Factors Affecting Growth of MSEs in Jimma Town, Oromia Regional State

Abstract

The purpose of this study is analyzing the growth determinant factors in MSEs business focusing on the enterprises in Jimma town particularly those stayed in the industry five years and above by taking simple random sampling of 113 MSEs as sample enterprise out of 308; applying explanatory research and the binary logistic regression analysis of the external and internal factors affecting employment growth. Entrepreneurial/managerial training before starting the business, ownership type, sector type of enterprise and amount of initial capital are the internal independent variables. Likewise the external independent variables are existence of external financial/credit source and access to business services. The descriptive analysis indicated better growth by Cooperative (23.9%) from the total ownership under investigation, service sector as the best growing sector with 78.3% within the service sector and 16.5% within the growing enterprise from the five sectors. MSEs given prior training and special practical training on the work as well as those possess credit source showed better growth. The result of Pearson correlation shows positive correlation between the dependent variable and independents with the correlation strength weak to moderate. Basic logistic regression assumptions and goodness of fit check conducted. Logistic regression analysis shows ownership type, amount of initial capital and existence of external financial/credit source are significantly contributed to the employment growth at 5 percent significance level. The greater the amount of initial capital, the more is employment growth. Similarly MSEs those have credit source and those engaged in cooperative type showed more growth than those with no credit source and engaged in sole proprietorship and partnership respectively. So, as this study it is better to make easy and flexible the access to credit source with providing the appropriate capital amount according to the environmental context for all either sole proprietorship, partnership or cooperative.