Capital growth constraints of micro and small enterprises: the case of Jimma Town

Abstract

The development of MSEs has been identified as one of the strategies for the country's industrialization, employment generation and poverty reduction. Despite the increased number of MSEs in Ethiopia, the rate of MSE failure is alarming. It is expected that MSEs possess distinct skills found to have greater effect on their performances for their development. The aim ofthis study was to investigate the major performance determinants of micro and small scale enterprises in Jimma town. To achieve this purpose, descriptive research method was designed in order to identify the internal and external factors that affect the capital growth of MSEs. Mixed approach was used for answering research questions. 244 MSEs owners were selected by using stratified random sampling from three sub-cities. In the process of answering the basic questions, structured questionnaire that include demographic profiles, characteristics of MSE owners and their enterprises, determinants that affect the performance of Micro and small entrepreneurs was designed in open-ended, closed ended and likert scales. In addition, semistructured interviews were conducted with top officials of the TVET, MSEDO, and OCSSCO) were included in the study. Descriptive statistics involved the use of frequencies and mean. Inferential statistics were used to observe the variation in the growth of capital among the different levels of each of the explanatory variables with the aid of SPSS. Multiple Regression Model is used to test the hypotheses stated in this study regarding the performance of enterprises in relation to each of the independent variables of the study. The R2 result shows that there is a significant strong and linear relationship between the dependent variable growth of capital and the independent variables. Accordingly, result of the study indicates that access of credit has the biggest potential to contribute to the performance, followed by working premise, internal finance, infrastructural access, management skill, access of market, access of training, government policy and accounting and record keeping skill. The study also attempted to forward some possible recommendations. These among others include: MSE Owners," they have to develop their management, accounting, entrepreneurial and technical skill through training. ORMSEDA; should maintain special lending services to MSE. MSEDO Officers; should discuss with municipality manager and other administrative bodies to avoid the problem working premise and create market linkage, promotion and display places. OCSSCO should maintain individual lending systems and minimize the interest rates that they charge to MSEs. TVET Officers should facilitate both technical and entrepreneurial skill training.