Increasing the Competitiveness of Small and Medium Sized Enterprises

Spurs High Payoffs for the Bottom Line and Beyond

“This intervention led to positive results, the most prominent of which was controlling the factory's production costs, thus enhancing the factory's competitiveness and generating new job opportunities as sales increased. We expect this improvement to continue over the coming months and in the long term.” — Abdul Qaher Al Qaheri, Financial and Administrative Consultant

On a typical day, the Al Wahda Factory in Ta’izz is abuzz with activity and the sounds of cutting and sewing machines. Catering to the popular demand for leather clothing and products in Yemen, Al Wahda exemplifies the dynamism and growth potential of the country’s small and medium-sized enterprises. Founded in 2007, Al Wahda grew to employ 25 full-time workers by 2020 and was generating more than $300,000 in annual sales. Now, with USAID support, the company is poised to expand further still and add 15 new employees by August 2021.

Market forecasters estimate that in the next five years, the global demand for leather garments will grow by five to six percent. For Al Wahda, the prospect of seizing some of that market growth inspired its management in 2019 to consider expanding both the size of its production and range of its products. Within Yemen, they anticipated an expected annual growth of 10 to 15 percent. Looking beyond their country’s borders, they also wanted to move into new export markets by tapping into the strong demand for leather goods in neighboring Somalia, Ethiopia, and Djibouti.

However, Al Wahda managers knew that growth would bring its own challenges – particularly regarding weaknesses in the company’s production capacity, manufacturing efficiency, pricing strategy, and distribution channels. Without a way to address these issues, they would face significant problems, such as unexpected delays, interrupted deliveries, or variations in quality standards that could seriously undermine their expansion prospects.

“Some of the obstacles we faced were those commonly shared by other companies, such as fluctuations in fuel supplies, raw material prices, or foreign currency exchange rates. But we also faced problems associated specifically with our company, including financial and administrative challenges, especially related to expanding production,” says Factory Manager Abdulsalam Alodaini.

Yemen’s private sector holds the potential to spur economic and job growth, but it is severely under-developed. As Mr. Alodaini points out, many of the most significant constraints impacting business growth involve business planning, management, and quality control issues.

USAID’s Economic Recovery and Livelihoods Program (ERLP) helps growth-oriented companies like Al Wahda improve internal processes to become more competitive. This helps them rapidly boost sales and generate more jobs.

USAID helped Al Wahda improve financial and accounting procedures, optimize its pricing and costing methods, and enhance its logistics processes. The company adopted production and process improvements to reduce inefficiencies and waste while enhancing manufacturing performance. USAID helped Al Wahda strengthen its supply chain management, accelerate response times, improve delivery schedules, and ensure consistent quality. The company’s resource allocation, inventory management, and marketing processes were also bolstered.

For all its challenges, Yemen’s private sector has shown remarkable resilience since the outbreak of war and the global Covid-19 pandemic. A more vibrant private sector will lead to increased employment and incomes, as well as higher productivity, greater profitability, and new innovation. By strengthening the unrealized potential and ambition of growth-oriented private firms, USAID is working to leverage the social and economic promises of business growth in Yemen, revitalizing a critical source of social stability and helping to rebuild a sense of opportunity for the people of Yemen.

USAID’s Economic Recovery and Livelihoods Program (ERLP), addresses critical economic stabilization challenges in Yemen. At the macroeconomic level, it restores economic stability, enhances fiscal management, and increases international trade flows. At the microeconomic level, ERLP helps small producers create their own businesses, strengthens private sector performance and competitiveness, and creates jobs and new market linkages for sustainable livelihoods.