Factors affecting Performance of Micro and Small Enterprises in Sayilem district

Abstract

Unemployment and low income are some of the present problems in urban cities of Ethiopia. The government of Ethiopia has formulated a policy to mitigate the problem wholly by induce MSEs. Basically, MSEs are set up with the goal of poverty alleviation. It is also stiff base for medium and large enterprise. As a whole MSEs are seen as an essential backbone and springboard for economic growth, job creation, poverty reduction and social progress in both developed and developing countries. However, the performance of MSEs in Sayilem district is low. So, this study was done to investigate the determinants of MSEs Performance in study area using descriptive statistics and econometric model of binary logistic regression and multiple linear regression model with the help of (Stata-14). Both primary and secondary data were also employed in getting the necessary information for the analysis of the study. A total of 148 sample respondents were identified using multiple stage sampling technique. The result of the study shows that majority of the MSEs have been a recent establishment and faced challenges of inadequate initial capital, government policies and regulation related factors, limited infrastructure facility, unfair market competition, lack of training, limited access to credit, and lack of know-how and skills to use technology. Furthermore, the study also noted that most of the operators were found to be young labor force of male operators and less participation of female operators than male. In general, the main objective of this study is to analyze factors that affect the performance of MSEs in Sayilem district. Due to the main finding of econometric result of binary logistic regression gender of the operator, education level of the operator, access to credit, access to market, government policies and regulation and amount of initial capital were found to be significant factors determining performance of MSEs. Similarly econometric result of OLS also shows that Government policy and regulation, access to credit, access to training and level of market competition to be significant factors determining performance of MSEs. Therefore, to improve the overall performance and capacity of MSEs for generating profits in particular, creating job opportunity thereby and alleviation poverty in general, governments, policy makers, donors, financial institutions and operators of MSEs should pay attention on overcoming the major constraints facing performance of MSEs in the study area