Analysis on Factors Affecting the Growth of Micro and Small Enterprises: The Case of Gulele Sub-City, Addis Ababa, Ethiopia

Abstract

Micro and small enterprises are the integral parts of industrial development and considered as the cornerstones of a vibrant entrepreneurial economy and social transformation especially in developing countries. The government of Ethiopia has given sizable recognition and credit for the expansion of these enterprises. However, due to various socioeconomic and political factors including cumbersome bureaucratic procedures, they have been subjected to undergrowth, stagnation, and disappearance. This study, thus, aims to examine factors affecting the growth of micro and small enterprise in Addis Ababa city particularly in Gulele Sub-city, Woreda 03. The study used mixed research approach. The data for this study were collected using survey questionnaire from 120 enterprise leaders/owners/ who were selected via random stratified sampling method. Descriptive statistics, growth rate method, and multiple linear regression model were applied for quantitative data analysis. The analysis reveals that enterprises grew with the rate of 0.20, but growth rate had no similar trends among different sectors: service, trade, manufacturing, urban agriculture, and construction. Moreover, the regression analysis shows that out of eleven explanatory variables, age, gender, and work experience of leaders or owners jointly with age of enterprise, number of total employees, suitability of working place, marketing problem, and government’s policies had significant contribution on the growth of micro and small enterprises in the study site. In conclusion, the growth of the enterprises was affected by various socioeconomic, demographic, environmental, and policy related factors. Therefore, all stakeholders should work jointly to overcome the existing problems, create workable environment, and develop practicable strategies to increase the performance and harness the tremendous contributions of the sector for job opportunity and economic transformation. Keywords: Micro and Small Enterprise; determinant; Growth, Addis Ababa