FACTORS AFFECTING THE PERFORMANCE OF MICRO AND SMALL ENTERPRISES (THE CASE OF GAMBELLA TOWN, WESTERN ETHIOPIA)

Abstract

This study aims to identify the factors affecting the performance of micro and small enterprises in Gambella town, Ethiopia. For the sake of achieving the objectives of this study, primary data was collected from a sample of 218 operators selected with stratified random sampling methods engaged in trade, service, construction, manufacturing, and urban agriculture sectors. Performance reports and face-to-face interviews with officials were also data sources for the study. The research employed both descriptive and inferential methods of analysis. Both quantitative and qualitative approach was employed. The findings indicate that there exists a positive and statistically significant relationship between financial factors, working place factors, management skill factors, and infrastructure factors and the “performance” of MSEs. Moreover, the financial factor, working place factor, management skill factor, and infrastructure factor significantly explain the variations in the “performance” of MSEs at a 5% level of significance. Furthermore, regulatory factors had a negative and statistically significant relationship with the “performance” of MSEs. The results of this finding imply that the government should work with banks and other lending institutions to provide sufficient funds to MSEs with minimum cost. Sufficient and comfortable working premises are also required for MSEs to perform effectively. Government bodies should coordinate and remove unnecessary official procedures, tax burdens, and bureaucracy in licensing that consume the time of operation of the enterprises. Entrepreneurship training on how to manage and control their business activities should be provided to take advantage of new opportunities.