Determinants of Micro and Small Enterprises Growth in Rural Area: Evidence from Feresmay Town

Abstract

Currently, the Ethiopian government gives a great emphasis on the growth of MSEs particularly by formulating a national MSE development and promotion strategy. Besides, some empirical studies were conducted to identify the factors affecting the MSEs growth in Ethiopia. Almost all of these studies were concentrated in the capital city, Addis Ababa and in some other large urban towns of the country. To fill this gap, this study was conducted in a rural town called Feresmay. The main objective of the study was to investigate the factors affecting the growth of MSEs in Feresmay town. For the sake of achieving this objective, primary sources of data were collected through structured questionnaire from a sample of 153 MSEs which were selected using a stratified random sampling technique. Moreover, face-to-face interview was also conducted with the coordinator of Feresmay town MSE development agency as well as 20 selected MSEs owners/operators in the town. While descriptive narrations through concurrent triangulation strategy were applied to analyze the interview questions, data collected using the questionnaire were analyzed using descriptive statistics and econometric model (OLS). Hence, growth of MSEs measured in terms of employment change was affected by different factors including owners/operators age, education level, prior experience, family size, MSE’s age, MSE’s distance from raw materials, access to credit, infrastructure and market. Therefore, government, non-government organizations and MSEs development agencies should motivate, help and advise the owners of MSEs on their overall business activities; give training on business issues, arrange forum and exhibitions for experience sharing; and solve the credit, infrastructure, supply and market access problems in collaboration with MFI, banks, Ethiopian Electric Power Corporation, suppliers and other organizations.

Keywords: MSEs, OLS, owner/operator, growth, determinant, Feresmay