Assessment of Domestic Private Investment in Wolaita Zone: Case of Sodo, Areka and Bodity Cities

Abstract

Investment constitutes an important economic component that matters for economic growth. In the case of Ethiopian context, although private sector investment has shown improvement following the 1995 economic reform it still has a fluctuating feature. This study has made assessment of domestic private investment in Woliata Zone. Using clustered random sampling, a sample size of 96 respondents is drawn from three reform city administration of the zone, namely: Areka, Bodity and Soddo. The researcher indentified variables based on literature, and customized these variables to the context of the Zone. The variables are: Access to finance (both bank credit and traditional finance sources), Availability of good infrastructure, Success stories of other Investors, Availability of good government bureaucracy, Availability of Good investment environment, Extent of investment potential in the Zone. To achieve its objective the study used descriptive statistic, and also linear regression analysis is applied to indentify major factors that have influence on domestic private investment in the Zone. The finding indicates that only Success Story, Good government bureaucracy, investment potential of the Zone and Good investment environment are found to be factors positively contributed to the domestic private investment activities of the zone. The role of other variables such as infrastructure, availability of finance and the feasibility of the business are found to be statistically insignificant. In ordered to assess the role of finance in the investment trend of the zone, the study also assessed the major sources of finance for domestic private investors in the Zone. Accordingly the findings revealed that although significant amount of investors use bank as source of finance, still the majority of the investors relay in on traditional credit systems such as IQUB and loan from relatives. Regarding the availably of the finance the respondents indicated that they disagree.  The finding also indicates that the majority of the study subjects do not rely on the modern business consultations and feasibility studies rather they go for investment based on the success stories of others.

Keywords: Investment, Domestic private investment, Wolaita Zone