Abstract
In Ethiopia, Micro and small enterprises (MSE) serves as a source of income, employment and poverty reduction. The objective of this review is to examine determinants of MSE growth in Ethiopia. Accordingly, SME growth is mostly impacted by limited access of credit service, Lack of market linkage and information, business skill gaps, lack of sustainable training, financial constraints, poor technology, shortage of electricity and lack of reliable Power Supply, lack of infrastructure, lack of experience and high interest rate. The study recommends that the financial institutions in Ethiopia like banks and microfinance institutions should provide financial assistance through improving their borrowing procedures by lowering the interest rates and collateral and simplifying the lending systems by removing the tight borrowing regulations is vital for easier accessibility to credit by SME. Business training must be provide to the SMEs by government and non-government organization to facilitate business knowledge and give sufficient managerial and marketing skill training for MSE to change the traditional way of operating and marketing business in to the modern types of production and marketing Keywords : SME, challenges, growth, Ethiopia DOI: 10.7176/EJBM/13-5-03 Publication date: March 31 st 2021
Highlights
The growth of Small and Medium Enterprises (SMEs) is a critical element in the sustainable development of developing economies
A study conducted by FDRE, (2013), for example, report that micro and small enterprises are major derivers of both employment and economic growth contributing to more than 50 % to GDP and 60 % to employment in developed economies, constitute less than 30% of employment and 17% of GDP in developing countries
The paper concludes that the major constraints that affecting the growth of SMEs listed in various studies in Ethiopia are limited access of credit service, Lack of market linkage and information, business skill gaps, lack of sustainable training, financial constraints, limited access to credit, capital constraints, poor technology, shortage of electricity and lack of reliable Power Supply, lack of infrastructure, lack of experience and high interest rate
Summary
The growth of Small and Medium Enterprises (SMEs) is a critical element in the sustainable development of developing economies. According to Simen and Lara, (2009) , Micro and small enterprises sector is recognized as an integral component of economic development and a crucial element in the effort of lifting countries out of poverty. Gemechu Abdissa (2016) revealed that SMEs sector is the engine of economic growth, stimulating entrepreneurship and innovation and promoting competition and productivity and it has vital role in unemployment reduction, equitable income distribution and import substitution and alleviating poverty in Ethiopia. The sector is crucially important to the economic and social development of the country in the sense that it generates broader job opportunities and assist to alleviate poverty and facilitates rural and urban economic linkage and boost the economy as well as promotes Entrepreneurship culture and enhance self-employment and serves as fertile ground for the emerging of Medium and Large Industries, etc
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