Determinants of Micro and Small Scale Enterprises Growth in terms of Employment in Hosanna Town, SNNPR, Ethiopia

Abstract

The study Determinants of Micro and Small Scale Enterprises Growth in terms of Employment was conducted in Hosanna Town, Hadiya zone, Southern Ethiopia. The main objective of the study is to find out the determinants of Micro and Small Enterprises growth in terms of employment growth. Out of 379 Micro and Small Enterprises in the study area, 194 Micro and Small Enterprises (MSEs) were selected as a sample using stratified and simple random sampling technique. They were stratified based on the sector they are operating. The data were analyzed using descriptive statistical tools such as mean, percentage and by using tables and charts. The binary logit model was applied to identify determinants of MSEs growth. The study used employment as growth indicators. Growth rate for the two indicators was computed by the change of natural logarithm of employment over the life of enterprise. After calculating growth rate, Micro and Small Enterprises were grouped into two categories growing and non growing. Micro and Small Enterprises which had growth rate ≤ 0 categorized into non growing and MSEs which had growth rate > 0 growing. The finding of the study shows that out of the total sample 42.8% of MSEs are growing and 57.2% of MSEs are non growing in terms of employment. The model result indicated that out of 16 explanatory variables, distance from raw materials and access to infrastructure are significant at 10% significance level. Also age of enterprise, education level of MSEs managers, access to market and government regulation factor are significant at 5% significance level and prior experience of MSEs managers is significant at 1% significance level. Therefore, government and non-government organizations that are concerned with the promotion and development of MSEs need to take these factors in to account to accomplish better result and increase the potential contribution of MSEs to the economic growth