FACTORS AFFECTING SUSTANABILITY OF SMALL AND

MEDIUM SCALE ENTERPRISE IN CASE OF NAKAMTE

TOWN

A THESIS SUBMITTED TO COLLEGE OF BUSINESS AND

ECONOMICES DEPARTMENT OF MANAGEMENT IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
MASTERS IN BUSSSINESS ADMINISTRATION

BY: Rukiya Mohammed Faji

ADVISOR: Dinkisa Keno (PHD)

GREAT LAND COLLEGE

MASTERS OF BUSINESS ADMINISTRATION
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
July, 2024
NEKEMTE, OROMIA, ETHIOPIA
I
 GREAT LAND COLLEGE
DEPARTMENT OF MANAGEMENT
BUSINESS ADMINISTRATION
APPROVAL SHEET FOR SUBMITTING FINAL THESIS
As examining Board members of the Final MA thesis open defence, we certify that we have read
and evaluated the thesis prepared by Rukiya Mohammed Faji under the title “Factors affecting
the Sustainability of small scale firm to medium scale firm in Nekemte town” and recommend
that the thesis be accepted as fulfilling the research thesis requirement for the Master of Arts in
Business Administration (MBA).

_______________________________ ________________ _______________

1. Chairperson Signature Date

_______________________________ ________________ _______________

2. Internal Examiner Signature Date

_______________________________ ________________ _______________

3. External Examiner Signature Date

Final Approval and Acceptance

Thesis Approved by

___________________________________ __________________ ___________

Department PGC Signature Date

___________________________________ ________________ __________

Dean of College Signature Date

Certification of the Final Thesis

I hereby certify that all the correction and recommendation suggested by the board of examiners
are incorporated into the final thesis submitted entitled with “factors affecting the transition of
small scale firm to medium scale firm in Nekemte town” by Rukiya Mohammed Faji.
_____________________________________ ________________ ____________
Dean of SGS Signature Date
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 CERTIFICATE
This is to certify that the thesis entitles “Factors Affecting Sustainability of Small and Medium
Scale In Case Of Nakamte Town”, submitted to Great Land College for the award of the Degree
of Master of Business Administration (MBA). Therefore, I hereby declare that no part of this
Thesis has been submitted to any other university or institutions for the award of any degree or
diploma.

Main Adviser’s Name Date Signature

DR. Dinkisa keno __________ ________________

III
 DECLARATION
I hereby declare that this proposal entitled “Factors Affecting Sustainability of Small and Medium
Scale In Case Of Nakamte Town”, has been carried out by me under the guidance and
supervision of The Thesis is original and has not been submitted for the award of any degree or
diploma to any university or institutions.

Researcher‟s Name Date Signature

Rukiya Mohammed Faji __________ __________________

IV
ACKNOWLEDGMENT
Above all, I thank the Allah for giving me the strength to start and go through with my studies. I
would particularly like to extend my heart-felt thanks and appreciation to my advisor Dinkisa
Keno (PhD.) for his follow up, devotion of his precious time, valuable suggestions, constructive
comments, and systematic guidance to improve the content of this research thesis from
beginning. He also deserves my utmost gratitude for his encouragement, on time responses.
Finally, I would like to say thanks my respondents for their patience and time consumed to give
me the response on my question appropriately.

V
6
 ACRYNYMS AND ABBREVIATIONS
CSA: Central Statistical Agency
MSE: Micro and Small Enterprises
MSEDS: Micro and Small Enterprises Development Strategies
SPSS: Statistical Package for Social Sciences

7
Table of Contents

DECLARATION ......................................................................................................................... IV

ACRYNYMS AND ABBREVIATIONS ...................................................................................... 7

TABLE OF CONTENTS .............................................................................................................. 8

LIST OF TABLES........................................................................................................................11

LIST OF FIGURES .................................................................................................................... 12

ABSTRACTS............................................................................................................................... 13

CHAPTER ONE ......................................................................................................................... 14

INTRODUCTION....................................................................................................................... 14

1.1 BACKGROUND OF THE STUDY ..................................................................................... 14

1.2 STATEMENT OF THE PROBLEMS ......................................................................................... 16

1.3 RESEARCH QUESTIONS....................................................................................................... 18
1.4. OBJECTIVE OF THE STUDY................................................................................................. 18
1.4.1. GENERAL OBJECTIVE. .................................................................................................... 18
1.4.2. SPECIFIC OBJECTIVES. ................................................................................................... 18
1.5 SIGNIFICANCES OF THE STUDY........................................................................................... 19
1.6 SCOPE OF THE STUDY .......................................................................................................... 19
1.7. LIMITATIONS OF THE STUDY .............................................................................................. 19
1.8. ORGANIZATION OF THE PAPER .......................................................................................... 19

CHAPTER TWO ........................................................................................................................ 20

REVIEW OF RELATED LITERATURES .............................................................................. 20

2.1. THEORETICAL LITERATURES REVIEW. ............................................................................. 20

2.1.1. Definitions and Concept of MSE’s in Global Context. .......................................... 20
2.1.2. Definition of MSE’s in Ethiopian context. .............................................................. 24
2.2. FACTORS AFFECTING THE GROWTH AND DEVELOPMENT OF MICRO AND SMALL

ENTERPRISE. ............................................................................................................................. 25

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 2.2.1. Access to Infrastructure. .......................................................................................... 25
2.2.2. Access to Financial Services. .................................................................................... 26
2.2.3. Access to Working Premises ..................................................................................... 27
2.2.4. Distance from main Market Centre. ....................................................................... 28
2.2.5. Poor Planning. ........................................................................................................... 30
2.2.6 Market Linkage and MSE Growth. ......................................................................... 30
2.3. EMPIRICAL LITERATURE REVIEW ON MSES.................................................................... 31
2.4. CONCEPTUAL FRAME WORK OF THE STUDY. .................................................................... 32

CHAPTER THREE .................................................................................................................... 33

RESEARCH METHODS AND METHODOLOGIES ............................................................ 33

3.1. RESEARCH APPROACH AND DESIGN ................................................................................. 33

3.2 TARGET POPULATION OF THE STUDY. ................................................................................ 33
3.3 SAMPLING TECHNIQUES AND SAMPLE SIZE DETERMINATION.......................................... 34
3.3.1. Sampling Technique .................................................................................................. 34
3.3.2. Sample Size Determination ...................................................................................... 34
3.4 SOURCES OF DATA .............................................................................................................. 35
3.5 DATA COLLECTION TECHNIQUES....................................................................................... 35
3.6 DATA ANALYSIS TECHNIQUES. ........................................................................................... 36
3.7. ETHICAL CONSIDERATION ................................................................................................ 36

CHAPTER FOUR 4 .................................................................................................................... 37

4. DATA PRESENTATION, INTERPRETATION AND ANALYSIS .................................... 37

4.1 INTRODUCTION................................................................................................................. 37

4.2 RESPONSE RATE ................................................................................................................. 37

4.3 GENERAL INFORMATION OF THE RESPONDENTS ................................................................ 37
Figure: 4. 2 Age of the respondents ................................................................................... 38
4.4. DESCRIPTIVE ANALYSIS OF STUDY VARIABLES ................................................................ 42
4.4. 1 Factors Affecting the growth and Development of micro and Small-Scale
Enterprises. .......................................................................................................................... 42
4.4.1Management Related Factors for Growth and development of MSE.................... 42
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 4.4.2. Financial factors for Growth and development of Enterprise .............................. 43
4.4.3. Marketing Factors Related Factors to Growth of MSE ........................................ 45
4.4.4. Working place Related Factors to growth of MSE ................................................ 46
4.4.5. Infrastructure Related Factors to growth of MSE ................................................ 47
4.4.6. Sustainability to Medium Scale Firm ...................................................................... 48
4.5. CORRELATION ANALYSIS .................................................................................................. 49
4.6. MODEL ASSUMPTION TEST ............................................................................................... 50
4.7. REGRESSION ANALYSIS ..................................................................................................... 51

CHAPTER FIVE ........................................................................................................................ 54

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ............................................. 54

5.1. SUMMARY .......................................................................................................................... 54

5.2. CONCLUSIONS .................................................................................................................... 55
5.3. RECOMMENDATIONS ......................................................................................................... 56

REFERENCES ............................................................................................................................ 58

APPENDIXES I .......................................................................................................................... 60

APPENDIXES I .......................................................................................................................... 65

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LIST OF TABLES
Table3. 1: Target Population of the Study..............................................................................25
Table 3.2: Sample Frame of the study...................................................................................26
Table 4.1: Demographic Variable Under study.......................................................................29
Table 4.2: Duration of SMEs operation & the type of SMEs‟ Sector......................................30
Table 4.3: Financial sub factors wise score..............................................................................31
Table 4.4: Infrastructure sub factors wise score.......................................................................32
Table 4.5: Marketing sub factors wise score............................................................................33
Table 4.6: Work premise sub factors wise score.....................................................................34
Table 4.7: Transition of small scale firm to medium scale firm..............................................35
Table 4.8: Correlation Coefficients Result...............................................................................37
Table 4.9: Model Summary Result..........................................................................................39
Table 4.10: ANOVA Result....................................................................................................39
Table 4.11: Regression Coefficients Result............................................................................40
Table 4.12: Summary of Decision on Hypothesis................................................................ 41

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LIST OF FIGURES

Figure 2.1: Conceptual Framework of the Study.....................................................................24

Figure 4.1: Normality of Regression Standardized Residuals.................................................58
Figure 4.2: Normal P-P of Regression Standardized Residual................................................59
Figure 4.3: Scatter plot of the Standardized Residuals............................................................60

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 ABSTRACTS
This Research was aim to investigate factors affecting the Sustainability of micro and small
enterprises/MSEs: The Case of Nekemte Town Hence, the situation whether the objective of
these MSEs is providing merits special consideration of Sustainability of Mses. The MSEs are an
important force to create employment, generate income and contributes to the country’s GDP
and economic growth. It enhances productivity and technical change and stimulate economic
development, activate competition, develop role markets reduces poverty. This study was tries to
answer five important research questions with the factors affecting the growth and development
of micro and small enterprises in the study area. With the above objectives in mind, data were
gathered through Questionnaire and Review of both published and unpublished materials. The
information was gathered through questionnaire from a sample of 206 managers/owners by
using systematic random sampling. Eventually, the study was used quantitative tools to
investigate factors affecting the growth and development of micro and small Enterprises in Case
of Nekemte Town.
.
Key words: MSEs, Financial, Infrastructure, Marketing, Work premise and Sustainability

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 CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The definition and types of micro and small enterprises differ from country to country and there
is no universally (stated definition for micro and small enterprises. (Lepi & cited in Demis and
Mulugeta, 2011). The characteristics of the informal sector (small and micro enterprises) have
also been described as it is easy to enter, it is financed mainly from personal and family
resources, it requires low starting capital, it uses labor-intensive techniques, and it relies on the
non-formal school system such as apprenticeship and on-the-job training ( (..., 2011).) Aboagye
and Gozo, 1986; cited indemis, 2011).
The micro and small business sector is an important force to generate employment and more
equitable income distribution, activate competition, exploit niche markets, enhance productivity,
and bring technical change through the combination of all of these measures to alleviate poverty.
MSEs can play a role in improving the socio-economic condition of the poor since they create
employment opportunity that enable them to generate their income which in return leads to
access for socio-economic merits such as education, better health condition, good housing and
nutrition (Endalsasa, Ephrem, & Munira, 2012). The growth of micro and small enterprise get
great concern in the recent time by many policies makers and researchers globally, because of
realization of their economic contribution to GDP and economic growth. The MSEs are also an
important force to create employment and more equitable income generation, activate
competition, develop role markets, enhance productivity and technical change poverty reduction
through hall of these stimulate economic development (Efrem, 2011).

According to the Central statistical Agency (2009), 2009) almost 30% of all new jobs created in
Ethiopia are attributed to governmental Sectors. In Ethiopia, MSE sector is the second largest
employment generating sector and key factor for rapid economic development next to
agriculture. But they face different factors like external factors; firm‟s related factors that hinder
the growth of enterprise. In order to handle this challenges government of Ethiopia had design
micro and small enterprises strategy and formulated laws to establishment of executives starting

14
from federal to grass root level to enhance the strength and competence of MSEs and also
different microfinance enterprises are providing credit for these enterprises (FDRE and MoTI,
2009) In a normal process micro and small scale enterprise have to develop from one level of
growth to the next level of growth that means from micro to small, from small to medium, and
from medium to large scale enterprise by fulfilling the criteria needed. When it is developed from
small scale to medium scale, creates employment opportunity, facilitates industrial development, it
becomes independent from government support and leave the place for new micro enterprise. So, if
this process is continues, the development of industries will be fast and its contribution for
economic growth also increases. But for some different reason this process is not properly
applicable especially from small scale to medium. The Growth and Development of small scale to
medium scale enterprises, changes over time in their employment and output shares, market
orientation and location are usually thought to be related to many factors, including the level of
economic development, changes in real income per capita, population growth, and progress in
technology.

From the perspective of the entrepreneurs‟ personal factors, like their gender, age, professional
background and educational achievement have impacts on micro and small enterprise growth and
performance. But if these constraints are reduced or avoided, MSE‟s play an important role in
national economy and understandable that able to provide the job opportunities as well as the
survival of MSE present day in general MSE‟s is an all-time necessity. It will be gain distinction
and will increase its importance in coming days to develop country‟s economy ( (worku., 2013).
Recognizing the significance of this sector, the Ethiopian government issued the national micro
and small enterprises strategy in 1997 and established the federal micro and small enterprises
development agency in 1998. The country‟s industrial policy in 2003 and the poverty reduction
strategy in 2006 have singled out MSE‟s as major instruments to create a productive and vibrant
private sector and reduce poverty among rural and urban dwellers. The micro and small enterprises
sectors contribute to the economy of nations‟ by creating employment opportunities, production of
goods and services and other value added activities. Given this thought, the most important
question addressed in this paper is the factors affecting the growth and development of micro and
small enterprises/MSEs in west wallaga zone Nekemte Town.

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1.2 Statement of the Problems
The purpose of this study will to examine the factors affecting the growth and development of
micro and small enterprises (Mses) and come up with recommendations that will promote the
sector in Nekemte Town. In all economies of the world, especially in developing countries micro
and small enterprises are crucial for sustained growth and development. MSE‟s play key roles in
creating dynamic economy, market oriented economic growth, creating more job opportunity,
alleviating poverty and promoting democratization. (ILO, 2010). But its current growth stage in
terms of its contribution to GDP, employment creation and income generation is not as such
appreciating due to different internal and external challenge both at establishment and on operation
level. In most developing countries, including Ethiopia problems like poverty, unemployment,
illiteracy and high population growth rate etc.
The Ethiopian government adopted the national micro and small enterprise development strategy
for the first time in November 1997. The policy identified a number of constraints hampering the
development of MSE‟s. The policy serves as guideline to all stakeholders to stimulate the
establishment of new enterprises and enabling the existing ones to grow and become more
competitive. This policy identified un-favorable legal and regulatory frameworks, underdeveloped
infrastructure, poor business development services, limited access to finance, ineffective and
poorly coordinated institutional support as the key constraints that hinders the development of the
sector (SME‟s strategy for Ethiopia, 1997).
Girmay (2010) studied on the Managerial Performance in Small Scale Enterprise, focus more on
whether Small Scale Enterprise (SSE‟s) can operate as successful and surviving firm and to
formulate data base model of managerial performance measurement. The researcher also tried to
identify the challenges faced by MSEs in Jimma. Some of the factors identified are: lack of
information, lack of clear-cut policy, lack of skilled workforce and socio-cultural constraints.
However, the study failed to investigate how small-scale enterprise can be developing to medium
scale enterprise.
In sight of this EEA (2015) report indicated that Ethiopia where rate of urban and rural
unemployment in the country estimated to be 48% percent in urban (ILO, 2010) to overcome these
problems MSE sectors is one of the best options as the sector plays significant role for the national
economy in general. But there are tremendous challenges that affect their Growth and development
and reduced their ability to contribute effectively to sustainable development of the economy.
16
According (Elias, 2018) also tried to analyze growth determinants of MSEs and found that
product diversification is a major determinant factor for the growth of small enterprises in Metu
Oromia Regional State. The finding revealed that business experience is associated with new
start-ups calls for the promotion of the culture of apprenticeship and hold experience sharing for
the young as a possible area of involvement in employment generation schemes to minimize the
extent of unemployment, the researcher holdup to see MSE‟s contribution in the development of
medium scale enterprise by solving their challenges and using their opportunities. Previous
studies show that different research has been done at different place so far focusing on factors
that hinder the growth of MSEs and the outcome of the program in aggregate forms Therefore,
the governments of the federal democratic republic of Ethiopia have recognized and given
attention to the promotion and development of MSE‟s for they are important pathways to address
the problem related to unemployment and viable economic growth and equity in the country. To
this effect, the government has formulated a national micro and small enterprise development and
promotion strategy in 2013, which enlightens a systematic approach to alleviate the problems and
promote the (Guda, 2018)
Regarding the role of micro and small enterprises in the process of industrial development the
research conducted by (Solomon, 2004). Empirical studies fail to investigate the growth and
development enterprises. For instance, all of them cannot find out or not indicated the problem of
the growth and development of micro and small enterprise.
Besides, the previous researchers those undertake on the same topic they didn‟t study the growth
and development of MSE„s briefly their remains a knowledge gap on how the growth and
development of MSE improve in this sector. So, this study is going to be fulfills the knowledge gap
and create awareness/motivation distinguishing the factor affecting the growth and development of
MSE and come up with recommendations that will promote the sector in Nekemte Town.

17
1.3 Research Questions.
Research question employed for this research will be the following:
1. What is the effect of Management factors on Sustainability of micro and small enterprise in
Nekemte Town?
2. What is the effect of Financial Factors on Sustainability of micro and small enterprise Nekemte
Town?
3. Which is the relationship between Market linkage factors Sustainability of micro and small
enterprise in Nekemte Town?
4. What is the effect of working place factors on Sustainability of micro and small enterprises in
Nekemte Town?
5. What is the relationship between infrastructure factors Sustainability of micro and small
enterprises?
1.4. Objective of the Study.
1.4.1. General Objective.
The General objective of this study is to investigate and analyze factors affecting the
Sustainability micro and small enterprise in Nekemte Town
1.4.2. Specific Objectives.
1. To find out the effect of Management factors on Sustainability of micro and small enterprise in
Nekemte Town.
2. To analyze the effect of Financial Factors on Sustainability of micro and small enterprise in
Nekemte Town.
3. To determine the relationship between Market linkage factors and Sustainability of micro and
small enterprise in Nekemte Town.
4. To find out the effect of working place factors on Sustainability of micro and small enterprises
in Nekemte Town.
5. To determine the relationship between infrastructure factors Sustainability of micro and small
enterprises.

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1.5 Significances of the Study
The research had identified factors that affecting the growth and development of micro and small
enterprise in the study area. Additionally, the findings of this study were contributed to local or
regional leader‟s involvement. It also expected to use as base line information to policy makers,
experts and zone planners. The importance of this study was served as springboard for other
studies, which may focus on similar topics and issues, related to micro and small business
challenges and opportunities to Sustainability from small scale to medium scale. Accordingly, the
finding of the study may help national policy and strategy makers and practitioners in designing
and implementing appropriate policies that would enhance the Sustainability development of
small-scale enterprise to medium scale enterprise. The study was also served as a reference
material for those who wants to further study in similar area.
1.6 scope of the study
In order to address the research objectives, the study was enclosed spatially and operationally. The
study was limited to Oromia regional state, East Wallaga, Nekemte Town as a research setting. It is
also delimited to those SME‟s who have registered under the SME‟s development strategy of
Ethiopian government and licensed according to the strategy of SME‟s.
1.7. Limitations of the study
The main problem during the survey period or Challenges confronting the study of those
problems are Lack of enough budget to finance data collection and provided necessary
materials to create awareness among respondents and stake holders and to assign data collection
supporter, Inefficiency of time to study further in different perspectives, In consistence or un
correctness of required data between Keble and town office to get full information about MSE
and Poor documentation of reliable data among concerned government bodies of the town .
1.8. Organization of the paper
The paper was structured in five chapters as follows. Chapter introduction, background of the
study, statement of the problem, objectives, research question, organization and limitation of the
paper chapter two the literature review of micro and small enterprises meaning and definitions,
conceptual frame work and empirical chapter three research methodology and design describes the
research methodology applied in the study. Chapter four data analysis and research results and
discussion: chapter five conclusions and recommendations.

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 CHAPTER TWO
REVIEW OF RELATED LITERATURES
2.1. Theoretical Literatures Review.
This chapter will be presents an over view of previous literatures related to the research and an
overview of theoretical frame work and its factors that affect the Growth and development of
small scale to medium scale enterprises.
2.1.1. Definitions and Concept of MSE’s in Global Context.

Regarding the definition of the term MSE‟s universally accepted definition is not yet given. This
is because of the heterogeneity of MSEs themselves and the nature of the economy in which they
operate. This become the agent for the absence of establishing feasible global definitions that can
be used everywhere in the same manners. MSEs do serve as a means of bringing economic
Growth and development by using the skill and the talent of people without requiring high-level
training, much capital and sophisticated technology ( (Endalkachew 2. , 2016))According to (
(FMSEDA, 2017) Micro and small scale enterprises have been accepted worldwide as
instrument of economic growth and development. They contribute significantly to the national
economy of every country by virtue of alleviating poverty and creating jobs. No wonder that
government, particularly in the developing countries, has made tremendous efforts and establish
policies to enhance the capacity of micro and small-scale enterprises (MSEs).

Most small enterprises are registered businesses and they are usually more organized and
inefficiently run. Because they have a larger number of uneducated, technically not skilled
proprietors, they have no easier access to bank credits and with no targeted assistance and
support they offer the least potential for growth.
The small businesses grow and expand their classification changes from small to medium and
eventually to large enterprises which may have its operations in one country or region to having
a global presence. Most of the rules and regulations are favored towards small enterprises as
compared to the large establishments; such rules included liberal price setting, tax exemption
benefits to small business start-ups, less administrative controls and wage formation. But as the
small enterprises grew; the rules changed such that the small-scale enterprises experience
difficulties that make them unable to transit and become large business establishments. Some of

20
the difficulties included economic difficulties leading to decline in production, stiff competition
caused by the ability of large enterprises to advertise and garner the market and the shortcomings
of economic legislation which is difficult for all businesses and it is especially hard for small and
medium enterprises, as cited (in (Ongalo, 2010)
According to the National Board of Small-Scale Industries (NBSSI) in Ghana, both fixed asset
and number of employees are applied as criteria in the definitions of micro and small-scale
enterprise. It defines a Small-Scale Enterprise as one with not more than 9 workers, has plant and
machinery (excluding land, buildings and vehicles) not exceeding 10 million Cedes (US$ 9506,
using 1994 exchange rate). The European Commission (EC) coined the term `Small and Medium
Enterprises (SMEs) based on the following three components. According to this commission
where Firms with 0 to 9 employees are considered as micro enterprises the one with 10 to 99
employees are categorized under small scale enterprises. Meanwhile firm with 100 to 499
employees are indicated as medium enterprises ((Tora Hope, 2009)
The nature of the MSE strategy which distinguished the new strategy from the old one are: new
definition of MSEs based on manpower and total asset, one clustered marketing and display site,
saving 20% to get 80% loan, one site production and manufacturing, Lease system to buy big
machineries and vehicles with payback of 40 years, tax holiday based on MSE typology and
nature, persistent training and capacity building, formal accounting and auditing procedures,
limited transformation period from 1-3 years, structural arrangement at district and town
administration level, decreasing the minimum number of MSE to sole proprietorship and provide
new MSE type like cooperative, share company and other. According to the new strategy the
town administration is responsible to be considering as collateral only if the MSE members are
more than 10 (FMSEDA, 2011), (Yared, 2017).
Small businesses are the back bone of many economies across the globe. It is one of the
important segments of the economic growth. It initiates change and works for the goods of
people. Micro and small enterprises (MSEs) make important contributions to the development of
many countries‟ economy. The growth of a healthy, competitive MSEs sector will be maximized
when there is a strong enterprise culture in the society at all levels; a continuous growth in the
quality stock of independent business; maximum potential for growth of existing small
businesses: and a highly supportive economic, social and stakeholder environment (Lemma,

21
2018). In developing countries, they are seen as a major „self-help‟ instrument for poverty
eradication.
The MSE sector everywhere is characterized by highly diversified activities which can create
employment opportunities for a substantial segment of the population. This implies that the
sector is a quick remedy for unemployment and poverty problem (Admasu, 2012). Micro and
small enterprises are believed to have a vital role in poverty reduction, employment generation as
well as economic development in poor countries like Ethiopia ( (Gedam, 2010)).
The Ethiopian government has long recognized the important contribution that small and micro
enterprises can make in poverty reduction, employment creation and private sector development.
Micro and small enterprises offer both a safety regulator for the survival of workers that is
available to find steady wage employment and opportunity for the poor entrepreneurs to
raise their capital and income. These enterprises also offer a vehicle for acquiring and applying
skills to raise productivity and private sector growth, providing better wage-earning opportunities
for the poor, while raising national income ( (Endalkachew 2. , 2016)).
Today in Ethiopia the importance of small business enterprises though job creation, source of
wealth for owners, source of income for government GDP etc.., becomes increasing and the
government also gives attention to them. However, those small business enterprises have not
been able to contribute substantially as needed to the economic development of the country
which is particularly because of financial, production, marketing and other problems. These
problems are still major bottlenecks to their development. Lack of adequate finance and credit
has always been a major problem of Ethiopian small business, ( (Lemma, 2018)).
As per review by ( (Zinash, 2014)), various books and literatures written on entrepreneurship
asserted that entrepreneurship is one of the resources needed for production and transformation
process and thereby serving as sources of new and innovative ideas. The study of entrepreneurs
as individuals analyzes the variables that explain their appearance, such as personal
characteristics, the psychological profile like the need for achievement, the capacity to control,
tolerance of ambiguity and a tendency to take risks or non-psychological variable such as
education, experience, networks, the family, etc.
Small Scale Enterprise forms the bedrock of the economic growth of every nation. This is
because no nation can achieve a viable economic growth and development without the
establishment of Small Scale Enterprise. Small Scale Enterprise has always been in the forefront
22
of development strategies of every nation. Thus, the quest of any nation‟s development mustbe
centered around Small Scale Enterprise; because of its great role in terms of production
activities, employment generation and the overall improvement in the qualities of the life of
people (Mohammed G. , 2016). According to ( (Birdthistle, , 2007)) Ireland is a small open
economy, which is dependent on international trade. The Irish government has begun to focus on
the development of smaller domestic firms as a source of future growth, which makes sense
given the relevance of enterprise to the Irish economy.
The purpose of every business is to improve its economic value in the market by meeting
customer needs, wants and benefits. SME businesses are the mainstay of economic contribution
so they are not exempt from this purpose. If SMEs want to be successful, they should respond to
the sustainability challenges because customers evaluate a firm based on the sustainable
practices, ( (Salimzadeh, 2016)
In many countries, especially in developing countries micro & small enterprises are small
informally organized commercial operations owned and operated mostly by the poor. They
account for a substantial share of the total employment and gross domestic product (GDP)
contribute significantly to the alleviation of poverty and income creation. They are often the
chief economic defense of the most vulnerable households in high-risk environment, such as
civil conflict and natural disasters (micro enterprise laying the foundation for economic
development (MELFED 2004) as cited in (Bereket, 2010).
When choosing an adequate measure for the growth of the SME examined, it is useful to take a
look at previous studies to ensure convenience and comparability of the results. Basically, there
are various indicators used for growth measurement in the empirical research literature, as cited
in (Fonger, 2017), (Wakkee et al., 2015): Sales, employment, physical output, assets, profits and
market share.
MSEs are found in every economy; either in developing economy or developed economy.
In either case, they play significant role in the growth and sustainability of growth of countries.
In most of countries, there are small number of large enterprises, larger number of medium
enterprises and very large number of micro enterprises (Tarmidi, 2005) as cited (Mohammed Z.
A., 2014). The attitude towards growth is measured according to a scheme introduced by
Wiklund et al. (2003), as cited in (Fonger, 2017). To measure growth attitude, the authors ask the

23
respondents to assess 100% increase in the number of employees within 5 years with respect to
various consequences of this growth.

SMEs have been accepted worldwide as instruments of economic growth and development
Governments, particularly in the developing countries, have made tremendous efforts and
established policies towards enhancing the capacity and sustainability of SMEs However, despite
government institutional and policy support, there is a grave concern and skepticism about
whether SMEs can bring about economic growth and development, particularly in developing
countries (Adedamola, 2016).

2.1.2. Definition of MSE’s in Ethiopian context.

In the case of Ethiopia, there is also lack of uniform definition at the national level to have a
common understanding of the MSE‟s Sector. Even though difficulty is there in having clear cut
definitions, the country wide used definition of MSEs according to MoTI and CSA, 2009 is
based on level of paid-up capital/fixed asset, size of employment, the technological
establishment used and consultancy services. This categorization is important for functional and
promotional purposes to achieve the desired levels of development. However, three mostly used
definitions of MSEs are the definition by Ministry of trade and industry (MoTI) on the basic
criteria of capital investment and on the other hand by central statistical authority (CSA) that
uses employment and MSEDS use the capital investment and employment. In addition to the
above-mentioned definition currently, the revised MSE‟s Strategy divided MSEs in terms of
product and service.

The other definition in Ethiopian context is the definition used by CSA which categorized MSEs
in to different scales of operation depending on the above-mentioned yardsticks. According to
CSA a micro enterprise is one with fewer than 10 workers; those with 10-50 workers constitute
small enterprises while medium and large-scale enterprises are those with more than 50
employees.
The Government of Ethiopia is focusing on the micro and small enterprises basically because of
their contribution in reducing unemployment. The focus stems from the increasing
unemployment problem in Ethiopia; and MSEs have significant role in poverty alleviation and

24
job creation in ( (Solomon, 2004)) as cited in (Mohammed Z. A., 2014). They are attracting
the attention of government, and government is supporting them in different ways like
financial support, creating marketing link, providing free showing area, free production and
operation area, promotion and so on.
In Ethiopia, despite the enormous potential of vibrant MSMEs to contribute to job creation,
income generation and poverty alleviation, the high failure rate of small firms and enterprises is a
subject of much concern. In an attempt to identify determinant factors that affect survival,
previous studies have focused on firm size/scale of operation, firm age, type of entrepreneur,
macroeconomic environment and type of technology. However, little attention has been given to
analyzing the contribution of social capital in promoting the survival of small enterprises, and for
improving their degree of performance. A critical analysis of MSMEs that have managed to
survive and remain competitive in challenging environments indicates that such firms have relied
on social capital (Eshetu, 2008).
2.2. Factors affecting the growth and development of micro and small enterprise.
In Ethiopia, like in any other developing countries, medium and large-scale manufacturing or
service giving sectors are not create enough jobs to absorb the ever-increasing labour force,
especially in urban areas (Gedam, 2010). After decades of both political and economic problems,
Ethiopia is one of the poorest countries in the world, and an impetus to sustain and equitable
income growth is needed (IKED,). As countries more integrated into the global economy were
hit severely by the crisis, their policy makers turned attention towards domestic and regional
demand to diversify risks. The Growth and development of small scale to medium scale
Enterprise of MSEs affected by inter-firm related factors like linkage, network and competition.
The growth factors of MSE was also associated with external factors such as access to credit,
infrastructure, market, working place, technology, social services and other legal regulatory
frameworks.

2.2.1. Access to Infrastructure.

The most of MSEs faced lack of appropriate location for their businesses. Some of the MSEs are
located in places with inadequate supply or lack of public services and economic infrastructure
(water supply, electricity, transport systems, telecommunication system and sanitation services).
In comparison to middle or high-income communities, MSE with access to these services incur a

25
relatively high cost per unit for the service ( (Mohammed Z. A., 2014)). Besides, small size firm
cannot afford to invest in private public goods or to buy services from private providers which
would be more expensive than supplying from government suppliers. A poor economic
infrastructure and limited access to public services increases the operating costs of small firms,
limits their ability to meet quality standards hinders their participation in linkage relationships.
2.2.2. Access to Financial Services.
A crucial element in the development of the MSE sector is access to finance, particularly for
growth of enterprises. Access to finance is supposed as one of the main obstacles to doing
business and greater obstacle for MSEs than it is for large firms, particularly in the developing
world and that adversely affect the growth and performance of the MSE sector
(Masayebi&Maleki, 2013)

Different scholars evidenced that the MSE start their business with their own savings
supplemented by borrowing from friends and relatives. Since most of the MSE are poor they
start their business with very little capital. A few meet their capital requirements through
informal credit mechanisms which exist within their community but rarely from the formal
sector institutions. The Credit from formal sources is not only managed by government
regulations but often they also form part of public sector domination and hence administered by
a bureaucracy that is generally unfriendly to the poor, illiterates and semi-educated in the small
firm sector.

Similar attitudes also prevail in the private sector; the private banks for example rarely find it
profitable to deal with these units, though a few exceptions are emerging. Access to finance is a
key issue for MSE growth. Accessing credit, particularly for starting an enterprise is one of the
major constraints faced by members of entrepreneurs. Often have fewer opportunities than other
firms to gain access to credit for various reasons, including lack of deposit, an unwillingness to
accept household assets as collateral and negative perceptions of female entrepreneurs by loan
officers (Nyoro, 2007).

26
2.2.3. Access to Working Premises
According to (Bereket, 2010) if MSEs have a constant work place, they can draw long year
strategic plans regarding expansion of the business. In addition to state that the construction of
market sheds and common facility address this problem. Thus, government with support from
donors could engage in construct centres at suitable locations by assistance of the government,
donors and private sector could help citing shades for MSEs to address the problem of work
place, coupled with measures to encourage private investors to engage in construction of
premises suitable for entrepreneurs.
The factors that these factors such as entrepreneurial skills, financial, infra-structure, marketing
and work premise are factor that they have statistically significant positive correlation with
MSEs growth, (Genet, 2018).
SMEs have significant effect on the income distribution, tax revenue, and employment, efficient
utilization of resources and stability of family income (Jasra, 2011). (Admasu, 2012), finding
indicated that finance factors, marketing factors, infrastructure factors, technological factors,
work premise factors, management factors and entrepreneurial factors hindered the performance
of MSEs.
According to (Ayanda, 2011), small and medium enterprises have been considered as the engine
of economic growth and for promoting equitable development. The labor intensity of the SME
sector is much higher than that of the large enterprises. The role of small and medium enterprises
in the economic and social development of the country is well established (Ayanda, 2011). Micro
and small enterprise in Ethiopia are confronted with several factors that affect the performance of
MSE which includes financial problems, lack of qualified employees, lack of proper financial
records, marketing problems and lack of work premises, etc (Admasu, 2012).
MSEs is one of the institutions given recognition in the country„s industry development plan and
is the fact that it serves as vehicles for employment opportunities at urban center and as it
underpin the economic development (Mulugeta Kebede, 2017). When 60 percent living below
the poverty line are taken into account, the share of those gainfully employed in the SME sector
is more likely to be in the region of 10% as recorded by US Industry Small Business
Administration (SBA) (Ayanda, 2011). Micro, small and medium sized enterprises are credited to
offering about 75% of the general employment and contributing about 18% of GDP in the
Kenyan economy. These enterprises cut across all sectors of economy including general trade
27
(whole sale and retail), services, farm activities and manufacturing ,as cited in (Kung‟u, 2015)
,(Atieno, 2009).
MSE may be source of livelihood for poor and unemployed people like in both urban and rural
areas and have critical potential role in poverty reduction and economic recovery and growth
(Gedam, 2010). Micro enterprise development is an income generating strategy that helps poor,
low to moderate income, and other disadvantaged individuals start or expand Microenterprises
(Netsaalem, 2011). Specifically, microenterprise development fulfills personal, family, and
community needs by creating income, building assets, and contributing to local employment
creation (Netsaalem, 2011).

As a proven economic development tool, microenterprise development assists these

disadvantaged individuals in working their way out of poverty, fulfilling their dreams, and
contributing to their community (Association for Enterprise Opportunity, 2005).The roles of
SMEs in the creation of productive employment are concerned with its position in the center of
the range of sizes and resources intensities in a rising economy. Developing economies have
started to focus on the crucial role that SMEs can play in their development (Jasra, 2011).
According to (Mohammed Z. A., 2014), Micro and small enterprises are defined in a variety of
ways using various factors. Although many countries around the globe seem to use common
factors in their definitions, the degree of emphasis and measures used differ quite
considerably. These factors include number of employees, volume of sales, and the capital value
of the business. Generally, there are two types of definitions. The first is operational definition,
which are largely used for working purposes and the other is theoretical definition, which
are generally, employed to characterize the sector.
2.2.4. Distance from main Market Centre.
Marketing of a product or service is a central activity for a successful business if it closer to the
road, commercial area. In order to get maximum benefit from the market, MSE should be
collaborate among the different sectors or organizations and value chains are also collaborations
among firms in order to achieve better value from the market. This could be facilitated through
the support of MSE value chain development which is responsible for reducing urban poverty,
unemployment level through promoting high value products with effective income generation
and linking MSEs with national and international markets (Tekle, 2014).

28
Factors that contribute to success or failure of SMEs is marketing skills. There is extensive
evidence to prove that marketing plays a significant role in the success of SMEs. Marketing is
also one of the biggest challenges SMEs face in their business operations. SMEs in Algeria are
weak in terms of market research and have inadequate marketing skills because most Algerian
SMEs are owned and managed by one person. Such entrepreneurs take care of all the managerial
functions of the enterprise and lack the time and funds to invest in research to establish their
target market or identify customer trends (Bouazza, 2015).
Several studies confirm the strong influence of market orientation on firm performance. For
example, (Komppula, 2004), results show that most influential market orientation elements are a
fast response to negative customer satisfaction information, strategies based on creating value for
customers, immediate response to competitive challenges and fast detection of changes in
customer product preferences. Unavailability of appropriate dry waste and sewerage system,
power interruption, inadequate water supply, and poor transportation facility near the working
site are the critical influencing factors for the full scale implementation of MSE‟s
(Mekonnen, 2013). (Admasu, 2012), has identified the critical problems of MSEs in to market
related problems, which are caused by poor market linkage and poor promotional efforts.
According to given explanation by (Heslina, 2016) in developed countries, concern on SMEs is
very high. This is due to the fact that SMEs has been considered as the backbone of the
economy. However, SMEs are vulnerable to a variety of internal as well as external barriers. As a
consequence, governments‟ attention to SMEs is mostly in the form of creating conducive
environment, entrepreneurship development, access improvement to both domestics and
international markets, providing financial facilities, the competitiveness improvement and
providing information and supporting network.
There has therefore been a growing concern and interest by the government and development
agencies for the improved performance and growth of the small and medium enterprises. MSEs
had faced challenges in acquiring better managerial knowledge and skills as they did not get the
right capacity building training from qualified institutions. Their managers had confronted with
skill deficiencies in preparing their own work plans and exploiting market opportunities
(Mekonnen, 2013).
The rapid growth of global markets observed over the last decade has stimulated competition in
both developed and developing countries, forcing entrepreneurs and policy makers to adopt
29
market-oriented policies. The fact that, the share of SMEs has increased in these countries
suggests that efficient SMEs have actually been able to deploy new strategies in order to
maintain, or even enhance, their competitiveness in a globalized economy (Lema, 2013).
Majority of MSE‟s didn‟t have short and long term marketing plan, fully addressed market
linkages, clearly defined customers, means of product accessibility and differentiated products;
and have been facing challenges related to the negative attitude of the community towards the
quality of their products (Mekonnen, 2013).
(Atandi, 2013), he was found that credit available to MSEs does not necessarily lead to
addition of assets. The effect of credit available to MSEs on expanding market share, it indicated
that credit availability does not guarantee a bigger market share. The effect of credit available to
MSEs on business performance by considering stock levels held it revealed that little money was
allocated to purchasing of additional stock. On establishing the effect of credit available to MSEs
by considering additional number of employees it was found that MSEs do not necessarily lead
to good performance.
2.2.5. Poor Planning.
Enterprises members fail to plan because of their ignorance and lack of vision (i.e. not knowing
what to plan for and believing that careful thought about the business‟s future will reveal new
problems to be faced); lack of specific objectives and ideals; lack of information on which to
make assumptions about the future as well as lack of self-discipline and the inability to stay close
to the goals they have set (Tekle, 2014).
2.2.6 Market Linkage and MSE Growth.

One of the major challenges that hampers the growth and development of MSEs is access to
sufficient and sustainable market. The ability to tap into new markets requires expertise,
knowledge and contacts. In the past decade‟s Micro enterprises were viewed as marginal and
unproductive entities that were used as means to avoid taxes and had little potential for growth of
the enhancement of entrepreneurial capacity with the limitation of market link. But nowadays,
the contribution of micro and small enterprises to employment, growth and sustainable
development is widely acknowledged with context of market linkage. MSEs are long recognized
as important vehicles of economic diversification, income generation and distribution and
accelerating the economy of a country. They can also help to achieve a more equitable

30
distribution of the benefits of economic growth and thereby help alleviate some of the problems
associated with uneven income distribution (Tegegne and Meheret, 2010).

2.3. Empirical Literature Review on MSEs

Workeneh (2007) in his study entitled Constraints of Micro and Small Enterprise in addressing
employment opportunity found that MSEs operators in Addis Ababa face lack of adequate
training, unfavorable regulatory policy of the government institutions, problem of premise, and
inadequate training in the area of marketing and bookkeeping affect the performance and
contribution of the sector.
Eshetu and Zeleke (2008) conducted a longitudinal study to assess the impact of influential
factors that affect the long-term survival and viability of small 25 enterprises by using a random
sample of 500 MSMEs from 5 major cities in Ethiopia. According to this research, that lasted
from 1996-2001, the factors that affect the long term survival of MSEs in Ethiopia are found to
be adequacy of finance, level of education, level of managerial skills, level of technical skills,
and ability to convert part of their profit to investment.
This is so because the findings of the study revealed that businesses that failed, during the study
period were characterized by inadequate finance (61%), low level of education (55%), poor
managerial skills (54%), shortage of technical skills (49%), and inability to convert part of their
profit to investment (46%).(ibid).
According to the study of Mulugeta (2011) ,the critical problems of MSEs has recognized and
classified in to market-related problems, which are caused by poor market linkage and poor
promotional efforts; institution-related problems including bureaucratic bottlenecks, weak
institutional capacity, lack of awareness, failure to abide policies, regulations, rules, directives,
absence of training to executives, and poor monitoring and follow-up; operator-related
shortcomings like developing a dependency tradition, extravagant and wasting behavior, and lack
of vision and commitment from the side of the operators; MSE-related challenges including lack
of selling place, weak accounting and record keeping, lack of experience sharing, and lack of
cooperation within and among the MSEs and finally society-related problems such as its
distorted attitude about the operators themselves and their products.

31
2.4. Conceptual Frame work of the Study.
Since the growth and development of micro and small enterprises is important for job
opportunities, economic development and base for industrial development. This growth and
development is influenced by both internal and external factors; operators need to understand
what influences SME‟s to develop to the next stage. Because the conceptual model relies on the
work of researcher which considered showed different constraints that are serious in the success
or failure of SMEs in their growth and development.

According to Mande & Kamaldeen, 2014 conceptual frame work is the way in which briefly
understand independent factors and dependent variable. In line with the above ideas, challenges
of SME are categorized as Infrastructure factors, Market linkage factors, financial factors, Work
premise factor and management factors which interact together and challenges performance of
SME.

Figure 2.1: Conceptual Framework of the Study

Independent variable Dependent variable

Management Factor

Financial Factor

Market Factor Sustainability of MSEs

Work place factors

Infrastructure Factor

Source: Adapted from (Admasu, 2018)

32
 CHAPTER THREE
RESEARCH METHODS AND METHODOLOGIES
3.1. Research Approach and Design
The type‟s research design employed for this study was explanatory research design with
arrangement of primary data collection via a cross-sectional survey questionnaire follow by
quantitative research approach. The study mainly used descriptive and inferential researches to
describe the existing situation and as well used survey method so as to accurately and precisely
describe the research population which commonly utilized under descriptive type of research.
3.2 Target Population of the Study.
According to the secondary data from Innovation and job opportunity office of Nekemte Town
(2014EC), there are 426 active micro and small enterprises within five sectors having a total
number of 426 owners? Hence, the study will be concern about MSEs owners/managers involve
in manufacturing, construction, service, agriculture and trade operating in select from Nekemte
town. The consist of about 48.4% (206) of the total micro and small enterprises in Nekemte
Town. This makes it a good representative for analyzing factor affecting Growth and
development of small scale to medium scale enterprises in the Nekemte Town.
Table: 3.1 Target populations of study

No MSEs Sector No of MSEs Members of MSEs

1 Construction 127 831

2 Manufacturing 19 53

3 Trade 101 305

4 Service 169 864

5 Urban Agriculture 10 42

Total 426 2,095

Source: Innovation and job opportunity office of Nekemte town 2024.

33
3.3 Sampling Techniques and Sample Size Determination.
3.3.1. Sampling Technique
The researcher was use probability sampling design to get information about the study of
population. Probability sampling, stratified random sampling technique procedure was taken for
this study to select sample respondents from five sectors (strata) of MSE. So, the study was apply
simplified formula provided by (Yamane, 1967) in order to determine the required sample size at
95% confidence level and with the level of precision of= 5%(0.05%) and 1 is constant. Since the
total population is large.
3.3.2. Sample Size Determination
The total number of 426 enterprises cover under the study includes manufacturing (19),
construction (127), service (169), urban agriculture (10), trade (101) sectors. The sample size
selected here will consider as representative of five sectors and also large enough to allow for
precision and confidence of the research findings. The following formula to simplified for
proportion will use for the calculation of the sample size since it will relevant to studies where a
probability sampling method will use (Yemane 1967) from the total of 426 MSEs consisting 206
managers.

From the total of 206 MSEs consisting 206 managers.

By applying the above formula or

= 206

n = sample size N = Total population e = level of perception (sampling error) = 5% (0.05%)

1= is constant

Within each selected strata, there are five sectors of MSE‟s. These are: Construction; Service;
Trade manufacturing and Agriculture Within these five sectors, there are a. number of MSEs in
each organization. The researcher in this regard tries to take proportional number of MSE‟s
After determining the sample size, the researcher will use simple random sampling technique to
select sample respondents from five sectors (strata) of MSE. This method applied to select
34
sample of specified size from each stratum. Proportional allocation will be used to determine
sample size of each sector using the following formula taken from (Cochran,
1977). Where n =sample size of strata Nc= Total population number of individual

strata N= Total population.

Table 2. Proportional Sampling technique.

No MSEs Sector No of MSEs Members of MSEs Sample(n)

1 Construction 127 831 127/426x206=61
2 Manufacturing 19 53 19/426x206=9
3 Trade 101 305 101/426x206=49
4 Service 169 864 169/426x206=82
5 Urban Agriculture 10 42 10/426x206=5
Total 426 2,095 206
Source: own survey 2016
3.4 Sources of Data
The study was used both primary and secondary data. The primary data was collected directly
from respondent of enterprises leaders. The Secondary data was collected from published and an
unpublished report was referring to journals, annual reports, manuals, proclamation and
regulations.
3.5 Data Collection Techniques
In this study, primary data was collected from managers or owner of the micro and small
enterprises. The researcher will be collected the primary data at the time of field survey. To collect
necessary information from the sample population, sampling was carrying out using questionnaire.
Questionnaire containing Likert scale types was designed and administer to a total of 206 of the
enterprise managers or owners by systematic random sampling method. Initially the
questionnaires prepared in English but it was translating in to Afan Oromo, to make more
understandable for respondents.
The secondary sources of data were gathered from files, office manuals reporting were used to
provide additional information where appropriate. In addition, variety of published and
unpublished government documents, websites and reports will be review to make the study
faithful.

35
3.6 Data Analysis Techniques.
After collecting the data, the researcher was conducted factor analysis to check whether the
questions fulfill the standard by looking at their extraction value and also will check different
assumptions. And then, descriptive statistics namely frequencies, percentages, would be used to
analyze the data collected quantitatively by questionnaire. Generally, the researcher was used
descriptive analysis followed by inferential analysis (correlation and regression) to analyze the
cause-and-effect relationship between dependent variable and independent variables using SPSS
version 26 computer software
3.7. Ethical Consideration
On the first page of each questionnaire, the researcher was communicating the details and the
aims of the study in order to secure the consent of the research. And also, the researcher was
initiating the respondents to fill the questionnaires willingly. Generally, the researcher was
ensured the respondents not to disclose their names and any other personal information except
what they are required to fill on the questionnaires.

36
 CHAPTER FOUR 4
4. Data Presentation, Interpretation and Analysis
4.1 Introduction
Under this chapter, the data collected through different data collection methods and tools are
discussed and analyzed carefully in order to show and assess the Growth and developmental
development of MSEs from small scale to medium enterprise in the study area.
4.2 Response Rate
Two hundred six questionnaires were distributed across the five sectors in two Mses centers, out
of which 192 were completed and retrieved successfully, representing 93.2% response rate. Out
of the 206 questionnaires administered 9, 61, 82, 5 and 49 were distributed to Manufacturing,
Construction, Service, urban Agriculture and Trade respectively. The numbers of questionnaires
retrieved from Manufacturing, Construction, Service, urban Agriculture and Trade are 8, 56,76,4
and 48 respectively. This represents a response rate of 88.8 Percent, 91.8 Percent, 92.6 Percent,
80 Percent and 97.9 Percent for Manufacturing, Construction, Service, urban Agriculture and
Trade respectively. Generally, this section is organized in the following manner: First, the
general information about MSEs was presented. Second, data collected through questionnaires
were analyzed concurrently.
4.3 General information of the respondents
In this section, the study provides details of the gender, age, marital and educational status of
Managers/Operators are discussed and presented which is relevant for the respondents
4.3.1 Sex of respondents
Figure: 4.1 Gender of the respondents

Gender Frequency Percent

Male 133 69.3
Female 59 30.7
Total 192 100.0
Source: - Own field survey, 2016

37
As far as sex of the respondents is concerned, a result indicates that there is low proportion of
women compared to men in the MSEs. In the Town the proportion of men in MSEs covers 133
(69.3%) and women constitute only 59 (30.7%), demonstrating that there is a clearly observable
gender gap (table 4.1). There are some constraints for this variation such as cultural norms
regarding „appropriate‟ works of men and women. However, that proportion is adequate to
capture the interests of females.

4.3.2 Age of Respondents

Figure: 4. 2 Age of the respondents

Frequency Percent
Below 20years 8 4.2
21-30 years 56 29.2
31-40 years 104 54.2
41-50 years 16 8.3
Above 51 8 4.2
Total 192 100.0
Source: - Own field survey, 2016

Regarding the age structure, 8(4.2 %) of respondents were found below 20 age categories while
56 (29.2%) of the respondents were found in the range of 20-30 years age group. Age groups 31-
40, 41- 50 and 51 and above years constituted 104 (54.2%), 16 (8.3 %) and 8 (4.2 %) of
respondents, respectively. The majority of the respondents i.e., 91.6 Percent were found in the
age range of below21-50 years and the remaining 4.2 Percent of respondents were found in the
age range of 51 and above years. This result shows that the most included sample respondents
are the active sections of the societies, that are expected most to benefit from the MSEs and
urban development strategies (MOTI, 1997). In other words, the finding of this research
indicates that the MSEs accommodate the most active and productive age group of people as
shown in table 4.2 above.

38
 4.3.3 Educational Status
Table: 4.3 Educational levels of the respondents

Frequency Percent
1-8 grade 8 4.2
10 complete 26 13.5
Level I-IV 60 31.3
Diploma 15 7.8
BA/BSC holder 83 43.2
Total 192 100.0
Source: - Own field survey, 2016

For enhancing the productivity and growth of MSEs, education and skills are important. As indicated
in Table 4.3 Managers/Operators of the enterprises are found in different levels of education status.
Of the 192 respondents, 4.2 Percent of respondents were elementary Furthermore; about 13.5 Percent
of respondent were 10th Complete. As can be seen from the table, 31.3 Percent and 7.8 Percent of
sample respondents have TVET and Diploma respectively; whereas 43.2 Percent of respondents got
BA/BSC. This implies that most of the respondents‟ 43.2 Percent are BA/BSC holder. While the
remaining 4.2 Percent, 13.5 Percent, 31.3 percent and 7.8 Percent of respondents attended
Elementary, 10th Complete, TVET and Diploma respectively. Hence, from the educational levels of
the managers/ Operators of the enterprises, it is possible to generalize that large proportions of the
participants in MSEs are those who have TVET (I-IV) and BA/BSC holder.

4.3.4 Marital Status of Respondents

Table: 4.4 Marital Statuses of the Respondents

Category Frequency Percent

Married 131 68.2
Single 55 28.6
Divorce 6 3.1
Total 192 100.0
Source: Own Field survey 2016

39
With respect to marital status, out of the 192 respondents in the selected enterprises, 68.2
Percent of the respondents are married while 28.6 Percent of respondents are single. The
divorced sample respondents accounted for about 3.1 Percent. Hence, these table shows that
most proportions of married and single are able to participate in MSEs, and the sector is capable
of absorbing both single and married individuals indiscriminately and is increasing their income.
The proportion of divorced is also not that large and widowed individual not seen at all in the
demography of the Town.

4.3.5. Type of Enterprise

Table 4.5
Category Frequency Percent
Constructions 56 29.2
Services 76 39.6
Trade 48 25.0
Manufacturing 8 4.2
Urban agriculture 4 2.1
Total 192 100.0
Source: Own Field survey 2016

The above table shows the type of Mses Sector in which the samples of respondents were serve.
Majority of respondents 76(39.6%) were in service followed by Construction that accounts
56(39.6%) ,next the trade 48(25%) ,the rest 8(4.2%) and 48(2.1%) of respondents were
manufacturing and urban agriculture respectively. As above table 4.5 shows majority of
respondents were under service which accounts 76(39.6%)

40
4.3.6. Capital of Respondent

Table 4.6
Frequency Percent
Below 20,000 16 8.3
20,001-50,000 64 33.3
50,001-100,000 56 29.2
100,001-500,000 48 25.0
500,001-1,500,000 8 4.2
1,500,001 and above
Total 192 100.0
Source: Own Field survey 2016

The table you provided shows the frequency and percentage distribution for different income
brackets. There are 192 total entries, and the majority of the values fall within the 20,001-50,000
and 50,001-100,000 income brackets, comprising 33.3% and 29.2% of the total, respectively.
The lowest percentage is in the 1,500,001 and above bracket, with no specific frequency
provided.

4.3.7. Duration of Enterprises

Table 4.7
Frequency Percent
One to five 123 64.1
Six to Ten years 64 33.3
11 and above 5 2.6
Total 192 100.0
Source: Own Field survey 2016

The above table shows the duration of the enterprises under studied. Out of participants
123(64.1%) of respondents said their MSEs have operate between one to five years , 64(33.3%)
of respondents said their MSEs have operate between six to ten years and 5(2.6%) of respondents
said their MSEs have operate between eleven and above years of operation history. This shows
that most of the research MSEs has one to five years of duration. This indicates that most of the
MSEs under research were relevant operational experience to investigate the growth of Micro
and small enterprises in the research area.
41
4.4. Descriptive Analysis of Study Variables
4.4. 1 Factors Affecting the growth and Development of micro and Small-Scale Enterprises.
The study participants‟ level of agreement about factors affecting the Growth and development
of small-scale firm to medium scale firm in Nekemte town were undertaken. The study
participants were asked using Likert scale to indicate their level of agreement with scale such as
1= strongly disagree, 2= Disagree, 3=Neutral, 4= Agree, and 5= strongly agree. The mean value
of the response computed based on Likert scale indicated the average agreement of respondents.
According to the measurement of midpoint (3) on the five-point Likert scale and mean score
below midpoint (3) is disagree; mean score above midpoint (3) is agree and the mean score equal
to midpoint (3) is neutral. Respondents indicated their level of agreement on each of the five
level of agreement of variables under studied. The following Table 4.4, 4.5, 4.6,4.7 and 4.8 were
presented with mean and standard deviation on the factors affecting Growth and development of
small-scale firm to medium scale firm response of participants „in each SMEs study area.
The other variable in this study is the management experience of the principal owners of the
business which is expected to create variations on the Growth and developmental development
of MSE‟s. Management has always been a problem in this sector as most small-scale businesses do
not have the required management expertise to carry them through once the business start growing.
4.4.1Management Related Factors for Growth and development of MSE.
Table: 4.1.1.

Descriptive Statistics
N Mean Std. Deviation
There is adequate management experience 192 3.48 1.092

There is clear division of duties 192 3.38 1.209

There is adequate training of management 192 3.42 1.123

There is effective communication 192 3.72 .928

There is strong selection of associates in business 192 3.59 1.034
Valid N (listwise) 192

Source: Field survey, 2016

42
According to Fagge, (2004) the Management problems militate against the effective operation of
small and medium enterprises. Management has always been a problem in this sector as most
small-scale businesses do not have the required management expertise to carry them through
once the business start growing. The situation gets compounded as training is not usually
accorded priority in such establishments.

From Table 4.1.1, 41.5 Percent of respondents in this study respond that they have no any prior
management experience acquired either being employed in other organizations and working in a
management position or managing their own independent enterprises before the current one.
Generally, from the results in Table 4.12, the performance of those enterprises owned and
managed by those individuals having management experience is better than the others. This is
because, management experience may provide entrepreneurs with prior knowledge of markets,
ways to serve markets, and of customer problems and this kind of exposures in turn increases the
chance of the enterprise‟s success in their business environment. In general, it was investigated
that most of them were responding that Management Factors are hinders the Growth and
development of small-scale Enterprises.

4.4.2. Financial factors for Growth and development of Enterprise

A crucial element in the development of the MSE sector is access to finance, particularly for
growth of enterprises. Access to finance is supposed as one of the main obstacles to doing
business and greater obstacle for MSEs than it is for large firms, particularly in the developing
world and that adversely affect the growth and performance of the MSE sector.

Table 4.4.2. Financial factors of the Enterprise to transit.

43
 Descriptive Statistics
Item N Mean Std. Deviation
There is adequate credit access for MSEs 192 2.43 1.124

There is sufficient number of financial 192 2.43 1.109

institutions in the Town.

There is adequate loan providing service 192 2.32 1.096

MSEs have adequate working capital 192 2.56 1.142

MSEs have the required cash management skills 192 3.46 1.148

Valid N (listwise) 192

Source: Field survey 2016

As it shown in Table 4.4.2, As an with management and workers of Nekemte MSE Office and
the actors of the Nekemte Town MSE officials are confirmed that the Financial Factors
indicated that there are Inadequacy of credit institutions, lack of credit access, Shortage of
working capital, Fear of High collateral requirement and other lending institutions, loan
application procedures of banks and other lending institutions Fear of High interest rate charged
by institution and other lending institutions, which hinder the Growth and developmental
development of small scale Enterprises in the study area. The majority of respondents 2.4 to 3.46
mean to ported that they have the problem related to Asking collateral for loans, on the problem
of loan provision.
In addition, during the interview of management and workers of Nekemte MSE Office and with
the actors of the Nekemte Town MSE officials, they all agreed the existence of the problems and
explained the measures that the government is undertaking to lessen them such as lack of finance
for credit, and gap to address all MSEs have financial problem. However, they all agrees the
measurements taken to alleviate these problems are not sufficient and so that a lot has to be done
in the future. Related to this result, Beck et al. (2010) noted that while domestic credit to the
private sector has generally been increasing in most developing countries, anecdotal and
statistical evidence suggest that smaller enterprises continue to be largely left out.

44
4.4.3. Marketing Factors Related Factors to Growth of MSE
One of the major challenges that hampers the growth and development of MSEs is access to
sufficient and sustainable market. The ability to tap into new markets requires expertise,
knowledge and contacts. In the past decade‟s Micro enterprises were viewed as marginal and
unproductive entities that were used as means to avoid taxes and had little potential for growth of
the enhancement of entrepreneurial capacity with the limitation of marketing Factors.
Table 4.4.3. Marketing Factors for Growth and development of small scale to medium scale
Descriptive Statistics
Item N Mean Std.
Deviatio
n
MSEs have adequate market for their products and 192 2.80 1.178
services.
MSEs have adequate knowledge for searching new 192 3.31 1.247
market
MSEs have adequate demand forecasting ability. 192 3.14 1.216
MSEs have product quality to attract market 192 3.31 1.247
MSEs promote their products and services to attract 192 3.13 1.202
potential users
MSEs have strong customer relationship and handling 192 3.44 1.133

Valid N (listwise) 192

Source: Field survey, 2016

Regarding the Table 4.4.3, six questions were designed to gather information about Marketing
Factors. a total of six questions were covered. As it is shown in the above table, most of the
mean values for Marketing Factors was almost between 2.8 and 3.4, which revealed on average
the respondents were agreed that many times have not to cancel commitments and having to
prepare priority lists to get done all the marketing factor that affect the Growth and
developmental development of MSE‟s

In this regard in an interview conducted with enterprises leaders and leader of Nekemte Town
MSE official Actors of MSE officials, it was confirmed that they had lack of coordination,
attitude and capacity problem in well planning, everybody generating the same or similar

45
activates. For instance, if one person opens Beauty Saloon the one other person also opens the
same. If Mr. An opens wood work Mr. B also does the same. Such like too challenges the growth
of MSE in the study area.
4.4.4. Working place Related Factors to growth of MSE

Descriptive Statistics

N Mean Std. Deviation

MSEs are provided with own 192 2.55 1.120

premises.
Current working places of the 192 2.58 1.204
MSEs are convenient
Working place is facilitated by 192 2.59 1.224
government bodies for the MSEs
Working places of MSEs have 192 2.83 1.271
premise for future expansion
Valid N (listwise) 192

As presented in Table 4.6, the mean value of work place sub factors study result differs from
(M=2.53, SD=1.02) to (M=2.83, SD=1.71) and it would be described from highest mean score to
lowest mean score as follows. In the table 4.6, the respondents were asked whether the local
government were supporting the SMEs operation and its mean score was (M=2.95 & SD=1.35).
This shows that the local government were not supporting the SMEs operation in the study area.
and all of the work premise sub factors shows disagree in the study area/ the work premise were
not suitable for SMEs activity in the study area.

46
4.4.5. Infrastructure Related Factors to growth of MSE

Descriptive Statistics
N Mean Std. Deviation
There is continuous supply of electricity for 192 2.46 1.265
MSEs.
There is adequate Road access to channel 192 3.42 1.225
MSEs to the market
There is adequate supply of Water for 192 2.64 1.168
MSEs
There is continuous supply of telephone 192 2.54 1.249
and internet service for MSEs
Valid N (listwise) 192

As illustrated in Table 4.4, the mean value of infrastructure facility response was varied from
(M=2.46& SD=1.26) to (M=3.42 & SD=1.22) and it was described from the large mean result to
small mean result as follows.
Concerning continuous supply of electricity for MSEs has (M=2.46 & SD=1.26),the accessibility
of sufficient transportation service for business activity has (M=3.4 & SD=1.22),the accessibility
of required water supply for business operation has (M=2.64 & SD=1.16), is continuous supply
of telephone and internet service for MSEs has (M=2.54 &SD=1.24), This implies that the
majority of respondents were disagree on these items. Generally, there is no sufficient
infrastructure facility in the study area.

47
4.4.6. Sustainability to Medium Scale Firm
Table 4.7: Growth and development of small-scale firm to medium scale firm

Descriptive Statistics
Item N Mean Std.
Deviati
on
The income of the MSEs is increasing from time to 192 3.05 1.252
time
MSEs are profitable on their business activities 192 3.15 1.234

Volume of services and production of MSEs is 192 2.98 1.221

increased
MSEs are increasing employment by creating additional 192 2.94 1.213
job opportunities in the town
The existing environmental opportunities affect the 192 3.72 1.070
growth and development of MSEs
Valid N (listwise) 192

Source: Survey, 2016

The table above represents the response of participants regarding Growth and development of
small-scale firm to medium scale firm. Accordingly, the mean score on Growth and development
of small-scale firm to medium scale firm response were range from (M=2.94, SD=1.13) to (M=
3.72, SD=1.07). The Growth and development of small scale firm to medium scale firm depends
on the income of the MSEs is increasing from time to time, has the mean score of (M=3.05&
SD=1.25),the MSEs are Volume of services and production of MSEs is increased the Growth
and development of the small scale firm to medium scale firm, has the mean score of (M=3.15&
SD=1.234), the Growth and development of small scale firm to medium scale firm is affected by
effectively achieving the enterprise objective, has the mean score of (M=2.98 & SD=.65), the
Growth and development of small scale firm to medium scale firm is increasing employment by
creating additional job opportunities, has the mean score of (M=4.52& SD=.69), the Growth and

48
development of small scale firm to medium scale firm is firms environmental opportunities
affect the growth and development of MSEs, has the mean score of (M=3.72& SD=1.07),
Almost all of the study participants were strongly agreeing toward all sub factor of Growth and
development of small-scale firm to medium scale firm items raised to them.
4.5. Correlation Analysis
Table 4.8: Correlation Coefficients Result

Correlations
Manage Financi Market Workin Infrastru Growth
ment al Linkag g Place cture and
Factors Factors e Factors Factors develop
Factors ment
Management Pearson 1
Factors Correlation
Sig. (2-tailed)
Financial Pearson .732 1
Factors Correlation
Sig. (2-tailed) .000
Market Pearson .766 .765 1
Linkage Correlation
Factors Sig. (2-tailed) .000 .000
Working Pearson .750 .751* .688** 1
Place Factors Correlation
Sig. (2-tailed) .000 .000 .000
**
Infrastructur Pearson .799 .756 .724 .730 1
e Factors Correlation
Sig. (2-tailed) .000 .000 . .000 . .000
** ** **
Sustainabilit Pearson .756 .670 .752 .757** .741 1
y Correlation
Sig. (2-tailed) .000 .000 .000 .000 .000
*. Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed).
As it can be seen from table 4.8; there is significant relation between the dependent variable and
all independent variable under study. The Growth and development of small-scale to Medium
Scale Firm has strong and positive relation with Management Factors for 75.6 showing that the
better financial issues would better improve the Growth and development of small-scale to
Medium Scale Firm. The Growth and development of small-scale to Medium Scale Firm has
49
strong and positive relation with financial issues for 67.0 showing that the better financial issues
would better improve the Growth and development of small-scale to Medium Scale Firm. The
second correlated factors with the growth and development of SMEs are marketing practices
have also a strong and positive relation which accounts 71.4% showing that improving marketing
practices by SMEs in Nekemte town will improve the Growth and Development of small-scale
firm to medium scale firm. Factor with growth and development of SMEs is availability of
infrastructure have moderate and positive relation; which accounts 74.1% showing that the more
availability of infrastructure the better the Growth and Development of small-scale firm to
medium scale firm.
The fifth correlated factor with growth and development of SMEs is work places which have
moderate and positive relation; which accounts 75.7% showing the more the work premise is
suitable for SMEs operation, the Growth and Development of small-scale firm to medium scale
firm will increase in Nekemte town.
4.6. Model Assumption Test
These are test for normality, linearity and Equality of variance (homoscedasticity) scatter plot.
In SPSS, test between variables is done by using tolerance values and variance inflation factors.
It means that variance inflation factor (VIF) values below 10 are acceptable. Similarly, tolerance
value should be higher than 0.1. As observed from coefficients of Regression table 4.11, there is
no multi-collinearity problem in this study because the value of tolerance is higher than 0.380
and variance inflation factors value is also less than 10 as seen from table 4.11 and the
researcher has tested the possibility to use the regression model for this study. Sometimes the
Collinearity problem is occurred when two or more predictor variables has a higher correlation.
So, the researcher may be faced while drawing conclusion because of high correlation. The
Durbin-Watson statistics should be between 1.5 and 2.5 for independent observations. In this
study the value of Durbin-Watson from the above table 4.9 is 2.150. This value is within the
acceptable range of the assumption and it implies that the observations are independent.
The researcher has also evaluated the normality, linearity and homoscedasticity by examining the
Normal Probability Plot of the Regression Standardized Residual, the tendency of the points is
straight line. The visual examination of the Regression Standardized Residuals indicate there is
no violation of the normality assumption, the data collected on histogram does not skew neither
to the left nor to the right of the mean. Therefore, the data output is normally distributed. This
50
could secure the model is significant to explain dependent variable with respect to predicators of
the study. The scatter plot of the standardized residuals has no serious assumption violations.
4.7. Regression Analysis
Table 4.9: Model Summary Result

Model Summary
Model R R Square Adjusted R Std. Error of Durbin-Watson
Square the Estimate
a
1 .720 .518 .505 .735 1.922
a. Predictors: (Constant), Infrastructure Factors, Market Linkage Factors, Management
Factors, Working Place Factors, Financial Factors
b. Dependent Variable: Sustainability

As it can be observed from table, the independent variables, work premise, availability of
infrastructure, financial issues and marketing practices have significant effect on the Growth and
Development of small-scale firm to medium scale firm. The model indicates that of the variation
in the dependent variable (Growth and Development of SMEs) is because of the effect of the
independent variables. According to the above table, these overall factors have (72%) of
association with Growth and Development of SMEs and these factors have summary impacts of
(51.8 %) on Growth and Development of SMEs. Even though the summary of impact of these
factors on the Growth and Development of SMEs have well-presented above it required to
specifically discuss the respective impact that each factor have on Growth and Development of
SMEs.
Table 4.10: ANOVA Result

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 107.945 5 21.589 40.016 .000b
Residual 100.348 186 .540
Total 208.293 191
a. Dependent Variable: Sustainability
b. Predictors: (Constant), Infrastructure Factors, Market Linkage Factors, Management Factors,
Working Place Factors, Financial Factors

51
The Analysis of Variance table above shows the overall model is significant (F=40.016, P<0.05).
The study F- test value shows statistical significance at P value less than 0.05, indicated that F is
large enough to prove that the model used is suitable for the measurement of effects that these
independent variables on the Growth and Development of SMEs and the relationship between
the dependent and independent variables are meaningful.
Table 4.8 Regression Coefficients Result

Coefficients
Model Unstandardized Standar t Sig.
Coefficients dized
Coeffici
ents
B Std. Error Beta
1 (Constant) .731 .360 2.030 .044
Management Factors .090 .062 .074 1.441 .021
Financial Factors .131 .061 .114 2.142 .033
Market Linkage Factors .421 .056 .394 7.550 .000
Working Place Factors .516 .052 .519 9.874 .000
Infrastructure Factors .084 .055 .081 1.531 .038
a. Dependent Variable: Sustainability

As it can be observed from table above, all the factors of SMEs Growth and development,
financial issues, marketing practices, work place issues and infrastructure have significant impact
on the SMEs Growth and Development. These four factors, financial issues, marketing practices,
work place issues and availability of infrastructure have significant impact as it can be seen from
the significance level column all values being less than 0.05 along with all positive impact of all
the four independent variables on the dependent variable (the SMEs Growth and Development).
Consequently, the issues were provided to have highest work place issues (51.9%) impact on the
SMEs Growth and Development while Market Linkage (39.4%) is the second highest factor
affecting the SMEs Growth and development, Financial Factors (11.4%) is the third factor
affecting the SMEs Growth and development and availability of infrastructure (8.1%) is the
fourth factor affecting the SMEs Growth and development in the Nekemte town. Management
Factors (7.4%) is the fifth factor affecting the SMEs Growth and development In general, all
factors are significant to the dependent variable.
52
Based on the magnitude of weighted beta, it can be concluded that if all independent variables
are ignored, then the Nekemte town SMEs itself have the value of 0.042 on SMEs Growth and
Development. Nevertheless, if there is one additional standard deviation changes in independent
variables; work premise issues, marketing practices, financial issues, availability of infrastructure
and Management factors would be improved the Growth and development of small-scale firm to
medium scale firm with a value of 51%, 39.4% ,11.4% and 8.1%, and 7.4 respectively.

53
 CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
This chapter deals with the summary, conclusion and recommendations parts of the research.
The first part of this chapter presents the summary of the major findings. The second part of the
chapter is concerned with the conclusion drawn by the researcher and the third part is about the
recommendations made by the researcher.

5.1. Summary
The data collected from the respondents in terms of questionnaire and interview have been
analysed through the use of SPSS 26 version in using descriptive statistics; Correlation and
Regression out puts have been summarized as follows. The background characteristics of
respondents have been evaluated from the point of their educational background, sex, duration of
their SMEs operation and the type of SMEs‟ sector. Most of the participants of this study were
male respondents and the educational level of most participants were less than or equal to
diploma. Out of SMEs sector studied the service industry has taken the lion share and the
majority of SMEs sector studied have one to five years of operation.
The independent variables for this study were the four factor of SMEs Growth and Development
of MSEs, which are financial issues, marketing practices, work premise issues and availability of
infrastructure have estimated influence on the Growth and development of MSEs (dependent
variable).Financial issue under study has been evaluated from the dimensions of sufficiency of
credit institutions, cash management skill, adequacy of working capital, collateral requirement of
credit institution, interest rate charged by lending institution and loan application procedures of
lending institutions point of view. As such it has been found that the participants of these
selected SMEs sectors in Nekemte town showed their proudness with their cash management but
they have no adequate working capital for their business operation. Marketing practices has been
evaluated from the viewpoints of demand forecasting technique, accessibility of information,
conducting marketing research, relationship with customer and use of promotional tool. The
finding shows that the SMEs sector under study in Nekemte town has good relationship with
their existing customer but the SMEs sector studied have not employed demand forecasting
technique for their products. Work premise issues has been evaluated from the perspectives of
54
government support, tax imposed on SMEs, registration and licensing for SMEs operation,
availability of required input for SMEs operation, suitability of working place for SMEs
operation. As per the finding there is few local governments support of SMEs operation,
however the tax imposed on SMEs was not fairness & reasonability in the study area.
Finally, the availability of infrastructure has been evaluated from the viewpoints of electric
power supply for SMEs operation, water supply for SMEs operation, telecommunication service
for SMEs operation, transportation service for SMEs operation, proper technology for SMEs
operation and rent house for SMEs operation. The finding indicates that there are few
availabilities rent house rent house for SMEs business expansion but there is no sufficient
telecommunication service for SMEs operation in the study area.
The other output is Correlation result of the study. Here the researcher has shown that the
financial issues and marketing practice that were considered her have strong and positive relation
with the Growth and development of SMEs. Availability of infrastructure has also strong and
positive relation with the Growth and development of SMEs while work premise issues has also
moderate and positive relation with the Growth and development of SMEs in Nekemte town.
The effect of the independent variable (factors of SMEs Growth and development) has been seen
to be significant. Mainly financial issues have proved to have the dominant significant effect on
the Growth and development of SMEs in Nekemte town followed by marketing practices, work
premise issues and availability of infrastructure respectively as unstandardized coefficient result.
5.2. Conclusions
Being based on the specific objectives of this study the researcher has made detail analysis of
SMEs factor of Growth and development and the Growth and development of SMEs sectors in
Nekemte town. As such here are the major conclusions made by the researcher. The questions
were raised to identify the factors affecting the Growth and Development of small-scale firm to
medium scale firm in Nekemte town were financial issues, marketing practices, work premise
issues and availability of infrastructure. And the researcher finds out SMEs factors of Growth
and development relatively the least practiced was marketing issues, in Nekemte town SMEs
sector. According to descriptive analysis results, highest mean value has been scored to work
premise issues. These results indicate that relatively there is no suitable work environment for
SMEs Growth and development in the study area. In order of the mean values maximum to

55
minimum marketing practices, availability of infrastructure, financial issues and work premise
issues took the first, second, third and fourth place.
5.3. Recommendations
On the basis of the data analyzed and conclusions made the researcher has recommended certain
aspects to be considered for further improvements to be made.
 According to the descriptive finding of this study, the SMEs owner and member in
consultation with concerned body are politely recommended to improve their marketing
practices followed infrastructure, financial issues and work premise respectively in
Nekemte town.
 On the basis of inferential findings of this study, financial issues which has biggest
contribution for the Growth and development of small-scale firm to medium scale firm,
so that the local government has to enhance the accessibility of credit institutions and the
consultant services of SMEs as a result their working capital might be improved in the
study area. Moreover, the SMEs sector has to use appropriate marketing strategy to
attract their existing and potential customer; consequently the Growth and development
of small-scale firm to medium scale firm might come soon.
 The concerned government bodies are suggested to resolve the infra-structure constraints
of SMEs sector in Nekemte town and their Growth and Development might be enhanced.
The local government body and other supportive organization are recommended to
resolve the work premise constraints of SMEs sector in Nekemte town as a result the
SMEs Growth and development might be improved.
 As it has been reviewed from different literatures in chapter two, we can see that the
SMEs Growth and development is currently becoming any counter agenda and means of
development, poverty reduction that we must improve and make it further research based.
This study also found that the SMEs Growth and development in Nekemte town is
significant reservation existed stating that the SMEs Growth and development is not well
transformed from small scale firm to medium scale firm. Therefore, the factor of SMEs
Growth and development were evaluated to have significant effect on the transformation
of SMEs that should be well addressed and enhanced to medium scale firm.

56
 The potential researcher is recommended to conduct research on factors affecting SMEs
Growth and development in Nekemte town by taking each SMEs sector annual profit and
asset as secondary data.
 Despite the useful contributions of the study, it is clear that this research study had the
following limitations. Firstly, the scope of the study is limited to Nekemte town SMEs.
This means that organizations which come under a different law, other organization were
not included. Secondly, the data were collected at one point in time, the direction of
causality of the relationships examined in this study is not certain.
 Based on the results of the study, additional research is needed to enhance the
understanding of the factors affecting the Growth and development of small-scale firm to
medium scale firm in Nekemte town. Obviously, the scope of this study is limited in one
town. The participants were from only one town. Further research therefore needs to
extend sampling to other town and cultural groups. Considering the Nekemte town SMEs
as a case study, the study suggests that researchers examine the factors affecting the
Growth and development of small-scale firm to medium scale firm. Additionally, future
research might focus on the effect of mediating variables that underlie the factors
affecting Growth and development of SMEs and the Growth and development of SMEs.

57
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59
 APPENDIXES I
QUESTIONAIRES
GREAT LAND
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
QUESTIONNAIRES FOR RESPONDENTS
Dear respondent,
My name is Rukiya Mohamed and I am a graduate student in Great Land College. Currently, I
am undertaking research entitled Factors Affecting Sustainability of micro and Small Enterprise
in Nekemte Town: You are one of the respondents selected to participate on this study. Please
assist me in giving correct and complete information to present representative finding. Your
participation is entirely voluntary.
Finally, I confirm you that the information that you share me will be kept confidential and only
used for the academic purpose. No individual‟s responses will be identified as such and the
identity of persons responding will not be published or released to anyone.
Thank you in advance for your kind cooperation and dedicating your time. At last, if you have
any questions or comments on this research work, please participate via the following address
Researcher: Rukiya Mohamed
Phone Numbers
E-mail E-mail:[email protected]
Advisor: Dr. Dinkisa Keno
General directions to Respondents
Mark (√) for appropriate answer for the questions in a given box
For questions that demands for your opinion, please try to honestly describe in the given space; if
the space is not enough you can use the back space of the papers. Any additional suggestion is
appreciated.
Sincerely, Rukiya Mohamed

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Instructions.

 No need of writing your name

 For scale type statements and multiple-choice questions indicate your answers with a
check mark mark (√) in the appropriate block.

Section A Demographic Data

1. Gender: Male Female

2. Age: Below 20years 20-30 31- 40 41-50 Above 50
3. Educational level Grade 1-8 10th completed Level (I-IV) Diploma
BA /BSC holder
4. Marital status: Married Single Divorced Widowed
5. What is the MSE sector of your Enterprise? Construction Service Trade
Manufacturing Livestock Urban Agriculture Mining
6. What are capital of your business?
≤20,000 20,001-50,000 50,001-100,000 100,001-500,000 500,001-
1,500,000 1,500,001 and above
7.How long has your enterprise been in operation
One to five years six to ten years eleven and above years
Section B: Factors affecting the growth and development of micro and small-scale
enterprises
Please indicate the degree to which you agree with the following statements in each table
presented blow.
5=Strongly agree 4=Agree 3=Undecided 2=Disagree 1=Strongly disagree

What is your level of agreement on Management Factors?

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No Management Factors Strongly Disagr Undecided Agree Strongly
disagree ee agree
(1) (2) (3) (4) (5)
1 There is adequate management
experience
2 There is clear division of duties
3 There is adequate training of
management
4 There is effective communication
5 There is strong selection of associates
in business
If you have anything to add _______________________________________________________

What is your level of agreement on Financial Factors?

No Financial Factors Strongly Disagr Undecided Agree Strongly
disagree ee agree
(1) (2) (3) (4) (5)
1 There is adequate credit access for
MSEs
2 There are sufficient number of
financial institutions in the Town.
3 There is adequate loan providing
service
4 MSEs have adequate working capital
5 MSEs have the required cash
management skills

If you have anything to add _______________________________________________________

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 What is your level of agreement on linkage Factors?
No Market Linkage Factors Strongly Disagr Undecided Agree Strongly
disagree ee agree
(1) (2) (3) (4) (5)
1 MSEs have adequate market for their
products and services.
2 MSEs have adequate knowledge for
searching new market
3 MSEs have adequate demand
forecasting ability.
4 MSEs have product quality to attract
market
5 MSEs promote their products and
services to attract potential users
6 MSEs have strong customer
relationship and handling
If you have anything to add _______________________________________________________

What is your level of agreement on Working Place Factors?

No Working Place Factors Strongly Disagr Undecided Agree Strongly
disagree ee agree
(1) (2) (3) (4) (5)

1 MSEs are provided with own premises.

2 Current working places of the MSEs are
convenient
3 Working place is facilitated by
government bodies for the MSEs
4 Working places of MSEs are
have premise for future expansion
If you have anything to add _______________________________________________________

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 What is your level of agreement on Infrastructure Factors?
Infrastructure Factors Strongly Disagr Undecided Agree Strongly
disagree ee agree
(1) (2) (3) (4) (5)
1 There is continuous supply of
electricity for MSEs.
2 There is adequate Road access to
channel MSEs to the market
3 There is adequate supply of Water for
MSEs
4 There is continuous supply of
telephone and internet service for
MSEs
If you have anything to add _______________________________________________________
What is your level of agreement on Growth and Development of MSE?
No Growth and development Strongly Disag Undecided Agree Strongly
disagree ree agree
(1) (2) (3) (4) (5)
1 The income of the MSEs is increasing from
time to time
2 MSEs are profitable on their business
activities
3 Volume of services and production of MSEs
is increased
4 MSEs are increasing employment by creating
additional job opportunities in the town
4 The existing environmental opportunities
affect the growth and development of MSEs
If you have anything to add _______________________________________________________

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 APPENDIXES I

Correlations
Manage Financ Marke Worki Infrastr Growt
ment ial t ng ucture h and
Factors Factor Linkag Place Factors develo
s e Factor pment
Factor s
s
Manageme Pearson 1
nt Factors Correlation
Sig. (2-
tailed)
Financial Pearson .732 1
Factors Correlation
Sig. (2- .000
tailed)
Market Pearson .766 .765 1
Linkage Correlation
Factors Sig. (2- .000 .000
tailed)
Working Pearson .750 .751* .688** 1
Place Correlation
Factors Sig. (2- .000 .000 .000
tailed)
Infrastructu Pearson .799 .756** .724 .730 1
re Factors Correlation
Sig. (2- .000 .000 . .000 . .000
tailed)
Growth and Pearson .756** .670** .752** .757** .741 1
developmen Correlation
t Sig. (2- .000 .000 .000 .000 .000
tailed)
*. Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed).

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 Model Summary
Adjusted R Std. Error of the
Model R R Square Square Estimate Durbin-Watson
a
1 .720 .518 .505 .735 1.922
a. Predictors: (Constant), Infrastructure Factors, Market Linkage Factors, Management Factors,
Working Place Factors, Financial Factors
b. Dependent Variable: Sustainability

ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 107.945 5 21.589 40.016 .000b
Residual 100.348 186 .540
Total 208.293 191
a. Dependent Variable: Sustainability
b. Predictors: (Constant), Infrastructure Factors, Market Linkage Factors, Management Factors, Working
Place Factors, Financial Factors

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 Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) .731 .360 2.030 .044
Management Factors .090 .062 .074 1.441 .021
Financial Factors .131 .061 .114 2.142 .033
Market Linkage Factors .421 .056 .394 7.550 .000
Working Place Factors .516 .052 .519 9.874 .000
Infrastructure Factors .084 .055 .081 1.531 .038
a. Dependent Variable: Sustainability

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