Review on Status of Micro and Small Enterprise (MSE) Development in Ethiopia

Abstract

In most of developing countries, agriculture failed to feed and sustain rural population due to high rate of population growth, poor technology, lack of capital accumulation, and unfavorable climatic condition. Around 85% of Ethiopia's population depends on smallholder agriculture, mostly in subsistence farming. The current Ethiopian government has been implementing ADLI policy that favors industry sector. To realize this, Ethiopian government paid attention to MSEs development where they taken as a benchmark for propelling industry sector. Taking in to account the role of micro and small enterprise in economic development, the review was aimed at exploring the status of MSEs in Ethiopia. The review showed that, the number of MSEs establishment has been increasing over last years. In terms of employment creation, the number of employees absorbed by MSEs has shown increasing trend over years. In terms of capital formation and contribution to country’s’ GDP, rate of capital in MSEs is below 50% and contribution of industry sector is very low suggesting use of various policy option to make them strong in terms of capital formation so that they contribute to national GDP significantly.

Keywords: Micro and Small Enterprises, Employment creation, Capital formation, GDP