Profitability of Agricultural Micro and Small-Scale Enterprise in North Wollo Zone, Amhara Regional State, Ethiopia

Abstract

The contribution of micro and small enterprises is limited as the majority are financially constrained and half of them exit from business in 2014/15, Amhara Region. Therefore, this study aimed to analyze the profitability of agricultural micro and small-scale enterprises in North Wollo Zone, Amhara Regional State, Ethiopia. Primary data was collected from 271 sample enterprises. The study employed descriptive and econometrics models for the data analysis. The financial ratio result shows that the return on asset, return on owner equity and net profit margin were 0.1601, 0.2768, and 0.1520 birr, respectively. The result of the probit model estimation shows that six variables, namely enterprise age, manager education level, credit use, input availability, owners’ aspiration, and frequency of extension contact significantly and positively influenced the probability of Micro and Small Enterprises (MSEs) being profitable. The second hurdle model, the truncation model showed that enterprise age, manager education level, record keeping, access to input, and frequency of extension contact significantly affected the extent of agricultural MSEs’ profitability. Therefore, enhancing the knowledge, skill, and aspirations of enterprise owners, improving financial access and outreach, providing financial bookkeeping training and practice, creating reliable integration with input producers, and frequent extension support to enhance the profitability and sustainability of enterprises.