunication and mobile in nonfarm livelihood development. A frequent theme technology varies across the region, but Somali already has emerging from the focus group discussions is that commu- a high level of digital usage and can serve as a model for nity members do not wish to just receive aid—they want other areas. Services such as Hello Cash or E-Birr are easily to take ownership of their livelihoods to actively improve adaptable and accessible to urban and rural communities their lives. Community members expressed concern over with a mobile connection. Refugees used to be excluded the sustainability and effectiveness of the livelihood inter- from using mobile money transfers, but with identification ventions offered by NGOs, which can be redundant and provided under the new refugee policy, they can now open insufficiently monitored. Such views align with the general a bank account and access mobile money transfer services. trend in the development and humanitarian industry toward Digitalization can also play a vital role in information more sustainable interventions and community ownership. dissemination, online market linkages, and marketing. “The communities should develop methods of supporting one Currently, market information is mostly exchanged infor- another within their surrounding communities rather than mally between enterprises and suppliers, and improved expecting support from external bodies or from far because access to technology has the potential to improve access this will build a sense of ownership and also an indication to market information and linkages. Technologies like for change, while others should also think beyond the financial WhatsApp is already being used for market information support because if once we supported with the skills and exchanges and cross-border trade. techniques how to run business we will bring the required finance within a short period of time, and the reason behind THE NEW REFUGEE POLICY the failures of the project is due to this commitment and lack New regulations, including the Comprehensive Refugee of communities participation in risk-sharing.” (FGD1, Response Framework adopted by the government of male participant, Kebribeyah) Ethiopia, end the strict encampment policy, improve access Local actors and enterprises play central roles in the for refugees to improved socioeconomic integration and in market system and enhance community resilience. However, limited cases, given them the right to work. However, a more platforms and mechanisms to facilitate private-public dia- nuanced notion of socioeconomic integration is needed logue are limited. Key actors include the Ethiopian dias- because in many of Ethiopia’s refugee-hosting areas, the pora from Somali, who distributed free personal protective concepts of host and refugee communities are somewhat blurred equipment to help people protect themselves from COVID- by the fact that members of both communities might share 19, and the salt association in Berhale, Afar, which creates ethnic and sociocultural traits and have been living with one employment and uses its resources for philanthropic causes another in symbiosis for centuries. 13 during crises like the pandemic. Successful local entrepre- how to collectively act to alleviate the impacts of joblessness. neurs could contribute to LED more systemically and could Some investors do some limited philanthropy—usually out help strengthen market linkages to CIGs. of religious dedication. However, what we need is coming together to change our society for the better” (RC11, NGO, “The public-private sector dialogue is not developed. Even Semera) the awareness is limited only to a handful of individuals. They need to establish a platform where they can confer 14 Assessment of the Nontraditional 4  Livelihood Subcomponent Implemented Activities under the program have been focused on vegetable The Development Response to Displacement Impacts sales, milk processing, cattle sales, petty trade, restau- Project (DRDIP) third component focuses on livelihoods rants and cafes, hotels, and clothing shops, among under its three subcomponents: (1) traditional livelihoods; other activities. (2) nontraditional livelihoods; and (3) capacity building. l RuSACCO. Member-owned financial cooperative Subcomponent 2, which targets nontraditional livelihoods, that provides financial services in rural areas. is the focus of this assessment. l Cooperative. Association with a minimum of The objective of the nontraditional livelihood sub- 50 members that facilitates access to inputs (e.g., component is to support the creation and strengthening equipment, technologies, and improved seeds for of local organizations to create business and employment farmers).5 opportunities and to increase income and savings among community members. Such goals are achieved through SUPPORT the establishment of community institutions, which are CIG members received training on financial literacy, busi- then given skills training, capacity-building equipment, ness plan preparation, entrepreneurial skills, and other and/or financial support. Three types of community- topics, in addition to seed money. Kebele and woreda offices based organizations are targeted by the subcomponent’s organized the trainings, most of which were held at the activities: common interest groups (CIGs), rural savings beginning of the project. Beneficiary CIGs, selected based and credit cooperatives (RuSACCOs) and cooperatives, on the quality of their submitted business plans, received described below (see also figure 4.1): start-up grants of ETB 150,000, distributed in two equal l CIG. A group of 10–15 economically active poor tranches. CIG members had to demonstrate their ability to individuals, with the common purpose of achieving save by contributing 7.5 percent of the capital before receiv- sustainable livelihoods by pooling their resources in ing seed money. savings and credit to accumulate capital. CIGs receive a booster DRDIP grant to support investments in 5. Cooperatives are governed by the Cooperative Societies Proclamation 985 select market-oriented enterprises. CIGs established (2016). 15 Figure 4.1. Community-Based Organizations Supported by DRDIP’s Nontraditional Livelihoods Subcomponent, 2016–20 CIG Cooperatives RuSACCOs 553 CIGs established 74 new cooperatives 66 new RuSACCOS established established 78 11,725 bene ciaries 133 RuSACCOs (64% women) cooperatives strengthened strengthened 74,250,000 ETB 20,000 bene ciaries seed money distributed 6,905 training bene ciaries 4,500,000 loans distributed for members 6,768,994 birr of pro t generated 5,538 training bene ciaries Cooperative managers and RuSACCO members ben- GOVERNANCE efited from the training and capacity-building activities. The Ministry of Agriculture is responsible for the coordina- Selected RuSACCOs also received seed money based on tion and overall management of DRDIP program activities. their business plans. Cooperatives did not receive financial Steering committees are in place at the federal, regional, support but were provided with office equipment. and woredas levels comprising relevant line ministries and Beneficiaries were selected at the local level among the agencies, as well as the Refugees and Returnees Services economically active poor—i.e., vulnerable community and the United Nations High Commissioner for Refugees members willing to work—with a focus on women and (UNHCR). At the regional and woreda levels, livelihood youth. Interviews conducted for this assessment confirmed implementation teams support the implementation of that a key aspect of the nonfarm livelihood support interven- nontraditional livelihood activities. These teams comprise tions is that they provide support to individuals who would DRDIP staff and experts from the Rural Job Creation otherwise not be able to start a business. Bureau, Cooperative Promotion Unit Agency, Bureau of Micro and Small Enterprise Development, Women and Children Affairs, Women, Children and Youth Affairs and the Bureau of Youth and Sports Affairs. 16 Strengths and Successes the subcomponent is also related to irregular migration: some youths who benefited from the interventions had SOCIAL INCLUSION AND SUPPORT TO THE MOST either planned to or had in the past traveled to the Middle VULNERABLE East in search of economic opportunities. While their past The subcomponent provides livelihood opportunities and experiences with migration may have helped them acquire jobs to vulnerable individuals who are excluded from the some of the skills needed to benefit from the program, in formal labor market and who have a limited ability to start some instances, the interventions appear to have dissuaded their own businesses. The support provided by the proj- further irregular migration. ect is therefore extremely significant to the intervention’s “I went to Saudi Arabia illegally to seek a job there and beneficiaries. change my life and support my family but, unfortunately, I “I was unemployed, and my friends and I formed this failed, and I returned two years ago. After that I could not association. Here in Asayita, most of the educated people are get a job in Berhale since I have no formal education and employed in government offices. But for us, who are illiterate there are no large companies hiring unskilled workers in the and have lower education levels, there is less job opportunities. town. There are a few businesses with capital in Berhale, The main constraint we faced to start our business or to get a but they are mostly operated by association members or family job was the problem of finding interested individuals to work members. So, I spent the last two years sitting at home and with [as they often] lack experience, lack business skills and waiting for aid, it has become my fate.” (CS24, male financial capacity. Micro and small-scale enterprise offices of youth participant, Berhale) Asayita woreda gave us training, and DRDIP provided us some financial support, which helped us to start our business CHANGING ATTITUDES TOWARD WOMEN and to change our life.” (CS22, male participant, Women have been the primary group benefiting from the Asayita) activities implemented under the nonfarm livelihood sub- component. Because of the challenges they face when trying IMPACTFUL TARGETING: CHANGING THE LIVES OF YOUTH to start businesses, especially in terms of accessing capital, Refugee-hosting areas are characterized by high levels of women beneficiaries stressed that they could not have cre- youth unemployment and underemployment, especially ated a business without the support of the subcomponent, among those lacking the higher education sought by which transformed their lives by making them self-reliant. employers and those lacking the necessary skills or capital The provided support has more than an economic to run their own businesses. In fact, beneficiaries identified impact: it also changes attitudes toward women because the lack of skills and lack of finance as the two most significant beneficiaries of the interventions no longer remain at home challenges that youths face. The subcomponent successfully to attend to domestic chores and care for children. Through addressed these barriers and gave vulnerable youths the their participation in economic activity through DRDIP’s chance to provide for themselves and their families. Some nonfarm livelihood component, beneficiaries could attend noted that the program benefits helped them in overcoming meetings, meet people, take on responsibilities, and gain feelings of social isolation and disengaging from harmful skills and recognition. Women felt pride in doing something practices like khat and alcohol consumption. Interestingly, that benefited their communities, and some explained that 17 Box 4.1. Business Creation and Women’s Economic Empowerment Case Study: Oduni (Gambella)—“Let Us Make a Difference in Life” Oduni, which means “let us make a difference in life” in the rather than looking for someone to give me some money, local language, is the name of a common interest group this gives me satisfaction. And I also support my family.” (CIG) formed with the support of the project in Ilay kebele Ojulu’s colleagues affirmed her observations, adding (Abol woreda, Gambella). The group has 15 members: that their earned income lets them provide for them- seven women and eight men. Members have together selves and for their children, without needing to depend saved 10,000 birr and attended training offered under the on their husbands, family members, or neighbors. They nontraditional livelihoods’ subcomponent. One woman also gained confidence in their ability to run a business member explains: “The training opened our eyes on how just like men can: to save money and run a business.” The first lesson the group learned was to adapt to “It made me think independently, for myself as a demand. When they began their activity, CIG members person and for my kids. It showed me that a woman has sold tea and coffee, but they did not have enough cus- the capacity to do something and is even doing better tomers to make money. The partners realized that there than a man.” were too many coffee shops in the area and that the Earning an income allows a woman to make decisions COVID-19 pandemic would limit the number of people about the allocation of money and improve the lives of traveling through the area. They decided to switch their their children: activity to selling cooking oil, sugar, soft drinks, biscuits, “My husband has very little money left at the end of the and other basic food items. Ojulu, the oldest woman in month, [he spends the money] in town before he comes the group, highlighted that their business contributed to home. My children and I used to suffer a lot. But now a change of attitudes in the community: after I started this business, my life and that of my kids “It changes the wrong mindset of communities that a have changed. I do not ask him any more for money to woman cannot make a living or ensuring her livelihood by support me and my children.” doing business herself. As I am earning my own income their communities are grateful for the services provided by I am very happy to participate in this project …. I do not their businesses and see them as “good examples.” have the words to express what I feel about this organization [DRDIP]. In some areas there were women who didn’t leave “Except for the DRDIP project, I don’t have any financial their houses. However, nowadays, women are able to organize resources. The DRDIP program takes us to different in different associations like participating in cotton, agri- meetings, and we share experience. They treat us well, they culture, animal fattening. In addition, this project organized help us. They give us either support or aid. In the long past, people in different works; it gave credits and improved we were subjected to do only housework and to care for our livelihood activities and thereby improved people’s lives.” children. But currently, we are able to do different works, and (CS20, female participant, Asayita) 18 Box 4.2. Business Creation and Women’s Economic Empowerment Case Study: Lucy Goat Association— A Women-Only Common Interest Group in Afar Tigist, 20 years old, remembers how the common inter- Initially, the CIG was established to open a restaurant est group (CIG) started. It was thanks to the support called Lucy Restaurant, but the newly established busi- of the kebele chairman, who convened 15 previously ness was heavily affected by the COVID-19 pandemic: unacquainted women and explained the project to them. “The COVID-19 time was very hard for such a The kebele administration had identified women who business and people were not interested or afraid to go were facing economic hardships and encouraged them and eat in restaurants. So, we could not continue doing to apply for the initative. After selecting beneficiaries, the it. Then, out of desperation, we decided to switch to the administration formed the groups: goat fattening business.” “It is the kebele that arranged everything and created our Members of the all-female Lucy Goat Association are also group. Now, we understand each other very well because young, most between the ages of 20 and 30. In a region we all are like a family. When the kebele was forming affected by conflict, the beneficiaries proudly stressed that the groups, we were not informed about who is who and their CIG comprises both Afar and Habesha members: doing what, but now, we know the behavior and weak and strong sides of each other very well and we work “The team members are mixed (half Afar and half hand in hand to achieve the objectives of our CIG.” Habesha), and we managed to develop good communication and mutual understanding. We are very thankful to our kebele for giving us this chance and making us engage in such productive activity that significantly changes our life.” Female beneficiaries believe that the nontraditional liveli- Some beneficiaries became the breadwinners of their hoods subcomponent contributed to changes in perceptions households after getting support from DRDIP. Women of a woman’s role in society and the family by contributing stressed that attitudes toward women are changing in the to their financial independence and increasing their social community, which is reflected in the type of occupation they status and decision-making power. Female CIG members can have: women are now free to become businesswomen, are now able to support their families, be financially inde- even in sectors that used to be for men only, such as con- pendent, and support other women who need help. tracting. As a result, the private sphere is also changing as women with income-earning jobs gaining more power in “Generally, us women are no longer dependent on men or on household decision-making processes. our husbands because we have money, so we can go and help elders, victims, and women with disabilities. Because of the “Yes, having a job or income helps women to be self-suffi- training, we are free from male domination and at the same cient, and they are independent, moreover, economically active time we show that women can be equal to men.” (CS20, women are somewhat superior, and they are the decision female participant, Asayita) makers of their family, therefore the community gives respect, 19 and their voice is louder than the others. They have great stressed that the livelihood support teams do not receive dignity. Myself and other women like me, who take the sufficient capacity-building training and lack the resources responsibility of their family, have gained some respect in this needed to effectively implement the nonfarm livelihood community, and we are partially or fully the decision makers activities. of our families. And our decision is not a destructive one, rather it is a constructive one.” (CS5, female participant, INSUFFICIENT TRAINING AND FOLLOW UP Aw Barre) The training provided by DRDIP was not sufficient for the beneficiaries to become successful entrepreneurs. Most INCREASING AND DIVERSIFYING THE SUPPLY OF GOODS training sessions took place at the beginning of the project, AND SERVICES IN LOCAL COMMUNITIES but capacity building was very limited throughout imple- Women respondents stressed that the interventions had an mentation. Respondents claimed that skill-gap assessments impact both directly on beneficiaries through income gener- would have allowed for training tailored based on the needs ation and savings as well as indirectly on the entire commu- of beneficiaries and that coaching mechanisms were missing. nity by sponsoring businesses that now provide goods and services not previously available at the local level, such as LACK OF MARKET LINKAGES, AND INVOLVEMENT OF particular foods, clothing, and shoes among others. In that THE PRIVATE SECTOR sense, the CIGs were able to address a market failure that The absence of the private sector and the lack of a market- was affecting the community’s well-being. based approach represent major gaps, a point raised by “To be honest, we benefited more [from the project] as we DRDIP stakeholders. In some areas, market assessments get income from it for our household, we saved money and were conducted prior to implementation to develop a we provide access to fresh and healthy vegetable for our menu of market-oriented nonfarm livelihood activities on communities, which means save time and no longer have to which CIG members should focus, but such efforts were not travel long distance to buy them, so I can confirm that both systematic, resulting in many cases with activities planned ourselves, as individuals, and the community, benefited from without the benefit of an assessment of existing business the project.” (FGD2, female participant, Kebribeyah) opportunities, without the involvement of private-sector actors, and without building on the local ecosystem. In Challenges and Gaps Gambella, regional actors deplored the intervention’s lack of attention to local value chains, especially in agro-process- LIMITED TECHNICAL CAPACITY OF GOVERNMENT ing and agro-packaging. OFFICES IN CHARGE OF THE IMPLEMENTATION AT THE LOCAL LEVEL INSUFFICIENT AMOUNT OF SEED FINANCE FOR CIGs While DRDIP implementation relies on the government, Beneficiaries explained that the grant of ETB 150,000 dis- especially regional livelihood specialists and woreda- and tributed in two equal tranches of ETB 75,000 was insuffi- kebele-level government employees, the lack of regional- cient to cover the investments required for some businesses. and local-level capacity represents a major problem. Local Because of high inflation in recent years, the provided actors assessed the situation similarly: woreda officials amount is sometimes inadequate to cover equipment and 20 inputs. For example, one respondent noted that flour mill- LIMITED SUPPORT FOR COOPERATIVES AND RUSACCOs ing is a profitable business but the price of a grain mill is Although the nontraditional livelihood subcomponent is ETB 200,000, which exceeds the amount of the grant. The meant to support CIGs, cooperatives, and RuSACCOs, issue of CIG member accountability was also raised. The local-level interviews indicate that most activities focused on allocated money is in the form of a grant rather than a loan, CIGs. Little information is available about the local support which means beneficiaries are not expected to pay back the provided to RuSACCOs, and most respondents stressed that funds. Some DRDIP staff reported problems with benefi- they still face major capacity gaps that the delivered training ciaries using grant money for personal expenses and believe did not fully address. Similarly, respondents were less enthusi- that the allocation of money through revolving funds would astic about the support provided to cooperatives and stressed improve accountability. that most of them were not interested in office equipment but instead wanted and expected financial support. Box 4.3. COVID-19 Impacts on Common Interest Groups Like most countries across the globe, Ethiopia was hit found it difficult to access supplies and bring goods by the COVID-19 pandemic in March 2020, leading to market. An increase in transportation costs—they the federal government to declare a state of emergency doubled since the pandemic and have not yet returned and to put restrictions in place from April to September to previous levels—hindered profits. Supply disrup- 2020. The pandemic affected the implementation of the tions caused the price of all commodities to skyrocket, nontraditional livelihood component in multiple ways. impacting CIGs by increasing supply costs and affecting First, to mitigate the spread of the virus, gatherings product demand. To cope with the pandemic and asso- of people were forbidden, resulting in the cancellation ciated inflation, most households had to reduce their of trainings and meetings of members of common inter- expenses and used their income for basics like food. In est groups (CIGs), rural savings and credit cooperatives response, some CIGs implemented adaptation strate- (RuSACCOs), and cooperatives, significantly limiting the gies, gravitating toward business activities in higher support received by beneficiaries. Even when gatherings demand. Examples include a CIG specializing in retail resumed, weekly meetings were replaced by monthly children’s clothing switching to selling vegetables and a ones, which, according to respondents, led to informa- restaurant turning into a fattening business. However, tion gaps. not all CIGs were able to adapt, and respondents noted In addition, the restrictions on movement put in that some businesses had to shut down completely place during the state of emergency had a tremendous during the pandemic, particularly restaurants, pool impact on individuals and businesses alike. Businesses houses, and hair salons. 21 LACK OF COORDINATION AMONG IMPLEMENTING ACTORS LACK OF REGULAR MONITORING AND ADAPTIVENESS Although livelihood support teams convened representa- OVER TIME tives of various government offices, activities were mostly In all regions, respondents raised concerns over the absence conducted in silos according to regional implementation of monitoring, which led to information gaps about the plans focused on quantitative targets. DRDIP project coor- performance of the CIGs, RuSACCOs and cooperatives. dinators complain about the lack of support from woreda Kebele-level officers lack the time, expertise, and incentives offices, which might suggest misalignment between the proj- to monitor and accordingly report on CIGs, RuSACCOs, ect and local government plans, although, in some cases, and cooperatives, and no formal system exists to collect woreda offices have been strongly involved in the project project-level information. Respondents noted that they did and supported activities. In addition, coordination between not have the opportunity to provide feedback on the selec- government actors and nongovernmental organizations tion of activities proposed by the project team or on the (NGOs) implementing various local projects was lacking at implementation quality. Respondents believe the activities all locations. might have been adapted to a greater degree had they been given the chance to provide feedback. 22 Recommendations for Phase II 5  This section summarizes recommendations that emerged for Refugees (UNHCR) and the International Finance from the assessment of the Development Response to Corporation. Displacement Impacts Project (DRDIP) nontraditional live- lihood subcomponent. COLLABORATE WITH THE PRIVATE SECTOR TO SUPPORT MARKET-DRIVEN ACTIVITIES Access to Markets The assessment revealed that market-based approaches DRDIP has not been able to adequately engage the private were not systematically adopted or used. In Benishangul- sector, and its approach may not be sufficiently market-based. Gumuz, market assessments were conducted prior to imple- The extremely heterogeneous state of private sector devel- mentation and influenced program activities; in other areas, opment in many of the refugee-hosting regions, as well as in this was not the case. Activities were therefore inconsistently the contexts in which the program operates, makes tackling informed by a thorough assessment of existing business these concerns quite difficult, but the following potentially opportunities, did not involve private sector actors, and did helpful approaches could be built into Phase II. not build on the local ecosystem. Engaging with groups like the Amaharo Coalition—a network of private sector actors FOSTER PUBLIC-PRIVATE DIALOGUE operating in refugee-hosting areas—could foster DRDIP Inadequate public-private dialogue was flagged as one of engagement with the private sector without the need to the program’s major constraints. Under PHASE II, DRDIP reach out to individual actors. should work to create synergies and linkages through effective public-private exchanges involving a range of FOCUS ON VALUE CHAIN DEVELOPMENT stakeholders, including government and nongovernmental In numerous assessed regions, respondents pointed to the actors, community representatives, enterprises, and sectoral need for more focus on regionally relevant value chains, associations, to address market challenges more systemat- such as agro-processing and agro-packaging in Gambella ically and to improve coordination. The program could and the leather and livestock industries in Somali and collaborate with development partners who are active in Afar. Phase II could emphasize the development of value the space, such as the United Nations High Commissioner chains and identify priority sectors. To ensure that program strategies are appropriately context-specific, a sectoral focus 23 Figure 5.1. Priority Sectors/Economic Activities by Region Afar Benishangul-Gumuz Gambella Somali • Milk processing • Apiculture • Fish processing • Milk processing RURAL • Salt production and • Soybean production • Milk processing • Apiculture processing • Milling and grinding • Briquette production • Apiculture • Waste management • Agro-processing of fruits • Leather processing • Manufacturing parts for URBAN and recycling • Bamboo processing • Grocery retail water irrigation • Cheap material production • ICT centers • ICT centers • Glass production for construction • Leather processing • Tourism will require the development of different strategies for rural PILOT REVOLVING FUNDS FOR SUSTAINABLE FINANCING and urban areas, for each region, and even for the relevant To address stakeholder concerns about the lack of account- woredas within a region. ability among CIG members in terms of their use of Figure 5.1 illustrates the prioritized sectors or economic DRDIP funds, revolving credit funds could be piloted in activities emerging from inputs from local government select regions, particularly Tigray and Benishangul-Gumuz, stakeholder and community-level discussions, which could as the security situation permits. The regional livelihood be explored under Phase II. specialists in these two regions have had several interactions with the Uganda DRDIP livelihoods team learn about the Access to Finance Uganda’s community revolving fund approach and experi- Financial access is a serious challenge to all businesses and ence. Based on this, these two regions have already prepared private enterprises in Ethiopia, and is particularly critical to a proposal for piloting the community-level revolving fund micro, small, and medium enterprises headed by women, approach, which can be implemented in Phase II. young adults, or others who struggle to provide needed collateral. PARTNER WITH MAJOR BANKS TO IMPROVE FINANCIAL ACCESS FOR SUCCESSFUL CIGs INCREASE SEED MONEY FOR COMMON INTEREST GROUPS Partnerships with major banks could facilitate access to Several respondents noted that CIG seed finance amount credit and digital financial services to successful businesses was insufficient for some of the more market-linked and started by CIGs. DRDIP could build on broader efforts profit-oriented businesses that members were intending being undertaken by the Ministry of Finance and the Job to start. Given this, DRDIP should explore the possibility Creation Commission in Ethiopia to encourage additional of increasing the amount of seed finance for CIGs from private financing for micro, small, and medium enterprises. ETB 150,000 to ETB 250,000. 24 USE COMMUNITY BUSINESS AGENTS TRAINED BY Integration with Other DRDIP TECHNICAL ASSISTANCE PARTNERS FOR LAST-MILE Components SUPPORT LEVERAGE DRDIP-SUPPORTED ECONOMIC A major gap in DRDIP is the provision of business devel- INFRASTRUCTURE opment and advisory services at the local/community level. Lack of supporting productive infrastructure is a main bar- During Phase II, community business agents with prior rier to the development of nontraditional livelihoods. The entrepreneurial experience could be recruited to support poor conditions of the roads that connect refugee-hosting community groups and entrepreneurs with the provision of areas to regional and national markets profoundly hinder a range of services, including identifying business oppor- the ability of enterprises to access supplies and sell their tunities, preparing business plans, delivering basic business products; the lack of electricity and water makes it extremely management training to entrepreneurs and CIGs, liaising challenging for many business activities to be fully oper- with financial institutions for enterprise loans, and facilitat- ational and/or remain profitable; and a deficient Internet ing backward and forward market linkages between entre- connection limits the introduction of technology and ham- preneurs/group enterprises and local government. pers the development of digital businesses. While such struc- tural challenges cannot be addressed by the nontraditional Women’s Economic Empowerment livelihood subcomponent, DRDIP’s first component could improve the most-needed local infrastructure, and linkages COLLABORATE WITH DEVELOPMENT PARTNERS TO among DRDIP’s components could be fostered. A coor- LEVERAGE WOMEN-LED CIGs IN THE PROMOTION OF dination mechanism could help create potential synergies WOMEN’S ECONOMIC EMPOWERMENT (WEE) between subcomponents. Based on the assessment, an early notable success of DRDIP’s nonfarm livelihoods subcomponent is its support Technical Assistance for the inclusion and empowerment of women in economic ENGAGE TECHNICAL ASSISTANCE PARTNERS TO activities. Phase II could build on this success by specifically SUPPORT BUSINESS ADVISORY SERVICES AND VALUE focusing on women-led CIGs and improving WEE-related CHAIN DEVELOPMENT, STRENGTHEN MARKET AND outcomes. Such an effort could be undertaken in conjunc- FINANCIAL ACCESS, SUPPORT AGGREGATION OF CIGs, tion with partners already active in the country, such as the AND STRENGTHEN LIVELIHOOD IMPLEMENTATION Gates Foundation. SUPPORT TEAMS Many stakeholders complain of their consistent struggle Refugee Inclusion to access a variety of business support services. Improving Several research pieces on Ethiopia’s refugee-hosting areas access to such services, providing technical support around show that, in some regions, refugees are already contribut- access to markets and finance, and strengthening livelihood ing to local economic development by introducing new skills implementation support teams could bolster the overall and innovation in some sectors. Phase II of DRDIP could implementation process. The project could engage relevant therefore consider both populations and include a percent- technical assistant partners to support this. age of refugee beneficiaries in the nontraditional livelihood 25 subcomponent. Further, and more specifically, DRDIP potential areas of focus, which could serve as a starting could support refugee CIGs based in camps as well as mixed point for further refinement. CIGs, in collaboration with UNHCR and the Refugees and Returnees Services, who could help identify appropriate Regular Monitoring and Measuring economic activities. Impact Another gap in DRDIP is the lack of consistent monitoring Support to Urban and Rural and the failure to use insights generated during monitor- Beneficiaries ing to inform and adapt program design. Introducing a Ethiopia’s urban and rural areas have developed very dis- streamlined management information system and regular tinct nonfarm economies. Phase II could develop differenti- and rapid assessments to measure the outcomes and impact ated strategies for the two areas, keeping in mind the specific of the nonfarm livelihood interventions could help address challenges and opportunities of both. Figure 5.1 identifies these concerns during Phase II. 26 References Adjognon, Guigonan Serge, Lenis Saweda O. Liverpool-Tasie, Rui market-assessment-in-jigjiga-and-kebribeyah-a-marketplace-in-be- Benfica, and Alejandro de la Fuente. 2017. “Rural Non-farm tween-resilience-and-integration. Employment and Household Welfare: Evidence from Malawi.” ———. 2020b. “Rapid Assessment of the Impact of COVID-19 on Policy Research Working Paper 8096. World Bank, Washington, DC. Labour Markets in Ethiopia: A Case Study of the Somali and Tigray Betts, Alexander, Raphael Bradenbrink, Jonathan Greenland, Naohiko Regions.” https://www.ilo.org/global/programmes-and-projects/ Omata, and Olivier Sterck. 2019. 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Ethiopia Gender Diagnostic Report, Gender Innovation Policy de recherches pour le développement international). 2020. Policy Initiative for Ethiopia. Washington, DC: World Bank. https://openknowl- Mapping: Women’s Economic Empowerment in Ethiopia. Ottawa: IDRC. edge.worldbank.org/bitstream/handle/10986/31420/135344. https://idl-bnc-idrc.dspacedirect.org/bitstream/handle/10625/ pdf ?sequence=5&isAllowed=y. 59668/IDL-59668.pdf ?sequence=2&isAllowed=y. ———. 2020. Ethiopia Poverty Assessment—Harnessing Continued Growth for ILO (International Labour Organization)/Samuel Hall. 2020a. Accelerated Poverty Reduction. Washington, DC: World Bank. https:// “Integrated Labour Market Assessment in Jigjiga and Kebribeyah: documents.worldbank.org/en/publication/documents-reports/ A Marketplace in between Resilience and Integration.” https:// documentdetail/992661585805283077/ethiopia-poverty-assess - www.samuelhall.org/publications/ilo-nbspintegrated-labour- ment-harnessing-continued-growth-for-accelerated-poverty-reduction. 27 Appendixes 28 Lessons from Recent Studies Pertaining A  to Nonfarm Livelihoods This literature review6 assesses findings from recent stud- Gender and Participation in Rural ies around the world pertaining to nonfarm livelihoods. Nonfarm Enterprises Specifically, this review was conducted with the Ethiopian l Women appear to be limited to low return wage and nonfarm economy in mind as an effort to support and self-employment activities in the nonfarm sector, inform the next phase of DRDIP’s nonfarm livelihoods resulting in lower impacts in terms of improving food interventions for women and youth in refugee-hosting areas. security. Principal findings relevant to DRDIP’s next phase are out- l Women’s nonfarm entrepreneurship is not strongly lined below. correlated with household composition or with edu- cational attainment. Gender and Productivity l Inequalities among men can be explained by unequal l Female-owned enterprises are less productive, assets, while inequalities among women depend on although their productivity may be underestimated the interplay of asset ownership and the degree to because of constraints on women’s time and impre- which women are able to negotiate norms govern- cise productivity measures. ing household production. A shift of responsibilities l Differences in output per worker between men and in household production to other family members, women are overwhelmingly accounted for by sorting including men, could improve women’s well-being according to sector and size. The discrepancies are and overall household incomes. not due to differences in capital intensity, increasing l In Ethiopia, Sri Lanka, Indonesia, and Bangladesh, returns to scale, human capital, or local investment age-participation profiles in nonfarm enterprise climate characteristics. activity are concave (lower participation rates among l The unequal degree of responsibilities in the house- the youngest and oldest groups) among women and hold and the consequent different time constraints insignificant among men. between genders drive differential business outcomes. 6. Literature review by Ashutosh Raina and Ronald Leo Sullivan Jr., 2021. 29 Age and E-commerce l For increased sustainability, connect new businesses l Household age composition matters for e-commerce with local mentors, professional support providers, participation. The larger the share of members ages and extension workers. 15 to 35, the more likely the participation. This indi- l Invest in microenterprise clusters through incubation cates that it is easier for younger people to participate and connection between rural and urban areas to scale in e-commerce. up to small and medium-sized enterprise (SMEs). l E-commerce is more likely to generate higher abso- l Investment in local infrastructure and business envi- lute income gains for individuals who are younger, ronments in rural areas will support the performance have technical training, knowledge of e-commerce of nonfarm enterprises. and migrant experience. However, in relative terms, l Asset and knowledge accumulation of existing firms income can increase more among individuals who are should be encouraged to the extent that existing firms older, less educated, have less knowledge of e-com- appear to confer positive externalities on other firms merce or less migrant experience. in their neighborhoods or clusters – increasing prox- imity is important in this regard. Policy Recommendations l Policies should support enterprise owners through l Focus should be on lowering barriers to entry for education and training, access to credit for business Women. These may include household time con- expansion, or possibly development of clusters. straints and access to finance, education, land, and l Developing e-commerce requires infrastructure, logis- inputs. tics, skills, entrepreneurship, and a conducive business l Food safety net policies should pay more attention to environment. In Taobao Villages, investments in the factors that allow increased participation in high- technical and vocational training, as well as tailored er-earning activities by women, since they could then technical training on e-commerce seem to help build on existing patterns of addressing food security. improve e-commerce participation and realize gains. l Microinsurance schemes and social protection poli- l The poor need instruments to gradually accumulate cies are needed to protect households from negative assets and access high-return activities. Local saving external events—especially those enterprises with and credit associations in rural Ethiopia seem to play high growth potential who are capable of taking on an important positive role. more risky and productive types of business (often l Farmers should be provided with low-interest credit headed by younger owners). and entrepreneurship skills training to facilitate engagement in nonfarm activities. 30 Literature Review Performance and Survival of Non-Farm Entrepreneurship experience of violence or theft. Geographic shocks such in Rural Africa: Evidence from the LSMS-ISA Surveys— as floods, droughts, pest attacks, and livestock epidemics Ethiopia, Malawi, Nigeria, and Uganda can impact agriculture. l In Ethiopia, shocks are not significantly correlated with Description/objective enterprise productivity or operation. This paper was prepared for the Annual Bank Conference l Few households enter riskier but more lucrative sectors. on Africa, “Harnessing Africa’s Growth for Faster Poverty l Rural nonfarm enterprises are more likely than urban Reduction” in 2014. Authors estimate productivity disper- enterprises to exit the market due to idiosyncratic shocks. sals and multinomial logit models. l The performance and survival patterns of rural nonfarm Type enterprises reflect a difficult business environment, lack of External scholarly paper adequate financing and social protection, and continuing regional and gender disparities. Authors/Global Practice P. Nagler and W. Naude Transforming Rural Non-Farm Livelihoods: Year The NRLM Journey 2014 Description/objective Country/region This note is part of the South Asia Agriculture and Rural Ethiopia, Malawi, Nigeria, Uganda Growth Discussion Note Series. It seeks to disseminate operational learnings and implementation experiences from Key findings World Bank-financed rural, agriculture, and food systems l Most rural nonfarm enterprises operate in low-risk, low- programs in South Asia. productivity sectors such as trade, sales, and services. l On average, nonfarm enterprises in rural areas are less Type productive than those in urban areas. World Bank discussion note l Female-owned enterprises are less productive than male- Authors/Global Practice owned enterprises. A. Gupta and V. Nair l Enterprises operating continuously over the year are more productive than enterprises operating intermittently. Year l In Malawi, idiosyncratic and geographic shocks nega- 2020 tively affect enterprise productivity; however, idiosyn- Country/region cratic shocks can push individuals to begin operating India a nonfarm enterprise. (Idiosyncratic shocks are those connected to the individual household, such as death or illness of a household member, loss of employment, or 31 Key findings – Develop a spatial approach which connects rural, l Local mentors, professional support providers, and small towns and large cities extension workers contributed to the sustainability of – Support existing micro enterprises (formal and infor- new businesses. mal) to graduate to SMEs. Support incubators which l Convergence with local governance structures plays a enable this. key role in providing regular market access to enterprises – Introduce incubation in technical schools and busi- in remote areas. ness institutions. Develop skills for business and entre- l Access to timely and affordable finance is critical. preneurship at all levels. – Support Ag Tech incubation Creating Jobs in the Non-Farm Economy— – Build on existing clusters and help them in spatial Lessons from Global Experience in Ethiopia scaling up – Build new enterprises and clusters around services Description/objective – Invest in an enterprise support ecosystem for nonfarm This presentation was created by Parmesh Shah, Global economy Lead, Rural Livelihoods and Agriculture Employment, Agriculture Global Practice of the World Bank. Growing the Rural Nonfarm Economy to Alleviate Poverty: Type An Evaluation of the Contribution of the World Bank Group World Bank presentation Description/objective Authors/Global Practice This independent evaluation assesses the contribution of Parmesh Shah the World Bank to growing the rural nonfarm economy to alleviate poverty. It assesses the Bank’s projects and strate- Year gies from 2004 to 2014 and provides recommendations. 2018 Type Country/region World Bank independent evaluation World Authors/Global Practice Key findings Independent Evaluation Group (IEG) l Opportunities for the rural nonfarm sector in Ethiopia include tourism, food and beverages, handcrafting and Year cultural industry, textile and garment, leather and foot- 2017 wear, and repair and manufacturing. Country/region l Potential strategies to bolster rural nonfarm enterprises World include: – Develop a continuum of on-farm, off-farm, and non- Key findings farm growth opportunities, enterprises and services; l Value-chain activities require better upfront diagnostics an integrated growth strategy of women’s roles, including their relative access to assets, 32 services, and markets, as well as bargaining power with Authors/Global Practice actors across the value chains. N. Owoo and W. Naudey l The rural nonfarm sector can contribute to economic Year growth, household income diversification, rural employ- 2014 ment, poverty reduction, and a more spatially balanced population distribution. Country/region l World Bank projects that have focused on reaching the Ethiopia, Nigeria rural poor, including rural livelihoods, community-based Key findings approaches with a productive aim, and social safety nets l Education, age, household size, religious affiliation ,and with a productive inclusion theme, have been effective in community infrastructure are the most significant deter- reducing vulnerability and increasing access to services minants of nonfarm enterprise productivity in Ethiopia but not in supporting the sustained income or employ- and Nigeria. ment that can lift people out of poverty. l In Ethiopia, Muslim-owned rural nonfarm enterprises l World Bank projects with a growth aim, including agri- appear to perform significantly better than those owned cultural value chain projects and productive partner- by non-Muslims. This may be evidence of the impor- ships, have frequently achieved increased sales, revenues, tance of religious social capital in rural nonfarm enter- and incomes; however, reach to the rural poor is often prise performance as well as a specialization in trade not evident (poverty is not targeted or tracked). among the Muslim population. However, the magnitude l In rural areas, agricultural workers are more than four of these religious effects are less—but still significant— times more likely than with people employed in other when controlling for spatial effects, suggesting that the sectors to be poor. spatial distribution of Muslim households play a major l Eighty percent of the world’s poor live in rural areas. role in explaining rural nonfarm enterprise performance in Ethiopia. (Models that do not explicitly correct for Non-Farm Enterprise Performance and Spatial spatial dependence overestimate the importance of reli- Autocorrelation in Rural Africa: Evidence from Ethiopia gious affiliation in explaining rural nonfarm enterprise and Nigeria performance in Ethiopia.) Description/objective l In Nigeria, nonfarm entrepreneurs who have access to a This paper tests for the presence and significance of spa- microfinance institution perform about one third better tial autocorrelation on rural entrepreneurship in Africa than entrepreneurs who do not have access to such an using data from the georeferenced 2011 Ethiopian Rural institution. Socioeconomic Survey (ERSS) and the 2010/2011 Nigeria l In Ethiopia, rural nonfarm enterprises owned by male General Household Survey (NGHS). heads of household perform better than female heads across all of the model specifications. Type External scholarly paper 33 l Rural nonfarm enterprise performance declines with survival, and exit using the World Bank’s Living Standards distance from tarred and asphalt roads, meaning that Measurement Study—Integrated Surveys on Agriculture physical infrastructure is an important determinant of (LSMS-ISA). rural nonfarm enterprise performance. Type l In Nigeria, additional community infrastructure variables, External scholarly paper such as access to telephones and distance to market, become important in determining nonfarm enterprise perfor- Authors/Global Practice mance. Paula Nagler and Wim Naude l In some regions, there is a negative relationship between Year rural nonfarm enterprise performance and agricultural 2016 participation, implying that enterprises in these areas are not clustered to take advantage of active farming Country/region activities, as is often assumed in other studies. (Further Ethiopia, Niger, Nigeria, Malawi, Tanzania, Uganda research is needed to establish if this is due to the type of Key findings rural nonfarm enterprise or to some other unexplained l Rural households operate enterprises due to both characteristic of rural nonfarm enterprises in Africa.) push and pull factors and tend to do so in easy-to- l Investments in local infrastructure and business envi- enter activities (sales and trade) rather than activities with ronments in rural areas will support the performance of higher starting costs (transport services) or that require nonfarm enterprises. an educational investment (professional services). l Asset and knowledge accumulation of existing firms l Rural, female-headed enterprises, those located further should be encouraged to the extent that existing firms away from population centers, and businesses that oper- appear to confer positive externalities on other firms in ate intermittently have lower levels of labor productivity their neighborhoods or clusters—enhancing proximity is than urban and male-owned enterprises or enterprises important in this regard. that operate throughout the year. l Policies to improve the skills and technology of poten- l Forty-two percent of rural households operate a nonfarm tially leading enterprises in the community may spill over enterprise, contributing between 8 percent (Malawi) and to nearby enterprises. 36 percent (Niger) to average household income. l Entrepreneurial and management training positively l Most rural nonfarm enterprises are informal, operate influence enterprise performance. seasonally, and create few jobs. l Positive business opportunities, particularly for house- Non-Farm Entrepreneurship in Rural Sub-Saharan Africa: holds living closer to denser markets, lead rural house- New Empirical Evidence holds to operate enterprises. The better educated and Description/objective those who can obtain credit are more likely to start This paper reports on the prevalence and patterns of non- businesses, suggesting that access to human and physical farm enterprises in six sub-Saharan African countries and capital matters. studies their performance in terms of labor productivity, 34 l Wealthier households and households headed by older, Type more educated men tend to be more engaged in non- World Bank scholarly paper farm enterprises. Authors/Global Practice l Enterprises operated by necessity seem less productive Guigonan Serge Adjognon, Saweda Lenis Liverpool-Tasie, than those operated because of an opportunity arising Alejandro de la Fuente, and Rui Benfica; Poverty and from market proximity. The latter tend to attain better Equity Global Practice capacity use by operating throughout the year, seek credit more often, and have better-educated owners. Year l Nonfarm enterprises in regions with a history of violent 2017 conflict are less productive. Country/region l Female-owned enterprises are less productive, although Malawi their productivity may be underestimated because of constraints on women’s time and imprecise productivity Key findings measures. l Analyzed separately, nonfarm wage employment and l Policies should support enterprise owners through educa- nonfarm self-employment are welfare improving and tion and training, access to credit for business expansion, poverty reducing. They are each associated with higher and possibly the development of clusters. household per capita consumption expenditures. l Microinsurance schemes and social protection policies However, households at the lower end of the wealth are needed to protect households from negative exter- distribution experience significantly less benefit from nal events—especially those with enterprises headed by participating than the wealthiest households do. younger owners. l Targeted interventions that improve poor households’ access to high-return nonfarm opportunities are likely to Rural Non-Farm Employment and Household Welfare: lead to greater successes in curbing rural poverty. Evidence from Malawi l Education is an important driver of nonfarm wage employment participation, but not a significant deter- Description/objective minant of nonfarm self-employment participation. This paper uses nationally representative panel data and a One-third of all nonfarm wage employment is within combination of econometric approaches to explore linkages the service sector, followed by transport and equipment between rural nonfarm activities (wage and self-employ- operators and other laborers (25 percent). Next are pro- ment) and household welfare in rural Malawi. Participation fessional and technical workers (25 percent). Thus, about in nonfarm wage employment occurs when at least one 75 percent of wage jobs do not require highly skilled member of the household holds or held a nonagricultural labor. Higher-paid wage jobs that require skilled labor job involving a wage or salary contract in the 12-month are available only to the non-poor. period prior to the survey. For nonfarm self-employment, l Access to credit is an important determinant of house- participation implies at least one member of the household hold participation in nonfarm self-employment. More has owned a business or worked on their own account precisely, access to credit by relevant households increases during the 12-month period prior to the survey. 35 participation in nonfarm self-employment by an average l For nonfarm wage employment, the middle segments of of about 8 to10 percentage points. the population benefit the most. For nonfarm self-em- l Farm households involved in rural nonfarm enterprises ployment, the upper segments benefit the most. However, appear more likely to invest in inputs purchases. in both cases, the poorest appear to benefit the least from l Participation rates among the poor are significantly participation. lower than among the non-poor. In 2013, 20 percent l A household’s engagement in nonfarm wage employ- of the poor were engaged in self-employment activities ment reduces the likelihood of its consumption expendi- compared with 30 percent of the non-poor. For wage ture falling below the poverty line by 7 percentage points. employment, participation rates for the non-poor are Self-employment reduces poverty incidence by 8.5 per- more than double that of the poor. (Descriptive analyses centage points. This is an important margin relative to indicate the existence of high and low return sectors of the pooled sample poverty incidence of 37 percent. nonfarm activities and that the high return sectors are l Participation in nonfarm wage employment reduces the almost exclusively available to a handful of privileged likelihood that a household feels food insecure by 5 to people due to entry barriers that prevent marginalized 6 percentage points. For nonfarm self-employment, the groups—the poor and sometimes women—from access- effect is not statistically significant. ing those opportunities.) l Participation in nonfarm self-employment increases the l The characteristics of rural nonfarm enterprises in likelihood (but not the intensity) of inputs use, especially Malawi are consistent with scant potential for job cre- inorganic fertilizer purchases, among rural households ation as they are mostly informal, have low productivity, by 5 percentage points. We do not find a significant effect and short life spans. of wage employment on input purchases. l Wealth of the household (captured by a normalized asset l Rural nonfarm enterprises have positive welfare effects index) significantly increases participation in both non- on objective and subjective measures of household wel- farm wage employment and self-employment. Assets such fare. The magnitude of the welfare effects of self-em- as tables, sewing machines, televisions, and bicycles, can ployment is larger than from wage employment. This be used to operate household enterprises, or commute to is likely through the provision of funds for investment a nonfarm wage or business place, as examples, thereby in agricultural production—the mainstay of most rural increasing a the likelihood of a household participating in households. nonfarm wage employment or self-employment. l The proportion of other households owning a business Non-Farm Diversification, Poverty, Economic Mobility and in the same geographic area significantly and positively Income Inequality: A Case Study in Village India affects the likelihood that each household will partici- Description/objective pate in nonfarm self-employment and nonfarm wage This paper assembles data at the all-India level and for the employment. village of Palanpur, Uttar Pradesh, to document the grow- ing importance and influence of the nonfarm sector in the rural economy from the early 1980s to the late 2000s. 36 Type Key findings World Bank research paper l E-commerce participation is not random: participation is higher among households with younger household Authors/Global Practice heads, secondary education, technical and vocational Peter Lanjouw Himanshu, Rinku Murgai, and Nicholas education, urban work experience, and knowledge of Stern; Development Research Group, Poverty and e-commerce. Inequality Team l E-commerce participation is associated with higher Year household income, with some indications that participa- 2013 tion has a strong positive effect on household incomes. l E-commerce appears to yield benefits that are broadly Country/region shared among participants in an equitable way in Taobao India Villages. Key findings l Development of Taobao Villages shows a trend of l While greater income mobility may be associated with clustering. New Taobao Villages tend to emerge next to some equalization of economic opportunities in the existing Taobao Villages. village, rising incomes from nonfarm sources have none- l Taobao Villages on the coast developed spontaneously, theless been strongly associated with rising inequality. often led by a couple of first-mover return migrants. Nearby villages then followed. E-Commerce Participation and Household Income Growth l Government support, often through subsidized service in Taobao Villages provision by experienced e-commerce service firms, has become a major force for the incubation of inland Description/objective Taobao Villages. This paper examines the role of e-commerce participation l Education of the household head is positively related to in household income growth, drawing from a representative e-commerce participation, but the positive and statisti- survey of Taobao Villages in 2017. cally significant marginal effects of education peak at Type technical school and then level off. Thus, e-commerce World Bank working paper participation requires a prerequisite level of education to get started, and technical school seems a better fit for this Authors/Global Practice requirement than general education. X. Luo and C. Niu; Poverty and Equity Global Practice l E-commerce is not attractive to graduates with univer- Year sity degrees because these graduates tend to have higher 2019 opportunity costs to participate in e-commerce. l Household heads who are less risk-averse are more likely Country/region to participate in e-commerce, which is still relatively new China to the rural areas and inherently more risky than tradi- tional farming. 37 l Age, gender, marital status, ownership of agricultural l Village population, which usually signifies local market land, and the health of the head of household are not potential, is not associated with e-commerce participa- significant predictors of e-commerce participation. tion. E-commerce helps to connect e-tailers to consum- l Households with more family members are more likely ers online, which attenuates the role of local demand. to participate in e-commerce, probably because they l While the wealthy gain more from participation in enjoy economies of scale and division of labor as well as e-commerce in absolute terms, the less wealthy experi- risk diversification. ence higher income growth in relative terms. l Household age composition matters for e-commerce l While younger individuals with technical training, participation. The larger the share of members ages 15 knowledge of e-commerce, and migrant experience are to 35, the more likely the participation. This indicates likely to have higher income increase in absolute terms that it is easier for younger people to participate in through e-commerce, those older, with less education, e-commerce. knowledge, or migrant experience have the potential to l Land does not have a significant effect on e-commerce benefit more in relative terms. participation. This might be because land is not direct l Developing e-commerce requires infrastructure, logistics, capital or a necessary condition in an e-commerce oper- skills, entrepreneurship, and a conducive business envi- ation. Households with more land might be in a stronger ronment. In Taobao Villages, investments in technical financial position to participate in e-commerce, but peo- and vocational training, as well as tailored technical ple without land might have lower opportunity costs to training on e-commerce seem to help improve e-com- participating in e-commerce. merce participation and realize gains. l People living in villages that are farther away from a train station are more likely to participate in e-commerce. As Does the nonfarm economy offer pathways for upward distance to train stations serves as a proxy for access to mobility? Evidence from a panel data study in Ethiopia markets, the farther away people are to train stations, Description/objective the higher their costs of accessing traditional markets. This paper uses data from the Ethiopian Rural Household This indicates that e-commerce reduces transaction costs Survey from 1994 to 2004 in 15 villages to investigate by connecting sellers and buyers online and becomes a the impact of rural farm households’ diversification into substitute for traditional markets. nonfarm employment on their consumption expenditure l People who live in villages that are in the suburbs of a dynamics, sources of consumption growth for nonfarm par- big city are less likely to participate in e-commerce, either ticipants, and whether nonfarm employment is pro-poor by because they are closer to traditional markets or because estimating its impact on expenditure growth separately for it is easier for them to engage in urban labor activities. the poor and the rich. 38 Type Employment Dynamics in the Rural Nonfarm Sector in External scholarly paper Ethiopia: Do the Poor Have Time on Their Side? Authors/Global Practice Description/objective S. Bezu, C. Barrett, and S. Holden This paper analyzes rural households’ engagement in nonfarm employment over time using the Ethiopian Rural Year Household Survey (ERHS) data from 1999 and 2004. It 2012 assesses whether poor households are able to access high-re- Country/region turn employment over time through the accumulation of Ethiopia capital. The article also examines how high-return rural nonfarm enterprises are affected by different types of shocks. Key findings l There is a positive relationship between the share of non- Type farm income and household expenditure growth. This External scholarly paper holds for all income tertiles, but the top income tertile Authors/Global Practice benefits more from rural nonfarm enterprise participa- S. Bezu and C. Barrett tion. Wealthier households participate in higher-return, skilled rural nonfarm enterprise activities. Year l Higher growth elasticity among wealthy households sug- 2012 gests that rural nonfarm enterprises may aggravate rural Country/region income inequality as participants earn higher returns and Ethiopia ERHS covers 15 villages that represent the main enjoy faster income growth with greater gains enjoyed by farming systems in the country. The sample in this study the initially better off. includes 1,275 households. l Faster growth among nonfarm participants results from higher returns to their endowments, especially to physi- Key findings cal assets, seniority, and female labor. l Wealth, access to savings/credit groups, and labor l Households at the top tertile of the distribution earn improve the likelihood of transitioning to high-return 75  percent more per capita than those at the bottom. nonfarm employment. However, unlike many other African countries, the share l Low-return rural nonfarm enterprise participants with of income from nonfarm employment is higher in the capital eventually transitioned into high-return enter- lower income tertile (33 percent of consumption expen- prises. Compared with those who stayed in the low- diture) than for the top income tertile (10 percent). return rural nonfarm enterprises, households who moved l The driving force behind livelihood diversification for to high-return enterprises accumulated significantly poorer rural households in Ethiopia seems to be desper- more assets and benefit from a stochastically dominant ation rather than profit seeking in response to lucrative livelihood. opportunities. 39 l Shocks that affect liquidity are more important than Year shocks that affect labor. Pests or diseases that affect 2014 crop and livestock holdings are more likely to trigger Country/region movement from high-return rural nonfarm enterprises Sub-Saharan Africa into low-return ones as they may result in loss of wealth and revenue as well as an increase of cash expenditures, Key findings which intensifies liquidity constraints. l In terms of welfare, specialization in nonagricultural l Health-related shocks do not trigger a transition out of income-generating activities stochastically dominates high-return rural nonfarm enterprises. On the contrary, farm-based strategies in all the countries in our African the illness of the head of household or spouse decreases sample. the likelihood that they will transition out of such an l When urban integration is low and agricultural condi- enterprise. tions more difficult, the preference toward rural non- l For nonfarm employment to serve as a way out of pov- farm enterprises is mixed, with households more likely erty, the poor need instruments to gradually accumulate to engage more fully in nonfarm activities in Niger and assets and access high-return activities. Local savings Malawi but less likely to do so in Uganda and Tanzania. and credit associations in rural Ethiopia seem to play an l While African households are still more likely to specialize important positive role. in farming compared with households in other regions, once the gross domestic product level is controlled for, Income Diversification Patterns in Rural Sub-Saharan the shares of income and participation in nonagricul- Africa: Reassessing the Evidence tural activities are not very different from those found elsewhere. Description/objective l While the nature of the diversification response will vary This paper uses comparable income aggregates from 41 from household to household, in each country, African national household surveys from 22 countries to explore the and non-African, greater reliance on nonfarm sources of extent of income diversification among rural households in income is associated with greater wealth. Sub-Saharan Africa and to look at how income diversifi- l Income from crop and livestock activities, as well as from cation in Sub-Saharan Africa compares with other regions, agricultural wage labor, represents a higher share of total accounting for differences in development levels. income for poorer households in almost all countries. Type l The links between certain assets and activities imply that World Bank policy research working paper due consideration should be given to those assets or com- bination of assets that will ensure broad growth in the Authors/Global Practice rural economy. This complexity means that a particular Benjamin Davis, Stefania Di Giuseppe, and Alberto Zezza; policy is unlikely to fit different situations across coun- Africa Region Office of the Chief Economist and tries or even within regions of a given country, and that Development Research Group, Poverty and Inequality location-specific policies are needed. Team 40 Non-farm Work and Food Security Among Farm l Policies should focus on lowering barriers to entry for Households in Northern Ghana women. Food safety net policies should pay more atten- tion to the factors that allow for the increased participa- Description/objective tion of women in higher-earning activities, because they This paper examines the impact of nonfarm work on could then build on existing patterns for addressing food household income and food security among farm house- security. holds in the Northern Region of Ghana. We analyze the l Promising policy measures that can help boost nonfarm impact by employing a propensity score matching method work availability include increasing the access of rural that accounts for the self-selection bias. households to assets such as financial capital and non- Type price factors such as education and infrastructure. External scholarly paper Gender and Rural Non-Farm Entrepreneurship Authors/Global Practice Victor Owusu, Awudu Abdulai, and Seini Abdul-Rahman Description/objective Using matched household-enterprise-community datasets Year from Bangladesh, Ethiopia, Indonesia, and Sri Lanka, 2011 this paper analyzes gender differences in rural nonfarm Country/region entrepreneurship. Ghana Type Key findings World Bank scholarly paper published in World Development l Participation in nonfarm work exerts a positive and sta- Authors/Global Practice tistically significant effect on household income and food Bob Rijkersand and Rita Costa security status. Income from nonfarm work is crucial to food security and poverty alleviation in rural areas of Year developing countries. 2012 l While participation rates of females were higher than Country/region males, male participation contributed to higher house- Bangladesh, Ethiopia, Indonesia, Sri Lanka hold incomes and better food security status compared with their female counterparts. This is possibly due to Key findings the barriers to women’s entry into higher-return rural l In Bangladesh, Indonesia, and Sri Lanka, women are nonfarm enterprise activities. less likely to be nonfarm entrepreneurs than men. l Women appear to be limited to the low-wage activities l Women’s nonfarm entrepreneurship is not strongly cor- in the nonfarm sector, resulting in lower earnings with related with household composition or with educational lesser impacts on improving food security. attainment. l In Bangladesh, Ethiopia, and Sri Lanka, female-owned firms are smaller and less productive. 41 l Differences in output per worker between men and l Age-participation profiles in nonfarm enterprise activity women are overwhelmingly accounted for through sort- are concave for women and insignificant for men, for ing by sector and size. They are not due to differences whom the implied coefficient estimates in Bangladesh in capital intensity, increasing returns to scale, human even suggest convex age-participation profiles. capital, or local investment climate characteristics. l Female-owned firms have significantly lower sales on l Working on the family farm and wage work, as well average than male-owned firms in all surveyed countries. as wage work and working for a nonfarm enterprise This is partly because they are significantly smaller. are substitute activities, while the decisions to work for l Sector sorting patterns by gender are very pronounced a family farm and to work in a nonfarm firm are less but vary by country. In Bangladesh, 95 percent of all strongly interdependent, perhaps because they are easier female-owned firms are engaged in manufacturing, and to combine. almost none are trading firms, while 49 percent of all l Nonfarm self-employment appears especially important male-owned firms are engaged in trade and only 28 per- for women heads of household as they are significantly cent are engaged in manufacturing. In Ethiopia, women more likely to work in a nonfarm enterprise than other (75 percent of rural nonfarm enterprises) are overrep- women in all countries. resented relative to men (46 percent) in manufacturing, l The share of children in the household is not signifi- which accounts for the bulk of nonfarm activity. (A rural cantly negatively correlated with women’s engagement nonfarm enterprise was defined as any income-generat- in nonfarm enterprise activity in any country. By con- ing activity (trade, production, or service) not related to trast, the share of children in the household is signifi- the primary production of crops, livestock, or fisheries cantly negatively correlated with women’s engagement undertaken either within the household or in any non- in wage employment in Bangladesh and Indonesia and housing units. Any value addition to primary production with women’s engagement in agricultural activities in (i.e., processing) was considered to be a rural nonfarm Ethiopia. activity). l Household size is not negatively correlated with women’s l The low productivity of female-run firms in Ethiopia participation in nonfarm enterprise activity except in may be partly driven by sorting into different activities, Ethiopia. This contradicts the idea that women’s entre- which our crude sector controls do not capture. They preneurship is constrained by domestic responsibilities. may also reflect gender differences in hours worked, as It seems that running a nonfarm enterprise, often house- we only observe differences in labor days in Ethiopia. If hold-based, is more conducive to combining domestic women combine working in a nonfarm firm with house- duties and being economically active, than is wage work. hold chores, they may work fewer hours on any given day. l The conditional association between nonfarm entrepre- l There is little evidence of gender differences in the neurship and schooling is weak; especially for women. returns to human capital, the direct impact of the invest- Education is strongly correlated both with the propensity ment climate on firm performance, or productivity due to be wage employed and with the likelihood of working to firm age and electrification. on a family farm. 42 Gender and Occupational Choices in Africa: l Inequality among men can be explained by inequality in The Role of Time Poverty and Associated Risks assets, while inequality among women is more complex and depends on the interplay between asset ownership Description/objective and the degree to which women are able to negotiate The paper proposes a theoretical model that shows women’s norms governing household production. A shift of choices may be critically constrained by the rigidities gov- responsibilities in household production to other fam- erning their time use. These are partly governed by social ily members, including men, could improve women’s norms that regard certain tasks as being purely female. well-being and overall household income. Type External scholarly paper Destination or Distraction? Querying the Linkage Between Off-Farm Work and Food Crop Investments in Kenya Authors/Global Practice Renata Serra Description/objective This paper explores the robustness of the relationship Year between off-farm work and farm input use in Sub-Saharan 2009 Africa by applying a range of econometric models to panel Country/region data collected in Kenya. World Type Key findings External scholarly paper l Policies that provide high return work opportunities for Authors/Global Practice women but are oblivious to their overall time constraints Melinda Smale, Yoko Kusunose, Mary K. Mathenge, and may actually deteriorate women’s living conditions. Didier Alia l There is a need to make household production more visible when addressing the question of increased rural Year incomes or economic diversification. 2016 l The unequal degree of responsibilities in the household Country/region and the genders’ consequent different time constraints Kenya drive differential business outcomes between genders. l Even when barriers that prevent women from entering Key findings more profitable off-farm employment are addressed l We find a strong, negative linkage between nonfarm work through, for example, microcredit, women may be and rates of fertilizer use in maize production, indicating unable to take advantage of such opportunities if risk trade-offs in labor allocation and farm investments. considerations and time poverty constraints are strong. l In the case of nonfarm earnings, the response of fer- l Risk induces women to enter off-farm activities for pure tilizer to additional income is negative at lower income diversification reasons even when returns are low. levels but positive at higher levels. 43 Determinants of Livelihood Diversification Strategies in the household, the head’s access to extension services, Eastern Tigray Region of Ethiopia distance to market, quantity of livestock owned, and agro-ecology. Large household size does not mean that Description/objective all the household members are productive. Some house- The objectives of this study were to: (1) identify choices of hold members are physically disabled and mentally household livelihood diversification options; and (2) analyze disordered due to the past war between the current gov- the determinants of livelihood diversification strategies ernment of Ethiopia and the military regime of Derg, among rural households. the Ethiopian–Eritrean war (1998–2002), and other Type diseases in the study area. External scholarly paper l Policy recommendations include: – The government should support nonfarm livelihood Authors/Global Practice diversification strategies as part of the national job Gebrehiwot Weldegebrial Gebru, Hyacinth creation objectives instead of solely supporting the EmentaIchoku, and Philip Ogbonnia PhilEze inadequate and drought-prone farm income. Year – Investing in quality education and increasing access 2018 to higher education will help the rural households’ probability of participation in off-farm and nonfarm Country/region livelihood diversification activities. Ethiopia (Saesietsaeda Emba district, Eastern Zone of – Farmers should be provided with low-interest credit Tigray) and entrepreneurship skills training to facilitate Key findings engagement in nonfarm activities. l Households’ likelihood of diversifying into off-farm – Intensive work on irrigation and making it accessible and/or nonfarm activities were positively affected by the to smallholder farmers are of paramount importance head of household’s level of education in years, access to to improving incomes and stabilizing livelihoods as a credit, annual income, membership in cooperatives, land response to drought. size owned by the household, and access to farm inputs. – Expansion of rural–urban roads is vital to link and l Households’ likelihood of diversifying into off-farm and strengthen the socioeconomic liaison and to foster or nonfarm activities were negatively affected by the development between rural and urban populations. household head’s age, dependency ratio, family size of 44 Regional- and Woreda-Level B  Assessment of Nonfarm Livelihoods 1. Afar Region and their milk, meat, and butter. In urban areas, service, construction, and handcrafting activities are more prevalent. Main economic activities Asayita’s economy has changed significantly in recent years, The local development priorities in Afar reflect its major with various associations establishing economic activities, economic sectors: (1) livestock and other farming (there such as gas stations, packaged water distribution, cattle and is a high prevalence of pastoralist communities); (2) min- goat fattening, and increased construction activities that are eral and natural resources (there are extensive salt, gold, providing work for the town’s job seekers. CIGs in rural and and potassium resources); and (3) tourism. Afar is also an urban areas are involved in various economic activities. The important trade corridor connecting Ethiopia to the port of Djibouti, and the current road construction toward Assab focus is on market-oriented animal fattening in rural areas and Djibouti could potentially improve local economic and small retail trading, restaurants, and hairdressing in development (LED). urban areas. Local actors TARGET SECTORS IN AFAR Nongovernmental organizations (NGOs) that are active Urban Rural in the woreda include DanChurchAid, Development Waste management and Milk processing Expertise Centre, CARE, Save the Children, and KfW recycling Development Bank. Relevant government stakeholders Cheap material production Salt production and for construction processing include the Technical Vocational Enterprises Development Tourism Apiculture (beekeeping) Office, the Animal and Agricultural Resource Office, and the Cooperatives’ Desk. ASAYITA WOREDA Opportunities and recommendations Main economic activities l Strengthen value chains and business environ- Like the entire region, there is a high prevalence of pasto- ment. Value chains should be bolstered, and an enabling ralist communities, with the main economic activities of business environment should be fostered to encourage agriculture (crop production and livestock) and trade. The the growth of CIGs. Potential approaches include cre- livelihoods related to livestock include selling the animals ating CIG unions of small trade businesses to provide a 45 joint supply of commodities and developing partnerships honey production, some of which is exported to Saudi with wholesalers. CIGs involved in fattening are doing Arabia and Djibouti. Salt extraction has been an essential well, but they are confronted with poor value chain economic sector and natural resource; and the salt asso- conditions and access to the market. Value chains should ciation is a vital local actor. Other than the salt business, be incorporated in wider markets by integrating CIGs other successful value chains are almost nonexistent, and involved in livestock fattening in trade routes from Chifra most commodities (e.g., clothing, coffee, and grains) are to Djibouti and by exploiting Afar’s advantage as a trade imported from abroad or from other regions in Ethiopia. route to Djibouti. Economic activities and employment opportunities in the l Expand financial services. Existing banks and micro- hospitality, metalworking, and construction industries has finance are unable to meet the needs individuals and increased in recent years; and access to social services such small businesses struggling to meet collateral and eco- as education and health have improved in the woreda. nomic asset requirements in pastoralist communities Local actors dependent on livestock for their livelihoods. Financial NGOs include the Food and Agriculture Organization services are needed that consider community capacities, of the United Nations, DanChurchAid, Swiss Church, which would enable CIGs and entrepreneurs to accumu- COOPI, Save the Children, and Goal Ethiopia. The late assets. Regional Development and Protection Programme was l Foster economic opportunities. Many respondents implemented for three years, and respondents highlighted asserted that there are a variety of sectors and economic the project as a successful example of integrating refugee activities that could be promoted to generate commu- and host communities.7 Financial service providers in the nity jobs and livelihoods in the woreda that are being woreda are Lion International Bank and the Commercial overlooked. Sectors with development potential include Bank of Ethiopia. high-quality hospitality, youth recreation centers, book- stores, libraries, veterinary medicine, and—given the Opportunities and recommendations importance of livestock to the area— leather and dairy l Cope with the conflict in Tigray. DRDIP staff shared production. concerns that they will not be able to conduct the planned l Promote sustainable environmental manage- work with this year’s allocated budget. Therefore, DRDIP ment. Given the increasingly devastating impacts of beneficiaries in Berhale need additional financial support climate change in the woreda, LED should prioritize to cope with the economic impacts of the conflict in the reduction of environmental vulnerabilities and the Tigray, and planned activities should be adapted to the promotion of sustainable economic development. high inflation and increasing commodity prices. l Foster systematic market coordination. DRDIP BERHALE WOREDA should create synergies and linkages through effective public-private dialogues with government and nongov- Main economic activities ernmental actors, enterprises, and associations playing a l The main economic activities in Berhale are agriculture, livestock farming; salt, gold, sulfur, and magnesium 7. For more on the Regional Development and Protection Programme, see https://ec.europa.eu/trustfundforafrica/region/horn-africa/ethiopia/ mining; and services. The woreda is also known for its regional-development-and-protection-programme-ethiopia_en. 46 significant role in Berhale to more systematically address farming of cash crops such as soybeans, animal rearing, and market challenges. To illustrate, Mekane Eyesus oper- apiculture (beekeeping). The second most important sector ates a nonfarm livelihood project similar to DRDIP in in the region is mining. In recent years, great efforts have the refugee camp in Berhale that is focused on youth, been made to attract foreign firms and investments in gold women, the displaced, the elderly, and unaccompanied and coal mining because the sector is currently dominated minors. A Mekane Eyesus staff member complained of by dangerous and inefficient traditional methods. Nonfarm challenges similar to those faced by CIGs, including a economic activities are largely based on the service sector. lack of market ties among the enterprises receiving their Manufacturing, such as woodworking, metalworking, and support, which discourages people from engaging in agro-processing, are burgeoning sectors, but most nonfarm nonfarm livelihoods. activities comprise trade, transportation, restaurants, cafes, l Promote promising economic sectors. Promising hotels, and salons—activities that are concentrated in urban sectors that should be introduced or strengthened include areas. block and cement factories for construction, gas stations, and tourism. Tourism is an underdeveloped sector that TARGET SECTORS IN BENISHANGUL-GUMUZ lacks an adequate hospitality infrastructure despite the Urban Rural many tourist sites located in the woreda. Supporting Agro-processing of fruits Apiculture (beekeeping) the development of the tourism industry with DRDIP Bamboo processing Gold mining activities could generate multiplying employment oppor- Information and communication Soybean production tunities and contribute to LED. technology centers l Encourage the extraction of natural resources. Berhale is rich in resources that, except for salt, have not BAMBASI WOREDA been appropriately exploited because resource extraction Influence of the refugee presence on the economy requires technology and expertise that the woreda cur- Agriculture is the dominant sector in Bambasi woreda, fol- rently lacks. DRDIP should support the provision of lowed by traditional mining. There are very few opportuni- modern technology for the extraction and procession of ties for nonfarm livelihoods, but the most common nonfarm gold and other resources, which is currently only being enterprises involve hotels, small retail shops, cafeterias, bak- done by individual miners who lack adequate tools. eries, and grinding mills. Bambasi’s economy is also influ- enced by the presences of refugees. On one hand, this offers 2. Benishangul-Gumuz Region opportunities for nonfarm livelihoods through employment Main economic activities with NGOs and international organizations and improved Agriculture remains the most dominant sector in the region. access to basic services and infrastructure, such as schools Most of the residents in Benishangul-Gumuz reside in rural and hospitals. On the other hand, the presence of refugees areas with significant infrastructure gaps. As a result, the has increased pressure on resources and conflict over farm- main forms of livelihood are farm activities, including the ing land. 47 Opportunities and recommendations with the unions and cooperatives as key partners in agro- l Improve the agro-processing sector. Agriculture is processing development in the area, leveraging their the main economic sector in the woreda. DRDIP should close links with farmers. These organizations could focus on supporting agro-processing businesses by lever- mobilize farmers to attend trainings, develop methods aging agriculture to bring about a structural transforma- of collective investments among members, and deliver tion in Bambasi. Specifically, through DRDIP, the World processed goods to market. Bank should focus on the processing of mangoes and avocado products, which can be exported and thereby HOMOSHA WOREDA improve livelihood opportunities in the woreda. Because Main economic activities mangoes and avocados grow well in this woreda, there is Agriculture is the primary economic sector in Homosha, a strong foundation of local expertise that could be scaled including crop and cereal production, animal rearing, dairy up with the proper training and capital investment. farming, and apiculture (beekeeping). Bamboo farming is a l Improve entrepreneurial skills. DRDIP should very profitable sector in the woreda, including complemen- make a greater effort to improve the entrepreneurial skills tary nonfarm livelihoods, such as construction, that utilize of youth and women in Bambasi. Trainings, awareness- bamboo. Homosha’s second-largest sector is mining, partic- raising campaigns, and capacity-building programs ularly gold, coal, sand, and stone. Nonfarm livelihoods are should be scaled and accompanied by counseling ser- restricted to services, such as small retail shops, restaurants, vices. Moreover, DRDIP should scale up market research and cafes. Technology is centered around agriculture. and business mapping so young people can better under- stand the local market and develop ideas for high-growth Opportunities and recommendations sectors. l Increase community engagement. Most residents in l Develop a better business environment. Tackling Homosha are engaged in smallholder farming and tend business bottlenecks should be the focus of local govern- to be highly risk adverse. A low level of awareness on the ment and World Bank cooperation through DRDIP. For benefits of nonfarm enterprises and a low level of capac- example, participants cited poor market information and ity to start nonfarm enterprises results in fewer residents the rising costs of inputs due to infrastructure gaps as willing to make the switch or to diversify their sources obstacles to business development. Through DRDIP, a of income through nonfarm activities. Through DRDIP, greater effort should be made to improve electricity and the World Bank should scale up community engagement water supplies, which would enable both the lowering of to raise awareness on the benefits of nonfarm economic the costs for businesses and the introduction of certain activities and provide the skills and tools needed for the technologies to enhance access to market information. residents of Homosha to increase their engagement in l Increase support to unions and multipurpose nonfarm enterprises. One method for increasing com- cooperatives. Such organizations are vital because munity outreach and the participation of target groups they have the capacity to improve market prices by in nonfarm economic activity is to partner with youth directly buying from farmers, bypassing brokers in the associations to organize trainings, savings initiatives, and process. They also support increased market access for coaching sessions. farmers. Through DRDIP, The World Bank could work 48 l Strengthen the agro-processing sector. Homosha whereby members lose interest and lack motivation, has a comparative advantage in the production of fruit resulting in less frequent meetings and less savings. One and a strong supply chain for bringing these products way to combat lethargy in CIGs would be to implement to Ethiopia’s central markets. In highlighting this, most more frequent evaluations and to discontinue support to participants noted the significant potential of agro-pro- CIGs whose members have lost their motivation. cessing. DRDIP should prioritize this type of nonfarm l Capitalize on infrastructure. Homosha has rela- enterprise because agro-processing requires significant tively good infrastructure compared with other woredas capital and capacity. DRDIP could coordinate with due to its proximity to Assosa and thereby to NGOs and farmers unions, providing training and funding to lever- other development actors. Its electricity is therefore more age existing networks. Moreover, to bolster the agro- stable and its roads leading to a large commercial market processing sector, the World Bank could take advantage in Assosa in good condition. DRDIP could capitalize on of Homosha’s moderate level of infrastructure, although these strengths and use Homosha as an area to pilot new heavy investments in technology and storage facilities are interventions, such as support for digital enterprises. needed. l Improve financial services. There are no banks in MAO-KOMO WOREDA Homosha. Moreover, there is a lack of lending institu- Main economic activities tions available that correspond with the community’s The main economic activity in Mao-Komo is agriculture, Islamic religious beliefs. Finance remains one of the including cash-crop farming and animal rearing (livestock greatest challenges pertaining to the development of and poultry). Apiculture is also widely practiced in this nonfarm livelihoods. The World Bank therefore needs to woreda, whose environmental conditions are ideal for keep- work closely with local government bodies, NGOs, and ing bees. Common nonfarm livelihoods include grinding farmer unions to explore creative funding sources in line mills; grain trading; handcrafting; metalworking; wood- with the religious beliefs of the community. working; and petty trades such as small retail shops, restau- l Encourage trade. The World Bank could facilitate rants, and cafes. While there is an interest in transitioning dialogue between the local administration and unions, to nonfarm livelihoods, lack of access to finance presents a eliminating the middleman and brokers who interfere major barrier because most households lack sufficient sav- with the supply chain, and provide capacity training to ings to invest in the required inputs for starting a business. local administrative bodies in charge of trade to ease and digitize the business registration process. DRDIP could Key actors work with the local administration of Sherkole and Because agriculture is the main economic sector in this Kumuk woredas to formalize and enhance cross-border woreda, there are a host of related key actors, including trade with Sudan. farmers unions, multipurpose cooperatives, and CIGs. l Enhance productivity of CIGs. Participants claimed NGOs and international organizations that improve infra- that CIGs were the most beneficial interventions to structure have been cited as key actors for LED. Moreover, improve nonfarm livelihoods in the woreda. However, government offices, such as the Women and Youth Affairs they also highlighted the inefficiencies of certain CIGs, Administration and the Saving and Agricultural Bureau, 49 have a strong presence in the community. Other important l Improve access to renewable technology. Most of promoters of LED that were cited by participants include the residents in Mao-Komo do not have access to con- the government of Finland, Christian Aid, Farm Africa, stant electricity. The World Bank could develop aspects GIZ, CSSP (a civil society support program), Bread for of DRDIP to provide clean and cost-saving technologies Africa, and Green Love Appreciation Development. such as clean cooking stoves and mini solar-powered grids. This could allow residents to save money, which in Opportunities and recommendations turn could increase their savings and allow them to make l Strengthen village savings and loan associations. greater investments in nonfarm opportunities. Moreover, In the absence of banks and lending institutions in Mao- providing residents with such technologies is a cost-effec- Komo, village saving loan associations are trying to fill tive way to ensure progress toward overall development the gap. They have two components: one social and one goals while more sustainable infrastructure interventions business. The social component promotes discussions are underway. with association members to discuss their problems l Scale-up apiculture sector. The World Bank’s and identify solutions; the business component creates DRDIP team could utilize the comparative advantage businesses by using village savings and loan associations of the apiculture sector in Mao-Komo and undertake and is focused on nonfarm livelihoods. Green Love initiatives to scale up the sector by developing the means Appreciation Development has been effectively support- of processing and exporting honey and by developing ing the associations at the local level, and opportunities training on sustainable apiculture methods in line with exist for the World Bank to partner with the organiza- the region’s environmental management objectives. tion to develop innovative ways of increasing access to l Support training and capacity building for finance in the woreda. women. Participants noted the success of DRDIP activ- l Facilitate access to finance and zero interest ities in improving the economic participation of women. loans. Residents of Mao-Komo need a lending institu- However, participants—particularly women—noted the tion in their woreda to eliminate the cost of traveling to need for continuous training and capacity building to larger and more commercial towns like Assosa to access effectively change the lingering stereotypes that constrain finance. Moreover, lending institutions that would thrive the economic participation of women. Trainings and in this woreda are ones that provide low to zero interest capacity-building efforts should be undertaken over a loans that are compatible with local religious beliefs. considerable length of time. Moreover, under DRDIP, Improving access to finance not only has a positive effect the World Bank could develop training and capacity on businesses but also positively influences changing building for representatives in charge of education to gender roles. The World Bank can work with private increase the participation of young girls in school and sector and government actors through DRDIP to facili- adapt the curriculum to help young girls bolster their tate easier access to finance for nonfarm businesses. This entrepreneurial skills. could take the form of in-kind assistance through the procurement of certain inputs in lieu of contemporary lending practices in the form of loans. 50 ABOL WOREDA 3. Gambella Region Main economic activities Main economic activities Agriculture remains the main economic sector in Abol. Agriculture remains the most dominant sector in Gambella. However, unlike other woredas, fishing is the main agri- The region contains expansive fertile land that attracts cultural activity due to its proximity to the Baro River. large-scale agricultural projects. The region’s rivers—Baro, As a result, the fishing sector has received support from Gilo, and Akobo—make fishing the second-most dominant international organizations such as the United Nations activity, but the sector remains underdeveloped, and most Development Programme (UNDP). As in other Gambella engage in traditional fishing practices. Nonfarm livelihoods woredas, nonfarm activities are concentrated in urban consist of grinding mills, restaurants, cafes, salons, transpor- areas and are mainly related to the service sector, such as tation, and, in large urban centers such as Gambella town, small restaurants and cafes, salons, and retail shops. Agro- banks. The manufacturing industry is underdeveloped, processing of fish products remains nascent to nonexistent. and substantial opportunities like leather production are underutilized. Opportunities and recommendations l Exploit untapped business opportunities. Most Regional and cross-border trade participants noted the need for the development of the Regional, interregional, and cross-border trade remain retail sector. Some highlighted the need for a supermar- nascent in the region, and there is scant evidence of initia- ket that could supply a wide range of goods. Other par- tives to boost it. Private sector actors lament the poor state ticipants stressed the need for stores that could provide of infrastructure and market access for both nonfarm and digital services or supply electronic goods. farm enterprises. The resulting unstable and insufficient supply leaves enterprises unable to meet demand or to plan, l Improve government support to small and hampering their ability to get their goods to market, espe- medium-sized enterprises (SMEs). Participants cially perishables. Cross-border movement is an integral highlighted the need for greater support by government part of life in the region, but while cross-border trade offers bodies to SMEs. Currently, international organizations multiple benefits, it remains underdeveloped in the region provide most of the support to SMEs, possibly due to the and receives little support from governments, NGOs, or the limited financial capacity of the local administration or private sector. the lack of capacity to adequately support them. There is an opportunity for the World Bank, through DRDIP, to build greater synergies with local development actors to TARGET SECTORS IN GAMBELLA ensure that support to SMEs is scaled up and continues Urban Rural after DRDIP activities conclude. Leather processing Fish processing l Diversify nonfarm livelihoods. While there are Briquette production Milk processing Information and communication Gold mining nonfarm enterprises in mostly the urban areas of Abol, technology centers they are mostly related to the service sector. There is a need for greater diversification of nonfarm livelihoods to include elements of manufacturing. The processing 51 and packaging of fish products offers a valuable oppor- it has the potential to attract large investments from foreign tunity to take advantage of vast fish reserves and local firms and governments. However, despite some foreign expert knowledge to scale up a sector that could provide firms operating in the mining sector in the woreda, partic- employment opportunities and kick off a process of ipants lament low levels of investment by firms in the local structural transformation in the area. The World Bank community. Further, there have been no local government could build upon UNDP’s work in supporting fish value interventions to ensure greater levels of employment and chains and focus on supporting infrastructure for the investment. Dimma, like Mare and Lare, are towns that processing of fish. had been doing well economically due to their proximity l Resolve critical infrastructure gaps. To support to the South Sudan border, which allowed them to benefit sectors with high potential, such as agro-processing, from cross-border trade. However, the civil war in South critical infrastructure gaps need to be filled. Participants Sudan has weakened trade along these border towns, and highlighted the need for more feeder roads across Abol COVID-19 has exacerbated movement restrictions, thereby to facilitate increased trade between rural villages and significantly lowering trade even further. urban centers. Another critical infrastructure gap is Opportunities and recommendations the absence of a marketplace. Participants lament the l Guide diaspora engagement away from land inability to adequately sell their products. The Word ownership. Through the LED platform, the World Bank could include a marketplace in the infrastructure Bank and its partners could work with the local gov- interventions to be implemented in the region. ernment to encourage the Ethiopian diaspora to invest l Improve training and capacity building on non- in areas other than land ownership, which could boost farm enterprises for women and youth. Both nonfarm livelihoods by enhancing human capacities, women and youth noted that there were scant opportuni- building critical infrastructure such as for green energy, ties to access information or gain critical skills to engage and improving technological take-up. in nonfarm enterprises. Women are particularly vulnera- l Facilitate forums between government and ble to such lack of information channels due to cultural business. Participants have cited a disconnect between norms that affect their level of education, mobility, and business enterprises and the local government. The social networks. Therefore, through DRDIP, the World World Bank could facilitate regular forums between both Bank should target training and capacity for education groups to address the needs of businesses. stakeholders in Abol to increase school enrollment among l Build local government capacity. Creating a forum young girls and scale up training on nonfarm enterprises for dialogue between business and government will not both in terms of duration and target groups reached. be effective if local government bodies are unable to carry out the action points agreed upon during such DIMMA WOREDA meetings. The World Bank, through DRDIP, could Main economic activities increase capacity building for government actors, which Mining is the most important economic sector in Dimma, could also ensure an effective government takeover of not necessarily in terms of workers employed, but because DRDIP activities over the long term. 52 l Improve infrastructure. Participants stressed the Opportunities and recommendations need to improve infrastructure, not only in Dimma town l Invest in promising sectors. Untapped nonfarm through improved access to electricity and water but also business opportunities include the trading of cattle skin the roads that connect Dimma to Gambella and other and the development of leather products. Moreover, large commercial towns. participants highlighted recreational centers as a prom- l Remove excessive requirements to access loans. ising business endeavor but did not frequently mention The requirements to access a loan in Dimma effectively successful youth associations, except the Neem Tree bar SMEs from participating, which deprives them of Association, which opened a recreational center. crucial funds to cope with the decrease in cross-border l Improve urban planning. Participants highlighted trade. Moreover, it inhibits SMEs from innovating. The the need for better urban planning to facilitate the devel- World Bank could advocate for the reform of lending opment of nonfarm enterprises. Businesses cited the policies to SMEs to remove current bottlenecks. lack of a marketplace as an indication of the needs of l Improve selection process and overall perfor- businesses to be included in the structure of urban areas. mance of CIGs. Feedback from participants stressed The World Bank should consider the development of the fact that, in some cases, the selection processes for marketplaces and business hubs under DRDIP activities. CIG members was subject to nepotism by members of l Increase support to the agro-processing sector. the local administration who attempt to have their rel- Agriculture remains the dominant sector in Gog, and atives involved regardless of their merit. Furthermore, therefore greater support should be given to agro-pro- to improve CIG performance, the number of members cessing businesses to leverage existing value chains. should be reduced. Participants suggested that 15 mem- Participants highlighted the need to boost the milk pro- bers was too large of a group to successfully coordinate. cessing industry and to support firms that can package Moreover, CIGs should receive follow-up trainings and and transport fish to other regions. Both sectors should evaluations to ensure that viable CIGs are not discontin- be the focus of DRDIP interventions to boost the ued. Lastly, the financial support given to CIGs should agro-processing industry in Gog. be increased from 150,000 birr to 200,000 to account for l Expand coordination between government and the toll inflicted on the economy by COVID-19. other development actors. An increase in the level of coordination between the local government admin- GOG WOREDA istration and other development actors could increase awareness and improve interventions to boost nonfarm Main economic activities livelihoods. Moreover, the World Bank should assist the Agriculture is the main economic activity in Gog. The pri- local government in facilitating more private-public mary nonfarm activities involve restaurants, hotels, cafes, dialogues to better understand the needs of existing non- and health care. Mining is a prominent sector, but to a lesser farm enterprises because participants noted a breakdown degree than in the woredas of Benishangul-Gumuz. in understanding between government and the private sector concerning the needs of enterprise owners. 53 l Improve access to electricity. Participants cited a sector actors to develop innovative ways for both parties lack of electricity as a significant barrier to the devel- to support each other in advancing nonfarm enterprises opment of nonfarm enterprises. It hampers business in Itang. expansion and prevents the emergence of businesses that l Improve access to finance. Increase the number of rely heavily on electricity, such as Internet cafes, or that financial institutions in Itang woreda; expand existing sell products and services that rely on electricity, such as operations of financial institutions to include women, print shops. Without stable access to electricity, the adop- youth, and rural households facing significant challenges; tion of digital solutions and the emergence of digital hone the credit application process; and free it of exces- enterprises are difficult. The World Bank should focus on sive bureaucracy. A more diverse range of assets should supporting the improvement of electrical infrastructure be considered when establishing qualifying criteria for and renewable energies. credit. The World Bank could play the role of advocate by petitioning financial institutions to pay attention to such ITANG WOREDA concerns and increasing funding to CIGs under DRDIP. l Engage with the diaspora. Attracting Ethiopian Main economic activities diaspora to meet current needs is a worthwhile pursuit, The main economic activities in Itang are centered around especially less profitable spaces, such as kindergartens agriculture, particularly cash crop farming, animal rearing, and recreational areas. The local government tries to pastoralism, and fishing. Nonfarm livelihoods among women attract members of the diaspora, usually for large-scale and youth are limited in Itang as well as in the region’s other farming or mining investments, but there is not a con- woredas. Women are primarily involved in the selling of sensus regarding how successful those attempts have fruits and vegetables; they are not involved in actual farm- been. The World Bank could undertake a study to fill ing, which is traditionally considered an activity for men this knowledge gap and provide recommendations to the only. However, women have recently started to engage in local government on methods for increasing diaspora commercial farming. Because employment among youth is investment. extremely limited in Itang, most young people have jobs that l Increase the skills training available to women. require significant physical labor, such as porters, construc- Female participants point to the lack of training opportu- tion workers, and day laborers. DRDIP and other similar nities for women, which limits their employment oppor- interventions have improved nonfarm livelihoods in the tunities. The World Bank should link with actors who service sector, such as small restaurants, cafes, and salons. could deliver continuous training and business capacity Opportunities and recommendations development to women, particularly young girls. More l Strengthen links with the private sector. Attracting sustainable changes should be enacted by education stake- the private sector is crucial to livelihood development and holders to alter the curriculum in a way that promotes lowering unemployment rates. Participants remarked entrepreneurial skills in young girls at an early age. The that the woreda administration could more actively World Bank, together with other stakeholders operating engage with current private sector actors to improve in this domain, could spearhead consultative meetings LED. Trough DRDIP, the World Bank could initiate with education stakeholders to engender solutions. quarterly forums that convene government and private 54 l Build greater synergies with other development Opportunities and recommendations actors. There are multiple government agencies that l Integrate interventions. Given the significant pres- are well-functioning bodies, such as the agriculture and ence of refugee communities in the woreda, DRDIP trade bureaus, but they are not focused on nonfarm should strengthen collaboration with NGOs and local livelihood development. The World Bank should build civil society organizations operating in refugee commu- greater synergies with these better-performing agencies nities to develop integrated interventions. to scale up interventions focused on nonfarm enterprises l Build on promising sectors. Given the woreda’s vast and develop links for the continuation of some DRDIP water resources and suitable land for agriculture and activities by local agencies. livestock, areas with potential include natural resource conservation and utilization; water bottling; and flour, 4. Somali Region milk, and meat processing. l Expand financial services. Financial institutions must Main economic activities better cater to the community’s needs with interest-free LED priorities are focused on improving livestock and loans and loan requirements that local entrepreneurs can agriculture production because most of Somali’s population meet. Comparable to the regional level findings, there is pastoralist. The main economic activities in the region is potential to increase the provision of digital finance are also found in those two sectors. Other relevant sectors services for LED and CIGs in Aw Barre because most include trade—especially cross-border trade—services, and people in the woreda already use electronic money trans- construction. Priorities for LED in those areas are strength- fer services such as the ZAAD, Hello Cash, E-birr, and ening value chains through infrastructure construction and Sahay. factories. l Strengthen the business environment. Like recom- mendations in other woredas, the business environment TARGET SECTORS IN SOMALI and LED should be improved by building vocational Urban Rural training centers, awareness-raising, and structural capac- Manufacturing parts for water irrigation Milk processing ity building on nonfarm livelihoods for community mem- Glass production Apiculture bers. Other priorities should include improving road and Leather processing market infrastructure through a continuation of related DRDIP activities; modernizing economic activities by AW BARRE WOREDA providing required machinery and capacity building; Main economic activities and strengthening value chains and market linkages by Aw Barre’s primary economic sectors are livestock, agri- collaborating more closely with private stakeholders. culture, trade, service, construction, and—most signifi- l Engage the diaspora. DRDIP should fully exploit cantly—traditional livestock farming and agriculture. In the the potential of the Ethiopian diaspora to promote secondary cities of Lefe Isa and Sheder, economic activities LED by linking members with beneficiary entrepre- are like those common in Aw Barre. neurs to create market linkages and benefit from their investment capacity to strengthen value chains and 55 promote modernization. The diaspora make significant coordinate with stakeholders to systematically incorpo- investments in nontraditional economic activities and rate digital tools in the program to, for example, increase provide aid to local communities in Aw Barre. Before access to simple, interest-free loans that align with the the pandemic, there were frequent investments from community’s needs, and introduce digital technologies to the diaspora—the construction sector especially bene- support savings and the creation of market linkages for fited. Stakeholders are also aware of policies to attract CIGs. diaspora, such as one offering free land to diaspora who l Engage diaspora. Several respondents noted that mem- invest in nontraditional agriculture. bers of the Ethiopian diaspora have become increasingly present in the woreda as a result of the recent enabling DOLLO ADO diaspora investment policies. Diaspora are often engaged with modern farming in rural areas. The diaspora could Main economic activities be more systemically engaged if they were to be included Dollo Ado’s economic activities are primarily traditional, including agriculture, livestock, petty trade, and service in coordination dialogues and connected to CIG and sectors. The woreda is rich in fertile land and river basins— DRDIP programs to create market linkages and build Dawa and Genale—for agricultural production. Livestock is partnerships for technology transfer and employment traded with nearby towns in Somalia and Kenya. The main creation and investments. secondary city is Hilawayn, whose economic activities and livelihoods are very similar to those of Dollo Ado. KEBRIBEYAH WOREDA Opportunities and recommendations Main economic activities l Ensure more systematic stakeholder involve- Livestock, agriculture, and trade are among the ment. DRDIP staff argued that meetings with gov- primary economic sectors in Kebribeyah. Because ernment, humanitarian, and development agencies are it is an agro-pastoralist community, LED priorities include not effective because stakeholders do not provide the on-farm livelihoods, such as agricultural products and ani- required inputs. DRDIP should improve coordination mal husbandry. On-farm livelihood production is hampered with stakeholders while also involving community mem- by the lack of efficient water irrigation. Off-farm economic bers and private actors. activities include trade, retail shops, restaurants, carpentry, l Prioritize the infrastructure component. Phase II metalworking, and construction. Stakeholders claim that of DRDIP should increase its emphasis on roads, mod- refugee communities in the woreda have a positive impact ernized farming for improved agricultural productivity on the economy because they increase demand for agricul- to exploit the fertile land, renewable electricity, and the tural products and other supplies. Due to the woreda’s prox- strengthening of technical skills training centers. imity to the border and the lack of factories and wholesalers l Tap into digital finance technology. Digital bank- to supply goods at a low price, respondents argued that ing and mobile communication technologies, which are illicit cross-border trade and contraband is the most profit- commonly used in the woreda, have improved access to able sector. Most consumable goods are imported illegally financial services and market linkages. DRDIP should from Somaliland towns and sold at a lower price than goods 56 legally imported by CIG businesses. In addition, some l Promising diaspora links. The woreda has strong respondents claimed that human trafficking is present in the links to diaspora and high inflows of remittances—this woreda. should be used more by DRDIP to attract investment in nonfarm livelihoods that contribute to LED and Opportunities and recommendations create jobs and market linkages for women and youth l Promote promising sectors. Strengthen agricultural in refugee-hosting areas. Many community members production through flour and milk processing factories, receive remittances, which contribute to the economy honey production, and vegetable products. Sectors that of the woreda. Diaspora are ready to invest in different are needed or that could be further improved include economic sectors, such as hotels, restaurants, animal fat- bakeries, furniture and glass work, garages, veterinary tening, and meat processing, which create employment services, and construction material production. and marketing linkages to the off-farm productivities in l Diversify economic activities. The nontraditional the area. economic sector should be diversified by developing l Expand environmental components by work- agriculture processing and creating market linkages. ing with local actors, such as Save Ethiopian Areas to strengthen in technical and vocational educa- Environments (SEE) and the Garbage and tion and training include embroidery, tailoring, electrical Sanitation Association, which are creating jobs, work, metalworking, carpentry, and diversification and particularly for women. There is increasing environ- modernization of animal and farming products. DRDIP mental degradation in areas where refugees settle, and should work more closely with technical and vocational the increasing number of people cutting trees for fire- education and training centers and support graduates in wood has led to massive deforestation and sparked con- establishing a business or cooperative engaged in non- flicts with host communities. To maintain social cohesion farm livelihoods. and address the increasing occurrence of conflicts over l Expand digital finance services and technology. scarce resources in the woreda, it will be essential to sup- Like at the regional level, because some services are port climate-adaptive markets and lifestyles. already used in the woreda, there is the potential to expand digital finance services and technology for the market system. 57 © 2022 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW, Washington, DC 20433 202-473-1000 | www.worldbank.org Some rights reserved. 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