Determinants of MSE Performance in Afar, Ethiopia: The Moderating Role of NGO Support

This study examines the direct and moderating effects of Non-Governmental Organization (NGO) support on the operational efficiency and financial stability of micro and small enterprises (MSEs) operated by pastoralist entrepreneurs in Ethiopia’s Afar Region. Employing a convergent parallel mixed-methods design, data were collected from 384 MSE owners through structured surveys and from 84 key informants and 96 focus group participants via interviews and discussions. Partial Least Squares Structural Equation Modeling (PLS-SEM) assessed the direct effects of access to finance, market linkages, raw material availability, capacity-building training, and NGO support on performance outcomes, along with the moderating influence of NGO interventions. Findings reveal that NGO support exerts the strongest direct effects on both operational efficiency and financial stability, while market linkages and access to finance also positively influence outcomes. Raw material availability showed limited direct effects but was significantly strengthened by NGO support, highlighting the value of targeted interventions. Capacity-building training had minimal direct impact, indicating a need for context-adapted programs. Qualitative evidence confirms that NGO initiatives—through financial assistance, training, market facilitation, and youth-and women-focused programs—mitigate structural barriers and enhance enterprise resilience. The study underscores the pivotal role of NGOs in fostering sustainable MSE performance in fragile pastoral economies.