Micro Level Determinants of Private Investment in Hadiya Zone Hosanna Town, Southern Ethiopia with Special Reference to Agro-Processing Investment

Abstract

Ethiopia has been working tirelessly to transform its economy from agriculture dominated economy to industrialized and market-based economy. To a certain extent, the reform programme has resulted successful economic growth rates, private investment, and significantly higher volume of exports and export earnings. The major objective of this study was to find micro level determinants of private investment in Hadiya zone Hosanna town, Southern Ethiopia with special reference to agro-processing investment. A survey was conducted in Hadiya zone Hosanna town to find out the micro economic level determinants of private investment. Thus, econometric methods of data analysis involving Tobit models were used to analyze the micro-economic data collected. In addition, descriptive analysis was employed to analyze the survey data. The results of the study showed that firm size, education, access to land, access to credit, interest rate, legal system and corruption were the most important determinants of private investment in the study area. Moreover, the study result indicated firm size, education, access to land, and legal system were positively and significantly related with private investment. Where as corruption and interest rate were negatively and significantly associated with private investment. The results of this study revealed that most of the problems encountered by the private sector in Hadiya zone Hosanna town were institutional.

Keywords: Investment, agro-processing, Tobit models, Hadiya zone, Hosanna, Ethiopia