MADDAWALABUUNI

VERSI
TYCOLLEGEOFBUSI
NESSAND
ECONOMI
CSDEPARTMENTOFECONOMI
CS

ARESEARCHPROPOSALONFACTORSAFFECTI
NGTHE
PERFORMANCEOFMETALANDWOODWORKOFMI
CROAND
SMALLENTERPRI
SEI
NCASEOFGI
NNI
RTOWN,
EASTBALEZONE,
OROMI
A,ETHI
OPI
A

By
:-
MISAYEGEBRETSADI
KWALDERUFAEL

ADVI
SOR:DrGet
ahun T.

AUGUST2024

BALEROBE,
ETHI
OPI
A

i
i
 DEDI
CATI
ON
Idedi
cat
ethi
sresear
chpr
oposalt
omyadvi
sor
,bel
ovedf
ami
l
iesandmybest
f
ri
endsf
ort
hei
rcar
e,l
oveand dedi
cat
ed par
tner
shi
pint
hesuccessofmy
pr
oposalandt
oor
dermehal
fofmyr
esear
ch.

i
i
i
 STATEMENTOFTHEAUTHOR
Bymysi
gnat
urebel
ow,Ist
ateandconf
ir
mthatt
hispr
oposali
sthepl
anofmy
st
udy
;Ihav
efol
l
owedal
let
hicalandt
echni
calpr
inci
plesofr
esear
chpr
oposali
n
t
hepl
anni
ng oft
hispr
oposal
.Anyacademi
cmat
tert
hati
sincl
uded i
nthe
pr
oposal
hasbeengi
venr
ecogni
ti
ont
hroughci
tat
ion.

Thi
sresear
chpr
oposali
ssubmi
tt
edi
npar
ti
alf
ulf
il
lmentoft
her
equi
rement
sfor
BAdegr
eeofeconomi
csatt
heMaddaWal
abuUni
ver
sit
y.

Name:
Misay
eGebr
etsadi
k
Si
gnat
ure:
___
___
___
___
___
__
Dat
e:_
___
___
___
__
Depar
tment
:Economi
cs

i
v
 BI
OGRAPHI
CALSKETCH
Theaut
horwasbor
ninHakashakebel
e,Gi
nni
r Wor
edai
nBal
eZoneon11
Febr
uar
y,[Link]
etedmypr
imar
yschoolatAnesaPr
imar
ySchool
.Then,I
at
tendedmysecondar
yatGi
nni
rsecondar
yschool
.
.
Af
tersuccessf
ull
ypassedt
heEt
hiopi
anSchoolLeav
ingCer
ti
fi
cat
eExami
nat
ion
(
E.S.
L.C.
E.)
,Ij
oinedRobeCol
l
egeofEducat
ioni
n2014andgr
aduat
edwi
tht
he
Mat
hemat
icsi
nJul
y6,[Link]
tergr
aduat
ion,Iwasempl
oyedbyEastBor
ena
educat
ionof
fi
ceatmadawal
abuwor
edaAr
ti
stHachal
uHunddesaschool
.Ihad
beenwor
kingt
her
eunt
ilI j
oinedMaddaWal
abuUni
ver
sit
yinOct
ober2018t
o
f
oll
owmyBAst
udyEconomi
cs.

v
 ACKNOWLEDGEMENTS
If
eelagr
eatpl
easur
etopl
aceonev
idencemydeepsenseofappr
eci
ati
onand
hear
tfel
tthankst
omyadv
isorDr
.Get
ahunTol
osa f
ormyr
esear
chpr
oposal
dev
elopment
.
Iwoul
dli
ket
oexpr
essmyspeci
alt
hankst
oal
lmycol
l
eaguesf
ort
hei
rinv
aluabl
e
i
deasand comment
sand encour
agementt
o dev
elop myr
esear
chpr
oposal
.
Abov
eal
l
,Iwi
sht
oexpr
essmydeepestgr
ati
tudet
omyf
ami
l
ies.

v
 TABLEOFCONTENTS

APPROVALSHEETFORPROPOSAL…………………………………………………….
i
DEDI
CATI
ON i
i

STATEMENTOFTHEAUTHOR i
i
i

BI
OGRAPHI
CALSKETCH i
v

ACKNOWLEDGEMENTS v

TABLEOFCONTENTS v
i

ABSTRACT 1

CHAPTERONE 2

1.I
NTRODUCTI
ON 2

1.
1Backgr
oundoft
hest
udy 2

1.
2St
atementoft
hePr
obl
em 3

1.
[Link]
chQuest
ions 5

1.
[Link]
ect
ivesoft
hest
udy 5

1.
4.1. Gener
alObj
ect
ive 5

1.
4.2. Speci
fi
cObj
ect
ives 5

1.
[Link]
gni
fi
canceoft
heSt
udy 6

1.
[Link]
heSt
udy 6

1.
[Link]
ati
onalDef
ini
ti
onsofTer
ms 7

1.
[Link]
mit
ati
onoft
heSt
udy 7

CHAPTERTWO 8

[Link]
TERATUREREVI
EW 8

2.
[Link]
eti
calRev
iew 8

2.
1.1. Mi
croandSmal
lEnt
erpr
ises(
MSEs) 9

2.
1.2. TheRol
eofMi
croandSmal
lEnt
erpr
isei
nPov
ert
yReduct
ion 11

2.
1.3. Fact
orsI
nfl
uenci
ngPer
for
manceofSmal
lBusi
nesses 16

2.
[Link]
ri
cal
Rev
iew 19

2.
[Link]
ual
FrameWor
k 20

v
i
 CHAPTERTHREE 22

[Link] 22

3.
[Link]
ipt
ionoft
heSt
udyAr
ea 22

3.
[Link]
pesandSour
cesofDat
a 23

3.
[Link]
hodofSampl
i
ngandSampl
i
ngPr
ocedur
es 23

3.
[Link]
eSi
ze 24

3.
5.I
nst
rument
sandMet
hodsofDat
aCol
l
ect
ion 24

3.
[Link]
hodofDat
aAnal
ysi
s 24

3.
6.1. Descr
ipt
ivemet
hods 24

[Link] 25

[Link]
ES 31

5.
[Link]
ivi
tybr
eakdownandbudgetpl
an 31

5.
1.1. Act
ivi
tybr
eakdown 31

BudgetPl
an 31

5.
[Link]
ionnai
res 33

AnnexA 33

AnnexB 34

AnnexC 38

v
ii
v
ii
i
 ABSTRACT
Mi
cro and smal
lent
erpr
ises (
MSEs) ar
ethe dr
ivi
ng f
orces behi
nd t
he
devel
opmentofmar
ket
ing economi
es,i
n Devel
opi
ng count
ri
[Link] mai
n
pur
pose oft
he r
esear
ch was t
o assessi
ng t
he f
act
orst
hataf
fect
ing t
he
per
for
manceofwoodandmet
alswor
ksofMSEsi
nthest
udyar
eaofGi
nni
rTown.
Thest
udywi
l
lbeempl
oyedbot
hquant
it
ati
veandqual
i
tat
iver
esear
chdesi
gn.
Bot
hpr
imar
yandsecondar
ydat
aar
eempl
[Link]
espondentwi
l
lbesel
ect
ed
usi
ngsi
mpl
erandom sampl
i
ngt
echni
[Link]
ionnai
re,
int
ervi
ewanddocument
r
evi
ewar
ethemai
ndat
acol
l
ect
ioni
nst
rument
s,besi
des,t
hei
nter
viewquest
ions
wi
l
lbeanal
yzedusi
ngdescr
ipt
ivenar
rat
ionst
hroughconcur
rentt
ri
angul
ati
on
st
rat
[Link] dat
a wi
l
lbe anal
yzed usi
ng sampl
e st
ati
sti
calt
echni
ques
descr
ipt
ivest
ati
sti
csanal
ysi
sbyusi
ngf
requenci
es,per
cent
ages,meansand
st
andar
ddevi
ati
on ar
e empl
[Link]
ther
mor
eresear
cher
scoul
dincor
por
ate
mor
eonaboveext
ernalf
act
orsaddi
ti
onali
nfl
ati
onr
ate,dur
ati
onoft
heMSEt
o
t
ransf
ormt
onextst
ageofEnt
erpr
ise

Keywords:
-Micr
oandSmal
lEnt
erpr
ises(
MSE)
,int
ernalandext
ernalf
act
ors,
andPer
formance.

CHAPTERONE

1.I
NTRODUCTI
ON
Thi
schapt
ercov
erst
hest
udy
'sbackgr
ound,i
ncl
udi
ngt
hest
udyar
ea,t
her
eason
f
ort
he st
udy
,and t
he st
udy
's ov
eral
[Link]
s chapt
erdi
scusses t
he
chal
l
engest
hatMSEsi
nGi
nni
rtownhav
einr
unni
ngt
hei
rbusi
nesses,aswel
las
t
her
esear
chquest
ionst
hatneedt
obeanswer
edandt
hegapt
hathadt
obef
il
led
byt
hest
udy
.Int
hissect
ion,keyconcer
nssuchast
hest
udy
'sobj
ect
ivesand

1
i
mpor
tancewer
eal
sohi
ghl
i
ght
ed.

1.
1Backgr
oundofthest
udy
Micr
o and smal
lenter
pri
ses (
MSEs)wer
ethe der
ived f
orces behi
nd t
he
dev
elopmentofmar
ket
ingeconomi
[Link]
ecei
vet
hemostessent
ialeconomi
c
gr
owt
hencour
agementandmakeasi
gni
fi
cantcont
ri
but
iont
othel
ong-
ter
m
sust
ainabi
l
ityofeconomi
cdev
elopment
.MSEs,accor
dingt
osomewr
it
ers,al
so
pl
ayakeypar
tint
heest
abl
i
shmentofempl
oymentoppor
tuni
ti
esandi
ncome
sour
cesf
orawi
depor
ti
onoft
hepeopl
e(MoUDC,2013)
.Si
nce2001,Et
hiopi
an
mi
croandsmal
lbusi
nesses(
MSEs)hav
efacedanumberofpr
obl
emst
hathav
e
har
medt
hei
rper
for
[Link]
nanci
ali
ssues,al
ackofqual
i
fiedst
aff
,al
ackof
accur
atef
inanci
alr
ecor
ds,mar
ket
ingi
ssues,andal
ackofwor
kspacear
eal
l
maj
[Link]
ther
mor
e,soci
al,economi
c,cul
tur
al,pol
i
tical
,andl
egalf
act
ors
hav
eani
mpactonbusi
ness(
EMSE2001)
.

Per
sonalat
ti
tudesori
nter
nalf
act
ors,suchasaper
son'
sat
ti
tude,t
rai
ning,and
t
echni
cal know-
how, al
so hav
e an i
mpact on MSE per
for
mance
(
Wer
otaw2010)
.Accor
ding t
o a st
udy conduct
ed by Hesl
i
na etal
.(2016)
.,
ent
repr
eneur
ialat
tri
but
eshav
easi
gni
fi
canti
mpactonbusi
nessper
for
mance
t
hroughbusi
nessgr
owt
hst
rat
egyandent
repr
eneur
ialcompet
enci
esAccor
ding
t
oOl
ughor(
2015)
,thei
mpor
tanceofi
nnov
ati
on,
whi
chi
sapar
tofent
repr
eneur
ial
t
rai
ts,i
s cr
uci
alf
or t
he gr
owt
h of smal
land medi
um f
ir
[Link]
nit
ure
manuf
act
uri
ngi
nmi
croandsmal
lent
erpr
ises(
FMMSEs)ar
efr
equent
lyl
ow-
tech,
l
abor
-i
ntensi
vebusi
[Link]
tet
hef
actt
hatf
urni
tur
emanuf
act
uri
ngMSEsi
n
Et
hiopi
aaccountf
orasi
gni
fi
cantpor
ti
onoft
hecount
ry'
sGDP,somef
ailt
o
sur
viv
e,whi
l
eot
her
scont
inuef
oral
ongt
imewi
thoutev
olv
ingi
ntomi
ddl
e-l
evel
busi
nesses.

Whenwel
ookatmostf
urni
tur
emanuf
act
uri
ngMSEs,weobser
vet
hatt
hey
pr
oducei
dent
icalandnonst
andar
dpr
oduct
sandt
hatt
hei
ref
fi
ciencyhasnot
i
mpr
[Link]
esul
t,t
hepur
poseoft
hisr
esear
chi
stounder
takeast
udyt
hat
i
dent
if
iest
hepr
imar
yel
ement
sthataf
fectper
for
manceandi
nvest
igat
est
hei
r
associ
ati
on and ef
fect usi
ng descr
ipt
ive anal
ysi
s. Fundi
ng gaps ar
e a
f
undament
alobst
acl
etogr
owt
hforsmal
l
erbusi
nesses,
andt
hewi
dedi
spar
it
yin
pr
ofi
tabi
l
ity
,sur
viv
al,
andgr
owt
hofMSEscompar
edt
obi
ggerbusi
nessescr
eat
es

2
uni
quef
inanci
ngchal
l
[Link]
ther
mor
e,smal
l
-busi
nessowner
sandmanager
s
somet
imesl
ackcommer
cialexper
ienceand/
orat
rackr
ecor
dasent
repr
eneur
s.
I
n bot
h manuf
act
uri
ng and mar
ket
ing,t
he ear
ly st
ages ofexpansi
on ar
e
char
act
eri
zedbyuncer
tai
nty
.Smal
l
er,mor
einnov
ati
vebusi
nesseswor
kinhi
gh-
compl
exi
tyf
ast
-changi
ng set
ti
ngs,and r
elysi
gni
fi
cant
lyon i
ntangi
bleasset
s
(
OECD,2006)
.Taki
ngt
heseconsi
der
ati
onsi
nto account
,themostsi
gni
fi
cant
quest
ionaddr
essedi
nthi
sst
udyi
swhatf
act
orsi
nfl
uenceMSEper
for
mancei
n
Gi
nni
rTownf
ormet
alsandwoodwor
[Link]
nni
rtowni
samaj
ort
owni
ntheOr
omi
a
r
egi
onalst
ate,whi
chi
slocat
edi
nsout
heastEt
hiopi
a'
[Link]
ioussmal
landmaj
or
busi
nessent
erpr
isesexecut
ingt
hei
rmar
ket
ingact
ivi
ti
esar
ecent
eredi
nthet
own.
Thesebusi
nesseshav
ebeenconf
ront
edwi
thav
ari
etyofmar
ket
ingandot
her
pr
obl
emst
hatmayl
i
mitt
hei
rabi
l
ityt
ocont
ri
but
etot
het
own'
seconomi
cand
soci
aldev
elopment
.Asar
esul
t,t
hiskr
esear
chpr
oposalat
tempt
edt
orev
iew
sev
eralt
heor
eti
calandempi
ri
calst
udi
esonf
act
orsi
nfl
uenci
ngt
heper
for
mance
oft
hei
nter
est
ingi
ndust
ry.

1.
2. St
atementoft
hePr
obl
em
MSEsar
einmostdev
elopi
ngCount
ri
esf
aceconst
rai
ntsbot
hatst
artupphases
andaf
tert
hei
rest
abl
i
shment
.Ther
ear
emanypr
obl
emst
hatmayhampert
he
heal
thygr
owt
handpr
ogr
essofMSE,Especi
all
yont
hewoodandmet
alwor
ks
ent
erpr
ise.I
nAf
ri
ca,
forexampl
e,t
hef
ail
urer
ateofMSEsi
sabout85%outof100
ent
erpr
isesowi
ng t
o absenceofski
l
lsand accesst
o capi
tal(
Fedahunsi
,K
1997:
170-
186)
.Iti
sty
picalofMSEsi
nAf
ri
cat
obel
acki
ngi
nbusi
nessski
l
lsand
col
l
ater
alt
omeett
heexi
sti
ngl
endi
ngcr
it
eri
aoff
inanci
ali
nst
it
uti
ons(
Wor
ldBank,
2004:
29)
.Thi
s,accor
ding t
o Wor
ld Bank,has cr
eat
ed f
inance gap i
n most
mar
ket
[Link]
eabl
etosour
ceandobt
ainf
inancemost
lyf
rom i
nfor
mal
sect
ors,
li
kef
ri
endsandr
elat
iveswhi
l
emedi
um orl
argeent
erpr
isesobt
ainf
unds
f
rom [Link]
sunequalaccesst
ofi
nancebyMSEsandmedi
um andl
arge
ent
erpr
iseshasunder
minedt
her
oleofMSEsi
ntheeconomi
cdev
elopmenti
n
Af
ri
cancount
ri
es(
Wor
ldBank,2004:
29)
.Ther
ear
emanypr
obl
emst
hatmay
hampert
heheal
thygr
owt
handpr
ogr
essofMSE,especi
all
yont
hewoodand
met
alwor
ksent
erpr
ise.
Manyoft
hest
udi
eswer
edonesof
aronFact
orsaf
fect
ingt
heper
for
manceof

3
met
alandWoodwor
ksofmi
croandsmal
lent
erpr
[Link]
nst
ance:Aber
aAbebe
(
2017)ment
ioni
nhi
sresear
chsomeoft
hepr
obl
em whi
chwood&met
alMSEs
f
ace,
inadequat
eaccesst
omar
ket
,lackf
inanceandpr
obl
emsofi
nfr
ast
ruct
ures

Thest
udyconduct
edbyEt
hiopi
anCSAdi
scl
osest
hat
,thecont
ri
but
ionofsmal
l
ent
erpr
isesi
ncr
eat
ingj
oboppor
tuni
ti
esandi
nthedev
elopmentofoureconomy
i
svi
tal(
FMSEDA,2006:
13)
.Howev
er,t
hei
rcont
ri
but
ioni
sver
ylow i
ncompar
ed
wi
tht
hatofot
hercount
ri
esduet
ofi
nanci
alpr
obl
em,
lackofqual
i
fiedempl
oyees,
l
ackofpr
operf
inanci
alr
ecor
ds,mar
ket
ingpr
obl
ems,l
ackofwor
kingpr
emi
ses
andr
awmat
eri
[Link]
nfor
mat
ionaboutmar
ketoppor
tuni
ti
esandst
andar
ds
andr
egul
ati
onsi
soneoft
heunder
lyi
ngf
act
orst
hathi
ndert
hei
rper
for
mance
(
Mul
uGebr
eey
esus,
2009:
10-
13)
.

Accor
dingt
oZel
ekeWor
ku(
2009:
1-9)l
ackofi
ntegr
ati
onbet
weent
hev
ocat
ional
cur
ri
cul
um t
aughtatacademi
cinst
it
uti
onsandski
l
lsr
equi
redatt
hewor
kpl
acei
n
smal
lbusi
nesses and ent
erpr
ises i
s a maj
orobst
acl
etot
he gr
owt
h and
dev
elopmentofMSEs

The same aut

horcont
inued st
ati
ng:t
he per
for
mance oft
he MSE sect
ori
n
Et
hiopi
aispoori
ncompar
isonwi
thsi
mil
arsect
orsi
not
her…Af
ri
cancount
ri
es
such as Sout
h Af
ri
ca,Keny
a,Uganda and Tanzani
[Link]
lbusi
nesses and
ent
erpr
ises i
n Et
hiopi
a ar
e gener
all
ychar
act
eri
zed byan acut
e shor
tage of
f
inance,l
ackoft
echni
calski
l
ls,l
ackoft
rai
ningoppor
tuni
ti
esandr
awmat
eri
als,
poori
nfr
ast
ruct
ureandov
er-
tax.

I
n2012,
thepopul
ati
onofur
banEt
hiopi
awasest
imat
edt
obeov
er13mi
l
li
on(
or
16.
5per
centoft
hecount
ry'
stot
alpopul
ati
on)(
Eji
gay
ehuandEdr
iss,2012)
.Ev
en
t
hough Et
hiopi
a'
slev
elofur
bani
zat
ion i
slow i
n cont
rastt
o ot
herAf
ri
can
count
ri
es,t
heur
banpopul
ati
oni
srapi
dlygr
owi
ngatar
ateof4% eachy
ear
.
Et
hiopi
a'
sur
banpopul
ati
oni
spr
edi
ctedt
oexceed50mi
l
li
oni
n2050i
fcur
rent
gr
owt
hrat
escont
inue.
Oneoft
hepr
imar
yfact
orscont
ri
but
ingt
oincr
easedf
ood
i
nsecur
it
yint
hecount
ry'
sur
banar
eashasbeent
hecombi
nat
ionofur
bani
zat
ion
andpr
icei
nfl
ati
on(
WFP,
2009)
.

Becauseoff
astmi
grat
ionofpeopl
efr
om v
ari
ouspar
tsoft
her
egi
on,ahi
gh
nat
ural
growt
hrat
eofpopul
ati
on,
alowdeat
hrat
e,andl
i
mit
edwor
koppor
tuni
ti
es

4
i
nthepr
ivat
esect
orandgov
ernment
,thet
own'
sunempl
oymentpr
obl
em has
wor
senedi
nrecenty
ear
s.(
2017,Of
fi
ceofTownAdmi
nist
rat
iveSoci
o-Economi
c
Pr
ofi
l
es)
.

Ont
heot
herhand,t
heunempl
oymentr
atei
sri
singasar
esul
toft
hel
arge
numberofst
udent
sgr
aduat
ingf
rom uni
ver
sit
ies,col
l
eges,andot
heri
nst
it
uti
ons
(
TSEPO,2017)
.Accor
dingt
oTSEP(
2017)
,ther
ewer
e1340degr
eeanddi
ploma
hol
der
soutofwor
kduet
oashor
tageofj
obpossi
bil
i
ties.I
naddi
ti
ont
opr
ovi
ding
empl
oymentoppor
tuni
ti
es f
orMSEs i
nthe communi
ty,st
akehol
der
s shoul
d
i
dent
if
yobst
acl
est
hati
mpedet
heper
for
manceofMSEsi
nvol
vedi
nwoodand
met
alwor
kandpr
ovi
dedi
rectsuppor
tthr
oughv
ari
ousi
mpl
ement
ati
onmet
hods.

Ther
efor
e,t
her
esear
cherwant
stof
il
landdev
elopst
hegapbet
weent
hepr
evi
ous
r
esear
chandt
hisst
udyi
.e.t
her
ewi
l
lbeAccesst
owor
kingspace(
Gov
ernment
-
bui
l
tsheds)
,access t
o mar
ket
s(l
i
nkages)
,access t
ofi
nance (
guar
ant
ee
pr
ovi
si
on)
,accesst
oindust
ri
alext
ensi
on(
avar
iet
yofbusi
nessdev
elopment
ser
vices such as mar
ketl
i
nkages and t
echni
calsuppor
t),suppl
i
es ofr
aw
mat
eri
alsofwood&met
alsi
nal
ltar
get
edMSEsandaccesst
otr
aini
ngand
adv
ancedt
echnol
ogyar
eamongt
hef
act
orst
hatwi
l
lbeaddr
essedi
nthi
sst
udy
i
nEastBal
eZoneGi
nni
rtown.

1.
3. Resear
chQuesti
ons
 Whatar
et hesourcesoff
inanceorf
undsav
ail
abl
etot
hewoodandmet
al
wor
ksofMSEs?
 How mar
ket
ingpr
obl
emsaf
fect
smar
ket
ingef
fi
ciencyper
for
manceoft
he
woodandmet
alwor
ksofMSEs?
 Whatar
ethei
nter
nalandext
ernalf
act
orst
hataf
fectt
heper
for
manceof
MSEs?
 Whatar
ethepr
obl
emsofwoodandmet
alwor
ksofMSEsi
ncaseofGi
nni
r
Townmi
nimi
zed?

1.
4. Obj
ect
ivesoft
hest
udy

1.
[Link]
alObj
ecti
ve
Themai nobj
ect
iveofthestudyi
stoassessi
ngf
act
orst
hatar
eaf
fect
ingt
he
per
for
manceofwoodandmet
alwor
ksofMSEsi
nEastBal
ezonei
ncaseof

5
Gi
nni
rTown.

1.
[Link]
fi
cObj
ect
ives
Thespeci
fi
cobj
ect
ivesar
eto:
 Toexami
net
hesour
cesoff
inanceorf
undsav
ail
abl
efort
hest
art
-upandt
he
expansi
onoft
hewoodandmet
alwor
ksof MSEs.
 Toexami
net
hei
mpactofmar
ket
ingpr
obl
emsonmar
ket
ingef
fi
ciencyoft
he
woodandmet
alwor
ksofMSEsper
for
mance
 Toassesst
hei
nter
nalandext
ernalf
act
orst
hataf
fectt
heper
for
manceoft
he
woodandmet
alwor
ksofMSEs.
 ToRecommendpossi
blesol
uti
ont
oal
l
evi
atet
hepr
obl
em oft
hewoodand
met
alwor
ksofMSEs

1.5. Signi
fi
canceoft
heStudy
Thi
sstudywi
l
lhelpMicroandSmallBusi
nessesi
nthemet
alandwoodwor
king
i
ndust
ri
esbecomemor
eawar
eoft
heel
ement
sthati
nfl
uencet
hei
ref
fect
iveness
i
nter
msofmar
ket
ingef
fi
ciencyandef
fect
ivenessandbui
l
dpl
ant
stomi
ti
gat
e
anyr
iskst
hatmayar
ise.
I
tal
soenabl
est
hem t
orecogni
zemar
ket
ingasacr
it
icalcomponentoft
hei
r
company
'sper
for
manceandexpansi
on.
The st
udy
'sf
indi
ngs assi
stot
herMSEs i
n exami
ning t
hei
roper
ati
ons and
under
standi
ngt
hedanger
stheyf
acei
nor
dert
otakepr
oact
iveef
for
tst
omi
ti
gat
e
t
heser
[Link]
ther
mor
e,t
hef
indi
ngsoft
hisst
udyar
eant
ici
pat
edt
oai
dint
he
est
abl
i
shmentofpol
i
ciesbyt
hegov
ernment
,MSE dev
elopmentof
fi
ces,and
ot
herr
elev
antst
akehol
der
sint
hecount
ry'
sMSEsect
[Link]
esul
tsoft
hisst
udy
wi
l
lbehi
ghl
i
ghtt
hecompet
it
ivest
rat
egi
est
hatMSEsi
nal
lsect
orscanempl
oyi
n
or
dert
o sur
viv
einat
urbul
entbusi
ness env
ironmenti
nfl
uenced by l
arger
or
gani
zat
ions,andt
hef
indi
ngshi
ghl
i
ghtt
hecompet
it
ivest
rat
egi
est
hatMSEsi
n
al
lsect
orscanempl
oyi
nor
dert
osur
viv
einat
urbul
entbusi
nessenv
ironment
i
nfl
uencedbyl
argeror
gani
zat
ions.

1.6. ScopeoftheSt
udy
Thestudywi
l
lbeli
mitedtoGinni
rtown,EastBal
eZone,Or
omi
aregi
onalst
ate,
whi
chi
ssubdi
vi
dedi
ntof
oursub-
admi
nist
rat
iveKeebl
e’
s,Thesur
veywi
l
lfocus
excl
usi
vel
yonmet
alandwoodwor
kMSEst
hatar
enewl
yact
iveandhadbeen

6
r
egi
ster
ed under t
he Gi
nner t
own admi
nist
rat
ion MSE. Fr
om t
heor
eti
cal
per
spect
ive,onl
yext
ernalf
act
orssuchas,pol
i
ticall
egalf
act
ors,wor
kpr
emi
ses
f
act
ors,t
echnol
ogi
calf
act
ors,i
nfr
ast
ruct
uralf
act
ors,mar
ket f
act
ors,r
aw
mat
eri
alf
act
orsandi
nter
nalf
act
orsmanagementf
act
orsandent
repr
eneur
ial
f
act
orsar
econsi
der
edasi
ndependentv
ari
abl
esandper
for
manceasdependent
v
ari
abl
[Link]
hodol
ogi
cal
l
y,t
his st
udy wi
l
luse si
mpl
erandom t
echni
ques
met
hodt
odi
str
ibut
equest
ioner
sforoper
atesMSEandusepur
posi
vesampl
e
met
hodt
omadei
nter
view wi
thmanger
[Link]
hisst
udyal
so
i
ncl
udespr
ocessi
ngt
hesesur
vey
swi
tht
heut
mostcar
eandat
tent
ion.

1.
7. Oper
ati
onalDef
ini
ti
onsofTer
ms
Mi
croent
erpr
ise:meanscommer
cialent
erpr
isewhosecapi
tali
snotexceedi
ng
bi
rr 20,
000 ot
her t
han hi
gh t
echnol
ogy and consul
tancy ser
vices.
Ent
erpr
isesempl
oyi
ng10orf
ewerwor
ker
s.
Smal
lent
erpr
ise:meansabusi
nessengagedi
ncommer
cialact
ivi
ti
eswhose
capi
tali
sexceedi
ngbi
rr20,
000andnotexceedi
ng50,
000bi
rr
,ot
hert
han
hi
gh t
echnol
ogy and consul
tancy ser
vice i
nst
it
uti
on and numberof
empl
oyi
ng11-
50wor
ker
s.
Fact
ors:
Afact
ori
sacont
ri
but
oryaspectsuchaspol
i
tico-
legal
,wor
kingpr
emi
ses,
t
echnol
ogi
es,i
nfr
ast
ruct
ures,mar
ket
ing,f
inanci
al,management and
ent
repr
eneur
iali
nfl
uencest
hataf
fectper
for
manceofmi
croandsmal
l
ent
erpr
ises.
Per
for
mance:i
nthi
spaperper
for
mancedef
inedi
nter
msofpr
ofi
tabi
l
ityoft
he
MSE
Cooper
ati
ve:associ
ati
onofatl
east10i
ndi
vi
dual
swhoar
efr
om t
hesamear
ea.
Ent
erpr
ise:I
tref
erst
oauni
tofeconomi
cor
gani
zat
ionoract
ivi
tywhet
her
publ
i
corpr
ivat
eengagedi
ntot
hemanuf
act
uri
ngofgoods.
Manuf
act
ure of met
alpr
oduct
s:ar
e an ent
erpr
ises sect
or engaged i
n
manuf
act
ure of f
abr
icat
ed met
al pr
oduct
s,except machi
ner
y and
equi
pment
;manuf
act
ureofpar
tsandaccessor
iesf
ormot
orv
ehi
clesand
t
hei
rengi
nes.
Par
tner
shi
p:i
nvol
vest
woormor
eindi
vi
dual
swhohav
eapar
tner
shi
pagr
eement

7
 t
ooper
ateabusi
nessandshar
etheear
ningsandl
i
abi
l
iti
esoft
hev
ent
ure.
Respondent
:respondent
sar
ethosei
ndi
vi
dual
swho ar
eownermanager
sor
oper
ator
sofanent
erpr
ise.
Cr
edi
tscor
ingt
echni
ques:Thi
sinv
olv
est
heuseofst
ati
sti
calmodel
sbyl
ender
s
t
oappr
oveLoanst
oSMEsbypr
edi
cti
ngt
hepr
obabi
l
ityofdef
aul
t
Loan:
tol
endespeci
all
ymoneyoncondi
ti
ont
hati
twi
l
lber
etur
ned.

1.
8. Li
mit
ati
onoft
heSt
udy

Ther
esear
cherpur
posel
ydel
i
mit
edt
hescoopoft
hest
udyt
oassesst
hef
act
or
t
hataf
fectt
heper
for
manceofwoodandmet
alwor
kmi
croandsmal
lent
erpr
ises.
Thest
udywi
l
lbe conduct
edatGi
nni
rtown,EastBal
eZoneOr
omi
[Link]
or
l
i
mit
ati
onoft
hest
udyi
sbr
ini
ngl
i
mit
edonl
yinGi
nni
rtowneastbal
ezoneon
wood and met
alwor
k mi
cro and smal
lent
erpr
ises,t
ime ofconst
rai
ntt
he
r
esear
ch,
lackoff
ewr
entr
elat
edwor
ksaswel
last
ranspor
[Link]
nli
mit
ati
on
oft
hest
udywi
l
lbel
ackofr
ecentl
i
ter
atur
eint
hear
ea,const
rai
nts(
lackof
accesst
odat
a),
sampl
i
ngr
est
ri
cti
ons,
andot
herr
esour
cel
i
mit
ati
onset
c.

8
 CHAPTERTWO

[Link]
TERATUREREVI
EW
2.
1. Theor
eti
calRev
iew
Accor
dingt
o(EnockNkonoki
,2010)
,themai
nvar
iabl
es/
probl
emst
hatr
est
ri
ct
smal
lfi
rms'success/
growt
hmayal
sobedi
vi
dedi
ntot
wocat
egor
ies:el
ement
s
t
hator
igi
nat
efr
om i
nsi
det
hecompany(
int
ernalt
othef
ir
m)andel
ement
sthat
ar
isef
rom out
doorcompany(
ext
ernalt
othef
ir
m).
Thet
rai
tsandmi
ndsetoft
he
ent
repr
eneur
(s)and t
heassoci
ati
onasacompl
etear
einsi
dev
ari
abl
est
hat
r
est
ri
ctsmal
lcompanygr
owt
[Link]
esmadei
nthef
ir
m,whet
herornotby
wayoft
he ent
repr
eneur
(s)ort
he wor
kfor
ce can hav
e an i
mpacton t
hese
par
amet
[Link]
act
eri
sti
csi
ncl
udeal
ackofdesi
reanddr
ive,al
ackof
ent
erpr
isei
nfor
mat
ionandexper
ience,
andal
ackofeconomi
cresour
[Link]
enoughcapi
tal
,l
ackofast
rongbusi
nesspl
an/
visi
ont
hef
t/cheat
ing,aswel
lasa
l
ackofhav
efai
thi
nthecor
por
atewor
ld,
Poormanagement
,wor
kingunr
egi
ster
ed
ori
nfor
malcor
por
ati
ons,i
nsuf
fi
cientr
ecor
d-keepi
ng,i
nadequat
etr
aini
ng and
coachi
ngPeopl
efact
or/
lackofr
equi
redt
alent
,asni
cel
yasapoor
lywr
it
ten
pr
ofessi
onaladv
ert
isementandconsul
tat
[Link]
ernalconst
rai
ntsl
i
mit
ingsmal
l
associ
ati
ongr
owt
har
ethoset
hathav
etodowi
thdeci
sions,r
ules,andpol
i
cies
t
hatdi
rect
lyaf
fectasmal
lfi
rm,andi
nresponse,whi
l
ethecompanydoesno
l
ongerhav
edi
rectcont
rolov
ert
hesel
ect
ionsmade,
itdoeshav
ethecapabi
l
ityt
o
ef
fectal
ter
nat
eint
hei
rexi
stence.
These el
ement
s come f
rom out
side t
he
company
,and t
hey ar
e: Cor
rupt
ion,compet
it
ion,aut
hor
it
y’s pol
i
cy,and
t
echnol
ogi
cal
bar
ri
ersar
eal
li
ssuest
hatwantt
obeaddr
essed.
Er
adi
cat
ion ofpov
ert
y,women'
s empower
ment
,job cr
eat
ion,and ent
erpr
ise
dev
elopmentasapur
posei
nit
sel
far
eal
lpossi
bler
esul
tsofmi
croandsmal
l
busi
nessi
nfr
ast
ruct
uredev
elopment(
FDRE2010;UNEconomi
cCommi
ssi
onf
or
Af
ri
ca2008;Moy
i2013;Mar
kosetal
.2015;Br
endaandGr
egor
y2015)
.MSEs,
accor
dingt
oHabt
amuetal
.(2013)
,canassi
stpr
omot
emonet
aryt
ransi
ti
on
t
hroughmaki
nguseofpeopl
e'
scapabi
l
iti
esandski
l
lswi
thoutr
equi
ri
ngf
ull
-si
ze
t
rai
ning,cash,oradv
ancedt
echnol
ogy
.Smal
landmi
crocor
por
ati
onspr
ovi
de

9
i
ncome,empl
oyment
,tal
entdev
elopment
,it
ems and pr
ovi
derdel
i
ver
y,and
di
ff
erentadv
ant
agest
ohumansi
ncr
eat
ingcount
ri
es.(
Anne,2014)
.Semi
-st
atus
MSEsar
eoneoft
het
oppr
ior
it
iesamongstAf
ri
candev
elopmentpackages(
UN
2008)
,andar
eseenasawayt
ogai
nasmoot
htr
ansi
ti
onf
rom commont
o
cont
empor
aryi
ndust
ri
alsect
ors,asni
cel
yasapr
eci
ouscont
ri
but
ion t
othe
count
ry'
sgr
owt
handdev
elopmenti
nphr
asesofj
obadv
entatal
owcapi
talcost
(
Stephen and Wasi
u 2013)
.As a r
esul
t,t
he GFDRE has i
dent
if
ied MSE
cont
ri
but
ionst
ocount
rywi
dei
mpr
ovementef
for
ts,andanMSEdesi
gnhasbeen
dev
elopedandappl
i
edonaccountt
hat1997.(
MSE2011)
.Mor
ethan1.
5mi
l
li
on
j
obshadbeencr
eat
edatsomepoi
ntoft
hef
ir
stMSEi
mpr
ovementmet
hod
(
1997–2002)
.Howev
er,numer
ousst
udi
eshav
eobser
vedt
hatMSEf
acesev
er
i
nsi
deandext
eri
orhur
dlesi
nthei
roper
ati
[Link]
oseexami
nat
ionofnumer
ous
r
esear
chhasf
oundki
ndar
angeofboundar
iest
oMSEi
ncr
easeandsur
viv
al.
MSEsi
nEt
hiopi
ahav
eal
sobeenconf
ront
edwi
thaquant
it
yofchal
l
engest
hat
obst
ruct
edt
hei
[Link]
.(2013)hadpi
npoi
ntedt
hati
nsuf
fi
cient
i
nfr
ast
ruct
uref
aci
l
iti
es,i
nadequat
efi
nance,t
err
ibl
emanager
ialand t
echni
cal
ski
l
ls,
andi
nadequat
ewor
kingpr
emi
seshadbeent
hef
undament
alchal
l
engest
o
MSEs’pr
ofi
tabl
eoper
ati
onsf
oll
owedbymeansofadv
ert
isi
ngpr
obl
ems,Low
assi
stf
rom r
espect
ivei
nst
it
uti
[Link]
ightofent
ryt
o capi
tali
sthemost
out
standi
ngpr
obl
em amongal
ladv
ersev
ari
abl
esi
mpedi
ngt
hei
ncr
easeand
dev
elopmentoft
heMSEsect
ori
nmostcount
ri
es,accor
dingt
oDev
ereuxand
Shar
p(2006)
,asment
ionedi
nZel
eke(
2009)andMbony
aneandLadzani(
2011)
.
Fur
ther
mor
e,Haf
tuetal
.(2009)f
oundt
hatascar
cit
yofmoneyandwor
kingar
ea
ar
ethemostobst
acl
esski
l
ledbywayofamassi
veper
cent
ageoft
hepopul
ati
on.
Wor
king pr
emi
ses,mar
ket
ing,and f
inanci
alv
ari
abl
es hav
e been t
he most
i
mpor
tantf
act
orsnot
abl
yaf
fect
ingMSEper
for
mance,
accor
dingt
oHai
l
emi
chael
(
2014)andAmasu(
2012)
.

2.
1.1. Mi
croandSmal
lEnt
erpr
ises(
MSEs)

10
2.
1.2.
Defi
nit
ions:-Ther
eisapr
obl
em amongcov
eragemaker
s,economi
sts,and
busi
nesspr
ofessi
onal
sthatMi
croandSmal
lEnt
erpr
ises(
MSEs)ar
edr
iver
sof
monet
arygr
owt
[Link]
esomeMSEscont
ri
but
espr
omi
nent
lyt
othef
inanci
al
sy
stem t
hru dev
elopi
ng mor
e empl
oymentoppor
tuni
ti
es,pr
oduci
ng gr
eat
er
per
for
mance v
olumes,i
ncr
easi
ng expor
ts and i
ntr
oduci
ng i
nnov
ati
on and
ent
repr
eneur
shi
p ski
l
[Link]
eyesus(
2009)ci
ti
ed i
n Dababnehand Tukan
(
2007)
,thechar
act
eri
sti
cofMSEnotonl
ydi
spl
ayst
hemonet
arypat
ter
nsofa
[Link]
eraddi
ti
onal
l
ythesoci
alandcul
tur
aldi
mensi
[Link]
ff
eri
ng
pat
ter
nsar
erat
hermi
rr
oredi
nsi
deone-
of-
a-ki
nddef
ini
ti
onsandcr
it
eri
aofMSEs
adopt
edbywayofexcept
ionalcount
ri
es:wher
eassomer
efert
other
angeof
empl
oyeesast
hei
rspeci
alst
andar
dsf
orMSEs,ot
her
susei
nvest
edcapi
tal
,and
someot
heruseacombi
nat
ionoft
hewi
dev
ari
etyofempl
oyees,
inv
est
edcapi
tal
,
i
ncomeandent
erpr
iseki
ndRi
gor
ousl
ydef
ini
ngsmal
lbusi
nesshasusual
l
ybeen
di
ff
icul
t,ev
encont
rov
ersi
al.

Thet
erm cov
ersav
ari
etyoff
ir
msandmostwr
it
ersusei
tasanal
ter
nat
ive
l
oosel
ybasedont
hei
rpur
poseofst
udy
.AsGebr
eey
sus(
2009)adopt
edt
he
def
ini
ti
onofsmal
lent
erpr
isef
rom Pet
erson,Al
baum andKozmet
sky
s(1986)
,A
smal
lent
erpr
isei
sonewhi
chi
sindependent
lyownedandoper
ated,
andwhi
chi
s
nol
ongerdomi
nanti
nit
ssubj
ectofoper
ati
on‟Resear
cher
sandot
herf
asci
nat
ed
ev
ent
shav
eusedpr
eci
sest
andar
dst
ofunct
iont
hesmal
lcommer
cialent
erpr
ise
asaassembl
epr
iceadded,
costofasset
s,annual
sal
es,
andr
angeofempl
oyees.
Thel
att
ert
wost
andar
dsar
emostf
requent
lyusedt
odel
i
mitt
hecat
egor
y.I
nthe
caseofEt
hiopi
a,t
her
eisl
ackofuni
for
m def
ini
ti
onatt
henat
ionalst
aget
ohav
ea
f
requentappr
eci
ati
onoft
heMSEsect
[Link]
l
ethedef
ini
ti
onbywayofMi
nist
ry
ofTr
adeand I
ndust
ry(
MoTI
)makesuseofcapi
tali
nvest
ment
,theCent
ral
St
ati
sti
calAut
hor
it
y(CSA)makesuseofempl
oymentandf
avor
scapi
tali
ntensi
ve
appl
i
edsci
encesasay
ardst
[Link]
ini
ti
onusedbyMoTI
,whi
chmakesuseof
capi
tali
nvest
mentasay
ardst
ick,hasbeendev
elopedf
orf
ormul
ati
ngmi
croand
smal
lor
gani
zat
ioni
mpr
ovementmet
hodi
n1997ConceptofSmal
landMi
cro
Ent
erpr
ises(
SMEs)eachuni
tedst
atest
endst
oder
ivei
tsowndef
ini
ti
onpr
imar
il
y
basedont
heposi
ti
onofsmal
l
-scal
eor
gani
zat
ionsar
epr
edi
ctedt
opl
ayi
nthe
f
inanci
alsy
stem andt
hepr
ogr
ammerofassi
stancedesi
gnedt
oobt
aint
hatgoal
.

11
Var
yingdef
ini
ti
onsamongsti
nter
nat
ionall
ocat
ionsmayaddi
ti
onal
l
yoccurf
rom
v
ari
ati
onsi
nindust
ri
alagencyatext
raor
dinar
ydegr
eesofeconomi
cdev
elopment
i
ncomponent
soft
hesameusofa(
Anamekwe,
2001)
.

Fori
nst
ance,
Sul
e(1986)r
ecommendedt
hatacompanyt
hatcanber
egar
dedas
mi
croorsmal
linaneconomi
cal
l
yadv
ancedUSAl
i
keUni
tedSt
atesofAmer
ica,
Gr
eatBr
it
ainorJapan,gi
vent
hei
rhi
ghst
ageofcapi
tali
ntensi
tyandsuper
ior
t
echnol
ogy
,mayaddi
ti
onal
l
ybe cat
egor
ized as medi
um orev
en l
arge i
na
cr
eat
ingusofal
i
keNi
ger
[Link]
ini
ti
onsal
so exchangeov
ert
ime,owi
ngt
o
adj
ust
ment
sinr
atel
evel
s,adv
ances i
ntechnol
ogi
calknow-
how orot
her
consi
der
ati
ons. I
n t
he Uni
ted St
ates of Amer
ica, t
he Smal
l Busi
ness
Admi
nist
rat
ion (
SBA,2003)hasanumberdef
ini
ti
onsf
orsmal
lcor
por
ati
ons
dependi
ngont
het
ypeofi
ndust
[Link]
mil
arl
y,i
nEt
hiopi
ather
eisnouni
for
m
def
ini
ti
onatt
hecount
rywi
dedegr
eet
ohav
eaf
requentunder
standi
ngoft
heMSE
sect
[Link]
nist
ryofTr
adeandI
ndust
ry(
MoTI
)andt
heEt
hiopi
anCent
ralSt
ati
sti
cs
Aut
hor
it
y(CSA)hav
edescr
ibedMSEssepar
atel
[Link]
l
ethedef
ini
ti
onbymeans
ofMoTImakesuseofcapi
tal
inv
est
ment
,theCSAmakesuseofempl
oymentand
f
avor
scapi
tali
ntensi
vet
echnol
ogi
esasay
ardst
[Link]
ini
ti
onusedwi
tht
he
ai
dofMoTI
,whi
chusecapi
tali
nvest
mentasay
ardst
ick,
hasbeendev
elopedf
or
f
ormul
ati
ngMSEi
mpr
ovementst
rat
egyi
n1997(
MoTI
,1997:
8-21)
.

Accor
dingt
other
eli
abl
edef
ini
ti
onsofMoTI
,mi
croor
gani
zat
ionsar
eagenci
es
ent
erpr
isesf
oundi
nal
lsect
orsofEt
hiopi
aneconomywi
thapai
dupcapi
tal
(fi
xed
asset
s)ofnol
ongerext
rat
hanBi
rr20,
000,
howev
erexcl
udi
nghi
ght
echnol
ogi
cal
know-
howconsul
tancycor
por
ati
onsandot
herex
cessi
vesci
enceest
abl
i
shment
s.
Smal
lor
gani
zat
ionsar
ecommer
cialent
erpr
iseagenci
eswi
thapai
dupcapi
talof
gr
eat
ert
hanBi
rr20,
000butnow notexceedi
ngBi
rr50,
000andexceptf
orhi
gh
t
echnol
ogy consul
tancy cor
por
ati
ons and ot
her excessi
ve t
echnol
ogy
or
gani
zat
ions(
MoTI
,1997:
821)
.

Accor
ding t
oregul
ati
on,“
micr
o ent
erpr
ise”means an ent
erpr
ise hav
ing a
compl
etecapi
tal
,exceptf
orbui
l
ding,notexceedi
ngBi
rr50,
000i
nthecaseof
pr
ovi
derzoneornownotexceedi
ngBi
rr100,
000i
nthecaseofi
ndust
ri
alsect
or
andengages5empl
oyeesi
ncl
udi
ngt
heowner
,hi
shousehol
dcont
ri
but
orsand

12
di
ff
erentper
sonnel(
Art
.2(
1))
.Thesamer
ulesdef
ines“
smal
lent
erpr
ise”asan
ent
erpr
isehav
ingat
otalcapi
tal
,exceptbui
l
ding,f
rom Bi
rr50,
001t
o500,
000i
n
t
hecaseofpr
ovi
dersect
ororBi
rr100,
001t
oBi
rr1,
500,
000i
nthecaseof
i
ndust
ri
alsect
orandengages6t
o30empl
oyeesi
ncl
usi
veoft
heownerhi
s
househol
dpar
ti
cipant
sandot
herempl
oyees(
Art
.2(
2))
.

As we can under
stand f
rom t
he abov
e def
ini
ti
ons,t
her
eis no uni
ver
sal
l
y
accept
abl
edef
ini
ti
[Link]
ff
erentschol
arsdef
ineMSEsdi
ff
erent
lybased
ont
hel
evelofdev
elopmentoft
hecount
ryunderr
evi
[Link]
e,i
tis
usualt
oseet
hatdi
ff
erenti
nst
it
utesdef
ineMSEsdi
ff
erent
lyusi
ngt
hei
rown
par
amet
ers. Aswecanappr
ehendf
rom t
heabov
edef
ini
ti
ons,t
her
eisno
uni
ver
sal
l
y accept
abl
e def
ini
ti
on [Link]
ff
erentpupi
l
s out
li
ne MSEs i
n
anot
herwaybasedont
hest
ageofdev
elopmentoft
heUSAofabel
owr
evi
[Link]
pr
ovenabov
e,i
tiscommont
oseet
hatdi
sti
ncti
nst
it
utesout
li
neMSEsdi
ff
erent
ly
t
heuseoft
hei
rper
sonal
par
amet
ers.

2.
[Link]
eofMi cr
oandSmallEnt
erpri
seinPover
tyReduct
ion
Pover
tyin Et
hiopi
ai sful
l
-si
ze and remains a mostimportantpr
ojectof
sust
ainabl
eimpr
ovementandst
abi
l
ity(
Lut
her
anWor
ldFeder
ati
onofEt
hiopi
a,
2006ment
ionedi
nEshet
u&Mammo,2009:
2).Bynow,i
tiscl
earandagr
eeabl
e
t
hatpov
ert
y,eachi
nur
banand/
orr
uralar
eas,i
sal
laboutl
ackoff
undament
al
needs,l
owori
nsuf
fi
ci
entst
ageofear
ningsandconsumpt
ion,t
err
ibl
ecommand
ov
err
esour
ces,
andhi
ghl
evelofsoci
alexcl
usi
on,
inequal
i
tyandv
ulner
abi
l
ity
.The
posi
ti
on pl
ayed t
hrough MSEs,t
hrut
he numbersoci
oeconomi
c adv
ant
ages
emanat
ing f
rom t
hear
eawasonceobser
ved t
o beemi
nenti
ntheav
erage
i
mpr
ovementef
for
tandsy
stem ofnat
ions.I
not
herwor
ds,byusi
ngpr
oduci
ng
l
argerv
olumesofempl
oymentaswel
lasgr
eat
ert
ier
sofi
ncome,t
heMSEswi
l
l
notsol
ely hav
e cont
ri
but
ed cl
osert
o pov
ert
yreduct
ion,howev
ert
hey wi
l
l
addi
ti
onal
l
yhav
emor
esui
tabl
ethewel
far
eandt
rendyofdwel
l
ingoft
hemanyi
n
t
hesoci
ety(
Mukr
as,
2003:
58-
69)
.
I
nconf
ormi
tywi
tht
heabov
evi
ew adv
ancedbyUNI
DOandasanor
gani
zat
ion
wor
ri
edt
othesi
tuat
ionofl
abor
,theI
LO’
smet
hodt
opov
ert
yreduct
ioni
sthr
u
smal
lbusi
nessent
erpr
isedev
elopment
.Thi
smet
hodf
ocusesont
hedesi
resof
poorhumanbei
ngswhoar
esect
ionoft
heMSEeconomy
,asowner
s/oper
ator
s

13
andwor
ker
s,ast
hei
rdependent
s,ast
heunempl
oyedwhomayal
sogai
nfr
om j
ob
cr
eat
ion and as cust
omer
[Link]
l
e si
mil
arl
yst
rengt
heni
ng t
he abov
e pr
oven
appr
oach,Vandenber
g(2006:
18)suggest
sthat
:theI
LO’
sexi
sti
ngappr
oachf
or
pov
ert
yreduct
iont
hrusmal
lent
erpr
isesoughtt
oemphasi
zet
hef
actt
hatsmal
l
ent
erpr
isesmakeaf
ant
ast
iccont
ri
but
iont
opov
ert
yreduct
ionwhent
heysuppl
y
empl
oyment
,suf
fi
ci
entdegr
eesofj
obqual
i
ty,andl
ow costgoodsandser
vices
usedbyusi
ngt
hepoor
;ent
repr
eneur
shi
p,mi
xedwi
thpr
oduct
ivi
tyi
ncr
ease,i
sa
keyi
ngr
edi
entf
orpov
ert
yreduct
iont
hrusmal
lempl
oyerdev
elopment
;andbr
ight
ent
erpr
ises, compet
it
ive mar
ket
s and a f
air gl
obal
i
zat
ion can make a
consi
der
abl
ehav
eanef
fectonpov
ert
yreduct
ion.
Dr
awi
ngonal
ear
naboutcar
ri
edouti
ntheur
banf
aci
l
iti
esof4West
ernAf
ri
can
nat
ionspar
ti
cul
arl
yBeni
n,Bur
kinaFaso,
NigerandTogot
oper
cei
vekeyel
ement
s
shapi
ng t
he mi
cro or
gani
zat
ion sect
or,expl
ores t
he needs,char
act
eri
sti
cs,
mot
ivat
ions,and success f
act
orsf
ormi
cro ent
repr
eneur
shi
pint
he r
egi
on,
t
oget
herwi
thsomeoft
hei
mpedi
ment
stot
heboom andsuccessofmi
cro
or
gani
zat
ionv
ent
ures(
RoyandWheel
er,2006:
452)
.RoyandWheel
eri
ndi
cat
ed
t
hatMSEsuppl
yagr
eatsuppl
yofempl
oyment
,ther
ebycont
ri
but
ingt
ogetr
idof
pov
ert
ytot
heci
typoor
.

2.
1.3.1. MicroandSmallEnt
erpr
iseforEconomi
cGrowth:‘Pr
o’and‘Contr
a’
Ar
guments
There aretwo pol
ari
zed t
houghts,accordi
ng to(Agyapong,2010:196-
205;
Ander
son etal
.,1994:
129-
133 and St
aley & Mor
se,1965:
31)t
he r
ole and
cont
ri
but
ionofMSEt
ofi
nanci
algr
owt
handpov
ert
yreduct
ion:‘
Pro’and‘
Cont
ra’
Ar
gument
[Link]
rwor
ksof
tenl
abel
edast
hecl
assi
calandcont
empor
aryt
heor
ies
onMSEs’dev
elopment
.Thecont
raar
gumentpr
edi
ctt
hatadv
ant
agesofMSEs
wi
l
lscal
e down ov
ert
ime and gi
antbusi
nesses (
LEs)wi
l
lsoonerorl
ater
pr
edomi
nat
eint
he cour
se ofeconomi
cimpr
ovementmar
ked t
hrough t
he
i
ncr
easei
nincome.I
nli
newi
tht
heseshor
tcomi
ngsandpessi
mism Admassi
e
andMat
ambal
ya(
2002:
1-29)
,fori
nst
ance,concl
udedt
hatexcessi
vest
ageof
t
echni
cal i
nef
fi
ci
ency
, whi
ch mi
nimi
ze t
hei
r achi
evabl
e out
put degr
ees
si
gni
fi
cant
[Link]
chcar
ri
edoutt
hroughBi
ggs(
2002ment
ionedi
nTegegne
andMeher
et,
2010:
14)st
rongl
yquest
iont
her
oleper
for
medwi
tht
heai
dofMSEs
t
o mi
nimi
ze t
he i
nci
dence ofexcessi
vel
evelpov
ert
yin mostdev
elopi
ng

14
economi
es t
hrough empl
oymentcr
eat
ion,i
ncome t
echnol
ogy and mul
ti
pli
er
r
esul
tsondi
ff
erentsect
orsoft
heeconomy
.Whi
l
etheseasonedar
gumentv
iews
pr
imar
il
y based on ex
per
iences f
rom many nat
ions di
spl
ayi
ng t
he ‘
cont
ra’
ar
gument
sappeart
ogetl
esshel
psasmanygl
obalai
dagenci
es,i
ncl
udi
ngt
he
Wor
ldBank(
2004:
41)
.TheWor
ldBankgi
vest
hreecor
ear
gument
sinsuppor
ti
ng
MSEsi
nLDCs,
whi
chi
nli
newi
tht
hear
gument
soft
he‘
moder
n’(
pro)par
adi
gm on
t
hei
mpor
tanceofMSEsi
ntheeconomi
csy
stem (
Wor
ldBank,2002and2004
ment
ioned i
n Tul
us T.
, 2006:
5). Fi
rst
, MSEs enhance opposi
ti
on and
ent
repr
eneur
shi
pandsubsequent
lyhav
eext
eri
oradv
ant
agesonf
inanci
alsy
stem
v
astef
fi
ciency
,innov
ati
onandmi
xtur
epr
oduct
ivi
tygr
owt
[Link],MSEsar
e
t
ypi
cal
l
y mor
e pr
oduct
ivet
han LEs howev
er f
inanci
almar
ket and ot
her
i
nst
it
uti
onaldi
sast
ersandnotconduci
vemacr
oeconomi
csur
roundi
ngsi
mpede
MSEdev
elopment
.Thi
rd,
MSEenl
argementboost
sempl
oymentgr
eat
ert
hanLEs
boom duet
othef
actMSEsar
emor
elabori
ntensi
ve.I
ndi
ff
erentwor
ds,
theWor
ld
Bankbel
i
evest
hatdi
rectaut
hor
it
iesai
dforMSEsi
nLDCshel
pthesenat
ionst
ake
adv
ant
age of t
he soci
albenef
it
sfr
om t
hei
rincr
eased compet
it
ion and
ent
repr
eneur
shi
p,andt
hei
rMSEscani
mpr
ovef
inanci
alboom anddev
elopment
.
Theabov
ear
gument
sdonotmean,
howev
er,
thatLEsar
enol
ongeri
mpor
tant
,or
MSEscanabsol
utel
yal
ter
nat
ivet
hef
unct
ionofLEsi
ntheeconomy
.Ev
en,t
her
e
ar
eskept
icalv
iewsf
rom manyaut
hor
saboutt
hisWor
ldBank’
spr
o-MSEpol
i
cy.
Some aut
hor
s st
ress t
he adv
ant
ages ofLEs and pr
ojectt
he assumpt
ions
under
lyi
ng t
his pr
o-MSE pol
i
[Link]
fi
cal
l
y,LEs may addi
ti
onal
l
y expl
oit
economi
esofscal
eandgr
eat
ereasi
l
yunder
taket
heconst
antf
eesr
elat
edwi
th
l
ookup and dev
elopment (
R and D) wi
th t
remendous pr
oduct
iveness
consequences(
Tul
usTabunan,
2006:
5).

2.
1.3.
2. TheMicr
oandSmallEnt
erpr
iseSectori
nEthi
opi
a
Thefi
ve-
yearGrowt
handTransf
ormat
ionPlan(GTP)hasgi
venspeci
fi
cat
tent
ion
t
otheexpansi
onandst
rengt
heni
ngofmi
croandsmal
l
-scal
efi
rms.
Accor
dingt
oMoWUD (
2007:
17-
28)
.Thezonei
sbel
i
evedt
obet
heessent
ial
suppl
yofempl
oymentandpr
ofi
tser
aforawi
dert
eam oft
hesoci
ety
.The
pr
edomi
nantobj
ect
iveoft
hispr
ogr
am,whi
chi
sdev
elopi
ngandmer
chandi
sing
MSEs i
n ur
ban ar
eas,env
isages decr
easi
ng ur
ban unempl
oymentr
ate.A
compl
eteof176,
543MSEshadbeeni
nst
all
edi
n2009/
10usi
ng666,
192peopl
e.

15
Thenumberofhookedupandwhol
eempl
oymentcr
eat
edwentup141.
6and
25.
6 per
cent
,respect
ivel
y,compar
ed t
oay
[Link] whol
e quant
it
yof
mor
tgageobt
ainedf
rom mi
crof
inancei
nst
it
uti
onswasonceBi
rr814.
1mi
l
li
on
beneat
htheev
aluat
ionper
iod,
22.
8per
centhi
ghert
hancl
osi
ngf
iscal
year
.

2.
1.3.
3. Mi
croandSmallEnt
erpr
iseDevel
opmentStrategy
Ent
erpr
isepr
omoti
ngeff
ort
sinEthi
opiahavehi
stor
ical
l
ytargetedonur
banbased
andMSEs.I
ntheSi
xti
esandear
ly1970s,
abr
anchi
nsi
det
heMi
nist
ryofI
ndust
ry
andTour
ism usedt
ober
esponsi
blef
orcoor
dinat
ingpr
omot
ingt
hingst
odo
whi
chbasi
cal
l
yconsi
stedofpr
esent
ingcoachi
ngonent
erpr
iseadmi
nist
rat
ion
(
Uni
tedNat
ions,2002:
101-
103)
.Asment
ionedbywayofUni
tedNat
ionsf
il
e
(
2002:
101-
103)
:In1977,t
heHandi
craf
tandSmal
lScal
eIndust
ri
esDev
elopment
Agency(
HASI
DA)wasoncesetupt
ofur
nishcoachi
ngi
ngener
ali
nmanagement
andt
echni
calabi
l
iti
esandt
oser
veascoor
dinat
ingcor
por
ati
onf
orGov
ernment
cov
erageonsmal
lent
erpr
[Link]
tageofcashanddet
ri
ment
algov
ernment
pol
i
cyt
owar
dtheper
sonalar
eai
nthe1980smadei
text
raor
dinar
il
ychal
l
engi
ng
f
orHASI
DAt
ohav
eani
mpactont
hei
mpr
ovementofl
ocalsmal
lent
erpr
ises.
Si
ncemi
d-1999,t
hegov
ernmenthasr
evi
sit
edt
heent
ir
eissueofsmal
land
medi
um or
gani
zat
ionpr
omot
ioni
nEt
hiopi
ahowev
erwi
thext
raf
ocusonmi
cro
andsmal
lent
erpr
[Link]
mpor
tantl
ear
naboutusedt
obecar
ri
edoutwi
th
t
hesuppor
tofadonorempl
oyerwhi
chr
esul
tedi
nthecoachi
ngofaNat
ional
Mi
croandSmal
lEnt
erpr
isesDev
elopmentPr
omot
ionSt
rat
egy(
NMSEDPS)
.
TheEt
hiopi
anaut
hor
it
iesl
aunchedt
hecount
ry’
sfi
rstMSEi
mpr
ovementmet
hod
i
nNov
ember1997E.
[Link]
oremostobj
ect
iveoft
hecount
rywi
dest
rat
egy
f
ramewor
kist
ocr
eat
eanenabl
i
ngenv
ironmentf
orMSEs.I
naddi
ti
ont
othi
s
f
undament
algoaloft
hecount
rywi
deMSEappr
oachf
ramewor
k,t
heMoTIhas
dev
elopedaspeci
fi
cobj
ect
ivewhi
chi
ncl
udes,f
aci
l
itat
ingmonet
arygr
owt
hand
del
i
veraboutequi
tabl
e dev
elopment
,cr
eat
ing l
ong-
ter
m j
obs,st
rengt
heni
ng
cooper
ati
onbet
weenMSEs,of
fer
ingt
hebasi
sformedi
um andmassi
vescal
e
ent
erpr
ises,
adv
ert
isi
ngexpor
t,andbal
anci
ngpr
efer
ent
ialt
her
apybet
weenMSEs
andl
argeror
gani
zat
ions(
MoTI
,1997:
8-27)
.Thest
rat
egyout
li
nest
hecov
erage
f
ramewor
kandt
hei
nst
it
uti
onalenv
ironmentf
oradv
ert
isi
ngandf
ost
eri
ngt
he
i
mpr
ovementofMSEsandst
imul
ati
ngt
heent
repr
eneur
ial
pressur
eint
hecount
ry.

16
2.
1.3.
4. TheImplement
ati
onStruct
ureoftheSt
rat
egy
Thetwomostnecessar
yest
abl
ishmentsthatar
ewit
houtdel
ayconcer
nedi
nthe
adv
ert
isi
ng ofMSEs ar
e MoTIand t
he newl
ysetup [Link] l
att
eri
s
env
isaged t
o oper
atet
hef
eder
aland r
egi
onaldegr
eeofgov
ernment(
MoTI
,
1997:
8-27)
.

2.
1.3.
5. TheMini
str
yofTr
adeandIndust
ry
Themini
str
yofalter
nateandent
erpr
isehasresponsi
bil
i
ty,ast
heor
ganoft
he
f
eder
algov
ernmentf
ort
hemet
hod ofi
nsur
ancepol
i
ciesand t
echni
quest
o
pr
omot
etheexpansi
onoff
ir
msandt
ofaci
l
itat
ethepr
ovi
sionofhel
ptoMSEs.
The ot
herdut
ies gi
ven t
othe mi
nist
ryi
sto gui
de and cr
eat
e conduci
ve
env
ironmentf
ort
hedev
elopmentofper
sonalpr
omot
ionali
nst
it
uti
[Link]
onal
bur
eauofchangeandent
erpr
isehadbeendel
egat
edt
oenhanceandpr
omot
ethe
ar
eai
nthei
rar
easv
iacoor
dinat
ingr
egi
onalt
hingst
odoanddev
elopi
ngnet
wor
ks
wi
thcommer
cialent
erpr
iseassoci
ati
onst
obeefupt
hegl
i
deofdat
atoMSEs
(
MoTI
,1997:
8-27)
.

2.
1.3.
6. TheFeder
alMicr
oandSmallEnterpri
sesDevelopmentAgency
Tosimil
arl
ymakesuretheaccept
abl
einst
it
utionalcoor
dinati
onforMSEassist
f
unct
ions,t
heaut
hor
it
iescr
eat
edt
henew Feder
alMi
croandSmal
lEnt
erpr
ises
Dev
elopmentAgency (
FeMSEDA)i
n 1998.I
n addr
essi
ng abov
e obj
ect
ives,
FeMSEDA i
s expect
ed t
o suppl
y gui
de t
othe Regi
onalMi
cro and Smal
l
Ent
erpr
ises Dev
elopmentAgenci
es (
ReMSEDA)
.The FeMSEDA (
2006:
39-
42)
pr
ovi
de:managementt
hroughdel
i
ver
ing‘
tr
aini
ngt
het
rai
ner
s’pr
ogr
amst
oequi
p
r
egi
onalagenci
es,busi
ness associ
ati
ons,and di
ff
erent gur
us t
o suppl
y
ent
repr
eneur
shi
ptr
aini
ngandf
aci
l
itat
ionof
fer
ingsandBDSt
oMSEs;r
eadi
ngt
he
pr
obl
em ofi
dent
if
yingpr
act
icabl
emar
ket
sforMSEsandaddr
essi
ngpr
oductf
ine
i
ssues;di
ssemi
nat
ingi
nfor
mat
iont
oMSEs;andadv
isi
ngaut
hor
it
iesonMSE
i
nsur
ancepol
i
ciesandst
rat
egi
[Link]
sooper
atesski
l
lsandt
echnol
ogy
coachi
ngf
aci
l
iti
es,agr
eatdeall
i
kei
ncubat
ors,wher
ecoachi
ngi
spr
esent
edi
n
woodwor
king,
met
alwor
king,
gar
ment
smaki
ngandhandi
craf
ts.I
tal
sopr
ovi
desa
mar
ket
ingout
letf
orMSEpr
oduct
sini
tssal
esanddi
spl
aycent
erandor
gani
zes
MSEpr
oductexhi
bit
ionsatcount
rywi
deandnear
bychangef
air
s.
TheFeMSEDAhasbeencur
vedupassel
f-
sust
aini
ngaut
hor
it
y’scr
ewhav
ingi
ts
v
eryowncr
imi
nali
dent
if
icat
ionandr
unbymeansofaboar
dofadmi
nist
rat
ion

17
whi
ch consi
sts of r
epr
esent
ati
ves of t
he per
sonalsect
[Link]
ivat
e sect
or
par
ti
cipat
ioni
nthemanagementofcompanyAdv
ert
isi
ngCor
por
ati
oni
sanew
appr
oachi
nEt
hiopi
[Link]
sdi
rect
lyi
ncostt
otheMoTI
.In2000,t
he
r
egi
onalgov
ernment
saddi
ti
onal
l
yfur
nishedf
ort
heor
gani
zat
ionofReMSEDAst
o
f
urni
shext
ensi
onof
fer
ingst
oMSEsatt
her
egi
onal
,zonalandwer
edal
evel
.The
MoTIt
hroughFeMSEDA,
off
ersi
nst
it
uti
onal
suppor
t.

2.
[Link]
orsI
nfl
uenci
ngPer for
manceofSmallBusi
nesses
Factor
saff
ecti
ngtheover
allperf
ormanceofSMESarebothext
ernalandi
nter
nal
f
act
[Link]
obl
em conf
ront
ingMSE‟
sappear
stobesi
mil
ari
nleastdev
eloped
ordev
elopi
ngcount
ri
[Link]
i
cser
vicej
obs,engagi
ngi
nabusi
nessv
ent
ure
hav
enothi
stor
ical
l
ybeenconsi
derahi
ghst
atuspr
ofessi
oni
nAf
ri
caal
though
ent
repr
eneur
smaybecomewel
lrespect
edci
ti
zenswhent
heygetr
[Link]
shas
al
sobeent
ruei
nEt
hiopi
a(Mer
sha,
Sri
ram,
andHai
l
u,2010)
.Howev
er,
theext
ent
oft
hepr
obl
emsv
ari
esf
rom count
ryt
ocount
ryandi
ndust
ryt
oindust
ry;andi
t
dependsonf
ir
ms‟char
act
eri
sti
cs(
Aremu&Adey
emi
,2011)
.Cur
rent
ly,t
her
ear
e
manyi
nter
nalandext
ernalf
act
orsf
aceSSE‟
sint
hei
roper
ati
onsandhi
ndert
hei
r
gr
owt
hinEt
hiopi
a(MUDC,2013)
.Ahar
dlookatv
ari
ousst
udi
eshasr
eveal
eda
numberofdet
err
ent
stot
he gr
owt
h and sur
viv
aloft
he SSE‟
[Link] ar
e
summar
izi
ngasunder
.

2.
1.4.
1. LackofAdequat
eFinance
Fi
nancialconst
rai
ntssuchasinadequat
einv
est
mentcapi
tal
,insuf
fi
cientl
oan,
andi
nef
fi
cientf
inanci
almar
ketar
ethemaj
orobst
acl
esi
ndoi
ngbusi
ness,and
mostMSE‟
sar
ehi
ghl
yri
skyv
ent
uresi
nvol
vi
ngexcessi
veadmi
nist
rat
ivecost
s
and l
ack ofexper
ience i
n deal
i
ng wi
thf
inanci
ali
nst
it
uti
ons (
CLEP,2006)
.
Accor
dingt
oSacer
dot
i(2005)i
nHabt
amuetal
.(2013)
,fi
nanci
ali
nst
it
uti
ons
suchasmi
crof
inanceandt
hebanki
ngsy
stemsi
nAf
ri
caar
enoti
naposi
ti
oni
n
pr
ovi
ding enough f
inanci
alsuppor
ttot
he expansi
on ofmi
cro and smal
l
busi
[Link](
2013)al
soi
dent
if
iedt
hatf
inanci
nghasbecomeapr
inci
pal
chal
l
enget
osmal
lscal
eent
erpr
isesi
nEt
hiopi
a;exceptCi
tyadmi
nist
rat
ionsand
r
egi
onalmi
crof
inancei
nst
it
uti
ons,t
hei
rsav
ingsandf
ami
l
ysuppor
ts,banksi
n
Et
hiopi
adonotpr
ovi
def
inancei
nthef
orm ofl
oant
oMSE‟
sduet
ocol
l
ater
al
obl
i
gat
ionsandot
herr
equi
rement
.

18
2.
1.4.
2. LackofWorkingPremises
Worki
ngpr
emiseswit
hleastl
easingpri
ceadj
ust
menti
sthef
ir
str
equi
rementand
t
akenasmandat
oryt
othegov
ernment(
GFDRE,
1997and2011)
.Accor
dingt
othe
t
hreey
ear
sper
for
mancer
epor
tofFact
orsAf
fect
ingt
heper
for
manceofSmal
l
-
Scal
eEnt
erpr
ise(
Rest
aur
antandHot
els)I
nray
aAzeboWer
eda:TheCaseof
Mohoni
,May
chew and Kor
em FMSEA (
2005)
,the gov
ernmenthas suppl
i
ed
23,
263,
938Sq.k/
met
ersl
andt
obui
l
dings,
shedsanddi
spl
ayi
ngpl
[Link]
though
t
heseef
for
tshav
ebeenmake,i
tist
hesecondr
ankedchal
l
engesi
nregi
onal
t
ownsandt
hemaj
oronesi
nAddi
sAbaba(
Habt
amu,etal
.
,2013;MUDC,2013)
.
Thus,
thepr
obl
em r
equi
resat
tent
iont
ogai
nSSE‟
sexpect
edbenef
it
.

2.
1.4.
3. LackofManager
ial
andTechni
cal
Skill
s
Thepr obl
emsofMSE‟ smanagementari
sesfrom thel
i
mit
edknowl
edgeand
abi
l
ityoft
heownerorshor
tageofcompet
entst
afft
oadv
icet
heowneron
managementpol
i
cies(
Stephen&Wasi
u,2013)
.Deci
sion-
maki
ngski
l
ls,sound
managementand account
ing pr
act
ices ar
ever
ylow f
orSSE oper
ator
sin
dev
elopi
ngcount
ri
es(
Aremu&Adey
emi
,2011)
.Inaddi
ti
on,l
ackofmanager
ial
ski
l
lsl
eadst
opr
obl
emsi
npr
oduct
ionduet
olackofcoor
dinat
ionofpr
oduct
ion
pr
ocess,andi
nabi
l
ityt
otr
oubl
eshootf
ail
uresonmachi
ner
yand/
orequi
pment
’s
andt
heycannotaf
for
dtoempl
oyspeci
ali
stsi
nthef
iel
dsofpl
anni
ng,
financeand
admi
nist
rat
ion(
CLEP,
2006)
.

2.
1.4.
4. LackofAdequat
eMarket
Market
ingknowledgei
simpor
tantf
ort
hepr
omot
ion,
growt
handdev
elopmentof
smal
l
-Scal
eent
erpr
ises.I
nthi
sregar
d,t
heEt
hiopi
angov
ernmenthasf
ormul
ated
MSE‟
s st
rat
egi
es t
o ease mar
ket
ing chal
l
enges by cr
eat
ing i
nter
-l
inkage
mechani
smswi
thot
heri
nst
it
uti
ons,pr
ovi
dingt
rai
ningonmar
ket
ing,dev
elopi
ng
expor
tsuppor
tpr
ogr
ams and mar
ket
ing i
nfor
mat
ion cent
er(
MoTI
,1997)
.
Howev
er,i
nabi
l
ityt
osel
lthepr
oduct
sandser
vices;l
ackofadequat
emar
ket
ing
channel
s,and l
ack ofmar
ket
ing ski
l
ls ar
ethe pr
obl
ems t
othe st
art
ing of
busi
nessandf
urt
hergr
owt
hoft
hesect
or(
MUDC,
2013;
MoFED,
2011)
.

2.
1.4.5. InadequacyofI
nfr
ast
ruct
ureFaci
li
ti
es
Ar esearchconductedbyDaniel(
2012)stat
edt hatunf
avor
abl
eroads,power
i
nter
rupt
ion,shor
tageofwat
er,andi
naccessi
blet
elecommuni
cat
ionsar
ethe

19
maj
orchal
l
engesandwi
thoutwhi
chpr
imar
y,secondar
yandt
ert
iar
ypr
oduct
ion
cannotf
unct
[Link]
ther
mor
e,Habt
amu etal
.(2013)i
ndi
cat
ed t
hatSSE‟
s
oper
ati
ngwi
thav
ail
abl
einf
rast
ruct
uref
aci
l
iti
eshashi
gherpr
obabi
l
ityofl
ong
l
ast
ingexi
stenceandgr
owt
hascompar
edt
othoseSSEst
hatar
eoper
ati
ng
wi
thoutadequat
einf
rast
ruct
ures;andel
ect
ri
cpoweri
nter
rupt
ionandi
nadequat
e
wat
ersuppl
yin Et
hiopi
a was hi
ghl
y af
fect
ed t
he gr
owt
h oft
he busi
ness.
Ther
efor
e,emphasi
sshoul
d begi
vesi
ncet
hesuccessorf
ail
uresofSSE‟
s
busi
nessgr
owt
handdev
elopmentdependont
heav
ail
abi
l
ityandef
fi
ciencyof
i
nfr
ast
ruct
ureut
il
izat
ion.

2.
1.4.
6. Er
rat
icSupplyofRawMat er
ial
s
Li
nkingMSEstoproduct
ioninputsuppl
i
ers,i
mpr
ovi
ngsuppl
i
ers‟capaci
tyand
r
egul
arsuppl
yofqual
i
tyi
nfor
mat
ion on i
nputsuppl
ysour
ceshav
e posi
ti
ve
ef
fect
sont
hesuccessofSSE‟
s(Si
va,2012)
.AsMUDC(
2013)haspoi
ntedout
oneoft
hemaj
orpr
obl
ems,const
rai
ningt
heSSE‟
sdev
elopmenti
nEt
hiopi
awas
f
oundt
obeer
rat
icsuppl
yofr
aw mat
eri
[Link]
i
orat
esuchapr
obl
em,an
aggr
essi
vest
rat
egyneedst
o becr
aftt
o pr
omot
ebusi
nessv
ent
ures,whi
ch
suppl
yinput
s,byl
ocal
andi
nter
nat
ional
inv
est
ors.

2.
1.4.7. Regulat
oryConstr
aint
s
Registr
ati
onandl
icensi
ng,andtheext
entofgov
ernmentof
fi
cial
inv
olv
ementand
accessi
bil
i
tyofr
ulesandr
egul
ati
onshav
eimpact
sonMSE‟
[Link]
dingt
oDl
i
tso,
K.
,and Pet
erQ.(
2000)
,hi
gh st
art
up cost
sforl
i
censi
ng and r
egi
str
ati
on
r
equi
rement
s,costofset
tl
ing l
egalcl
aims and excessi
ve del
aysi
n cour
t
pr
oceedi
ngs can i
mpose excessi
ve and unnecessar
y bur
dens on MSE‟
s
oper
ati
[Link]
ent
houghr
egi
str
ati
onandl
i
censi
nghel
psSSE‟
stohav
elegal
i
ty
r
ight
s,andt
oreducet
hepr
eval
enceofi
nfor
mal
i
ty,mor
ethan12% ofMSE‟
sin
Addi
sAbabadi
dn‟
thav
eregi
str
ati
onl
i
cense(
MUDC,
2013)
.

2.
1.4.
8. Capi
talShort
age
Theauthorobser
vesthatsmal
l-
scal
eent
erpr
iseshav
eser
iousf
inanci
alpr
obl
em
i
n atl
eastt
hree r
espectof
:a)Secur
ing f
unds i
n smal
lamountatr
ates
compar
abl
ewi
tht
hosepai
dbyl
argei
ndust
ri
es.b)Bui
l
dingandmanuf
act
uri
ng
adequat
efi
nanci
alr
eser
vesc)Secur
ingl
ongt
erm equi
tycapi
tal
.

20
2.
1.4.
9. Inf
lat
ion
Despit
ethef
actthatcostofcapi
tali
shi
gherf
ort
hesmal
l
-scal
emanuf
act
urer
,
t
heef
fecti
sev
encompoundbyr
aisi
ngi
nfl
ati
onr
ate.
Fact
orsAf
fect
ingofSmal
l
-Scal
eEnt
erpr
ise(
Rest
aur
antandHot
els)I
nray
aAzebo
Wer
eda:
TheCaseofMohoni
,May
chewandKor
em

2.
1.4.
10. I nadequat
eEducat
ionandSki
ll
s
Educati
onandski
ll
sneededt
orunmi cr
oandsmal
lent
erpr
[Link]
chshows
t
hatt
hemaj
ori
tyoft
hecar
ryi
ngmi
croandsmal
lent
erpr
isesi
nIr
anar
enotqui
te
wel
lequi
ppedi
nter
msofeducat
ionandski
l
[Link]
udysuggest
sthatt
hose
wi
thmor
eeducat
ionandt
rai
ningar
emor
eli
kel
ytobesuccessf
uli
ntheSME‟
s
sect
or(
KingandMcGr
ath,
2002)
.Assuch,
forsmal
lbusi
nessest
odowel
li
nIr
an,
peopl
eneedt
obewel
linf
ormi
nter
msofski
l
lsandmanagement
.SMEsappear
t
obedoi
ngwel
lwi
tht
hespr
out
ingofmanycommer
cialcol
l
egesof
fer
ingv
ari
ous
comput
erappl
i
cat
[Link]
ther
,st
udi
esshow t
hatmostoft
hoser
unni
ngSMEs
hav
eatl
eastat
tai
nedcol
l
egel
evel
educat
ion.

2.
2. Empir
icalRev
iew
Thekeyv
ari
ablesaffect
ingt
heper
for
manceofMSEsi
ndev
elopi
ngcount
ri
es,
accor
dingt
oMead&Li
edhol
m(1998)andSwi
erczekandHa(
2003)
,ar
enott
hei
r
smal
ldi
mensi
onbutt
hei
risol
ati
on,whi
chr
est
ri
ctsgetr
ightofent
ryt
omar
ket
s,
knowl
edge,f
inance,and i
nst
it
uti
onalsuppor
[Link] r
esear
ch under
taken i
n
Tanzani
a by sur
vey
ing 160 mi
cro ent
erpr
ises showed t
hathi
gh t
ax r
ates,
cor
rupt
ion,andr
egul
ati
oni
nthef
orm ofl
i
censesandper
mit
s,ar
e-40-
|Page
f
oundt
obet
hemosti
mpor
tantconst
rai
ntst
o24busi
nessoper
ati
onsofmi
cro
ent
erpr
ises(
Fjel
dst
adetal
,2006ci
tedi
nMul
uget
a,2011)
.Accor
dingt
oJSWi
ese
(
2014)whoconduct
edast
udyont
hedet
ermi
nantf
act
orsofsust
ainabi
l
ityshows
owner
sormanager
swi
thmor
eexper
ience(
manager
ial
,sect
ororpr
evi
ousSME
exper
ience)t
endt
ohav
eagr
eat
eri
ncl
i
nat
iont
owar
dsgr
owt
handwasal
so
consi
der
edessent
ialcr
it
eri
aforsust
ainabi
l
ity
.Wol
die,
etal
.
,(2008)andMbugua,
etal
.,(
2014)cont
endt
hatSMEsowner
sormanager
swi
thmor
eexper
ience
(
manager
ial
,sect
ororpr
evi
oussmal
lbusi
nessesexper
ience)t
endt
ohav
emor
e
gr
owt
hpot
ent
ialt
hant
hosewi
thal
ackofexpect
edpot
ent
ialandal
sot
hehi
gher
t
hel
evelofeducat
ionat
tai
nedbyt
heowner
/manager
,thehi
ghert
hel
i
kel
i
hoodof
gr
owt
hoft
heent
erpr
[Link]
ialski
l
lsandexper
ienceaf
fectbusi
nesses

21
per
for
mance atcer
tai
nlev
[Link]
nce smal
lbusi
nesses accountf
orsi
zeabl
e
pr
opor
ti
onsofeconomi
cact
ivi
ty,t
her
efor
e,andsi
ncet
heyar
eani
mpor
tance
sour
ceofdy
nami
sm andi
nnov
ati
on,smal
lbusi
nessmanagementski
l
lsshoul
d
beapr
imar
yfocusf
oreconomi
cpol
i
cyi
ngener
alandf
ori
nnov
ati
onst
rat
egi
es
(
Kei
th,
2001)
.
PaulandRahel(
2010)det
ermi
nedt
hatt
hest
udi
edf
ir
msexper
ienceda25%
sampl
i
fyi
ntot
alempl
oymentbecauset
hef
indoutaboutbegan,basedt
otal
l
yon
asur
veyof123busi
nessuni
tsi
nfourSub-
townsofNi
fasSi
l
k-Laf
toandKi
rkos
sub-
cit
iesofAddi
sAbaba,andai
medt
o checkoutt
heconst
rai
ntsandkey
det
ermi
nant
sofgr
owt
h,par
ti
cul
arl
yinempl
oymentexpansi
onFur
ther
mor
e,t
he
cent
eredMSEs'
tangi
blei
ssuesatgr
aduat
ionhav
ebeenal
ackofmoney(
52.
8%)
,
a abi
l
iti
es i
ssue (
17.
9%)
,and a l
ack ofwor
king house (
17.
1 per
cent
age
)
.Fur
ther
mor
e,Dani
el(
2007)hi
ghl
i
ght
edal
ackofr
aw mat
eri
als,r
obustr
ival
ry,
andawor
kingcapi
talshor
tfal
l
.Adi
l
's(
2007:
63)l
ookupi
nAddi
sAbabal
ocat
ed
t
hati
mpr
opergov
ernmenti
nter
vent
ion,al
ackoff
inance,adi
sadv
ant
agei
n
l
ocat
ion,al
ackofmar
ket
,andal
ackofexhi
bit
ionr
oom ar
ethekeybar
ri
erst
hat
MSEsf
[Link]
uget
a(2011)hasal
sohi
ghl
i
ght
edandcl
assi
fi
edt
henecessar
y
pr
obl
emsconf
ront
edbyusi
ngMSEsasmar
ket
-r
elat
edi
ssues,
whi
char
ebr
ought
aboutv
iasuscept
ibl
emar
ketconnect
ionandpr
omot
ional
eff
ort
s.
Bur
eaucr
ati
cbot
tl
enecks,al
ackofi
nst
it
uti
onalcapaci
ty,al
ackofawar
eness,a
f
ail
uret
oenf
orcel
aws,r
egul
ati
ons,r
ules,anddi
rect
ives,al
ackofGov
ernment
t
rai
ning,and t
err
ibl
e moni
tor
ing and f
oll
ow-
up ar
ejusta f
ew exampl
es of
i
nst
it
uti
on-
rel
atedi
[Link]
ator
-r
elat
edsl
i
cki
ncr
easi
ngst
ruct
uredTr
adi
ti
on,
st
eepl
y-
pri
cedandsquander
ingbehav
ior
,andmember
s'l
ackofi
magi
nat
iveand
pr
esci
entanddedi
cat
ion;MSE-
rel
atedpr
obl
emsi
ncl
udeal
ackofapr
omot
ing
l
ocat
ion,
ter
ri
bleaccount
ingandr
ecor
dkeepi
ng,
alackofr
ideshar
ing,
andal
ack
ofcooper
ati
oni
nter
iorandamongMSEs,
aswel
lassoci
etalt
roubl
essuchast
he
soci
ety
'ser
roneousmi
ndsett
owar
dsi
tsmember
sandt
hei
rpr
oduct
[Link]
ear
ly
st
atedi
nTer
fasaetal
.,(
2016)accesst
ofi
nanceappear
stobeav
erysev
ereor
maj
orobst
acl
easr
epor
tedbyabout55% and64% ofmi
croandsmal
lscal
e
ent
erpr
isesr
espect
ivel
[Link]
obl
em ofaccesst
ofi
nancei
smor
esev
eref
or
smal
lent
erpr
isescompar
edwi
thmi
croent
erpr
iseast
hel
att
erof
tenhav
eaccess
t
o mi
crof
inance i
nst
it
uti
ons (
MFI
s)as t
hei
rloan r
equi
rementi
s wi
thi
nthe

22
capaci
tyofMFI
[Link]
ialobj
ect
iveoft
hest
udyi
stov
eri
fyel
ement
sthat
ar
epr
imar
il
yaf
fect
ingt
heper
for
manceofwoodandmet
alwor
ksofMSEsi
n
Gi
nni
rci
tybywayofdescr
ibi
ngi
nter
nal
andext
eri
orf
act
ors.

2.
3. ConceptualFr
ameWor k
The st
udywi
llgeneral
i
zed and bui
l
tar
ound t
wo set
s ofv
ari
abl
es,namel
y
dependentv
ari
abl
ewi
tht
heseper
for
manceofMSEandi
ndependentv
ari
abl
es
ar
ethatt
hei
nter
nalf
act
ors(
managementf
act
ors,ent
repr
eneur
sfact
ors),
and
ext
ernalf
act
ors(
pol
i
ticall
egalf
act
ors,wor
kingpr
emi
ses,Technol
ogi
calf
act
ors,
i
nfr
ast
ruct
uralf
act
ors,mar
ket
ing f
act
orsf
inanci
alf
act
ors and r
ow mat
eri
al
av
ail
abi
l
[Link]
ethatt
heconcept
ualf
ramewor
kisi
nli
newi
tht
hest
udy
pur
pose

Fi
gur
[Link]
ualFr
amewor
koft
hest
udy(
own)

23
 CHAPTERTHREE

[Link]

3.
1. Descr
iptionoft
heStudyArea
Thi
sst
udywillbeconduct
edattheOromi
aRegi
onalSt
ate,
EastBal
eZoneGi
nni
r
Townwhi
chi
slocat
edi
nthedi
rect
ionsout
heastOr
omi
[Link]
nni
rtowni
sfound
557Km.f
arf
rom capi
talci
tyofEt
hiopi
aAddi
[Link]
om mai
ncampusof
MadaWal
abuUni
ver
sit
yRobet
woway
s100km and132km,(
Robe-
Gor
o-Gi
nni
r)
and(
Robe-
Gasar
a-Gi
nni
r)r
espect
ivel
y. Thi
sst
udywi
l
lfocusonFact
orst
hat
af
fect
ingt
heper
for
manceofwoodandmet
alsonSmal
landMi
croEnt
erpr
ises.
Thel
ati
tudeand l
ongi
tudel
ocat
ion oft
het
own hasof7°
7′N40°
0′Ewi
th an
el
evat
ionof2,
400met
ers(
8,176f
t.
)abov
eseal
evel
,mor
eov
ert
het
ownhas
beenest
abl
i
shedi
n1931asaset
tl
ementar
ea,
gotal
egal
admi
nist
rat
ivest
atusi
n
1963,
andbecamet
headmi
nist
rat
ivet
[Link]
ezonei
n2020y
ear
.The2007
Cent
ralSt
ati
csAut
hor
it
yput
tedi
nther
epor
tthatt
heGi
nni
rtownwi
that
otal
numberofhousehol
ds19,
471,numberofhousi
ng uni
ts17,
865 and a t
otal
numberofpopul
ati
onsar
e44,
382,
outoft
his22,
543wer
emal
eand21,
839wer
e
f
emal
[Link]
dingt
oEastBal
eZonet
rav
elGui
debook(
2013)
,
Accor
dingt
oGi
nni
rmuni
cipal
i
tyst
rat
egi
cpl
an(
2004/
5)t
her
elat
ivesi
zeofl
and
dev
otedt
oresi
dent
ialuset
akeov
erwhel
mingpr
opor
ti
onoft
hel
anduseofbui
l
t
upar
ea(
2, 900m2)whi
142, chaccount
sfor84.
1per
cent
,wher
easl
argei
ndust
ry
( 000m2)
176, ,commer
cial( 995m2)
129, ,smal
lindust
ry( 940m2)account
98, s6.
9,
5.
1and3.
9per
centr
espect
ivel
yaddi
ti
onal
l
y,about32,000met
ersquar
eofl
and
i
slef
tforgr
eenar
ea,
howev
eri
tssi
zei
ser
odedbecauseofi
tsconv
ersi
ont
obui
l
d
upar
eas(
Get
achew,
2007:
cit
edi
nFet
iya,
2017)
.

24
Fi
gur
[Link]
ngt
heLocat
ionoft
heSt
udyAr
ea

3.
2. Ty
pesandSour
cesofDat
a

I
nthi
sst
udy
,bot
hpr
imar
yandsecondar
ydat
awi
l
lbegat
her
[Link]
imar
ydat
a
wi
l
lbecol
l
ect
edt
hroughst
ruct
uredf
ocusgr
oupdi
scussi
ons,
quest
ionnai
reusi
ng
f
acet
ofacei
nter
view oft
hesampl
ehousehol
dheadswi
thgat
her
edf
rom t
he
househol
dsur
veyandot
hersoci
o-economi
cvar
iabl
esf
rom t
hesampl
euni
ts.
Secondar
ydat
aist
obecol
l
ect
edf
rom di
ff
erentof
fi
cesl
i
kewor
edaandzonal
admi
nist
rat
ionandGi
nni
rTownAdmi
nist
rat
ion,Mi
croEnt
erpr
isesandI
ndust
ry
Of
fi
ceandot
herr
elev
antmat
eri
als.

3.
3. Met
hodofSampl
i
ngandSampl
ingPr
ocedur
es

I
nor
dert
osel
ectsampl
erespondent
smul
ti
-st
agesampl
i
ngt
echni
quewi
l
lbe
f
oll
[Link]
rstGi
nni
rtowni
spur
posef
ull
ysel
ect
[Link]
ter
,cl
ust
ersampl
i
ng

25
t
echni
quewi
l
lbeempl
oyedt
osel
ectmi
croscal
eent
erpr
[Link]
nal
l
y,st
rat
if
ied
r
andom sampl
i
ngt
echni
quewi
l
lbeappl
i
edt
osel
ect111sampl
erespondent
s
f
rom 253r
espondent
sof15t
hesel
ect
edMSEsofwood&met
alwhi
char
efound
i
nGi
nni
rTown.

3.
4. Sampl
eSi
ze

Sampl
esi
zei
sof
tendet
ermi
nedbyt
aki
ngi
ntoaccountt
hel
evelofpr
eci
sion,
the
l
evelofconf
idenceandt
hedegr
eeofv
ari
abi
l
ityi
ntheat
tr
ibut
esbei
ngmeasur
ed.
Thenumberofsampl
ehousehol
dswi
l
lbedet
ermi
nedbasedont
hef
ormul
a
gi
venbyKot
har
i(2004)j
ustt
hroughest
imat
ingt
het
oler
abl
eer
rormar
ginand
f
ixi
ngt
heconf
idencel
evel
.
n=z2pqN/
e2(
N-1)+z2pq
Wher
e:-n = sampl
esi
zeN=Tot
alnumberofpopul
ati
on Z= 95%conf
idence
i
nter
valundernor
malcur
ve(
1.96)e=accept
ance er
rort
erm (
0.07)P and
q=est
imat
eoft
hepr
opor
ti
onofpopul
ati
ont
obesampl
ed(
p=0.
5andp+q=1)
Basedont
hist
hesampl
esi
zef
ort
hest
udywasdet
ermi
nedasn=z2pqN/
e2(
N-1)
+z2pq
n=1.
962x0.
5x0.
5x253/(
0.07)
2(253-
1)+1.
962X0.
5X0.
5=111
Wher
e:n=t
hesampl
esi
ze=111
N=t
hest
udypopul
ati
on(
253)
;e=st
andar
der
ror(
7%)
;

3.
5. I
nst
rument
sandMet
hodsofDat
aCol
lect
ion

St
ruct
uredquest
ionnai
rewi
l
lbedesi
gnedi
nor
dert
ocol
l
ectbot
hqual
i
tat
iveand
quant
it
ati
vedat
aint
hisst
udy
.Incol
l
ect
ingt
hedat
afort
hisf
indi
ng,st
ruct
ured
andsemi
-st
ruct
uredquest
ionnai
reswi
l
lbeempl
[Link]
ionnai
resar
eto
beadmi
nist
eredbyenumer
ator
saf
tert
aki
ngshor
ttr
aini
nganddi
scussi
onont
he
quest
ionsandt
hewayt
heenumer
ator
sar
egoi
ngt
oaskt
her
espondent
[Link]
i
nfor
manti
nter
view wi
l
lbeconduct
edt
ocol
l
ectaddi
ti
onali
nfor
mat
iont
othe
st
udy
.

26
3.
6. Met
hodofDat
aAnal
ysi
s
3.
[Link]
ipt
ivemet
hods

I
n anal
yzi
ng t
he dat
a col
l
ect
ed,descr
ipt
ive st
ati
sti
cs such as f
requency
,
per
cent
ages,mean,st
andar
ddev
iat
ion,andi
nfer
ent
ialst
ati
sti
cssuchaschi
-
squar
etestf
ordummyv
ari
abl
esandF-
testcompar
isonf
orcont
inuous/
discr
ete
v
ari
abl
eswi
l
lempl
oyedt
oassesst
her
elat
ionshi
pofI
nter
nalf
act
orsandExt
ernal
f
act
orsef
fect
soft
hem onper
for
manceofMSEwi
l
lbeanal
yzed.

[Link]
Abebe,A.(
Nov .17,2017.
).FactorsThatAff
ectSmal
lBusi
nessEnt
erpr
iseswi
tha
Specif
icWoodandMet alWorks,
TheCaseofSodoTown,Wol ait
aZone,
SouthernEthiopi
[Link].7.

Adi
l
's.(,2007.).)Chall
enges and Const
rai
nts ofMi
cro and Smal
lScal
e
Ent
erpr
isesi
n:.Addi
sAbaba.

Adi
l
's.(2007).Chal
lengesandConstr
aint
sofMi cr
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33
[Link]
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5.
1. Act
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an

5.
[Link]
ivi
tybr
eakdown

Descr
ibet
het
imet
abl
eofwor
kwhent
hewor
kwi
l
lbegi
nandendeachpar
toft
he
st
udy
.Iti
sout
li
neofa wor
kschedul
ewhi
ch coupl
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hev
ari
ousr
esear
ch
act
ivi
ti
est
hatwi
l
lbei
nvol
vedi
nwi
that
ime-
fr
ame.I
tisi
mpor
tantt
hatpr
esenta
r
eal
i
sti
cti
me-
fr
amewhi
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ocat
essuf
fi
cientt
imef
ort
hev
ari
ousact
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ti
esand
al
sof
orr
evi
si
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edi
ti
ngandpr
oduci
ngt
hef
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text
.

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e1:Act
ivi
tybr
eakdown

Act
ivi
ty 2024

JUN JULY AUG SEP

Pr
e-sur
vey

Li
ter
atur
erev
iewandsecondar
ydat
acol
l
ect
ion

Desi
gni
ng,pr
epar
ing,pr
etest
ing and pr
esent
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dat
agat
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ingt
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ssemi
-st
ruct
uredquest
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checkl
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viewgui
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Ref
ini
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Recr
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Sur
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34
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nter
view

Dat
aencodi
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fil
ter
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comput
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Anal
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sandi
nter
pret
ati
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Thesi
swr
it
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Summar
y

Pr
esent
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on

BudgetPl
an

I
tist
hesubmi
tt
ingpr
oposalt
ofunder
[Link]
stwhatequi
pmentofneedaswel
las
t
heki
ndofser
vicest
opayf
orusef
orpr
oposal
.Ther
eisagener
alt
endencyt
o
under
est
imat
ecost
s,especi
all
ywhenmoneyi
sscar
[Link]
imat
ionofcostof
t
hisr
esear
chi
sgi
venbel
owbyEt
hiopi
anBi
rr
.

Tabl
e2:St
ati
oner
yCost
s
No It
ems Unit
s Qty UnitPr
ice(
Bir
r) Total
Cost(
Bir
r)
1 Not ebooks Pi
ece 6 20 120
2 Pen Packet
s 1 250 250
3 Pr interpaper Packet
s 2 230 460
4 Penci l Pi
eces 12 60 720
5 Tonercar t
ridge Pi
eces 1 1450 1450
6 CDRaw Packet
s 1 150 150
7 Fl ash Disk No 1 250 250
Subt
o
(t
8al
G B) 3400

Tabl
e3:Tr
anspor
tandUt
il
it
iesCost
s

No I
tems Uni
ts Qt
y Uni
t Total
Pri
ce Cost

35
 (
Bir
r) (
Bir
r)

1 Tr
anspor
tcosti
nGi
nni
rtown Bi
rr Ter
ms(
15*
5) 20 1500

2 Util
it
iesand servi
ces(photo Bi
rr 2000
copies, t
elephone, i
nter
net
fees,et
c)

Subt
otal 3500

Tabl
e4:Per
sonnelCost
s

No Descr
ipt
ionofact
ivi
ty Number of Perdi
em Number Total
per
sonnel rat
e(Bir
r) ofday
s cost
(Bi
rr)

1 Advisor
s f
iel
d 5 200 5*
15 15,
000
supervi
sion

Subt
otal 15,
000

Tabl
e5:Fi
eldoper
ati
onalcost
s
No I
tem Uni
t Numbe Numbe Per
diem Total
s r of r of per day
per
son day s per
per
son
1 Fi
eld data col l
ecti
on – dat a Bi
rr 15 15 50 11,
25
col
lect
ors’ Per diem = 15 0
per
son*15day
s* 70Bir
r/day
2 Fi
elddatacol
lecti
on–super v
isor
s Bi
rr 7 15 50 5250
Per
diem = 7
per
son*15day
s* 70Bir
r/day
Subtotal 16,
50
0

Tabl
e6:BudgetSummar
y
No I
tems Tot
alCosti
nBi
rr

36
5.
5.1 St
ati
oner
yCost
s 3400

5.
5.2 Tr
anspor
t and 3500
ut
il
it
ies
5.
5.3 Per
sonnel
Cost
s 15,
000

5.
5.4 Fi
eld oper
ati
onal 16,
500
cost
s

Tot
al 38,
400

5.
2. Quest
ionnair
es
Objecti
ve
Thepur
poseoft
hisquest
ionnai
rei
stogat
herdat
aforMast
er’
sthest
udywhi
ch
i
sent
it
ledwi
th“
Fact
orsAf
fect
ingt
hePERFORMANCEofMet
alandWoodwor
k
ofMi
croandSmal
lEnt
erpr
isei
ncaseofEastBal
ezoneatGi
nni
rTown,Sout
h
EastEt
hiopi
a”.Thest
udyi
spar
toft
hei
mpar
ti
alf
ulf
il
lmentf
ort
her
equi
rement
s
ofBAi
nEconomi
cs)atMaddaWal
abuUni
ver
sit
y.
Fi
rstofal
lIwoul
dli
ket
othankf
ory
ourwi
l
li
ngnesst
orespondt
hisquest
ionnai
re
I
.Dearr
espondenty
ouar
enotr
equi
redt
owr
it
eyournamet
ogi
vey
ouf
reedom,
t
orespondconf
ident
lyandt
okeepy
oursecr
etsaf
ely
.
I
[Link]
easeput√mar
kint
hepl
acepr
ovi
dedf
ory
oui
nboxf
orbot
hopenandcl
ose
quest
ions.
AnnexA
Par
tOne:Pr
ofi
leofRespondent
s

Nameoft
heTown_
___
___
___
___SubTown_
___
__
1) ent
erpr
ises(
respondent
)st
atus: A. mi
cro ent
erpr
ises [Link]
l
ent
erpr
ises
2)Gender
:[Link]
[Link]
e--
--
--
3)Ageofr
espondent
:…A,
18-
24 B,
25-
30 C,
31-
35 D,
36-
and
abov
e
4)Mar
it
al
5)st
atus:
[Link]
ngl
e [Link]
ri
ed [Link]
vor
ced [Link]
dowed

37
 [Link]
ormal
l
ymar
ri
edbutl
i
vingwi
thpar
tner
Educat
ional
stat
usofr
espondent
sA,
uneducat
edB,
1-4C,
5-8D,
9-12D,
Dipl
omaE,
Degr
ee
6)Fami
l
y hood l
i
fe:A,f
armi
ng B,
Pet
tyt
rade Gov
ernmentEmpl
oyee
D,
Lebar
er
Par
tTwo:Gener
alI
nfor
mat
iononBusi
nessEnt
erpr
ises
[Link]
sthemai
nact
ivi
tyoft
heent
erpr
ise?
[Link]
alwor
k [Link]
alwor
konl
y C,
Woodwor
konl
y

[Link]
dyour
aisef
undst
ost
art
-upy
ourbusi
ness?
[Link]
sonal
sav
ing [Link] [Link]
crof
inancei
nst
it
uti
ons
[Link]
l
y [Link]
iends/
Rel
ati
ves [Link]
her
s(speci
fy) [Link]
F.I
qub/
Idi
r
[Link]
choneoft
hef
oll
owi
ngaspecti
sthemosti
mpor
tantf
ort
hesuccessof
y
ourbusi
nessv
ent
ure?
[Link]
nesspl
an [Link]
repr
eneur
ialt
eam [Link]
ness
oppor
tuni
ti
es
[Link]
aini
ngi
nbusi
nessski
l
ls
AnnexB

Fact
orsAf
fect
ingt
hePer
for
manceofMi
croandSmal
lEnt
erpr
ises

Themaj
orf
act
orst
hataf
fectper
for
manceofMSEsar
eli
stedbel
[Link]
ease
i
ndi
cat
ethedegr
eet
owhi
cht
hesef
act
orsar
eaf
fect
ingt
heper
for
manceofy
our
busi
nessent
erpr
[Link]
tery
our
eadeachoft
hef
act
ors,ev
aluat
ethem i
nrel
ati
on
t
oyourbusi
nessandt
henputat
ickmar
k(√)undert
hechoi
cesbel
[Link]
e,5=
st
rongl
yagr
ee,
4=agr
ee,
3=undeci
ded,
2=di
sagr
eeand1=st
rongl
ydi
sagr
ee.
[Link]
ernalf
act
orst
hataf
fectt
heper
for
manceofMSEs

1.
[Link]
it
ico-
legalf
act
orst
hataf
fectt
heper
for
manceofMSEs

[Link] Pol
it
ico-
legalf
act
ors 5 4 3 2 1

1 The t
ax l
evel on my busi
ness i
s not
r
easonabl
e

38
 2 Bur
eaucr
acyi
nent
erpr
isesr
egi
str
ati
onand
l
i
censi
ng
3 Lackofgov
ernmentsuppor
t
4 Pol
i
tical
int
erv
ent
ion
5 Lackofaccessi
blei
nfor
mat
ionon
gov
ernmentr
egul
ati
onst
hatar
erel
evantt
o
mybusi
ness
6 Long t
imeoft
aki
ng l
i
censeand pr
epar
ing
busi
nesspr
oposal

1.
[Link]
kingpl
acef
act
orst
hataf
fectt
heper
for
manceofMSEs

[Link] Wor
kingpl
acef
act
ors 5 4 3 2 1
1 Absenceofownpr
emi
ses
2 Cur
rentwor
kingpl
acei
snotconv
eni
ent
3 Ther
entofhousei
stoohi
gh
4 Di
ff
icul
t t
o obt
ain wor
king si
tes f
or
expansi
on
5 Exi
sti
ngwor
kingpr
emi
sesi
snotenough
6 Wor
kingpl
acei
s notsui
tabl
eforcust
omer
sat
isf
act
ion

1.
[Link]
ogi
cal
fact
orst
hataf
fectt
heper
for
manceofMSEs

[Link] Technol
ogi
cal
fact
ors 5 4 3 2 1

1 Lack of appr
opr
iat
e machi
ner
y and
equi
pment
2 Lackofski
l
lst
ohandl
enewt
echnol
ogy
3 Lackofmoneyt
oacqui
renewt
echnol
ogy
4 Unabl
etosel
ectpr
opert
echnol
ogy
5 Pr
oduct
iont
echni
ques
6 Mar
ket
ing and ecommer
ce
t
echnol
ogy
(B/
B

1.
4.I
nfr
ast
ruct
uralf
act
orst
hataf
fectt
heper
for
manceofMSEs

39
S. I
nfr
ast
ruct
uralf
act
ors 5 4 3 2 1
,
No
1 Poweri
nter
rupt
ions
2 I
nsuf
fi
cientandi
nter
rupt
edwat
ersuppl
y
3 Lackofbusi
nessdev
elopmentser
vices
4 Lackofsuf
fi
ci
entandqui
ckt
ranspor
tat
ion
ser
vice
5 Lackofappr
opr
iat
edr
ywast
eandsewer
age
sy
stem
6 I
nsuf
fi
cient and i
nter
rupt
ion of
communi
cat
ion

1.
[Link]
ket
ingf
act
orst
hataf
fectt
heper
for
manceofMSEs

[Link] Mar
ket
ingf
act
ors 5 4 3 2 1

1 I
nadequat
emar
ketf
orpr
oduct/
ser
vices
2 Sear
chi
ngnewmar
keti
ssodi
ff
icul
t
3 Lackofdemandf
orecast
ing
4 Lackofmar
keti
nfor
mat
ion
5 Lackofpr
omot
iont
oat
tractpot
ent
ial
user
s
6 Poorcust
omerr
elat
ionshi
pandhandl
i
ng

1.
[Link]
nanci
alf
act
orst
hataf
fectt
heper
for
manceofMSEs

S.
N Fi
nanci
alf
act
ors 5 4 3 2 1
o

1 I
nadequacyofcr
edi
tinst
it
uti
ons
2 Lackofcashmanagementski
l
ls
3 Shor
tageofwor
kingcapi
tal
4 Hi
ghcol
l
ater
alr
equi
rementf
rom banks
5 Hi
ghi
nter
estr
atechar
gedbybanks

40
6 Loan appl
i
cat
ion pr
ocedur
es of banks or
i
nst
it
uti
ons

1.
[Link]
eri
alsf
act
orst
hataf
fectt
heper
for
manceofMSEs

S.
No RawMat
eri
alsf
act
ors 5 43 2 1
1 Absenceofwoodmat
eri
als
2 Shor
tages Suppl
y of met
als and pr
ice
changes
3 Shor
tageaccessor
yequi
pmentand pl
ast
ic
mat
eri
als
4 Lackofqual
i
tywoodmat
eri
als
5 Di
stancef
rom r
awmat
eri
als
6 Absenceofcr
edi
trawmat
eri
als

[Link]
nter
nal
Fact
orst
hataf
fectPer
for
manceofMSE

2.
[Link]
act
orst
hataf
fectt
heper
for
manceofMSEs

[Link] Managementf
act
ors 5 4 3 2 1

1 Lack of cl
ear di
vi
si
on of dut
ies and
r
esponsi
bil
i
tyamongempl
oyees
2 Poor or
gani
zat
ion and i
nef
fect
ive
communi
cat
ion
3 Poorsel
ect
ionofassoci
atesi
nbusi
ness
4 Lack of wel
ltr
ained and exper
ienced
empl
oyees
5 Lack ofl
ow costand accessi
blet
rai
ning
f
aci
l
iti
es
6 Lackofst
rat
egi
cbusi
nesspl
anni
ng

2.
2Ent
repr
eneur
ialf
act
orst
hataf
fectt
heper
for
manceofMSEs

41
[Link] Ent
repr
eneur
ialf
act
ors 5 4 3 2 1

1 Lackofmot
ivat
ionanddr
ive
2 Lackoft
oler
ancet
owor
khar
d
3 Lack ofper
sist
ence and cour
age t
otake
r
esponsi
bil
i
tyf
oronesf
ail
ure
4 Absence of i
nit
iat
ive t
o assess ones
st
rengt
hsandweakness
5 Lackofent
repr
eneur
shi
ptr
aini
ng
6 Lack of i
nfor
mat
ion t
o expl
oit busi
ness
oppor
tuni
ti
es
Per
for
mancef
act
orsaf
fect
ingMSE’
s
S/
No Per
for
manceI
ndi
cat
ors 5 4 3 2 1

1 Changei
npr
ofi
tabi
l
ity
2 Changei
ndai
l
ymar
ketsal
es
3 Changesi
nbusi
nessasset
swi
tht
ime
4 Sal
esv
olume
5 Changei
ncust
omersat
isf
act
ion
6 Changei
nhumanr
esour
ce

[Link]
isonoft
hemaj
orf
act
ors

[Link] Gener
alFact
ors Mean St
andar
d Ranki
ng
dev
iat
ion
1 Pol
i
tico-
legal
fact
ors
2 Wor
kingpr
emi
sesf
act
ors
3 Technol
ogi
cal
fact
ors
4 I
nfr
ast
ruct
ural
fact
ors
5 Mar
ket
ingf
act
ors
6 Fi
nanci
alf
act
ors
7 Rawmat
eri
alf
act
ors
8 Managementf
act
ors
9 Ent
repr
eneur
ial
fact
ors

42
 AnnexC
Par
tThr
ee:I
nter
viewQuest
ionsf
orMSEOwner
s

Quest
ionnai
ref
act
oraf
fect
ingMet
al&Woodwor
kper
for
manceofTheTown
SME

[Link]
ionnai
resr
elat
edt
oSki
llt
rai
ning
1.
1Hav
eyour
ecei
vedanyt
rai
ningpr
ogr
am f
ory
ourempl
oyee?
1.
2Ist
her
eav
ail
abi
l
ityofski
l
ledwor
ker
sint
hel
ocalmar
ketf
ory
ourent
erpr
ise?
Descr
ibe:
___
_
[Link]
ionnai
resr
elat
edt
oMar
ket
sandmar
ket
ing
2.
[Link]
eyourmai
npr
oductcust
omer
s?Pl
easedescr
ibet
hemai
ncust
omer
s-
-
--
--
--
2.
2Hav
eyouanyExper
iencei
nsubcont
ract
ing?Yes-
--
--
--No-
--
--
--
2.
3Pl
easei
ndi
cat
ethet
ypeofcont
racti
noroutandnameoft
hecl
i
entf
ir
m
2.
4Whatar
ethemai
npr
obl
emsoft
heent
erpr
isesi
nmar
ket
ing?
[Link]
ionnai
resr
elat
edt
oRawmat
eri
alssuppl
ytot
heMSE
4.
1.I
sther
eanyr
awmat
eri
alspr
ovi
der
swi
thi
nthet
own? I
f,y
esDescr
ibe
4.
[Link]
chbasey
ourent
erpr
isei
sbuy
ingr
awmat
eri
al?
4.
3.I
foncr
edi
t,dot
hesuppl
i
erschar
gedi
ff
erentr
ate?
4.
[Link]
heent
erpr
isewassour
cedi
tscapi
tal
inv
est
ed?

4.
[Link]
trepor
tof(
Sal
esr
evenue)dur
ingt
hel
astf
ivey
ear(
E.C)

Year(
E.C)2007 2008 2009 2010 2011

(
ETB) -
--
- -
--
-- -
--
--
- -
--
--
- -
--
--
--

4.
[Link]
syourbusi
nessposi
ti
ondur
ingt
hel
astf
ivey
ear
sgoi
ngUpSt
abl
e
Down?

[Link]
ionnai
resr
elat
edt
oInf
rast
ruct
ure,
andPossi
bil
it
yofi
nvest
ment
s
5.
[Link]
chi
nfr
ast
ruct
ural
faci
l
iti
esandser
vicesdoy
ouhav
e?
5.
[Link]
obl
emsdi
dyouf
acewhi
l
erunni
ngMSEsi
nrel
ati
ont
oaccessof
i
nfr
ast
ruct
ure?
[Link]
etheI
nter
nalf
act
orsaf
fect
ingt
heper
for
manceofSMEs?
6.
[Link]
ethe ef
fectofl
ack ofBusi
ness managementski
l
ls on t
he

43
per
for
manceofMSEs?
6.
[Link]
etheef
fectofl
ackofmar
ket
ingski
l
lst
othebusi
ness?
6.
[Link]
etheef
fect
soff
inanci
almanagementt
othebusi
ness?
[Link]
ernal
fact
orst
hataf
fectt
heper
for
manceofSMEs
7.
[Link]
enthi
ghBur
eaucr
acyi
ncompanyr
egi
str
ati
onandl
i
censi
ngaf
fect
t
hebusi
ness
7.
[Link]
entl
ackofgov
ernmentsuppor
taf
fectt
heper
for
manceofSMEs?
[Link]
nanci
alr
elat
edf
act
ors
8.
[Link]
entShor
tageofi
nit
ialandwor
kingcapi
talaf
fectt
heper
for
mance
ofSMEs?
8.
[Link]
sthe ef
fect
sofdi
ff
erentbank(
inst
it
uti
ons)i
nter
estr
atet
othe
busi
ness?
[Link]
ionoft
hebusi
nessr
elat
edf
act
ors
9.
[Link]
entl
ocat
ionoft
hebusi
nessaf
fect
stheper
for
manceofSMEs ?
9.
[Link]
enthi
ghr
entofhouseaf
fect
sthebusi
ness?
[Link]
eot
herpr
obl
em(
s)di
dyouf
acedr
egar
dingt
he
ov
eral
lFunct
ioni
ngofy
ouract
ivi
ty?

44