Factors affecting the growth of micro and small enterprises in jimma town

Abstract

Micro and Small Enterprises (MSEs) play an important economic role in many countries and recognized as an important vehicles of economic diversification, employment creation, income generation and distribution, and poverty alleviation. MSE occupy a prominent position in the development agenda of many developing countries like Ethiopia. The purpose of this study is to assess the constraining factors related to marketing, management, finance and government supports hindering the growth of MSEs in Jimma town. The study has employed descriptive design in which proportional stratified random sampling method was used to collect data from MSEs owners/ managers of five selected sectors according to the objective of the study with a total population of 571 and 230 samples. The samples were selected randomly from each stratum using proportionate allocation after stratification of the sectors. Questionnaires and interviews tools of data collection were used in the study. The data was analyzed using descriptive statistics and presented through figures, tables and percentages. Finally, the result of binary logistic regression analysis that was used to identify the severity of the constraint factors in growth of MSE was presented. It is generally recognized that MSEs face unique challenges, which affect their growth and profitability and hence, diminish their ability to contribute effectively to sustainable development. The findings indicate that the most common factors affecting the growth of MSEs in Jimma town are: inefficient utilization of business resources and lack of suitable management style, lack of providing training and skill upgrading for MSE staffs, inadequate government's effort in change public attitude, and inadequate availability of infrastructure, lack of providing convincing business plan to get loan and unfamiliarity with financial information, lack of network with other businesses and scanty marketing information. Actions are recommended for owners, and other stakeholders to improve the performances of MSEs in Jimma town; MSEs owners/managers should improve internal operations through upgrading their skills, the government also expected to organize/make MSEs in identified industrial areas/parks in suitable location. Besides, in order to facilitate access to credit for MSEs, MFIs and banks need to allocate a certain portion of their loanable funds exclusively for MSE entrepreneurs. Replication of this study using larger samples and a broader geographic base, longitudinal data collection and using more statistical tests is suggested for crossvalidation purposes for future researches to identify the factors affecting the growth of MSEs.