Factors That Affect Financial Performance of Micro and Small Business Enterprises in Dambi Dollo Town, Oromia, Ethiopia

Zewdu Eskezia Gelaye

doi:10.7176/rjfa/11-1-01

Abstract

It is recorded that most of the business bodies in Ethiopia are micro and small which have been an instrumental component in GDP and core for work opportunities. Even though the identification of the important roles that micro and small enterprises play in the country, their evolution is mostly bounded by a number of factors, such as the existence of rigid laws, shortage of infrastructures, financing problems etc that frustrate the growth of the sector as reviewed from the previous researchers.The main objective of the study was to determine the factors that affect financial performance of micro and small business enterprises in Dembi dollo town administration. To achieve this objective the necessary data was collected from micro and small business enterprise owners by using questionnaires. The study employed a mixed research approach i.e. both quantitative and qualitative research approaches. Stratified random sampling technique was used to select proportional number of samples from the target population of the study. The researcher used both descriptive and multiple regression analysis methods to analyze the raw data which was obtained from the respondents.The finding of the study shows that problems related with shortage of infrastructures, lack of human resources knowledge and skill, bureaucracy in company registration and getting a license, instability in tax policy and high tax rate have a negative significant effect on financial performance of small business enterprises in Dembi dollo town administration. On the other hand; nonexistence of government policy related problems such as; regulatory laws, labor laws and reporting laws positively contributes to the performance of micro and small business enterprises in the town. Based on the findings of the study the researcher recommends that the government and other concerned bodies for the development and performance of micro and small business enterprises in collaboration with the enterprise owners should alleviate the problems related with infrastructures, human resources knowledge and skill and government policies in order to achieve higher performance of small business enterprises in the town. Keywords : micro and small enterprises, financial performance, infrastructures, knowledge, skill, financing, government policies DOI : 10.7176/RJFA/11-1-01 Publication date: January 31 st 2020

Highlights

1.1 Background of the Study Micro and Small business enterprises are vital and of paramount importance in the development of any country especially for a developing country like Ethiopia
The focus of this study was to find out the link between independent variables such as, infrastructures, human resource knowledge and skills, access to financing, government policy and problems related with marketing with the dependent variable, financial performance of micro and small business enterprises
This study simultaneously revealed that infrastructure really influences the performance of micro and small business enterprises because with infrastructure small business enterprises perform extraordinary well, indicates that small enterprises success lays on the neck of infrastructure that is why there is need to have adequate infrastructure on ground so that performance of micro and small enterprises can be achieved in Dambi dollo town administration

Summary

Introduction

1.1 Background of the Study Micro and Small business enterprises are vital and of paramount importance in the development of any country especially for a developing country like Ethiopia. They play multifaceted role such as boosting competition, innovation, as well as development of human capital and creation of a financial system. Micro and Small businesses highly encourage the growth and development of any economy; by creating jobs, increases competition, generating income and innovation, opening possibilities for business ventures and etc. In terms of increasing the importance of micro and small business for the growth and development of world economy, financial performance of micro and small businesses imposes itself as a relevant and important research area. The high failure rate, such as mortality of small businesses, increases the need towards overcoming issues pertinent to financial performance of micro and small business enterprises

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Conclusion