DETERMINANTS OF MICRO AND SMALL ENTERPRISES

Abstract

It is generally accepted that Micro and Small Enterprises (MSEs) have significant contribution to job creating, generating income, and poverty alleviation. However, the performance of MSEs in Godere Woreda is low. So, this study was done to investigate the determinants of MSEs performance in Godere Woreda using descriptive statistics and econometric model of multiple linear regressions. Both primary and secondary data were also employed in getting the necessary information for the analysis of the study. A total of 260 sample respondents were identified using multiple stage sampling technique. The result of the study shows that the majority of the MSEs have been a recent establishment and faced challenges of inadequate startup capital, government policies and regulation related factors, limited infrastructure facility, unfair competition, lack of training, limited access to credit, and lack of know-how and skills to use technology. Furthermore, the study also noted that most of the operators were found to be young labor force of male operators with educational qualification of high school or less. The result of linear regression analysis shows that out of twelve determinant variables, age of the operator, age of the enterprise, access to credit, amount of initial capital, level of market competition, government policies and regulation, access to training, gender of the operator, use of modern technology, and access to market factors revealed statically significant to affect performance of MSEs. 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 facing performance of MSEs.