Determinants of micro and small business enterprise growth in hosanna town, snnprs Ethiopia

Abstract

Micro and small enterprises play a key role in stimulating other sectors of the economy such as trade, construction and services, agriculture and in reducing unemployment. In Ethiopia, like in any other developing countries, medium and large-scale manufacturing or service giving sectors and state bureaucracies could not create enough jobs to absorb the ever increasing labor force, especially in urban areas. The main focus of the study is to examine determinants of micro and small business growth in Hosanna town, SNNPRS, Ethiopia. The research design was cross sectional survey based explanatory approach. Primary data in this study was collected through structured questionnaire based on 230 respondents from Micro and small enterprises. Total respondents were selected by using proportional stratified sampling and then simple random sampling method was applied. Secondary data was gathered from different published and unpublished written documents. Both are quantitative and qualitative in nature. Data analysis is carried out with the help of various descriptive and econometric techniques that (logit model). Evans model was used to measure growth of MSEs using change in employment size/capital since startup in which about 55.65% of MSEs are found survival and the remaining 44.35% are growing in terms of employment and about 70.87% of MSEs are growing and the remaining 29.13% are found survival in terms of capital. The binary choice logit model result shows Human capital:-Marital Status, previous business experience, motivation, staff quality, team work, staff training and staff motivation; business related factors:- Business existence, location, business plan and initial employment size; Institutional factor:- Access to finance, Access to market linkage, Access to electric power, Access to transport and social network; Support:- support of access to market and support of advisory/consulting were found significant determinants of MSEs employment growth. In terms of capital growth, Human capital:- Age, marital status, education level, previous business experience, training and staff; Business related factors:- location of enterprise, Business plan and startup capital; Institutional factor:- Access to finance, Access to market linkage, Access to electric power and social network; Support:- support of access to market, support of IT service and support of advisory/consulting were found significant determinants of MSEs growth. Therefore, government and non-government organizations concerned with the development and promotion of MSEs need to take these factors in to consideration to accomplish good result and increase the potential contribution of MSEs to the growth of a country Ethiopia.