FACTOR THAT AFFECTING THE GROWTH OF MICRO AND SMALL

ENTERPRISE (IN CASE OF ADJIBAR TOWN IN SOUTH WOLLO, AMHARA

REGION)

ARBA MINCH UNIVERSIT

COLLEGE OF COMMERS AND BUSINESS ADMINISTRETION
DEPARTEMENT OF FINANCE AND DEVELOPMENT ECONOMICS
A RESEARCH PROPOSAL SUBMITTED TO DEPARTMENT OF FINANCE AND
DEVELOPMENT ECONOMICS PARTIAL FULFILLMENT OF REQUIREMENT
FOR BACHELOR ART DEGREE (BA) IN FINANCE AND DEVELOPMENT
ECONOMICS

BY: BIRUK BRHAN

ID: RBE/307/10

ADVISOER: MIHRETU.T (MSc)

DECEMBER, 2020
SAWLA, ETHIOPIA
 ACKNOWLEDGEMENT
First and for most, I would like to thanks God and his lovely mother St. Mary for being with
me in completion of this proposal. I am happy to express my heartfelt gratitude to my advisor
and instructor MIHRETU.T (MSc) in commerce and business administration collage at Arba
Minch University, devoting his golden time for me from the beginning up to end and I would
like to say thanks to my friend who gives his laptop to done the proposal.
ACRONYMS

FEMSED Federal Micro and Small-scale Enterprise Development

ILO International Labor Organization

MOTI Ministry of Trade and Industry

MSE Micro and Small-scale Enterprise

OLS Ordinary Least Square method

REMSED Regional Micro and Small-scale Enterprise Development

UN United Nations

TABLE CONTENT
AKNOLOGEMENT.....................................................................................................................................i
ACRONYMS...............................................................................................................................................ii
TABLE CONTENT.....................................................................................................................................iii
Chapter One.................................................................................................................................................1
Introduction..................................................................................................................................................1
1.1Backgroud of the study........................................................................................................................1
1.2. Statement of the problem...................................................................................................................2
1.4 Research Hypothesis..........................................................................................................................3
1.5. Objective of the study.....................................................................................................................4
1.5.1. General objective of the study....................................................................................................4
1.5.2. Specific objective of the study..................................................................................................4
1.6. Scope of the study...........................................................................................................................4
1.7. Significance of the study.................................................................................................................5
1.8 Organization of the study...................................................................................................................5
Chapter Two.................................................................................................................................................6
2. Literature Review.....................................................................................................................................6
2.1 Theoretical literature review...............................................................................................................6
2.1.1 Definition of micro and small scale enterprise.............................................................................6
2.1.2 The role of micro and small scale enterprise in poverty reduction...............................................7
2.1.3 The micro and small-scale enterprise sector in Ethiopia..............................................................8
2.1.4 The Implementation structure of the strategy..............................................................................9
2.1.5 Factors affecting the growth of micro and small-scale enterprise..............................................10
2.2 Empirical Literature.........................................................................................................................12
Chapter Three.............................................................................................................................................14
3. Data source and Methodology the study.................................................................................................14
3.1. Description of the study area.........................................................................................................14
3.2 Type and source of data.................................................................................................................14
3.3. Sampling technique and sample size determination........................................................................14
3.5 Method of data analysis....................................................................................................................15
3.6. Model specification.......................................................................................................................16
3.6.1 Theoretical framework model....................................................................................................16
3.6.2. Empirical framework model.....................................................................................................17
CHAPTER FOUR:.....................................................................................................................................18
4. Time and Cost Budget............................................................................................................................18
4.1. Financial Budget..............................................................................................................................18
4.2. Time Budget....................................................................................................................................19
 Chapter One

Introduction

1.1Backgroud of the study

Micro and small business sector is recognized as an integral component of economic
development and crucial element in the effort to lift countries out of poverty. In developing
countries, micro and small-scale enterprise by virtue of their size, capital investment and their
capacity to generate greater employment have demonstrated their powerful propellant effect of
rapid economic growth (Degefu, 2018)

Micro and small enterprises are one of the tools of economic growth, job creation, and poverty
reduction in a country. They have been the means through which accelerated economic growth
and rapid industrialization have been achieved. While the contributions of small businesses to
development are generally acknowledged, entrepreneurs face many obstacles that limit their
long-term survival and development. Research on small-business development has shown that the
rate of failure in developing countries is higher than in the developed world (Kebede, 2019).

Micro and small-scale enterprises are widely recognized for their role in social, political and
economic development. Their importance is apparent in its ability to provide reasonably priced
goods, services, income and employment to the number of peoples. Consequently, the efficiency
of micro and small-scale enterprises is closely associated with the efficiency of the country
(Degefu, 2018).

Micro and small-scale enterprises operators should improve their access to business information,
access to infrastructure, access to financial service and access to managerial skills by working
and making links with different enterprises (Gelgelu, 2018).

In most fast-developing countries, micro and small-scale enterprise by virtue of their size, capital
investment and their capacity to generate greater employment have proved powerful proponent
effect for economic growth. The sector is also known as instrument bringing about economic
transition by efficiently using the skill and talent of people without requesting high level training,
capital and sophisticated technology. Moreover, they create job opportunities for a substantial
segment of the population. Hence, this is quick remedy for unemployment problem, direct
intervention and support of the government crucial to facilitate the environment for new job
sectors and self-employments. Ethiopia private sector as a whole is a highly dominated by micro
and small-scale enterprises which are geared towards satisfying the speeds of low-income groups
(Degefu, 2018)

Micro and small-scale enterprise in Ethiopia are extremely dominative and socially in efficient.
Its greatest asset is the desire to survive and eventually get rich. The other advantage is its
creativity and ingeniousness. Ethiopian private sector as a whole is highly dominated by micro
and small-scale enterprise which are geared towards satisfying the speeds of low-income groups
(Degefu, 2018).

Micro and small enterprises in Amhara National regional state, based on the proclamation No
42/1999, has formulated a strategy for MSEs development in the region knowing the enormous
importance that this sector can bring for the society of the region in such as, create employment
opportunity, bring rapid economic growth, produce wide range of goods & services which are
accessible and cheaper for huge number of persons of the region (Yimesgen, 2019).

In Adjibar town Micro and small enterprises are highly dominated since 1997 after the
facilitation of government incentives. After that micro and small-scale enterprise are important to
individual, they provide employment and raise the standard of living both employers and
employees (Adjibar micro and small-scale enterprise office,2017).

The aim of micro and small scale enterprises were not successful in achieving economic
development due to various constraints in general in Ethiopia and particularly in Adjibar town
(Adjibar micro and small-scale enterprise office,2017). In this research the researcher will try to
identify whether internal or external or both affect growth of micro and small-scale enterprise in
the town using cross-sectional data from sample respondents (operators).

1.2. Statement of the problem

The growth of micro and small-scale enterprise could be defined or measured as growth in total
assets, growth in number of employees and profitability of their business. The growth of micro
and small-scale enterprise means financial growth with adequate profit (Gelgelu, 2018)
In developing countries, micro and small enterprise were asked to rate among some of the most
common problem with in the sector to the daily operation and growth of their company. In order
of importance, the lack of adequate working premises, lack of access to credit, and shortage of
power supply have been ranked as the three most important obstacles that call for the attention of
all stakeholders working on micro and small enterprise development (Gebreeyesus, et al., 2017).

In Ethiopia, micro and small-scale enterprise faces absence of adequate infrastructure which is a
major problem for small units to grow. Most of the small units and industrial estates found in
towns and cities are having one or more problem like lack of power supply, water and drainage
problem, poor road, raw material and marketing problem. Thus, absence of adequate
infrastructure adversely affects the quality, quantity and production schedule of enterprise which
ultimately results in under-utilization of capacity (Getahun Mohammed, 2016).

The growth status of micro and small scale enterprise in Adjibar town cannot achieve their goal
due to various constraints from the information of Adjibar micro and small scale enterprise office
problem of MSEs in the case area is that from the top MSEs operator up to the small MSE
workers have less accountable to their responsibility, that means when there is access of credit to
the MSE workers after giving that credit the responsible bodies cannot try to see their business
activities and not see their risk of the business and can change the credit to unintended purpose or
other home consumption rather than use for the business activities( Adjibar micro and small
scale enterprise, 2017).

In this specific study area, there were no research work done in analyzing factor affecting the
growth of micro and small-scale enterprises so far to be reviewed. But there were some
research’s work done in another town in Ethiopia. For instance, study made by Tsegachew
(2015) found the factor that determines the growth of micro and small-scale enterprise and
Haftom, H.A, G.T, and Araya, H.G. (2016) external factors affecting the growth of micro and
small enterprise by using cross-sectional data. However, the study was focused only the external
factors that affect the growth of micro and small-scale enterprise. Gelgelu (2018) factors
affecting the performance of micro and small-scale enterprise, the study has applied a series of
data collection. However, the study was focused on descriptive statistics. Henry, N. A. (2017)
Factors affecting growth of small and medium enterprises by using time series of data collection.
However, the study focuses only internal factors using descriptive statistics.
This study will be focus on both the internal and external factors that affect the growth of micro
and small-scale enterprise by using cross-sectional data and econometric analysis in Adjibar
town.

1.4 Research Hypothesis

The expected effects of the external factor on the growth of MSEs will be hypotheses in the
following way.

 Access to Credit: It is defined as access of credit from financial source. Access to credit is
negatively associated MSEs growth. Limited financial debit is negatively affecting growth
potential of MSEs.
 Access to working premise: MSEs have own premise is positivity associated with its growth.
Any businesses need enough working premise for their product and service.
 Access to Infrastructure: It also, enhanced the availability infrastructure input such as road
network, water, electricity, etc. MSEs which are access to sufficient infrastructure facilitate
the growth of it. Therefore, infrastructure is positively related with the growth of MSEs.
 Access to Advisory consultancy: Consultant and advisory service them as a tools to enable
entrepreneurs to diagonally their business and undertaken informed decision is one of the key
elements from arrange of service. Therefor advisor consultancy is positively related with the
growth of MSEs.
 Access to Raw material: Raw material is the unprocessed items that are broken down,
processed or combined with other materials to create and end products. Therefor raw material
is positively related with the growth of MSEs.

1.5. Objective of the study

1.5.1. General objective of the study

The general objective of the study will be to assess factors that affect the growth of micro and
small-scale enterprise in Adjibar town, Amhara Region.

1.5.2. Specific objective of the study

The specific objective of the study will be;

 To assess the status of micro and small scale enterprises in the study area.
  To assess the internal and external factors that affecting the growth of micro and small
scale enterprise in the study area.
 To identify the external factors that affects the growth of the micro and small scale
enterprise in the study area.

1.6. Scope of the study

Conceptually the study will be limited on a cross sectional analysis to identify factor affecting the
/growth of micro and small scale enterprise. The study will restricts to micro and small scale
enterprise and will not try to address large and medium scale enterprise. Geographically this
study will be confine to Adjibar town.

1.7. Significance of the study

The findings of this study will be useful to the stakeholders including:

i. Academics/Researchers

Findings from this study will assist academicians in broadening of the prospectus with respect to
this study hence providing a deeper understanding of the critical factors that affect the growth of
MSEs.

ii. Micro and Small Enterprises

The findings of this study will help MSEs in Adjibar town and others, within an insight into the
benefits of using different factors studied in this research to predict the factors that affect the
growth of MSEs.

iii. Governmental Policy Makers

The government can use the findings of this study to assist in policy formulation and
development for a framework for critical finance, marketing, work premises and other factors that
affect the growth of MSE. Moreover, the findings of this study will help the policy makers and
financial institutions how to encourage establishing or expanding MSEs. It also enables them to
know what kind(s) of policies should be framed
1.8 Organization of the study
The study will be divided into five major parts. The first introductory part of the study contains
backgrounds of the study, statement of the problem, objective of the study, scope of the study,
significance of the study and organization of the study. The second chapter will devote to the
presentation of literature review of related researchers and conceptual framework. The third
chapter deals with research methodology of the study which contains type and sources of data,
sampling technique and sample size determination, method of data analysis and model
specifications of the research.
 Chapter Two

2. Literature Review

2.1 Theoretical literature review

2.1.1 Definition of micro and small-scale enterprise

Micro and small enterprise sector is highly diversified sector and plays a predominant role in the
economy of developing country. The employee a large proportion of labor force and in many
developing countries they are the source of income for various peoples. MSEs have also been
influential in bringing about economic transaction by providing goods and services to a large
number of people without requiring high-level of training large sum of capital or sophisticated
technology (Alemu KS, Dame DB, 2016).

In legal terms distinctions are only made between sole traders, partners and companies with no
formal definition of what constitutes a micro and small business. And there is no single and
universal definition of what constitutes a micro and small firm, which can be useful for all
purposes. Firms differ in their levels of capitalization, sales and employment. Hence, definitions
which employ measures of size (number of employees, turnover, profitability, net worth, etc.)
when applied to one sector could lead to all firms being classified as small, while the same size
definition when applied to a different sector could lead to a different result (Kebede, 2019) .

MSEs are also found to employ more women in their full-time permanent workforce compared
to larger firms, at least in most of the world’s regions (White, 2018). SMEs often provide the
entry point for women into formal sector employment. This suggests that a strong MSE presence
contributes to improving labor market outcomes for women. Indeed, new analysis shows that
emerging and developing countries experiencing an increasing share of formal employment in
SMEs are more successful in reducing the working poverty gender gap (White, 2018).

2.1.2 The role of micro and small-scale enterprise in poverty reduction

Micro and small enterprises are the engine of economic growth, poverty reduction and equitable
income distribution in developing economies like Ethiopia. It is the second largest employment
generating sector next to agriculture in Ethiopia. It has playing an important role for achieving its
development goals, to achieve the country plan GTP I and GTP II, to increase income and
domestic saving, equitable distribution of income, better utilization of local resource. Growth of
large industries, achievement economic independence improving efficient and production of
goods and services that satisfy the basic needs other (Yaregal Tilahun Geremewe, 2018).

In a developing country like Ethiopia, the role and importance of small-scale industries is very
significant towards poverty eradication, employment generation, rural development and creating
regional balance in promotion and growth of various development activities. This clearly shows
the importance of small-scale industries in the economic development of the country. The small-
scale industries have been playing an important role in the growth process of economy. In spite
of, stiff competition from the large sector and not very encouraging support from the government
(Getahun Mohammed, 2016).

The MSEs is the very important for reducing poverty and unemployment vulnerable groups, has
a potential to support the Ethiopian economy in achieving its development goals, increase income
and domestic savings, promotion of large-scale manufacturing industry to create employment
opportunities, creation of female-oriented businesses and creation for investments (Engida,
Regassa, Hassen, & Yifredew, 2017).

According to Addis Ababa 2016 report, due to limited growth in employment prospects in the
public sector and declining absorptive capacity of the agricultural sector, the numbers of new job
seekers are turning to micro and small enterprises (MSEs). The Ethiopia government is focusing
on the micro and small enterprises basically because of their contribution in reducing poverty and
unemployment becomes better than other sectors. Even he emphasizes more on micro and small
enterprises than medium and large enterprises. The government have been supporting their MSEs
extensively through many different programs, with subsidized credit schemes, financial support,
creating marketing link, providing free showing area, free production and operation area,
promotion and so on (Prof.A.Raghurama, Amare Abawa and, 2017).

Based on the report obtained from National Bank of Ethiopia from 2008/09-2014/15, it is
revealed that the new MSEs establishments is important for poverty reduction, for employments
generated. MSEs establishment has grown from 73,775 in 2008/09 to 271,519 in 20014/15.When
we see the employment creation of newly established MSEs on employment creation is
increasing from 530,417 people in 2008/09 to 2,800,000 people in 2014/15. According to World
Bank report 2013/14 revealed that the poverty level in Ethiopia had declined from 44% in 2000
to 30% in 2011 and have further went down to 26 % in 2013 (Prof.A.Raghurama, Amare Abawa
and, 2017).

2.1.3 The micro and small-scale enterprise sector in Ethiopia

Micro and small-scale enterprise in Ethiopia are extremely dominative and socially in efficient.
Its greatest asset is the desire to survive and eventually get rich. The other advantage is its
creativity and ingeniousness. Ethiopian private sector as a whole is highly dominated by micro
and small-scale enterprise which are geared towards satisfying the speeds of low-income groups
(Degefu, 2018).

2.1.3.1 The micro and small-scale enterprise development strategy

According to Federal Democracy Republic of Ethiopia (1997-2025) there are three strategies for
the development of MSEs for poverty reduction. The first strategies are Micro and Small
Enterprises development strategies of Ethiopia (1997-2010); the fundamental principles of this
strategy are “Agricultural Development Lead to Industrialization” (ADLI) and market economy
principles. This strategy has facing problem. Lack of access to finance, say nothing weather these
enterprises are grown to the next higher level or not, cannot define MSEs. The second one is
MSEs Development Strategy, Provision Framework and Methods of Implementation (2011-
2015); the main aim of this strategy is to alleviate the implementation gap of the first MSES
Development strategy, to shift ADLI strategy to “industry “and to alleviate the financial
constraint by means of giving the state government to give the credit to MSEs. The third one is
Industrial Development strategy plan (2013-2025); its emphasis on economic level of the country
should be reaching in the middle level of income by 2015 by focusing on manufacturing sector.
The main focus of this strategy is for job creation, promotion of industry and employment
creation which gives less emphasis for the economic contribution because of difficult of knowing
the exact contribution of Micro and Small Enterprise to GDP.(source )

Due to the weakness of the first edition of Growth and Transformation plan (GTP I) which do not
consider the Medium and Large enterprises, the second edition of Growth Transformation plan
(GTP II) (2015/16-2019/20) was formulated. From this projection the share of Micro and Small
Enterprises in GDP under base scenario in present is stated as 1.1 in 2014/15 to 1.8 in 2019/20
and for Medium and Large-Scale Enterprise as 3.7 in 2014/15 to 5.9 in 2019/2020. The plan has
tried to project the contribution of Micro and Small; and Medium and Large enterprises to GDP.
The entire projection is made only for manufacturing that overlooked the service sector
(Prof.A.Raghurama, Amare Abawa and, 2017).

2.1.4 The Implementation structure of the strategy

The most important institutions that are directly involved in the promotion of micro and small-
scale enterprise are MOTI and the newly established MSEDA.The latter is envisaged to operate
the federal and regional level of government (MOTI, 2017).

A. The ministry of trade and industry

The ministry of trade and industry has responsibility as the organ of the federal government for
the formulation of policies and strategies to promote the expansion of enterprises and to facilitate
the provision of assistance to micro and small-scale enterprise. The other duties given to the
ministry is to support and create conducive environment for the development of private
promotional institutions. Regional bureau of trade and industry were delegated to develop and
promote the sector in their regions by coordinating regional occupation to strengthen the flow of
information to micro and small-scale enterprise (MOTI, 2017).

B. The federal micro and small-scale enterprise development agency

Currently, the country is implementing the second five-year growth and transformation plan
(GTP II), which was introduced in 2015/16 to run until 2019/20. In this plan, the MSE sector
(especially manufacturing MSEs) was given due emphasis in view of its strategic importance in
minimizing urban unemployment and achieving the vision of being a leading country in Africa in
light manufacturing industries by 2025. Clear and ambitious targets have been set for MSEs to
achieve by the end of GTP II. In order to effectively implement this plan and incorporate the
urban food security and job creation agenda, the government has reorganized the former federal
agency (FeMSEDA) into two separate agencies. The first, called the “Federal Small and Medium
Manufacturing Industry Development Agency (FeSMMIDA),” was established by Council of
Ministers Regulation No.373/2016 and is accountable to the Ministry of Industry. The other
agency, the “Federal Urban Job Creation and Food Security Agency (FUJCFoSA),” was
established by the Council of Ministers Regulation No.374/2016 and is accountable to the
Ministry of Urban Development and Housing. ReMSEDA is a general name used to represent
regional agencies coordinating and supervising the development of MSEs at a regional level.
(source)

To further ensure the proper institution coordination for micro and small-scale enterprise support
function the government created the new federal micro and small-scale enterprise development
agency (FeMSEDA). In addressing above objectives, FeMSEDA is expected to provide and
support to the regional micro and small-scale enterprise development agency. The federal micro
and small-scale enterprise development agency establish for autonomous government institutions
having its own legal identity and run by aboard management of enterprise promotion Agency is a
new approach in Ethiopia. The federal micro and small-scale enterprise development agency is
directly accountable to the ministry of trade and industry. In 2011 E.C the regional government
also provided for the establishment of regional micro and small scale enterprise development
agency's to provide extension services to micro and small scale enterprises at the regional, zonal
and woreda level .The ministry of trade and industry through federal micro and small scale
enterprise development agency provides (Gebreeyesus, et al., 2017).

In most developing countries Small business faces wide range of problem. It may be either
supply side or demand side or contribution of both. Among those constraint lack of initial capital,
absence of legal and regulate environment, lack of access market, business information, lack of
working premises, in adequate infrastructural development are among main problems that facing
micro and small scale enterprise at the time of establishment and operation (Meresa, 2018).

2.1.5 Factors affecting the growth of micro and small-scale enterprise

A. Lack of access to capital and credit: In the development of micro and small-scale
enterprise it hundred by different problems. Among the problem lack of capital for startup
activities, operation, expansions can be mentioned. The Central statics authority of Ethiopia for
the purpose of its survey on small scale manufacturing industries in 2017 shows 30.64 % of total
establishment have faced problems of capital during the start of their operations However 9% of
the total establishment faced shortage of working capital when they are in operation (Kebede,
2019)
B. Low access to working premises: micro and small-scale enterprise operators usually don't get
access to suitable location to where they can get easy access to market. The days on today, the
issues of land acquisition and transaction cost has become very prohibitive to the emergency of
new enterprise and to the growth and survival of the existing ones. The issue of land provision
has become one of the most controversial issues in all urban areas. The land lease system has
greatly constrained the micro and small-scale enterprise who aspire to start up business (Meresa,
2018).

C. Inadequate Advisory consultancy: the delivery of good information is important for

sustainable competitiveness in local and global markets and creating and sustainable growth of
micro and small-scale enterprise sector. In completed and constantly changing business the
production and supply of quality good's or service to the customers at a minimum cost of
production depends highly on the availability and provision of business up grading service and
technical knowhow. Consultant and advisory service them as a tools to enable entrepreneurs to
diagonally their business and undertaken informed decision is one of the key elements from
arrange of service (Degefu, 2018).

D. Shortage of raw material: Raw material is the unprocessed items that are broken down,
processed or combined with other materials to create and end products. Raw materials are used in
particularly all aspects of a manufacturing and construction. Shortage of raw materials are
frequent problems to micro and small scale enterprise such problems may arise from shortage of
working capital, which effectively ties the enterprise to one high priced, unreliable or poor
quality supply (Meresa, 2018).

E. Lack of Adequate market: due to this aspect being very vital to overcome marketing
problems the crucial points that micro and small-scale enterprise are unable to meet are
manifested by lack of information where the best market area are located, inability to analyze
their respective market, lack of skills to set competitive prices. Marketing knowledge is important
for the promotion, growth and development of small-Scale enterprises. In this regard, the
Ethiopian government has formulated MSE‟s strategies to ease marketing challenges by creating
inter-linkage mechanisms with other institutions, providing training on marketing, developing
export support programs and marketing information center. However, inability to sell the
products and services; lack of adequate marketing channels, and lack of marketing skills are the
problems to the starting of business and further growth of the sector (Meresa, 2018).

F. Problems in market promotion: The role of promotion is to facilitate product or services

providers and customers. Commercial enterprise is concerned with attracting customers.
Different types of enterprise will have distinct promotional mixes utilizing a variety of
promotional methods. The major promotional mixes are as follows, advertising, sales promotion,
and public finance (Degefu, 2018).

2.2 Empirical Literature

In Ethiopia, the MSE sector has high capacity in absorbing high labor force; this is because the
sector characterized by diversified activities. Due to its contribution for alleviating the poverty of
the low-income people and of course with a number of constraints micro and small enterprises,
get the attention of many researchers (Meresa, 2018)

Abdissa (2016) investigated on the growth determinants of micro and small enterprises. The
study empirically tested the three determinants of growth of small business namely; the
individual factors, organizational factors and environmental factors. The study was conducted in
south west Ethiopia. They employed the purposive sampling techniques for the Analysis. They
find out that, individual’s factors directly affect the growth of the business, as well as an indirect
effect through organizational factors. Getachew petros (2017) conducted a study on the topic
“factors affecting growth Micro and small-scale Enterprises” in Hosanna Town. The study
reveals that, the growth of MSE’s in Hosanna town is hampered by several factors that are
beyond the MSE’s control and internal financing and human resource capacities. Thematic
technique was used to analyze audiotaped interview transcripts. The result of the study depicted
that several factors, including level of education, poor energy supply, access to external finance,
competition, inflation and government policies influence the growth of MSEs.

Most recently, Yikeber Yimesgen (2019), the study on the growth determinants of micro and
small enterprises and linkages with food security in Amhara Region. The study used a self-
structured questionnaire in gathering data and employed the factor analysis method to analyzing
the data through the statistical packages for social science (SPSS). The research uncovered that
that access to finance, innovation, government policies and nonfinancial factors affect the growth
of micro enterprise.

(Degefu, 2018) analyzed the factors that affect the growth of MSE in Addis Ababa using sample
household survey data collected in 2017. He used both descriptive data analysis and multiple
regression models to identify the factor affecting MSEs. Findings indicated that finance factors,
marketing, infrastructure, technological, working premise, management and entrepreneurial
factors hinder the growth of MSEs.

Hailay, Aregawi and Assmamaw (2014) analyzed the factors affecting the growth of MSEs in
Feresmay town using descriptive statistics and econometric model based on a sample of 274.The
study conducted that growth of MSEs measured in terms of employment change affected by
factors including owners age, prior experience, family size, MSEs age, access to infrastructure,
MSEs distance from row material and market.

The study recommended that the government and nongovernmental organizations and MSEs
development agencies should motivate, help and advice the owner of MSEs on their overall
business activities, giving training to business issues, arrange forum and exhibitions for
experience sharing and solve the credit, infrastructure, supply and market access problems in
collaboration with MFI, banks, Ethiopian electric power cooperation, suppliers and other
organizations.

2.3. The conceptual framework of the study

Chapter Three

3. Data source and Methodology the study

3.1. Description of the study area

This study will conduct in Adjibar Town in south wollo. It located in the Amhara region site at
latitude and longitude of 11°8, N39°3E and 11.133°N39°633E, with elevation between 274 and
2550 meters above the sea levels and total area is 15. 08km. National urban Planning Institution.
(2009).Adjibar town is bordered on the south by Leg ambo, on the south west by Sayint, on the
west by Magdala, on the north by the Bashilo river. Adjibar town has total population 137,412 of
whom 68,053are men’s and 69,359 women.

The majority of inhabitants are Muslim with 80.21%, reported that as their region. While 19.58%
of the population said to be reported Ethiopia orthodox Christianity and 0.21% are Protestants.
The town is the two largest ethnic groups reported in the town are Amharic (99.93%) and all the
other ethnic groups made up 0.7% of the population. Central Statistical Agency (CSA, 2007)

3.2 Type and source of data (Types of data and methods of data collection techniques)
In order to collect the reliable data, the researcher will use both primary and secondary source of
data and in order to achieve the objectives of the study. Primary data will collect through
questionnaire. Primary data such as how much micro and small-scale enterprise improve the total
assets of the owner and factor that affecting the micro and small-scale enterprise sector will be
gather from the operator of those sectors. Secondary data will use in order to know the number of
enterprises in each sector such as trade, construction, manufacturing; urban agriculture and
service so that sample size will be determine using secondary data of target population.
3.3. Sampling technique and sample size determination
There are two general types of sampling technique. These are probability and non-probability
sampling techniques. But in this study the researcher will be applies probability sampling
technique in which each element in the population had a chance of being chosen. In this study
will use stratified and simple random sampling techniques.

After reviewing different literature for the determination of scientifically acceptable sample size
the researcher will be preferred to use sample size determination formula of Yamane Taro (1967).
Accordingly:

n = n= N/1+ (N) e2

Where N=total number of households

n= sample size

e= expected error that the researcher committed when gathering data.

3.5 Method of data analysis

In this study both descriptive and econometric model will be employed in analysis. The
researcher will use descriptive analysis because it is important to had clear picture of the
characteristics of the sample units with respect to the desired characteristics. The descriptive
analysis will be used in this study includes mean, percentage and frequency of occurrence. The
researcher will also use econometric model, which is multiple linear regression model and will
apply ordinary least square method (OLS) to estimate the parameter of the model. Because of the
dependent variable is a continuous variable and the independent variable is either continuous
variable or dummy variable. It is an essential method of econometric analysis to recognize and
realizes pattern of the influencing factors.

Moreover, the study utilized cross-sectional in the sense that all relevant data will be collect at a
single point in time. The reason for preferring a cross-sectional study is due to the vast nature of
the study and the limitation of time. And obtaining information from a cross-section of a
population at a single point in time is a reasonable strategy for pursuing many descriptive
researches (Degefu, 2018)
3.6. Model specification

3.6.1 Theoretical framework model

Theoretically there were various econometric methods with which the researcher may obtain
numerical values of the estimate of parameters. Among these methods the study will be use
ordinary least square to estimate the model because of the nature of the variable. The dependent
variable of this model is continuous hence; if the dependent variable of this model is measurable
use the ordinary least square model. When ordinary least square model will use to estimate the
data with quantitative variable the resulting model was linear, that means the dependent variable
and independent variable had linear relationship because of these the researcher will apply
ordinary least Square model.

Most of the models were employed in micro and small-scale enterprise activity study in both
developed and developing countries is regression model they typically use the form of;

∆Lnct=Lnco+Bx

Xs=vector represent owners characteristics

∆Lnct=Lnct-Lnco represents the change in firm’s growth

Lnco=firms real current capital

Lnct=is firms real initial capital

To analyze factor affecting the growth of micro and small-scale enterprise, the researcher will be
used standard multiple linear regression model and would apply ordinary least square method for
estimating the parameter of multiple linear regression model are given by the form of;
Yi=B0+B1X1+...........+BkXki+Ui

Where, Yi=the dependent variable, Xi=refers the independent variable, Ui=error term, the B's are
regression coefficients they are unknown and they are assumed to have a fixed value, B0=is the
intercept coefficient.
3.6.2. Empirical framework model
The equation of the study will be generally built around two sets of variable namely dependent
variable growth in total assets of micro and small-scale enterprise and independent variable
education level, access to infrastructure, access to credit, access to working premise, location of
enterprise.

Yi=β0+β1sex+β2edu +β3Aif+β4Wp+β5Acr+β6Eage+β7Le+β8eib+μi where,

Yi=growth in total assets of micro and small-scale enterprise

β0=is the intercept term

Sex=sex of enterprise operator

Edu=educational level

Aif=access to infrastructure

WP= access to working premise

Acr=access to credit

Eage=Enterprise age

Le=location of enterprise from the nearby central market

Eib=experience in business

β1, β2, β3, β4, β5, β6, β7, β8 are the coefficients associated with each independent variable
which the change in mean value Yi per unit change in their respective independent variable
regress growth in total assets as a dependent variable on the selected linear combination of
independent variables using multiple linear regression model.Yi=growth in total assets of micro
and small scale enterprise, β0=is the intercept term.

3.6.2.1 Variables and hypothesis

Table 3.1
 CHAPTER FOUR:

4. Time and Cost Budget (Budget plan and Time schedule)

4.1. Financial Budget

NO. Items Quantity Unit cost Total cost

1 Secretary service paper 150 2 300

page

2 Transportation cost 1200 1200

3 Paper One 200 200

package

4 Pen 5 10 50

5 Flash 1(8GB) 350 400

6 Printing cost 150 2 300

7 Telephone & internet cost 150 150

8 Miscellaneous expense 500 500

9 Total 3100
4.2. Time Budget
N0. Activities Nov DEC Jan Feb Mar Apr May Jun

1 Title selection X

2 Literature search X

3 Proposal writing X

4 Data collection X x

5 Data analysis X

6 Research writing X X

7 Presentation x
References
Alemu KS, Dame DB. (2016). Determinants of Micro and Small Enterprises Success. J Tourism Hospit, 5(3),
214.

Degefu, D. G. (2018). Factors That Determine the Growth of Micro and Small Enterprises. (D. G. Degefu,
Ed.) iBusiness, 10(2150-4083), 185-200.

Engida, E., Regassa, M., Hassen, I. W., & Yifredew, F. Y. (2017). The role of micro and small enterpris in
reducing unemployment and poverty in Ethiopia.

Gebreeyesus, M., Ambachew, A., Getahun, T., Assefa, B., Abebe, G., Hassen, S., et al. (2017). Main
Features of Micro and Small Manufacturing Enterprises in Ethiopia. Baseline Survey Report,
Ethiopian Development Research Institute (EDRI), Addis Ababa.

Gelgelu, D. G. (2018). Assessment of the factors affecting the performance of micro and small scale
enterprise. Journal of Development and Agricultural Economics, 10(6), 192-199.

Getahun Mohammed. (2016). The Challenge and Prospects of Small Scale Enterprise in Ethiopia: A
Survey of Some Selected Small Scale Enterprise. (G. Mohammed, Ed.) International Journal of
Scientific and Research Publications, 6(5), 617-626.

Kebede, G. H. (2019, April 30). Policy Framework of Small and Micro Enterprises and Its Role on the
Development of the Sector. (G. H. Kebede, Ed.) Public Policy and Administration Research journal
(PPARJ), 9(4), 67-89.

Meresa, M. (2018, January 1). Factors Affecting the performance of Small-Scale Enterprise (Restaurant
and Hotels) Inraya Azebo Wereda. International Journal of Managerial Studies and Research
(IJMSR), 6(1), 68-92.

Prof.A.Raghurama, Amare Abawa and. (2017). Micro,Small and Medium Enterprises (MSMEs).
International Journal of Commerce,Business and Management (IJCBM), 6(1).

White, S. (2018). Creating Better Business Environments for Micro and Small Enterprises. Technical
Report,, Donor Committee for Enterprise Development, Cambridge, UK.

Yaregal Tilahun Geremewe. (2018). The Role of Micro and Small Enterprises for Poverty Alleviation. (Y. T.
Geremewe, Ed.) International Journal of Research Studies in Agricultural Sciences (IJRSAS), 4(12),
38-47.

Yimesgen, Y. (2019, February 28). The growth determinants of micro and small enterprises and its
linkages with food security. African Journal of Business Management, 13(4), pp. 138-146.