Factors affecting performance of micro and small enterprises in Addis Ababa: The case of Bole sub city administration

Abstract

Micro and Small Enterprise are driving forces for economic growth, job creation and poverty reduction in developing countries. Cognizant of this fact, Ethiopia is one of the countries which have taken measures to enhance the operation of Micro and Small Enterprises (MSEs). However, there are MSE’s in the country that have shown deteriorating performance and have been experiencing huge stumbling blocks with no significant graduation from one enterprise level to the next. Therefore, this study aims to identify and examine factors affecting the performance of micro and small enterprises in Addis Ababa, Bole Sub city. Both descriptive and explanatory research designs were used for the study. Mixed research approaches (qualitative and quantitative) were implemented. For primary data structured questionnaire was used and for secondary data books, articles, journals and previous literatures were reviewed. The target population for the study was 1127 MSEs which are registered in Bole Sub City MSE office which are engaged in construction, manufacturing, merchandise and service sector. In this study probability sampling technique and stratified random sampling were applied to sample size of 295 micro and small enterprises in Bole Sub city. And data was analyzed by using descriptive statistics and regression analysis. The empirical study elicited eight major challenges which seem to affect performance of MSEs which include: marketing problems, standardization and quality constraints, product diversification problems, poor management practices, entrepreneurial, education level, firm age and technological problems. The findings further indicate that, there exists linear and positive significant ranging from substantial to strong relationship was found between independent variables and dependent variable. Moreover, the selected independent variables may significantly explain the variations in the dependent variable at 1% level of significance. In line with the findings obtained from this study recommendations to respective governmental bodies and MSE’s owners/managers have been forwarded.