Abstract
This study was conducted in Durame Town, KembataTemaro zone, Southern Ethiopia. The objective of the study is to find out factors that determine growth of Micro and Small Enterprises and to assess current status of Micro and Small Enterprises in terms of employment and capital growth. Out of 148 Micro and Small Enterprises in the study area, 100 Micro and Small Enterprises (MSEs) were selected as a sample using stratified and simple random sampling technique. They were stratified based on the sector they are operating. The data were analyzed using descriptive statistical tools including mean, percentage and standard deviation. The binary logit model was applied to identify determinants of MSEs growth. The study used employment and capital as growth indicators. Growth rate for the two indicators was computed by the change of natural logarithm of employment or capita over the life of enterprise. After calculating growth rate, Micro and Small Enterprises were grouped into two categories growing and non growing. Micro and Small Enterprises which had growth rate < 0 categorized into non growing and Micro and Small Enterprises which had growth rate ≥ 0.The finding of the study shows that out of the total sample 40% of Micro and Small Enterprises are growing and 60% of Micro and Small Enterprises are non growing in terms of employment. In terms of capital 69% of Micro and Small Enterprises are growing and 31% are non growing. The model result indicated that out of 19 explanatory variables, 10 variables were found to be significant in determining Micro and Small Enterprises growth. Factors found to be significant for employment growth were: entrepreneurship training, location of enterprise, motivation of owner, market linkage, access to finance, access to water. Factors found to be significantly influencing capital growth were: education level of owner, motivation of owner, number of owners, initial employment size, social network. Hence, government and non-government organizations that are concerned with the promotion and development of MSEs need to take these factors in to account to accomplish better result and increase the potential contribution of MSEs to the economic growth.
Highlights
Poverty in Ethiopia is widespread and remains a major challenge of sustainable development and stability
Micro and Small Enterprises (MSEs) serves as sources for sustainable job opportunities for developing countries like Ethiopia, and for developed countries like USA
The promotion of MSEs is one of the strategic directions pursued by the government during the Growth and Transformation Plan (GTP) implementation period (2010/11-2014/15), focusing on promoting the development and competitiveness of MSEs
Summary
Poverty in Ethiopia is widespread and remains a major challenge of sustainable development and stability. It is estimated that close to half of the population in urban and rural areas of Ethiopia live in absolute poverty due to lack of economic opportunities, governance crisis, inadequate basic household income and poor means of survival [1].Sources of unemployment has been identified as one of the major challenges facing young people around the world, ranging from 25% to 45% in most developing countries. Government of Ethiopia has issued a national SMEs development strategy for the promotion of Small and Micro Enterprises in 1997 and established a well concerned institution for the sector by the Council of Ministers of Ethiopian Regulation Number 33/1998 on April 3, 1998. The revised MSEs Development Strategy was designed in 2011 in order to integrate the development of the sector with the country’s 5 year (2003-2007) Growth and Transformation Plan (GTP), hoped to bring about rapid economic growth and lift up the country to middle income level
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