BUSINESS ADMINISTRATION MANAGEMENT (MBA)

ARESEARCH TITLE GROWTH OF MICRO AND SMALL ENTERPRISES

IN ADDIS ABABA CITY ADMINISTRATION A STUDY ON SELECTED
MICRO AND SMALL ENTERPRISE IN BOLE SUB CITY WOREDA
THREE.

NAME ID No

Alemayehu Gana 087/13

A RESEARCH PAPER SUBMITTED TO QUEENS COLLEGE OF BUSINESS ADMINISTRATION

MANAGEMENT (MBA) IN PARTIAL FULFILLMENT OF REQUIREMENT FOR THE MESTERS OF
ART (MA) BUSINESS ADMINISTRATION MANAGEMENT (MBA)

ADVISOR: Getachewu (Dr.)

July, 2022
Addis Ababa, Ethiopia

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 Declaration

This paper is a presentation of our original research work. where ever contributions of
others are involved, every effort is made to indicate this clearly, with due reference to the
literature; information derived from the published or unpublished work of others has been
acknowledged in the text and a list of reference is given.

I, the undersigned, declare that this study entitled assessment growth of micro and small
enterprises in Addis Ababa city administration: a study on selected micro and small
enterprise in bole sub city woreda three has not been presented for a Mesters in any other
university, and that all sources of materials used for the study have been duly
acknowledged.

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Name of Candidates Signature Date

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Name of Advisor Signature Date

Approved by Examining Board:

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Name of Examiners Signature Date

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 APPROVAL SHEET

This research project is our original work and has not been presented for a degree in any
other college or university. Declared by:

1. Alemayehu Gana Signature: ……………

The research project has been submitted for examination with my approval as university
advisor. Approved by the Board of

Examiners Advisor:

--------------------------------------- Signature…………………………………….

Examiner: --------------------------Signature................................

Examiner: -------------------------Signature ……………………………….

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 ACKNOWLEDGEMENT

First of all our deepest thanks goes to the almighty of God for let us to stay in life to
this day and enables us to complete our academic life. We also would like to express
My deepest gratitude to my advisor Getachewu (Dr.) for his enthusiastic support
from the preparation until the final discussion of this paper with frequent follow up
with receiving in detail, main body of the paper and forwarding constrictive
suggestion. We are greatly thanks for Our family they had been assisted schooling
life and to give advice how can we goes with our planning activity to finish
academic schooling in this university. Finally we would like to acknowledge all
individual and institutions that have helped me materially and morally during the
preparation of this paper.

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Declaration----------------------------------------------------------------------------------------------------ii

Approval------------------------------------------------------------------------------------------------------iii

Acknowledgement-------------------------------------------------------------------------------------------vi

Abstract-------------------------------------------------------------------------------------------------Vii

CHAPTERONE

1 INTRODUCTION-----------------------------------------------------------------------------------------1

1.1 Background of the study-------------------------------------------------------------------------------1

1.2 Statement of the problem------------------------------------------------------------------------------2

1.3 Research questions--------------------------------------------------------------------------------------4

1.4 Objectives of studies------------------------------------------------------------------------------------4

1.4.1 General Objectives of the studies------------------------------------------------------------------4

1.4.2 Specific Objectives of the studies------------------------------------------------------------------4

1.5 Significance of the studies-----------------------------------------------------------------------------5

1.6 Scope of the studies--------------------------------------------------------------------------------------5

1.8 Limitations of the studies------------------------------------------------------------------------------6

1.9 Organization of the paper-----------------------------------------------------------------------------6

CHAPTER TWO

2 Review of Related Literature-------------------------------------------------------------------------8

CHAPTER THREE

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3. Research Design and Methodology -----------------------------------------------------------------21

3.1 Description of the study area

3.2 Research Design----------------------------------------------------------------------------------------21

3.2.Research approach ----------------------------------------------------------------------------------21

3.3 Source of data and types -----------------------------------------------------------------------------22

3.3.1 Primary data------------------------------------------------------------------------------------------22

3.3.2 Secondary data---------------------------------------------------------------------------------------22

3.4. Population and Sample design ---------------------------------------------------------------------22

3.5. Methods of Data Analysis---------------------------------------------------------------------------23

3.6 Ethical Consideration...........................................................................................................25

4. CHAPTER FOUR

4.1 .Data Presentation, Analysis, and Interpretation-----------------------------------------------30

4.1 Introduction---------------------------------------------------------------------------------------------30

4.2 Analysis of data-----------------------------------------------------------------------------------------30

CHAPTER FIVE-------------------------------------------------------------------------------------------34

5. Summary , Conclusion and Recommendation---------------------------------------------------34

5.1. Summary -----------------------------------------------------------------------------------------34

5.2. Conclusion--------------------------------------------------------------------------------------------36

5.3. Recommendation-----------------------------------------------------------------------------------38

Appendices

Reference

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 Abstract

The main objective of this study was to investigate the assessments growth of micro and
small enterprises in addis ababa city administration: a study on selected micro and small
enterprise in bole sub city werwda three. The study tested impact of availability of
technical and business management training for owners, the size of initial investment, the
output of Micro and Small Enterprises (MSES) as product versus rendering service,
working in cooperatives versus working without cooperative on growth of Micro and Small
Enterprises (Mses) in Bole Sub City of Addis Ababa City Administration. Primary data,
through structured questionnaire, was collected from random samples of 63 Micro and
Small Enterprises (Mses). Results revealed that Micro and Small Enterprises (mses) whose
owners attained training, started business with high initial investment, engaged on the
service sector, and established in non-cooperative form have better growth than those
whose owners/operators did not attend training, who started with low initial investment,
those engaged on production sector, and those working in cooperatives respectively. Hence,
the concerned government officials, nongovernmental organizations and other national
economic development players have to work hand in hand in the area of training,
availability of finance, formation and business sectors of Micro and Small Enterprises
(mses) in the country.

Key Terms- Addis Ababa City Administration, Bole Sub City, Growth, Micro and Small
Enterprises

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viii
 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the Study

The contribution of micro and small enterprises (MSEs Hereafter) to national
economies is widely acknowledged. According to World Bank, micro and small
enterprises play a major role in most economies, particularly in developing countries.
Formal MSEs contribute up to 45 % of total employment and up to 33 % of national
income (Gross Domestic Product) in emerging economies. These numbers are
significantly higher when informal MSEs are included (World Bank, 2015). The
Federal Micro and Small Enterprises Development Agency of Ethiopia was established
before 72 years and has passed through different institutional names. In 1998, Federal
Micro and Small Enterprises Development Agency (FeMSEDA hereafter) was re-
established according to Regulation of the council of Ministers 33/1998.The Ethiopian
government has given due attention to strengthen MSEs and took a decisive measure
for the development of the sector. As a result, the Council of Ministers approved
Regulation No.201/2011 and re-structured the Federal Micro and Small Enterprises
Development Agency again to enable the agency achieve its objectives (FeMSEDA,
2015). The key objectives of micro and small enterprises development program are to
create a reliable support for the development of competitive domestic industries and
private sector, create employment opportunities and thereby reduce poverty. Focus has
been given to enable micro and small enterprises produce goods and services which are
competitive initially in the domestic market and then gradually in the international
market, ensure a rapid technological transfer and expand to all cities of the country
(Ibid.).Some of the commonly used criteria are the number of employees, value of
assets, value of sales and size of capital or turnover, the capital invested and the total
balance sheet (asset, liability and capital). According to the Ethiopian Micro and Small
Enterprises Development Strategy (EMSEDS, 1997), MSEs are those business
enterprises with a paid up capital of not exceeding Birr 20,000 and excluding high tech
consultancy enterprises and other high-tech establishments, whereas small enterprises

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 are those business enterprises with a paid up capital above Birr 20,000 and not
exceeding Birr 500,000 and excluding high-tech consultancy enterprises and other
hightech establishments. The issue of MSEs Development ranked first among the
priorities of socio-economic development, given the growing need for employment
creation and poverty alleviation (Nugent, 2001). For instance, according to some
estimates, MSEs contribute to 22% of the adult population employment in developing
countries. The United Nations Industrial Development Organization (UNIDO)
estimates that MSEs represent over 90% of private business and contribute to more
than 50% of employment and of gross domestic product (GDP) in most African
countries (UNIDO, 1999).There is also an urgent need to create a strong competitive
MSEs Sector that is able to play a leading role in the development process. In Ethiopia,
a study undertaken by the Central Statistical Agency (CSA) disclosed that there were
about 974,679 micro enterprises, generating a means of livelihood for about 1.3 million
people (CSA, 2002). Another study conducted in 2003 by CSA also revealed that 1,863
SMEs had created employment opportunities for about 97,782 citizens (CSA, 2003).
Study report of FEMSEDA of year 2014 shows there were 8593 Micro Enterprises and
10,061 Small Enterprises in Addis Ababa (FeMSEDA, 2014). In this regard, growth of
MSEs has been in the recent past of great concern to many government policy makers
and researchers globally because of realization of their economic contribution to Gross
Domestic Product (GDP) and economic growth. As such they are no longer viewed as
“stepping stones” to real business but as a means of industrial and economic growth
and as well as tools of poverty eradication (ILO, 1986). Despite having immense
contribution in creating job opportunities and building the economy of developing
countries, MSEs operation and growth have been persistently challenged by numerous
internal and external factors, even a significant number of MSEs in different parts of
the country have collapsed and goes out of operation. In addition, Medias shows that,
MSEs sector in Ethiopia is a key target but its current size, performance in terms of its
contrition to GDP, employment and export and total manufacturing output is largely
unknown. A number of MSEs every month get license from government office and
start activity, and some of them grow and turn to medium enterprises, others
destination is not well investigated. Hence, there is need for efforts in examining the

2
 factors affecting the growth of SMEs. This research, therefore, aims to identify those
internal (firm-specific) and external (macroeconomic) factors affecting the growth of
MSEs in Bole Sub City of Addis Ababa City administration.

1.2 Statement of the Problem

In most developing countries, MSEs constitute the vast majority of firms, generating a
substantial share of both overall employment and gross domestic product (USAID, 2005).
In order to tap into the potential of SMEs for development and poverty reduction,
development partners and SMEs themselves need to address a number of challenges so that
graduation of as many enterprises as possible into medium sized enterprises is possible
(OECD, 2004). MSEs have been recognized by the Ethiopian government as a tool for the
poverty reduction and economic development of the country (FeMSEDA, 2011). Various
types of supports have been provided by the FeMSEDA to make sure that MSEs will
perform well regardless of the factors constraining their development. These include
providing financial support and trainings, Educational or Management skill development,
providing working premises, Market development and networking, and providing
technological development (FeMSEDA, 2015). Despite the vital role of MSEs in building a
competitive private sector and contributing significantly to economic growth and job
creation, MSEs are facing more challenges around the world in general and in developing
countries in particular (Abada et al., 2015). Despite the focus and support provided to MSE
sector, the performance of the industry in Ethiopia has fallen short of expectations due to
the various factors affecting the growth of MSEs. These include financial problems, access
to market, business information, working premises, lack of managerial and technical skill
and access to appropriate technology (EEA, 2015). MSEs engaged in manufacturing
activities have been growing by rate slower than the growth by large and medium scale
manufacturing industries over the last decade. Also, the share of manufacturing MSEs in
GDP of the country has declined from about 1.6 % in 2004/05 to 1.3 % in 2012/13.The loan
repayment performance of MSEs has declined from 89.6 % in 2010/11 to 68% in 2013/14
(Ibid.) . According to the World Bank (2015), only 3% of MSEs in Ethiopia get a loan or
financial credit service. Furthermore, 75% of the MSEs consulted by the World Bank
confirmed working premise challenges. Other challenges mentioned by World Bank

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include insufficient infrastructure and inopportune rules and regulations. It has been
found that the support service of MSEs in Ethiopia does not cover the majority of MSEs.
78.5% of MSEs do not receive financial support, 71% have no access to working premises
and 76% have never had a training support (MUDC, 2013). The growth of SMEs is
dependent on a range of internal and external factors. However, there is no clear
understanding or specific theory to show MSEs are affected by definite constraints of
growth (Stokes, 2010). Studies by Lussier, 1996) and Dragnic (2014), have listed out the
most challenging factors that influence MSE growth across different parts of the world.
The studies also showed the precise effect on growth by these factors. Similarly Reeg et al.
(2013), Abada et al. (2015), Hampel-Milagrosa (2014), SEDA (2012) and USAID (2005)
have showed the constraints of MSE growth and also stressed on the importance of
examining both internal and external constraints to fully understand their effect on growth
of MSE. Studies by Weldegebriel (2012), Ermias (2011), Dereje (2012), Kokobe (2015),
Bizusew (2015) and MUDC (2013) have showed the relationship between MSE growth and
its constraints in Ethiopia. While Bizusew (2015) and MUDC (2013) focus on the lack of
MSE support, Weldegebriel (2012), Ermias (2011), Dereje (2012) and Kokobe (2015) have
not include all the possible factors from both internal and external environment. As the
constraints of MSE growth consists of threats against both internal capabilities of the
enterprises and the external opportunities, it is important to investigate all the possible
factors of growth (Sun, 2004), (Papadiki and Chami, 2002), 4 (Olawale and Garwe, 2010).
The existing Ethiopian studies therefore lack a holistic view in examining all the internal
and external factors. Clearly, there is a gap studying the effect of both the internal and
external factors affecting the growth of MSEs in Addis Ababa, especially in here is no
universally agreed definition of Micro and Small Enterprises (MSEs), here is no universally
agreed definition of Micro and Small Enterprises (MSEs) growth of micro and small
enterprises in addis ababa city administration: a study on selected micro and small
enterprise in bole sub city wereda three.

This study was therefore conducted to fill the gap that was created due to lack of
knowledge to fully understand the effect of constraints on MSE growth from both internal
capabilities of MSEs and the external business environment in bole sub city wereda three .
The study will be useful in identifying the most influential factors constraining growth in

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bole sub city wereda three . The study will be a useful input for the bole sub city wereda
three to focus on these most influential factors and minimize the factors through support
delivered to the MSEs of Wereda

1.3 Objectives of the Study

1.3.1 General Objective

The main objective of this study will to investigate internal and external factors affecting
growth of micro and small enterprises in Addis ababa city administration: a study on
selected micro and small enterprise in bole sub city woreda three.

1.3.2 Specific Objectives

1. To identify the effect of attending technical and business management training on

growth of MSEs in Bole Subcity wereda three of Addis Ababa city Administration

2. To study the effect of manufacturing a product or providing a service on growth of

MSEs in Bole Subcity wereda three in Addis Ababa city Administration

3.To test the effect of working in cooperatives on growth of MSEs in Bole Sub-city
wereda three Addis Ababa city Administration

5 1.4 Research Questions

1. What are the most influential factors effect of attending technical and business
management training on growth of MSEs in Bole Subcity wereda three Addis Ababa
city Administration ?

2. How do effect of manufacturing a product or providing a service on growth of MSEs

in Bole Sub city wored three in Addis Ababa city Administration?

3. What is the growth trend effect of working in cooperatives on growth of MSEs in

Bole Sub-city wored three Addis Ababa city Administration?

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 1.6 Significance of the Study

The research is significant in identifying constraints that hinder the growth of MSEs
with in the sub city and further identify the major of Growth. The bole sub city
MSEDA can be benefited from this study to further facilitate its support to the MSEs
and identify the major challenges. The study brings a holistic view of studying of
growth from both the capability of the MSEs and the external business environment in
bole sub city, Wored 3. The study opens a way of investigating the challenges of MSEs
which can be extended to investigate other sub cities or towns of the country. The study
will also be useful input to Government policy makers and researchers who are
interested on investigating challenges that are depicted on the MSEs of the city.

1.7. Scope and Limitations

Due to time and financial constraints the study investigated the constraints affecting
the growth of MSEs in Addis Ababa, particularly in Woreda 3 of the bole sub city.
Although there are various factors affecting the performance of MSEs, this study
focused on the most frequently mentioned constraints on literatures reviewed. These
constraints are also the ones which MSEs get support from the FeMSEDA. These
constraints are politico-legal, working premises, technological, infrastructural,
marketing, Financial, Management and Entrepreneurial. It must be noted that the
study was cross-sectional (i.e. data was taken only once for the study) both in study
population and time of investigation. It must be noted that from the various aspects of
firm growth indicators change in capital accumulation was chosen as indicators such as
production output and sales volume are not easy to access from the MSEs and they
differ from one sector to the other. It is expected that the study might be limited by the
lack of access of correct information from the business owners of MSE due to their
suspicion that disclosing information regarding their business.

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1.8 Organization of the Paper

This paper consists of five chapters. The first chapter consists introduction to the study
that includes the background of the study, statement of the problem, research questions,
objectives scope significance and the limitations of the study. The second chapter consists
literature review. The third chapter consists the methodology of the study. Chapter four of
this research deals with data analysis, interpretation and presentation. The fifth chapter of
researcher deals with summary, conclusion, recommendation, questionnaires and reference
that used to conduct this study.

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 CHAPTER TWO

2. REVIEW OF RELATED LITERATURES

2.1. DEFINITION OF MICRO AND SMALL ENTERPRISES (MSEs)

In the past the definition of Micro and Small Enterprises was based on paid up capital
only. An enterprise is categorized as micro if it‟s paid up capital is less than or equal to
Birr 20,000. Similarly, an enterprise is considered small when its paid up capital is less
than or equal to Birr 500,000.However, this does not provide information on the size of
jobs or number of employees in the MSE. It also did not tell the size of the total asset for
the MSE and did not differentiate between manufacturing (industry) and services.
Current definition considers human capital and asset as the main measures of micro
and small enterprise to addresses the limitations of the old definition.

Table 1: The New MSE Definition (2011)

Type of the Sector Human Power Total Asset

Enterprise
Micro enterprise Industry <5 < 100,000(Birr)
Micro enterprise Service <50,000(Birr)
Small enterprise Industry 6-30 < 1.5 million (Birr)
Industry 6-30 < 1.5
million (Birr)
Small enterprise Service 6-30 <500,000(Birr)

1.5 ROLE OF MICRO AND SMALL ENTERPRISE (MSEs)

The small business sector is recognized as an integral component of economic

development and a crucial element in the effort to lift countries out of poverty
(Wolfenson, 2001). Small-Scale businesses are driving force for economic growth, job
creation, and poverty reduction in developing countries. Further, small scale business

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 has been recognized as a feeder service to large-scale industries (Fabayo, 2009). In light
of this, Micro and Small Enterprise Development Program in Ethiopia has been given
due attention by government since 2004/2005. Until 2004/2005, the national strategy
was implemented by Federal MSEs Development Agency organized only at national
level. Because of this, it was very difficult to make the strategy practical specially in
delivering business development service for MSE operators. Thus, by considering the
critical role of the sector and the challenges faced by MSE operators since 2004/2005
the government of Ethiopia decided to establish MSEs coordinating body at the
regional level.

attention must focus on the factors that have an impact on supply and demand for the
product produced by the MSE. The 'stochastic' models extended this simple static
model by consideration is given to the evolution of firms over time. These models also
introduced firm-specific costs. In this framework, firms draw each year's growth rate
from a distribution. 'Lucky' firms repeatedly draw high rates and grow over time.
These models were based on Gibrat's Law, the stylized fact that firm growth and firm
size are independent. However, researchers began to find fault with the assumptions of
the stochastic models, and empirical work demonstrated that Gibrat's Law does not
hold. This stochastic model was superseded in the theoretical literature by Jovanovic's
(1982) 'learning model'. In this framework, efficient firms (that is, firms with able
managers) grow over time, expanding each period when their managers observe that
their guesses about their managerial efficiency turn out to have understated their true
efficiency. Jovanovic's model, in its simplest form, predicts that the annual growth rate
of a firm will be a function of the accuracy of the manager's predictions regarding their
ability, as well as the price of the product. The learning model also has implications
about the relationships between growth rates and firm size and age. On average older
firms grow more slowly than younger ones. With respect to firm size, bigger firms grow
more slowly controlling for firm age. Bigger firm have small values of the cost
parameter (that is, they are more efficient). Such firms have less and less room for
further increases, given that the information distribution has a lower bound. The
Jovanovic model has been criticized for the immutability of the efficiency parameter. In
that model, managers are born with an efficiency level, and while they learn what that

9
 level is over time, they cannot alter it. Pakes and Ericson (1987) extended the basic
model to allow this parameter to be changed through human capital formation. Those
firms with managers possessing greater stocks of human capital should be more
efficient, and therefore should grow relatively faster. Another aspect of the literature
involves economies of scope at the firm level. Teece (1980), building on the work of
Penrose (1959) and Williamson (1975), theorizes that when the market for proprietary
know-how does not function efficiently, or when an input is specialized and indivisible,
a firm may find it more sensible to expand (diversify) than to sell the know-how or
input to another firm producing a different product. This approach emphasizes the
internal dynamics of the administrative structure of each firm. While this aspect seems
likely to offer some useful insights into the process of firm growth, such an analysis is
beyond the scope of this paper

1.6 MICRO AND SMALL ENTERPRISES (MSEs) AND THEIR GROWTH

What is growth in MSE? What is the yardstick to say one firm is growing while the
other is stagnant? In this study, firm growth for MSEs is defined as an increase in the
number of employees over time. MSE owners are typically able to remember their
number of employees over time, even if they fail to maintain reliable written records. In
addition, using the number of employees helps to avoid the need to deflate or otherwise
adjust currency figures, which is necessary when using revenue and other monetary
metrics. Employing other measures of growth may influence findings (Mead and
Liedholm, 1998). To date no theory specific to MSEs growth in developing countries has
been stated. Traditional neoclassical economics hypothesize that workers are added
until the value of the marginal product of the last worker is equal to the wage paid to
that worker. This implies that firm growth will occur as a reaction to changes in
technology, the wage rate, or the price of the product. As a result, if one is interested in
why small firms infactors related to the business environment, social or relational
factors, firm characteristics, and individual entrepreneur characteristics

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1.7 CONDITIONS FOR MICRO AND SMALL ENTERPRISES (MSEs) GROWTH Why
do some MSEs expand rapidly, while others stagnate? What factors account for the wide
variation observed in MSE growth course? Prior study on factors that affect MSE growth
tells, range of factors play an important role in shaping the growth performance of a
particular MSE, by influencing the opportunities available to owners and employees and
their capabilities to take advantage of such opportunities. These factors can be summarized
into four broad categories: contextual factors related to the business environment, social or
relational factors, firm characteristics, and individual entrepreneur characteristics.
Source: USAID Understanding Micro and Small Enterprise Growth, Report No 36, 2005

1.8 MEASURING MICRO AND SMALL ENTERPRISE (MSEs) GROWTH

There is a little agreement in the existing literature on how to measure growth of firms.
Thus most previous studies have used a variety of different measures such as total
assets, sales, employment size, profit, capital, and others (Berkhamet al., 1996;
Davidsson and Wiklund, 2000; Holmes & Zimmer, 1994). Moreover, growth has been
measured in absolute or relative terms. For this study, the parameter used to measure
the growth of MSEs was employment size.

1.9 ETHIOPIAN MICRO AND SMALL ENTERPRISE (MSEs) STRATEGY

In contrast to many MSE related studies, the working definition of MSE in Ethiopia is
based on capital. According to the Micro and Small Enterprises Development Strategy;
(1) Micro Enterprises: are those business enterprises with a paid-up capital of not
exceeding Birr 20,000 and excluding high tech consultancy firms and other high-tech
establishments; (2) Small Enterprises: are those business enterprises with a paid-up
capital above Birr 20,000 and not exceeding Birr 500,000 and excluding high tech
consultancy firms and other high-tech establishments (FDRE Ministry of Trade and
Industry 2007: 5). Hence, in this case the definition is based on capital and the level of
technical and technological capacities adopted. The information on MSE in Addis
Ababa indicated that from all the total licensed International Journal of Scientific and
Research Publications, Volume 6, Issue 1, January 2016 584 ISSN 2250-3153
www.ijsrp.org enterprises,75.4% are micro enterprises, 20.9% are small enterprises

11
 and the remaining 3.7% are medium and large enterprises (Addis ReMSEDA 2009a).
During the socialist regime (1974-1991) due to extensive nationalization of private
sector, many of the former private sector firms ceased to exist. But after 1991, the
current government adopted several policies and regulations aimed at supporting the
informal sector. MSE serves as sources for sustainable job opportunities not only for
developing countries like Ethiopia, but also for developed countries like USA. Thus they
are given prior attention as they are important and serve for sustainable source of job
opportunities to our country. As a result many important overall policy and
institutional reforms have been undertaken including: safety net, decentralization,
market economy, agricultural development led industrialization (ADLI), etc. Moreover,
a number of sector specific policy reforms and restructuring of regulatory institutions
may have contributed to the process of creation of micro and small enterprises. One of
the frameworks was related to issuance of the National Micro and Small Enterprises
Development Strategy in 1997 and the issuance of Proclamation No. 33/98 to provide
for the establishment of the Federal Micro and Small Enterprises Development Agency
(Addis ReMSEDA 2009a). In the same way to promote MSE, the Addis Ababa Trade
and Industry Development Bureau has two branches, one is for MSE which focuses on
the development of enterprises and the other one is for trade and industry. Micro and
Small Enterprises are one of the focal points on the development agenda of the
municipal government of Addis Ababa. The MSE branch has three main departments
namely; MSE Development, Marketing Research and Promotion Department, and the
Cooperatives Promotion and Controlling Department. Similarly, the structure of the
MSE is extended to all sub cities in Addis Ababa. There are MSE teams and teams for
the promotion of cooperatives in each sub-city while at the „kebele‟ level it is handled by
the MSE office under the „kebele‟ chief executive (Addis ReMSEDA 2009b). The MSE
branch has been organizing people with different skills into individual business and
cooperatives by creating job opportunities and providing various supportive services in
coordination with NGOs to create a favorable environment for the growth of the sector
(AddisReMSEDA, 2009b). Organizing and licensing was done by the cooperative office
and a working premise was provided by the sub-city administration, and other
concerned housing and land agencies. Space was provided depending on the size of the

12
 available land by assigning four square meters per person for a monthly fee of Birr
1.00/m2 for the food processing sector and monthly fee Birr 2.00/m2 for the metal and
woodworks sectors (Addis ReMSEDA 2009a). In November 1997, the Ethiopian
Ministry of Trade and Industry published the "Micro and Small Enterprises
Development Strategy", which enlightens a systematic approach to alleviate the
problems and promote the growth of MSEs (MOTI, 1997). Elements of the program
include measures with regard to creating an enabling legal framework and streamlining
regulatory conditions that hinder the establishment of new and expansion of existing
MSEs. In addition, specific support programs also include measures related to
providing working premises, facilitating access to finance, provision of incentives,
promotion of partnerships, business skill development training, access to appropriate
technology, access to market, access to information and advice, infrastructure and
institutional strengthening of the private sector associations and chambers of
commerce.

1.10ETHIOPIA‟S MICRO AND SMALL ENTERPRISE (MSEs) PROMOTION

POLICY The role of Micro and Small Enterprises (MSEs) is indispensable in poverty
reduction through employment generation. Cognizant of this, a national MSEs
Development Strategy was formulated in 1997. Ethiopia‟s MSE Policy envisages not
only reducing poverty in urban areas but also nurturing entrepreneurship and laying
the foundation for industrial development. The strategy was revised in 2010/11 with
renewed interests and more ambitious targets on employment and number of
entrepreneurs and transition to medium size level (Addis ReMSEDA 2009a). MSE
development, being one of the key focus areas of the country‟s development strategy,
receives massive support from the government in the form of access to finance, market,
technology, training and working space. The government strongly believes that MSEs
are the right solution to reduce urban unemployment and hence reduce poverty. This
ambition is reflected in the GTP. For instance, it plans to create three million new jobs
in the MSE sector in the five years growth and transformation period. Therefore, MSE
promotion and support is the vital strategy to fulfill this national plan of employment
creation in the short-run and achieving industrialization in the long-run. Ethiopia
adopts a layered policy support in which MSEs are categorized into start-ups, growing-

13
 middle and maturity. Start-up stage enterprises refers to those enterprises found at
their establishment stage and comprises a group or individual aspiring entrepreneurs
that seek various supports to make their enterprise operational. The basic challenges at
this stage include lack of initial and working capital, poor knowledge of business
management and entrepreneurship and lack of knowhow about the different
government policies and directives related to the sector. In order to mitigate these
challenges, FEMSEDA has designed a strategy that focuses on facilitating access to
initial capital, supporting MSEs in formalization and legalization process and provision
of training on business management, entrepreneurship and production technique.
Growing stage enterprises refers to those enterprises that are competent in the market
in terms of price and quality and successfully utilize the various government support
packages and are profitable in their business. However, enterprises at this stage also
suffer from different challenges like financial constraint, lack of appropriate technology
and technical skill, absence of sufficient working and sales premises and rent seeking
behavior. To alleviate these specific challenges, FEMSEDA has formed a national
strategy that focuses on facilitation of financial support and skill and technological
development program. On the other hand, enterprises are considered to have reached
the maturity stage when they are fully profitable and engaged in further expansion and
investments in the sector. At this stage FEMSEDA has a strategy that aims to
strengthen enterprises in terms of productivity and product quality. Moreover, at this
International Journal of Scientific and Research Publications, Volume 6, Issue 1,
January 2016 585 ISSN 2250-3153 www.ijsrp.org stage, knowledge of international
standards and better production technology are disseminated to enterprises.

1.11CHALLENGES OF MICRO AND SMALL ENTERPRISE (MSEs)

DEVELOPMENT IN ETHIOPIA

In Ethiopia, MSEs are confronted with various problems, which are of structural,
institutional and economic in nature. Lack of capital, working premises, marketing
problems, shortage of supply of raw materials and lack of qualified human resources
are the most pressing problems facing MSEs. Although the economic policy of Ethiopia

14
 has attached due emphasis to entrepreneurship values and appreciation of the sector's
contribution to the economy, there are still constraints related to infrastructure, credit,
working premises, extension service, consultancy, information provision, prototype
development, imbalance preferential treatment and many others, which therefore need
proper attention and improvement. It is in this context that the Ethiopian Micro and
Small Enterprises Development Strategy was conceived and developed (Ministry of
Trade and Industry, 1997).

1.12EMPIRICAL EVIDENCE

Empirical evidence from the U.S. (Evans, 1987; Dunne et al., 1989) and from the
developing world (Chuta, 1989) has repeatedly supported the inverse relationship
between firm growth and both firm age and size that is hypothesized by Jovanovic's
theory. In addition to firm age and size, demand and supply factors, such as sector and
location, enter into the growth decisions of individual firms, since they influence the
product and input prices. The learning model assumes all firms produce a
homogeneous product. Firms in different sectors face different product demands, as
well as being different on the cost side (e.g., inputs are more or less costly to obtain;
competition is more or less stiff). Therefore, if we intend to consider a group of
heterogeneous MSEs, we must allow for differences in sector. Sectorial differences in
growth rates have been shown by Phillips and Kirchoff (1988) for small firms in the
U.S. and by Chuta (1989) for enterprises in Nigeria. With respect to location, a firm's
proximity to demand sources and to concentrations of competition must influence its
profitability. In addition, the work of Piore and Sabel (1984), Sengenberger(1991), Pyke
(1990) and others highlights the importance of agglomeration externalities in firm
growth. These externalities come from many small firms locating near each other and
building reliable supplier and buyer relationships within the group.

15
 CHAPTER THREE

3.1RESEARCH METHODOLOGY

3.2 Description of the study area

Description of the study area The City Administration of Addis Ababa extends over 540
km² sub-divided into 10 sub-cities. The Bole sub-city, the focus of this study, is one of the
largest sub-cities located in the eastern part of Addis Ababa. The sub city has 14 woredas
(districts) and covers an area of 122.8 km²

3.2. Research Approaches

The study will use both qualitative and quantitative research approaches in order to
achieve the research Growth Of Micro And Small Enterprises In Addis Ababa City
Administration: A Study On Selected Micro And Small Enterprise In Bole Sub City Wored
Three.

. This is because of apply descriptive approach is focus on real world question and
applicable. It also answering practical question to provide relatively immediate solution
related to current of a study on selected micro and small enterprise in bole sub city werwda
three

3.3 Sampling Design

The sample selection carried out by a researcher so that it is reliable as to the
representation of the total population who are believed to be worker of the organization.
The eligible respondents were budget experts, managers, accounts economic and other that
have some responsibility in the sub-city. Hence the research sample unit will contain a
sample unit of 110 total personnel in the in the wereda by using probability judgmental
sampling. Within the sub-city an effort was to be made to interview the individual this are
managers, budget experts, senior ,officers and other that have some responsibilities in the
organization who is most familiar with the budget preparation and individuals who
concern the budget section. The techniques that are going to be implemented for the study

16
were census technique. This technique of sampling is selected, because it enables to get
accurate and sufficient information.

3.4. Source and types of data

Data collection data is collect using a combination of both quantitative and qualitative
methods. Quantitative data is primarily collect from the manager, finance , employee and
human resource departments . The questionnaires formed the basis for generating the
primary data. Qualitative data is collect using questionnaires and interviews which were
done purposively.

The data for this study is collecting from both primary and secondary sources of data.
3.3.1 Primary data: will be collected through the use of questionnaires and interview guide.
This is to help ascertain views and opinions pertaining to the topic under investigation.

3.3.2 The secondary data: will be gathered from literature review, journal, magazine,
website and the office report document in order to carry a trend analysis
3.5 Method of Data Collection

In the data collection process different data collection method will be use in the study.
According to the source of data that has been collected to conduct the researcher had been
collected two different types of data collection procedures will be use. These are primary
data that is questionnaires and interview.

The secondary data will be collected from different sources, such as the sub-city report
reference books and other research materials, magazines, personal documents, public and
official documents:- such as records, journals and magazines and newspapers reports.
Among personal documents letters, memories and diaries are an important secondary data
and these data are organized in both quantitative and qualitative method. For the
quantitative data the analysis part is conducted through percentage and tables regarding
the qualitative type of data explanation take place briefly manner.

3.6 Methods of Data Analysis and preset

17
After data collection, we use different accounting tools such as percentage and a table will
use to analyze and interpret the data and information in order to describe the annual
financial report of the organization and also used different system among them editing,
coding and tabulation. Editing to be used to involve the inspection of questionnaires on a
raw data and necessary for each questions and defecting the most glaring omission in
accuracy detail. Coding is a technical procedures by which data are categorized through
coding the raw data to transferred in to symbolic usually numerals. They may be tabulated
and counted. This can by specifying the categories in to which remains to be place. The
number would be depending up on the number of question on the questionnaires.
Tabulation can be consists of simply counting the number facts that fall in to various
groups. It communication the result of the study, can be used for several purpose it is
facilitated determining the empirical distribution.

3.7. Ethical Consideration

According to Economic and Social Research Council (2021), research ethics refers to the
moral principles and actions guiding and shaping research from its inception through to
completion, the dissemination of findings and the archiving, future use, sharing and linking
of data. This study, for that reason, was governed by the general rules of research ethics in
such a way that, the respondents were requested to provide information on voluntary
basis, prior communication about the purpose of the study was made and confidentiality of
the 110 information will assured.

18
 CHAPTER FOUR
4. Data analysis, Interpretation and Presentation
4.1 Introduction

This chapter presents data and findings of the study on assessment growth of micro and
small enterprises in Addis ababa city administration: a study on selected micro and small
enterprise in bole sub city woreda three. The study findings were presented according to
the research objectives as stated in chapter four also deals with analysis and interpretation
on the base of data gathered through questionnaires. The quantitative part of the analysis
was treated based on the data obtained from respondents on micro and small enterprise.
The closed ended questions of the questionnaire were analyzed using statistical tools such
as frequency count, percentage. Whereas, the second section that is the qualitative part of
the study was treated based on the data from interviews and open-ended questions of the
questionnaires were integrated systematically In order to acquire information for the study
totally 63 questionnaires were distributed.

4.1 Demographic Characteristics

Table 1: General Profile of growth of micro and small enterprises in addis ababa city
administration
Frequency Percentage(%)

No Item No %

1. Sex

Male 30 48%

19
 Female 33 52%

Total 63 100%

Source: questionnaire survey(2014)

As it has been indicated in the table 1 of items the quantitative part of the analysis gender
of the respondents is described and the composition of the respondents is somehow
proportional in that 30(48%) of the respondents are male where as 33(52%) of the
respondents are women. Based on the data indicated above the student researchers can
decide that more female respondents participated in filling out the questionnaire compared
to male respondents and It can be seen females had a greater representation of the whole
population. This indicates that female dominate in growth of micro and small enterprises
in Addis ababa city administration: a study on selected micro and small enterprise in bole
sub city of 52% as compared to male respondents who 48%. The female participation in
business area dominates the environment.

The table 4.2 presents the distribution of respondents by age. Different age groups tend to
have different needs.

Table 4.2: Distribution of respondents by Age

Age Number of Percentage(%)

respondent

18-26 13 21

26-36 22 34

36-45 17 26

Over 45 12 19

Total 63 100

20
Source: questionnaire survey(2022)

The findings show that most of the respondents are youth with the age between 26 and 35
years making up 34% of all respondents. The age group that follows is 36- 45 years which
makes up 26%, followed by group making 34%, this large percentage by the group 26-35
years may be a result of the large youth, who are educated and who are willing to
participate small and micro.

Table 4.3 Level of education of Respondent

Level of education Number of Percentages

respondent (%)

1-6 26 41

6-12 14 22

Certificate 10 16

Diploma 8 13

Degree 5 8

Total 63 100

Source: questionnaire survey(2022)

As shown table above questionnaire indicates that, the age group from 42-50 cover with
highest ratio. The education levels of , 41% of respondents were 1-6, 22% of respondent
were 6-12, 16% of respondent were certificate, 13% of respondent diploma and 8%
respondents were degree, this shown that the majority of tax payers are primary school.

21
The low level in academic qualification yields poor and irresponsible practices in micro
and small enterprises in Addis ababa city administration: a study on selected micro and
small enterprise in bole sub city

Table 4.4: Factors Affecting The Performance Of Micro And small Enterprises

No. strongly Agree Uncertain Disagree Strongly

The major factors that agree disagree
affect performance of
MSEs are listed below.
1 The tax levied on my 25(39.6%) 28(44.4%) 3(4.5%) 4(6.3%) 3(4.7%)
business is not
reasonable
2 Bureaucracy in 30(47.6%) 20(31.7%) 8(12.6%) 5(7.9%) ---
company registration
and licensing

3 Lack of accessible 38(60.3%) 18(28.5%) 4(6.3%) 2(3.17%) 1(1.5%)

information on
government
regulations that are
relevant to my business
4 Not Enough 34(53.9%) 13(20.6%) 10(15.8%) 4(6.3%) 2(3.17%)
government support on
politico-legal Factors

Table 4.4 growth of micro and small enterprises in addis ababa city administration: a study
on selected micro and small enterprise in bole sub city This show that The major factors
that affect performance of MSEs are listed below The tax levied on my business is not
22
reasonable 25(39.6%,) Strong agree,while28(44.4%) The tax levied on my business is not
reasonable agree, while 3(4.5%) The growth of micro and small enterprises levied on my
business is not reasonable disagree additionally30 (47.6%) of respondent Bureaucracy in
company registration and licensing strongly agree, while20 (31.7%) of respondent
Bureaucracy in company registration and licensing strongly agree, while8 (12.6%)
Bureaucracy in company registration and licensing uncertain, while38 (60.3%) Lack of
accessible information on government regulations that are relevant to my business
respondent strongly agree ,while 18(28.5%) Lack of accessible information on government
regulations that are relevant to my business agree, while4 (6.3%) Lack of accessible
information on government regulations that are relevant to my business uncertain, while34
(53.9%) Not Enough government support on politico-legal Factors respondent strongly
agree, while13 (20.6%) agree Not enough government support on politico-legal Factors
respondent while10 (15.8%) respondent uncertain Not Enough government support on
politico-legal Factors respondent, while 4(6.3%) Not Enough government support on
politico-legal Factors respondent disagree

Table4.5 Working Place Factors responendent

Working Place Factors

1 Absence of own premises 38(60.3%) 14(22.2%) 6 (9.5%) 3 (4.7%) (11.5%)

2 Current working place is 40 15 5(7.9%) 3 (4.7%)

not convenient (63.4%) (23.8%)

3 The rent of house is too 50 6 (9.5%) 4 (6.3%) 2 (3.1%) 1 (1.5%)

high (79.3%)

4 Not enough government 45(71.4%) 15(23.8%) 3 (4.7%)

support on Working place

23
 factors

Table 4.5 show that 38(60.3%) Absence of own premises respondent strongly agree
while14(22.2%) Absence of own premises respondent agree, while6 (9.5%) Absence of own
premises respondent respondent answer uncertain,while3 (4.7%) Absence of own premises
respondent respondent answer strongly disagree while40 (63.4%) Current working place is
not convenient believe that strong agree while15 (23.8%) Current working place is not
convenient believe that agree,while5(7.9%) Current working place is not convenient believe
that uncertain while,50 (79.3%)The rent of house is too high strong agree accordingly 6
(9.5%) The rent of house is too high strong agree accordingly agree while 4 (6.3%) The
rent of house is too high strong agree accordingly while45(71.4%) Not enough government
support on Working place factors strongly agree15(23.8%) Not enough government
support on Working place factors agree while 13 (4.7%) Not enough government support
on Working place factors uncertain according to their idea.

Table4.6 respondent Technological Factors

Technological Factors

Lack of appropriate 35(55.5%) 20(31.7%) 5(7.9%) 3(4.7%)

machinery and equipment

Lack of skills to handle new 30 (%47.6) 15(23.8%) 10(15.8%) 5(7.9%) 3 (4.7%)

24
technology

Lack of money to acquire 40 (63.4%) 10(15.8%) 7(11.1%) 3 (4.7%) 3(4.7%)

new technology

Unable to select proper 50 (79.3%) 10 (15.8%) 3 (4.7%)

technology

Not enough government 36 (57.1%) 12(19%) 9(14.2%) 4 (6.3%) 2 (3.1%)

support on Technological

From the table it show that 35(55.5%) Lack of appropriate machinery and equipment
strong agree, while20(31.7%) Lack of appropriate machinery and equipment respondent
agree 5(7.9%) while Lack of skills to handle new technology strong agree, while30 (%47.6)
Lack of skills to handle new technology 15(23.8%) agree while Lack of skills to handle
new technology 10(15.8%) while Lack of skills to handle new technology uncertain
5(7.9%)3 (while Lack of skills to handle new technology disagree 4.7%) Lack of money to
acquire new technology strong agree 40 (63.4%) while Lack of money to acquire new
technology agree, while10 (15.8%)Lack of money to acquire new technology uncertain 50
(79.3%)Unable to select proper technology10 (15.8%) Unable to select proper
technologywhile36 (57.1%)Not enough government support on Technological strong
agree12(19%)while Not enough government support on Technological agree9(14.2%)Not
enough government support on Technological uncertain 4 (6.3%)Not enough government
support on Technological.

 From analysis most of respondent lack of skill because of training.

Table4.7 Respondent Marketing Factors

Table II Marketing Factors

1. Inadequate market F=36(57.1%) F=14(22.2%) F=6(9.5%) F=4(6.3%) F=3(4.7%)

25
for my product

2. Searching new F=40(63.4%) 15 (23.8%) 4 (6.3%) 3 (4.7%) 1 (1.5%)

market is so difficult

3. Lack of demand 40 (63.4%) 15 (23.8%) 5 (7.9%) 3 (4.7%)

forecasting

4.Absence of 29 (46%) 22 (34.9%) 10 3 (4.7%)

relationship with an (15.8%)
organization that
conduct marketing
research

5. Concentrates 33 (52.3%) 15 (23.8%) 12 (19.%) 2 (3.17%)

his/her full attention
on dealing with
mistakes, complaints,
and failures.

29 (46%) 19 (30.1%) 11(17.4%) 2 (3.1%) 2( 3.1%)

6. Makes clear what

one can expect
Expresses satisfaction
when I meet
expectations

26
Table 4.7 show that Inadequate market for my product36 (57.1%)1. Inadequate market for
my product1. 14(22.2%) ,Inadequate market for my product1. Inadequate market for my
product6 (9.5%) Searching new market is so difficult40(63.4%)strong agree Searching
new market is so difficult 15 (23.8%) 40 (63.4%) respondent strongly agree,while15
(23.8%) Searching new market is so difficult agree 40 (63.4%) responses strong agree
Lack of demand forecasting, while15 (23.8%) Lack of demand forecasting while
uncertainty 5 (7.9%) responses 29 (46%) strong agree absence of relationship with an
organization that conduct marketing research22 (34.9%) agree absence of relationship
with an organization that conduct marketing research, while 33 (52.3%) Concentrates
his/her full attention on dealing with mistakes, complaints, and failures.strong agree,
while15 (23.8%) agree Concentrates his/her full attention on dealing with mistakes,
complaints, and failures. 12 (19.%) uncertain Concentrates his/her full attention on dealing
with mistakes, complaints, and failures2 (3.17%) disagree29 (46%) Makes clear what one
can expect Expresses satisfaction when I meet expectations strong agree while19
(30.1%)Makes clear what one can expect Expresses satisfaction when I meet expectations
agree, while 11(17.4%) Makes clear what one can expect Expresses satisfaction when I
meet expectations uncertain and 2 (3.1%) disagree while Makes clear what one can expect
Expresses satisfaction when I meet expectations uncertain 2( 3.1%) responses strong
disagree.

 Lack of access to market

 Lack of startup capital

 Lack of training on low to raise the growth level of their business

 Lack of skilled manager

27
 CHAPTER FIVE

5. SUMMARY, CONCLUSION AND RECOMMENDATION

5.1. SUMMARIES

The aim of this study was to investigate the factor that affect the growth of micro and small

enterprises. To this end, questionnaires were developed and addressed to respondents so as

to know factor that affect micro and small enterprise and suggest solution to the problem.

The study employed descriptive survey study and 63 micro and small enterprise were

included in the study as sample population. The data obtained were analyzed using

percentage method .Based on the result of the data analysis the following findings were

obtained.

 Micro and small enterprises in Addis Ababa city administration: a study on selected

micro and small enterprise in bole sub city from 30(48%) of the respondents are

male where as 33(52%) of the respondents are women. Based on the data indicated

above the student researchers can decide that more female respondents participated

in filling out the questionnaire compared to male respondents and It can be seen

females had a greater representation of the whole population.

 Education level of respondent large percentage by the group 26-35 years may be a
result of the large youth, who are educated and who are willing to participate small
and micro.
 Majority show that 38(60.3%) Absence of own premises respondent strongly agree.

28
  Inadequate market for my product36 (57.1%)1. Inadequate market for my

product1. 14(22.2%) ,Inadequate market for my product1. Inadequate market for

my product6 (9.5%) Searching new market is so difficult40(63.4%)strong agree

Searching new market is so difficult 15 (23.8%) 40 (63.4%) respondent strongly

agree,while15 (23.8%) Searching new market is so difficult agree 40 (63.4%)

responses strong agree Lack of demand forecasting.

Majority of micro and small enterprise in Addis Ababa Town center to the business by

government encouragement and looking high market opportunities in the town. Initial

capital of micro and enterprises in Bole is very low. Most of micro and small enterprise in

sub city face problem like: - Financial problem, access to market promotional problem and

computation is the major one.

5.2. Conclusion

Based on the major findings presented in above the following conclusion had been drawn

.As revealed from majority of the respondents that affect the growths of micro and small

enterprise are:

-lack of access to finance

, lack of access to market,

Lake of promotion

Competition and

Indulgences of government action and etc. So if these major problems are solved and

sector has given a high emphasis by government ,NGOs and private sectors it is possible to

29
let the sector growth and expand at an expected rate . In order to solve, the major problem

of micro and small enterprise the following suggestion are recommended.

This study was aimed to analyze the determinants of research Growth Of Micro And
Small Enterprises In Addis Ababa City Administration: A Study On Selected Micro And
Small Enterprise In Bole Sub City Wored Three, based on the sample of 63 enterprise
owner/manager drawn from three woreda, Both descriptive analysis and logistics
regression estimation results were used to answer the intended objectives. Therefore, based
on the findings, following conclusions are forwarded. MSEs have an important contributor
to economic growth and employment creation in Ethiopia. This contribution is determined
by different restraining factors. Due to different bottlenecks that hinder the growth, MSEs
which are found the three towns were not grown as it was expected. Non-growing and
growing enterprises respondent groups have statistically significant difference with respect
to the number of employees at start up and currently. MSEs Owner/manager
characteristics such as gender and age were found not to have influences on the growth
probability of the enterprises. The model result reveals that entrepreneurship competency,
management skill, and market access have positive and significant impact on the
probability of MSEs growth in study area. Hence, MSEs that was relatively lower
entrepreneurship competency, management skill and market access have lower probability
of growth compared to those MSEs that were better in competency, skill and access to the
market. Getting access to finance and engaging in innovation activity have negative impact
on the growth probability of MSEs in the study. This can be explained by the fact that
those MSEs that have been accessing loan service were lower growth rate probability
relatively to those MSEs had not get access to finance. Initial investment size and sector
variable have positive impact and statistically significant on MSEs growth. MSEs that were
started with higher initial investment size have the probability of growing compared to
MSEs that were started with lower initial investment. MSEs operate in manufacturing and
construction sector have high growth probability relatively than MSEs in other sectors
(Trade and Service). This might be due to high need in the side of consumer, and
government gives more attention for manufacturing and construction sector thereby
promote infrastructure in the country.

30
5.3. Recommendation

This study might have recommendations on the determinants of research Growth Of

Micro And Small Enterprises In Addis Ababa City Administration: A Study On Selected
Micro And Small Enterprise In Bole Sub City Wored Three, The role of MSEs in this area
was consistently recognized in high employment and income generating and has become a
major playing field for policy makers and donors with dual objective of enhancing growth
and alleviating poverty. Entrepreneurial competency, managerial skills, market access,
innovation, high initial investment, access to finance and being manufacturing sector were
identified as major determinants of growth of the MSEs in the study area. Then, proper
understanding of these factors constitutes an essential starting point and important for the
governmental and non-governmental organizations to formulate policies and strategies in
order to reduce poverty, unemployment and income inequality. the following
recommendations were forwarded to MSEs owner/manager, government and MSEs agency
office, and NGOs to promote MSEs and their performance in the study area.

 For Owner/Manager of MSEs

 Due to low implementation of growth strategies, the probability of MSEs growth
was low. Therefore, owner/manager of MSEs should upgrade entrepreneurial
competence through effective implementation of growth strategies such as
appropriate utilization of factors of production (effective controlling of human
resources and capital), effective selection of business partners, proper training for
employees, and sharing experience from other MSEs that are better in growth. To
have sustainable growth, MSEs owner/manager should equipped him/her with
management skills such as; setting a goal based on systematic planning, seeking
opportunity persistently, maintaining efficiency and quality in to consideration by
taking business risk and developing good business network. MSEs should make
themselves clear with the current and future need of customers for innovated
products/service before engaging in any innovative activity. In the process of
innovation development, MSEs should follow least cost strategy and use byproduct
as input materials so that they can make the product available at fair price for
customers and avoid shortage of markets for innovative products currently facing.

31
 However, in long terms, MSEs that are engaged in innovation activity may
contribute positively for their growth, therefore, for MSEs it is advisable to continue
doing innovation activities in a very efficient manner.
 For Government and MSEs Agency Office
 The MSEs development office of the selected towns should promote MSEs growth
through getting access to exhibition and tradeshows, making enterprises to have
access to updated market information, creating market linkage for MSEs to
participate equally without any favoritism in government procurement thereby
improve MSEs access to market. Moreover, sufficient managerial skill and market
access development training should be provided for MSE operators to change the
traditional way of operating, and marketing business should have modern types of
production and marketing. The government should support MSEs to show
progressive development in their growth through consulting them and to adopt
lower cost strategy, and to do their operation in a more effective way. Getting these
encouragements is a vital for MSEs to utilize their resources in effective ways. The
quality, distance from main road, and accessibility of infrastructures should be
considered in the provision of working space to the enterprises. Other concerned
bodies like universities should invite MSEs to enable them to be participated in
seminars and workshops to improve MSEs‟ capabilities, skills and access to
information and to increase their profitability which can serve as the best resource
acquisition strategy for new ventures in selected towns in Ethiopia. MSEs and bole
town administration office should undertake detailed study on the suitability of
business environment, identifying business areas where MSEs can successfully
participate such as supplier, intermediaries, and developing mechanisms whereby
product quality and unit costs are improved. As a result integrating MSEs are
important in those identified business activities without disturbing the market
mechanism and merit system. Moreover, it is better if the MSEs‟ agency office
advise the new enterprises to engage in manufacturing and construction sectors
than other sectors like trade and service.
 For Development Practitioners (NGO‟s)

32
  NGOs should provide capacity building training for MSEs on efficient utilization of
finance specifically to finance management, proper utilization of loan, loan
repayment, revenue generation and reinvestment of returns thereby MSEs growth
couldn‟t be obstacle due to increase debt of loan interest. In collaboration with other
concerned body, NGOs can support the growth of MSEs through providing
consultancy service, facilitating market access for innovated products and
encouraging MSEs innovation through introducing least cost method of production.

33
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Leighton, (1989), Some empirical aspects of entrepreneurship, American Economic
Review 79, no. 3. [19] Fabayo, J.A. (2009) Small and Medium Enterprises development
strategy: A paper presented at the first Annual International Conference on: Effective
Management of Small and Medium scale Enterprises for sustainable Economic. [20]
FDRE Ministry of Trade and Industry, (1997), Micro and Small Enterprises
Development Strategy Addis Ababa: Ministry of Trade and Industry. [21] FDRE
Ministry of Trade and Industry, (2007), National Micro and Small Enterprises
Development strategy Addis Ababa: Ministry of Trade and Industry. [22] Federal
Democratic Republic of Ethiopia Ministry of Trade and Industry (1997), Micro and
Small Enterprises Development Strategy, [23] Federal Ethiopian Micro and Small Scale
Enterprises Development Agency Report (2014) (Online) Vol.4, No.21, [24] Federal
Micro and Small Enterprises development Agency (2011), Micro and Small Enterprises
Development Strategy, Provision Framework and Methods of Implementation [25]
Federal Micro and Small Enterprises development Agency (2012), Competitive
Business Formation Guideline [26] Federal Micro and Small Enterprises development
Agency (2012), Facilitation Guideline FDRE ,(1998) Federal Negarit Gazeta of The
Federal Democratic Republic of Ethiopia, 147/1998 C.F.R. [27] Government of the
Federal Democratic Republic of Ethiopia (2011), Micro and Small Enterprise
Development Strategy, provision framework and methods of Implementation
(Approved), [28] Habtamu T.,(2007)Challenges and Opportunities of Small and
Medium scale Enterprises (SME) in Addis Ababa [29] Holmes, S., Zimmer, (1994), The
nature of small firm: Understanding the motivations of growth and non growth
oriented owners. Australian Journal of Management, 1994, Vol. 19, No. 1. ISSN 0266-
2426

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APPENDIX I

BUSINESS ADMINISTRATION MANAGEMENT (MBA)

ARESEARCH PROPOSAL GROWTH OF MICRO AND SMALL ENTERPRISES IN

ADDIS ABABA CITY ADMINISTRATION: A STUDY ON SELECTED MICRO AND
SMALL ENTERPRISE IN BOLE SUB CITY WERWDA THREE.

Questionnaires for employees

Dear Respondents, I Am Graduate Student Queens College Business Administration

Management (MBA)

Carrying out a research under the topic the research growth of micro and small
enterprises in addis ababa city administration: a study on selected micro and small
enterprise in bole sub city wored three. Therefore, your precise and clear answers to this

36
questionnaire will ended be critical for the success of this study. All information provided
would be kept entirely confidential manner, and the results will be used only for the
purpose of this research. This research is undertaken as part of fulfillment for the
program. The objective of this research is to fulfill the partial requirements for master
department of business administration management (MBA)

The data that collected from you will be used for academicals purpose only. Your genuine
and timely responses are quite vital to determine the success of this study. So, we kindly
request you to fill the questionnaire honestly and responsibly. We inform you that, the
information you provide will be consumed for academic purpose only and is confidential.
Thank you for your cooperation!

Section I: Demographic Data

Close-ended questions are answered by placing a tick (√ ) mark with in the box.

Background Information

1 Gender.:-A. Male  B. Female 

2. Age: - A. 22-26  B. 26-30  C. 30-35  D. Above 35 

3 .Educational status: - Education level:

A. Below 10/12  B. Diploma  C. Degree  D.Master 

4 .Marital Status A. Married  B. Single  C. Divorced 

D. Widowed 

5. Years of experience: - A. 1-3years B. 4-7 years  C. Above 8 years 

6. .Position status: - A. Manager  B. Assistant manager C. Customer service 

D. Accountant  E.If other specify 

37
Section Ii: Opinion Investigation On The Aresearch Growth Of Micro And Small
Enterprises In Addis Ababa City Administration: A Study On Selected Micro And Small
Enterprise In Bole Sub City Wored Three.

General Directions For each of the questions in the following sections, please tick a
number that represents your choice as to the level of agreement or disagreement with a
check mark (√) Strongly disagree=1, Disagree =2, Uncertain =3, Agree =4, strongly agree=5

Given the key given, tick or choose the right alternative that corresponds with your
opinion as follows:

Section 3: Factors Affecting The Performance Of Micro Andsmall Enterprises

Table I

No. strongly Agree Uncertain Disagree Strongly

The major factors that agree disagree
affect performance of
MSEs are listed below.
1 The tax levied on my
business is not reasonable
2 Bureaucracy in company
registration and licensing

3 Lack of accessible
information on
government regulations
that are relevant to my
business
4 Not Enough government

38
 support on politico-legal
Factors
Working Place Factors

1 Absence of own premises

2 Current working place is

not convenient

3 The rent of house is too

high

4 Not enough government

support on Working place
factors

Technological Factors

1 Lack of appropriate
machinery and equipment

2 Lack of skills to handle new

technology

Lack of money to acquire

39
3 new technology

4 Unable to select proper

technology

5 Not enough government

support on Technological

Table II Marketing Factors

1. Inadequate market for my

product

2. Searching new market is so

difficult

3. Lack of demand forecasting

4.Absence of relationship with an

organization that conduct marketing
research

5. Concentrates his/her full

attention on dealing with mistakes,
complaints, and failures.

6. Makes clear what one can expect

Expresses satisfaction when I meet

40
expectations

Thank you for your cooperation!

41