GROWTH PERFORMANCE OF SERVICE PROVIDING MICRO AND SMALL ENTERPRISES AND THEIR CONTRIBUTION TO CAPITAL AND EMPLOYMENT CREATION: EVIDENCE FROM ARBA MINCH TOWN

Abstract

ABSTRACT This study was aimed at evaluation of the growth performance of service providing MSEs and their contribution to capital and employment creation in Arba Minch town. Both qualitative and quantitative research method was used. Questionnaire and focus group discussion were used as data collection instruments. Primary data was collected from 222 managers of service providing MSEs which were randomly drawn from the study area. Focus group discussion was held with Enterprises and Industry Development office managements and Experts. Secondary data was also collected from published and unpublished materials. For data analysis, descriptive statistical tools such as tables, charts, frequency distribution, percentage and Correlation and multiple regression analysis were used. The study revealed that there is growth performance rate of MSEs in number in Arba Minch town and the five-year trend of MSEs, shows 20 % annual average growth rate of MSEs and it increased from 80 to 546. Regarding the type of the service providing enterprises 45.9 % were micro enterprises and 54.1 % were small enterprises. According to growth levels/stages of micro enterprises 14 % were startup/Existence, 15.3% were growth/Survival and 16.7 % were maturity/success. According to small enterprises 13.5 % were startup/Existence,18 % were growth/Survival and 22.5 % were maturity/success. Majority of the Service providing MSEs growth levels/stages are success. MSEs have great contribution to capital and employment creation. Regarding employment creation, MSEs created at start and present time to around 3.63 and 6.46 average number of employees, respectively. The MSEs have average annual capital was 29,583.33 Birr at start time while at present average annual capital of MSEs have 114,841.22 Birr within 5 years and it shows 25.76 % increment. The result of the study revealed that most MSEs accessed finance mainly from micro finance institutions that have been able to meet the credit needs of the MSEs. The finding emerged from investigation that independent variables such as coordination experience, access to infrastructure, access to finance, supply of raw material, access to working premises/space, education level, age of manager and enterprise exists significant and positive relationship between the growth performance. Therefore, attention should be given by the policy makers and other concerned bodies to develop supportive programs and corrective measures to ease the constraints and difficulties affecting growth performance of MSEs.