HAWASSA UNIVERSITY

FACULY OF BUSINESS AND ECONOMICS

DEPARTEMENT OF ACCOUNTING AND FINANCE

A RESEARCH PAPER ON FACTORS AFFECTING THE EXPANSION OF

MICRO AND SMALL BUSINESS ENTERPRISE (IN CASE OF YIRGALEM
TOWN)

PREPARED BY: DEREJE NEGASH

ADVISOR: MENBERE ASRAT (M SC)

A RESEARCH PAPER SUBMITTED TO THE ACCOUNTING AND FINANCE
BACHELOR PROGRAMME, IN PARTIAL FULFILMENT OF THE
REQUWEREMENT FOR THE AWARD OF DEGREE IN ACCOUNTING AND
FINANCE.

JUNE, 2018

YIRGALEM, ETHIOPIA

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 ACKNOWLEGMENTS

First of all I would like to thank almighty God and his mother Merry for their help in doing this research
paper.

I would like to express my deepest gratitude to my advisor Membere Asrat (M SC) for her advice, guide
and professional support in developing the research paper.

Finally, I Would like to thank all the members of the Hawassa university awada campus Library staff for
their endurance in searching for materials requested and prevision of these materials write developing
the paper.

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 ABSTRACT
The study was conducted to the factors that affect the expansion of micro and small business in
Yirgalem town. For this purpose, the researcher used both primary and secondary data. The
primary data was collected from questionnaire and interview of the employees and Micro &
small Enterprises in structured and unstructured ways. The secondary data was collected from
different books, reports & the like. The researcher selected the respondents for questionnaire by
probability stratified random sampling method. And the respondents for interview were selected
by non- probability purposive sampling method. Finally, the researcher found out the following
main finding as conclusion the main factors that affect the expansion of micro and small
business enterprises are lack of enough capital ,lack of managerial skill and lack of awareness
about the expansion of the micro and small business. As generally the researcher have been
recommended as ,the owners of MSE lack of awareness about the business the government body
that Were founded MSE Were create awareness towards owners by giving regular training
program to strength the skill of the business owners made and the government body that
organize small scale enterprises work with other concerned department and official so as to
eradicate the problem created by the their skill of micro and small business enterprises on the
operation of their business.

Key words:

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 List of table Page
Table 4.1 Age of the respondents.................................................................................15

Table 4.2 Gender of respondents..................................................................................15

Table 4.3 Educational status..........................................................................................15

Table 4.4 Martial status................................................................................................16

Table 4.5 Time of starting of business...........................................................................16

Table 4.6 Motive for starting of business.......................................................................16

Table 4.7 Reasons for unprofitability.............................................................................17

Table 4.8 Attracting customers.......................................................................................17

Table 4.9 Competition in the market..............................................................................17

Table 4.10 The cooperation with other person..............................................................18

Table 4.11 Purpose of the cooperation...........................................................................18

Table 4.12 Initial capital to run their business.................................................................18

Table 4.13 Initial capital of respondent...........................................................................19

Table 4.14 The reason of business failure.... .................................................................19

Table 4.15 The attitude of owners of MSE toward the enterprise.................................20

Table 4.16 Infrastructure problem in the town................................................................20

Table of contents

Contents Page No

Acknowledgement....................................................................................................................I

Abstract........................................................................................................................................II

List of table................................................................................................................................III

Acronyms....................................................................................................................................Iv

CHAPTER ONE

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1.0 Introductions............................................................................................................. 1

1.1 Background of the study..........................................................................2

1.2 Statements of the study.............................................................................3

1.3 Research Questions................................................................................4

1.4 Objective of the study.................................................................................4

1.4.1 General objective...................................................................................4

1.4.2 Specific objective..................................................................................4

1.5 significance of the study.........................................................................4

1.6 scope and limitation of study...............................................................5

1.7 Description of the study.........................................................................5

1.8 organization of the study.......................................................................5

CHAPTER TWO.

2.0 Review of Related Literature

2.1 Definition and concept of micro and small business

enterprise...............................................................................................................6

2.2 Micro and small business concept...................................................................6

2.3 Importance of micro and small enterprise.........................................................7

2.4 The advantage of small business enterprise.....................................................7

2.5 Disadvantage of small business enterprise ......................................................7

2.6 Special contribution of small business enterprise.............................................8

2.7 Types of small business enterprise ....................................................................8

2.8 Factors affecting expansion of micro and small business enterprise..................8

2.9 Source of finance for micro and small business..................................................9

2.10 Role of managerial skill for micro and small business.........................................9

2.11 Steps for selling a business...................................................................................10

2.12 Small business enterprise failure factors..............................................................10

2.13 Problem in Ethiopia small business enterprise.......................................................10

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 2.14 Economic, Social and Political aspect of small business enterprise.........................11

2.15 Management practice in Ethiopia small business enterprise.................................11

2.16 Small business as seedbed of Entreprenuership.....................................................11

CHAPTER THREE

3.0 Research Design and Methodology

3.1 Research type..........................................................................................................13

3.2 Data Source.............................................................................................................13

3.3 Method of data collection.......................................................................................13

3.4 Sampling technique.................................................................................................13

3.5 Target population...................................................................................................14

3.6 Sampling size..........................................................................................................14

3.7 Method of data analysis and data presentation.....................................................14

CHAPTER FOUR

4.0 Data Analysis and Presentation........................................................................................15

CHAPTER Five

5.0 Conclusion and Recommendation

5.1 Conclusion...........................................................................................................22.

5.2 Recommendation................................................................................................23

REFERENSES----------------------------------------------------------------------------------------------------25

APPENDIX------------------------------------------------------------------------------------------------------------------26

ACRONYMS

MSI- micro and small enterprises

MTI-minster of trade and industry

CSA-central statistical authority

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vii
 CHAPTER ONE

1. INTRODUCTION
Micro and small business can be defined as one ,which is independently owned and operated
and not dominated in its field of operation .It can also be defined in terms of sale volume and
the number of employed in the firm .

Small business and Micro enterprise may be defined as business with a small number of
employees. The definition of Micro and small business often varies by country and industry but
it is generally under 100 employees in the United States, while under 50 employees in the
European Union (Richard, 2003).

In Ethiopia, According to the minister of trade and industry ( MTI), adopted official definition of
micro and small business enterprises as follows; Micro and small business enterprises found in
all sector of the Ethiopian economy with a paid up capital (fixed asset of the not more than birr
20000 but excluding high tech consultancy and other high tech establishments. Small enterprises
are business enterprise with paid up capital of more than birr 20,000 but not more than 50000 but
excluding high technical consultancy firms and other high technical establishment(CSA,2003:4).

Generally, micro and small business can be defined as a business that is privately owned and
operated with small number of employers and relatively low volume of scales micro and small
business normally owned companies, partiers and sole proprietor ship. There is no doubt that one
of the main Objectives of any enterprises is to have their enterprise growth and expand. To
achieve this, it is very important to understand the factors that contribute to the growth and
expansion of small and microenterprise (CSA, 2003).

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There is general, consensus that expansion and growth in enterprise is a complex process, which
is neither linear continues nor dependent up on only limited number of factor availability of
financial ,human ,and social resource ,technical and management skill that can adopt to and cope
with a changing environment, the potential to develop staff and creativity and opportunity
recognition are some of key factors to determine the growth and expansion of enterprise
(http://www.bit/y/is/Ro:R. Available at: 05/05/2015)

1.1 Back Ground of the Study

Specifying any size standard to define small business enterprise is necessarily arbitrary, because
people adopt different standard for different purpose. For example ,legislators may exclude small
firms from certain regulation and specify ten employees as the cut-off point .Moreover ,business
may be described as small when compared to large firms but large when compared to smaller
ones. Example, most people would classify independently owned gasoline station,
neighbourhood restaurant and locally owned retail stores as small business.

Similarly ,most would agree that the major automobile manufacturer are big business .And firms
of in between sizes would be classified as large or small on the basis of individual view of point .

Small and micro enterprise (MSE) the world over comprise a widely divergent spectrum of
establishment ranging from micro and rural enterprises to modern industrial insulting
sophisticated technologies .Because of their contribution in each and every national economy
the importance and emphasis on MSE has been accentuated in the minds of policy
makers ,planners and industrial .This is the consequence of recognition that the shift from
agrarian to industrial and post-industrial knowledge base societies is not through the large scale
industrial houses but through individual and small scale industrial by visionaries from the small
micro enterprises .

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Small and medium enterprises cover a wider spectrum of industrial and play an great role in both
development and developing economies .Ethiopian is no exception and MSE occupy a
prominent position in the development of Ethiopian economy over the year, the number of
MSEs is growing from time to time (Hailey Gebretinsae,2003).

1.2 Statement of the Problem

Micro and small business enterprise can be as one which is independently owned and operated
and not dominated in the fields of operations. It can be also defined in terms of sale volume and
the number of employees in the firms.

The definition of SME is varies country to country .Over the world the number of employees or
capital investment or both has been used as the basis for the defining SME. The definition of
MSE in some of the developing and developed countries basis on environment criteria, generally
acceptable division are up to 19 workers are micro or very smaller enterprise, up to 20-100
workers is small enterprise and up to 101-500 workers is medium enterprise.

MSE defined up on different approach size criteria ,means that it measure by the size of
business vary or scale of operation including number of employees , asset size ,volume of
deposit ,and value of production .The other criteria is economic control it can be defined ,by the
covering three basic issue ;those are; market share ,independence and personalized management.

The expansion of micro and small business enter prise has a vital part to play in the economy of
the country. However, the sector of micro and scale industries have not been able to contribute
sustainable as needed to the economic development particularly because ,lack of available
finance, human technical and management skill ,and also characteristics such as behaviour ,
personality attitudes are the factor that influence that influence expansion of micro and small
business.

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1.3 Research Questions

Generally, the study attempted to answers the following basic questions;

1. What are those major factors that affect expansion of micro and small business enterprise
in the town?
2. How about attitude of owners of small enterprise on the expansion of their business?
3. Does the concerning government office discharge their responsibility for expansion of
micro and small business enterprise?
4. What are those measures taken by the concerning officials to tackle the problems?

1.4 Objective of study

1.4.1 General objective of study

The general objective of student is to identify the factors that affecting the expansion of micro
and small Business enterprise in Yirgalem town.

1.4.2 The specific objective of study

To assess the main factor affecting of micro and small business enterprise factors that

 To investigate those factors that hinders the expansion of micro and small business
enterprises in the town.
 To investigate the extent of attitude of Micro and small enterprise to expand their
business.
 To assess the role of government towards expansion of micro and small enterprise.
 To examine those measures taken by the concerning officials to tackle the problems of
the sector.

1.5 Significance of the Study

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The student focuses on factor that affects the expansion of micro and small enterprise in specific
area. The student were enables the owners to identify factors that affect the expansion of micro
and small business in the Town.

It also provides useful information for those concerning officials to take corrective solutions for
those factors that affected the expansion of MSE’s.

1.6 Scope of the Study

The student was conducted only on the factors that affect the expansion of micro and small
business enterprise in the Yirgalem Town. Moreover, the researchers investigated the issues that
have related to the issue concerned.

1.7 Limitation of the Study

The researcher was faced difficulties with regard to the collection of data .At the time of data
collection the researcher was encountered unwillingness of respondents to respond properly &
unavailability of sufficient materials.

1.8 Organization of the study

This research paper has five chapters. the first chapter is present the introduction parts that
reflects background of the study, statement of the problem and objective of study .The second
chapter was literature review which organized from different sources. Chapter three was
research design & methodology .chapter four would data analysis and presentation, the final
chapter contain conclusions and recommendation.

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 CHAPTER TWO

2. Review of Related Literatures

2.1 Definition and Concepts of Micro and Small Business

Micro and small business enterprise can be defined as one which is independent owned and
operated and not dominated in its field of operations.
It can also be defined in terms of sales volume and the numbers of employees in the terms.
Small business and micro enterprise may be defined as business with a small number of
employees. The legal definition of micro and business often various by counters and industry,
but generally under 100 employees in the united states .Which and so employee in the
European Union(Floral & Gustafson ,2003).
In Ethiopian, the Minister of Trade and Industry (MTI) adopted official definition of micro
and small business enterprise as follows.
 Micro and small enterprise are business found in all sector of the Ethiopian economy
with a high paid up capital (fixed asset )of not more than birr 20,000 but excluding high
technology consultancy firms and other high tech establishment .
 Small enterprise are business enterprises with a paid up capital of more than birr of 2,000
but more than 50,000 birr but excluding high tech consultancy firms and high
technology establishment.
 The definition of the MSE is very country to country over the world.

2.2 Micro and Small Business Concepts

Starting business is not an every but a process which may take many years to involve and come
to fruition, small scale industries in Ethiopia have not been able to contribute substantially is
needed economic growth in case of Technical knowhow, financial wealth and power, marketing
and production. In adequate finance and short time working, credit and other are major problem
of country small business an entrepreneur is an individual who establish and manages a business
for the principles purpose of profit and growth .But small scale enterprise find it difficult to get
raw marketing of good quality at a chapter rates in the field of operation (Haile G/Tisane, 2003:
4).

The Federal Democracy Republic of Ethiopia recognized and paid due attention to the
development of micro and small enterprise because they are important vehicle to address the
challenges of unemployment, economic growth and equally with in the country. Therefore, to
encourage, coordinate and assist institution which provider supports to development and
expansion of micro and small business enterprise. Small and medium enterprise covers a wider
spectrum of industries and plays a great role in both developed and developing economies.
Ethiopia is an exception and MSE Occupy a prominent in the development of Ethiopian
economy over the years, numbers of MSE is growth/growing from time to time. Market share,
independence and personalized management.

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2.3 Importance of Micro and Small Enterprises

The purpose is to understand the contribution made by small business as part of our total
economic system. Small firms operate in all industries, but they differ greatly in their nature and
importance from industries to industry. In ,therefore we first about the their economic
contribution we need to identify the different major industry like wholesale
trade ,construction ,manufacturing ,retail trade ,service ,finance ,insurance ,mining, and other .

The basic importance of this enterprise is economic contribution, creation of job opportunity;
improve economic sustainability and economic performance of country .The reason for more
rapid growth of the small firms in most development countries.

 Existence of new technologies, numerically controlled by machinery tools.

 Greater flexibility of required to as result of increased global competition.
 Small business is more flexible in employing the increasing the number of working
mother in the labour force.
 Consumer may be coming prefer to personalized products over the mass produced goods
and this opens a door opportunity for small business.

2.4 The Advantages of Small business Enterprises.

The desire for individual to own and operate their own small business is growing. As state,
creation of new business at the heart of free enterprises system. For individuals pursuing a
career in business ownership, numerous benefits can be attained personally as well as
professionally.

The following Characteristics are more common advantage of small business enterprises;

 Independence
 Financial opportunity.
 Employment

 Community service
 Job security; means that when one owns a business, work as long as he or she wants, no
mandatory retirement exist.
 Family employment and
 Challenges

2.5 Disadvantage of Small Business Enterprises

It should be recognized that some drawback of to owning a small business exist without proper
preparation of individual may find the career path of business ownership frustrating (Haile
Gebre tisane, 2003).

The following is major demerits of going to small business enterprise

 Sales fluctuation

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  Un competition
 Increased responsibility
 Financial loses
 Employee relation
 Risk of business failure.

2.6 Special Contribution of Small Business Enterprises.

As part of the community small firms unquestionably contribute to our National Economic
welfare. They produce a sustainable portion of our total goods and service .Thus, their general
economic contribution is similar to that of big business. Small business, however possess to
some qualities that make them more than miniature version of big business corporation

Among those economic contribution of MSE in our total economic value is followed

 Providing job; which in a sense as the population and economy grow, small business
enterprises new job opportunities.
 That is clear small business enterprise is called ‘ lion share of the new job :
 Sometime adding job while large corporation are downsizing and laying employees.
 Introduce innovation
 Stimulating economic competition
 Adding big business
 Distribution function and distribution of supply.
 Producing goods and service efficiently and so on.

2.7 Types of small Business Enterprise

The central statistics authority (CSA, 2003), categorized enterprise into different scale of
operation on the size of employment and nature of equipment they are;

 Micro enterprise :-are business activities that are independent owned and operated have
small share of market ,are managed by owner and employing five or less employees
 Small business :- are those enterprise which employee six to 49 or 6-49 employee .There
share the small characteristic with micro enterprise I n other aspects
 Medium scale enterprise: - are these enterprises which have relation higher share of are
independently or managed by year appointed executives and employ 50-99 people (CSA,
2003).

2.8 Factors Affecting Expansion of Micro and Small Business Enterprise

Owners of micro and small business enterprise are an individual who established and manages
business for the principle purpose of furthering personal goals .Introduction of new method
through which expanding business activities take place is the basis for starting and expanding
small business enterprise.

There are many person to expand your micro and small business owners may seek to gain
economics of scale ,diversity in to different markets , increase market share ,build on the brand
name or capitalization on an identified opportunity others may have personal reasons , as leaving

8
something for their children .The decision to grow and expansion of your business is an
important one and many consideration must be made and weight up before any plans are
made .There are various implication associated with growing your business ,with effects to the
business recourse finance and legal obligation as well as effects and implication to you
personally ,as the business owner . A key area of consideration on regards to how will finance
the growth of your business you may have retained profit from the business to finance the
business expansion but you may also be rewired to utilize a loan or over draft fatuities to
finance the purchase of more inventory larger premises or storage facilities , new equipment
technology etc.

We are also of the legal implications of expanding your business of expanding your business
growing your business may require you to changes your business structure, expose you to more
regulation and compliances requirements, as well as changes to your taxation obligation. There
are different factors that affect the expansion of micro and small enterprise .To understand these
factor we can divided into two types First, characteristics such as behaviour personalities
attitudes their social capital which influences access to resources.

We can also include management experience family history functional skill and relevant
business sector knowledge. The second categories of factor affecting business growth is a
business itself in terms of its structure and goals the performance of its management, if Particular
ability to take rational decision about its operation (.http;//www.bit/y/Ro;R/ Available at;
05/05/2015).

2.9 Source of Finance for Micro and Small business

Finance is the life blood of any business the business the best sources of business financing now
are not necessarily the same as before the great recession. Micro and small business struggled
using through great recession to find financing carry on their operations.

Micro and small business can be financed through “Equality financing and Debit” financing
inequality finance is the use of owners capital and debt financing through loan or borrow fund
the key is finding a good interest rate and a source of financing that fit business are ;.

 community bank loan

 small business administration guaranteed loans
 Community development financing institutions
 micro loan financing
 Peer to peer lending etc.

2.10 Role of Managerial Skill for Micro and Small business

To run a successful business you need a diverse range of business management skills.

When you start your business it likely that your responsibility will include;

 Sales and marketing

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  Accounting
 Human resources and
 Information technology (IT)

How confident to do you fill in your ability to manage them? Its good idea to plan ahead of time
how you are going to manage each area which include delegating various functions to a business
partner under taking additional training or contracting a specialist advisor such as a book keeper,
graphic designer or merchandiser .

2.11 Steps for Selling a Business

Step 1: Prepare financial analysis; the purpose of such an analysis is to define priorities and
forecast the next year business.

Step 2: segregates assets

Step 3: Value of business establishing the valuation of small business constitutes a most
important in its sales.

Step 4: Appropriate time knowing when to effort a business for sale is a critical factors.

Step5: Publish the office to sell, short prospect us on the small business that provides enough
information to interest potential investors should be prepared.

Step6: Finalize the prospective buyers on quarries need to be made in the trade concerning the
prospective buyers.

Step7: Remain involved through the closing meeting with the final potential buyers helps to
eliminate areas of miss understanding and negotiate the major requirement more effectively.
(Donald &Richard, 1998).

2.12. Small business enterprise failure factors.

Every year many business firms cease operation .The most frequent cause for this is failure to
pay debts in which case it’s common for owner to declare bankruptcy and to seek accommodate
the creditors such as paying them 25 birr .In other instance, because go out of existence of the
owner realize that, although currently they are solvent, it they continue operation the will incur
debts they cannot meets.

Among the following is the some specific cause for failure of small business enterprise.

 Incompetence
 Unbalanced experience
 Lack of managerial skill
 Neglect(careless on job or fraud and disaster)
 Inadequate record
 Expansion of beyond resource
 Lack of information about customer
 Failure of diversification market
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  One person management
 Lack of marketing research

2.13 Problem in Ethiopian Small Business Enterprise

Small business enterprise have not been able to contribute substantially as needed to the
economic development .Particularly, because of financial, production, and marketing problem.
This problem is still major handicaps to their developments. Lack of adequate finance and credit
has always been major problems of Ethiopian small business enterprise .Small scale unit do not
have access capital market because and small in sizes.

As all, the Ethiopian business environment is to change the attitude of work force, make them
disciplined and duty conscious and inculcate in them a sense of commitment towards their
organizations.

2.14 Economic, Social and political aspect of small business enterprise.

Small business enterprises have to play a vital role in Ethiopian economy .They need a strong
support on socio economic and political grounds.

2.15 Management practice in Ethiopian small business enterprise.

Small scale industries sector occupies a strategic position of the unique importance in the
Ethiopian economic .Today the village and small scale business sector roughly account for
roughly about one half of the total industries production .Industrial relation is not a major
problem in Ethiopian small scale business and job specialization is not strictly adhered to the by
them ,life time employment may not be possible in Ethiopian small business because of the
limited scope they offer for the career growth of employees what is more important in the
Ethiopian business environment is to change the attitude of work force ,make them disciplined
and duty conscious and inculcate in them a sense of commitment towards their organization .

2.16 Small Business as seedbed of Entrepreneurship

As stated earlier enterprise have low investment and simple technology .This use local resource
and cater largely to local demand through personal contacts .There are commonly known for
what is called one man show in which the same person may perform varies role simultaneously
as an owner a capitalist an organizer a manager a labourer and what not we know that is a person
who organizes manager and takes risk involves in running business or enterprise is commonly
called an entrepreneur.

This means there are as many entrepreneur as are small business enterprise .Thus small scale
enterprise and entrepreneurs are concomitant to each other say small enterprise precedes
entrepreneurs and vice versa .

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 In a common sense increasing small number of small business enterprise means increasing
number of of person assuming entrepreneurial career .In other sense increase in the number of
person assuming entrepreneurial career has exactly become sine quo non with scale in the
number of small scale business. Small scale enterprise serves as the seedbed of
entrepreneurships due their following peculiar features.

 Small units create more self-employment opportunities with comparatively less capital
investment.
 Small scale industries are usually based on local resource.
 These industrial can be located anywhere.
 These industries give quick return and have a shorter gestation period.
 These units cause relatively less environment pollution and disruption.
 The firms are viewed favourably because these lead to equitable distribution of income
and wealth.
 These units facilitate industrial dispersal and avoid problem of unplanned urbanization.
 A small firm requires simple technology and low managerial skill.
 These units help in better utilization of local resource and skill which might otherwise
remain utilized.
 Small units assist larger and medium industries by acting ancillaries.

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 CHAPTER THREE

3. Research Design and Methodology

3.1 Research Type

The Researcher type was descriptive. The data collected from the primary as well as secondary
data was analysed, interpreted and presented as it was existed.

3. 2 Data Sources

The study used both primary and secondary data sources. The primary data was collected from
questionnaires and interview both open ended and close ended collected from small and micro
enterprises who engage in different business. The secondary data was collected from books,
reports and documents relates to the study such as business office documents like reference and
other research material the course under study.

3.3 Methods of Data Collection

In order to obtain information, which are qualitative and quantitative that enable the researcher
to collect data from primary source by using both structured and unstructured questionnaires
made with owners of different Micro & Small Enterprises. Moreover, the interview was
conducted with the head of Micro & small businesses head and office of Micro and small
enterprise of Yirgalem Town. Secondary data was collected from books, internet, reports &
manuals.
3.4. Target Population

The population for the group of items that samples drawn were five sectors of micro and small
business enterprise in Yirgalem Town, which are taken as target population for this study. The
target population were as follows;

Table 3.1 Target Population

Item No Type of Sectors Number

1 Manufacturing Enterprise 40
2 Construction Enterprise 30
3 Service Enterprise 50

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4 Trade Enterprise 55
5 Agriculture Enterprise 25

Total 200

Source: Field Survey, 2018

3.5 Sampling Techniques

To select the sample of this study first of all researcher use probability stratified random
sampling. First of all, the researcher divides the micro & small enterprise who engage in
different business in to different strata’s and then we select the respondents for the questionnaire
by random sampling method.

Moreover, the interview selected by non- probability purposive sampling method made with the
managers of the micro and small enterprises and the head of each enterprises and small business
& head of office of Micro & small enterprise.

3.6 Sample Size/ Sampling Unit

Item Type of sectors Number Percentage Sample

No Size
1 Manufacturing Enterprises 40 20% 8
2 Construction Enterprises 30 20% 6
3 Service Enterprises 50 20% 10
4 Trade Enterprises 55 20% 11
5 Agriculture Enterprises 25 20% 5

Total 200 40

Source: Micro &Small Enterprise of Yirgalem Town, 2018

3.7 Methods of data analysis and presentation

The study has qualitative in nature and the research finding are presented in descriptive
analysis .As the research methodology would be descriptive more of textually discussion were

14
employed to be analysed. Finally the data collected from primary as well as secondary data was
presented by using different percentage& tables.

CHAPTER FOUR

4. Data Analysis and Presentation

In this chapter the analysis section detail and discussion were presented the primary goal of this
researcher has been to better understand factors that affects the expansion of the micro and small
business enterprise in Yirgalem town .The data collected mainly through questionnaire and
interview are presented using tables & percentages. The researcher designed and distributed 40
questionnaires & all of them were returned and analysed by the researchers.

Table 4.1 Age of the Respondents

Age Frequency Percentage

15-35 18 45
36-50 10 25
51-65 8 20
>65 4 10
Total 40 100
Source: Survey questionnaire, 2018

The above table indicate the distribution of respondent age .It indicate that 18(45%) of
respondent were found in age interval from 15-35, 10(25%) of respondent were found between
36-50 years, 8(20%) of respondent age were found from 51-65 years, and 4(10%) of respondent
were found above 65 years old. From the above the table researchers concluded that the majority
of respondent of MSE were found from the age interval of 15-35 years.

Table 4.2 Gender of the Respondents

Sex Frequency Percentage

Male 25 60
Female 15 40
Total 40 100
Source: Survey Questionnaire, 2018

The above table indicate that above 25(60%) of respondent were male on the other hand, about
15(40%) respondent were female .From these above table the researcher can conclude that the
majority of the respondents were males.

Table 4.3 Educational Status

Educational status Frequency Percentage

st
1 degree 5 16
Diploma 9 22

15
11-12 10 24
9-10 7 15
5-8 4 12
1-4 3 6
Illiterate 2 5
Total 40 100
Source: Survey Questionnaire, 2018

The above table indicate that 5(16%) of respondent were first degree ,9(22%) of respondent
were diploma ,10(24%) of respondent were 11-12,students 7(22%) of respondent were grade 9-
10 students,4(12%) of respondent were grade 5-8students, 3(6%) of respondent were grade 1-
4,and 2(5%)of respondent were illiterate from this data table the majority of MSE participant
were grade 11-12 students were and those who had diploma and 1 st degree and above were
activity participated the business of MSE because usually they seek for other job opportunity
rather than participated on MSE on the other hand participation of grade (9-10) and (5-8)
students were the same sanitation to participate on MSE and the same is true of grade 1-
4students and illiterate of respondents.

Table 4.4 Marital Status

Marital Status Frequency Percentage

Married 12 25
Unmarried 16 45
Divorced 8 18
Widowed 4 12
Total 40 100
Source: Survey Questionnaire, 2018

As it was shown on the above table 4.4 above, 12(25%) of respondent were married, 16(45%) of
respondent were unmarried, 8(12%) of respondent were divorced and 4(12%) respondent were
widowed. From the above table, the researcher can conclude that most of participants of MSE
were unmarried and the less participant were widowed.

Table 4.5 Time of Starting of Business

When you start business? Frequency Percentage

Past 15 37.5
Recent 25 62.5
Total 40 100
Source: Survey Questionnaire, 2018

On the above table 4.5, 15(37.5%) of the respondent were started business ancient time and
25(62.5%) of respondent were started the business recently. Thus, from the above table the
researchers can conclude most of the businesses were started their business recent time.

Table 4.6. Motive for Starting of Business

What was your motive to Frequency Percentage

start business?

16
Desire of creating job 20 50
Willingness of to earn profit 11 27.5
To change family life 9 22.5
Total 40 100
Source: Survey Questionnaire, 2018

As it indicated on the above table 4.6, 20(50%) of respondent were respond their motive to start
business was desire to creating new job, 11(27.5%) of respondent were respond that their motive
was willingness to earn profit and 9(22.5%) of respondent were respond that to change their
family life.

Table 4.7. Reasons For unprofitability

What was the reason for Frequency Percentage

unprofitability of the
businesses?
Lack of managerial skill 20 50
Low quality of production 11 27.5
High taxation 9 22.5
Total 40 100
Source: Survey Questionnaire, 2018

As it indicate on the above table4.10, 20(50%) of the respondent were in the town where have
lack of managerial skill, 11(27.5 %) of respondent were low or were have low quality of product
and 9(22.5%) of the respondent were have high taxation in the owners of MSE in the town.
From the above table researcher can conducted that the major cause of or unprofitability is lack
of managerial skill or lack of skilled force and followed low quality product while high taxation
were the least cause for unprofitability in the town.

Table 4.8. Attracting Customers

Do you think that the MSE’s Frequency Percentage

has the skill to attract
customers?
Yes 26 60
No 14 40
Total 40 100
Source: survey Questionnaire, 2018

To successful competitors in the market and gain high market share the relationship between
MSE and their customer play a crucial role. From the above table the researcher can conclude
that most of the owner in the town attracted their client or customer in the buying and selling
activity.

Table 4.9 Competition in the market.

How your businesses Frequency Percentage

compete in the market?
Treating client in good 13 40
manner

17
High quality product 10 25
Sale at low price 9 20
Extending service on time 8 15
Total 40 100
Primary source; survey questionnaire 2018.

On the above table 13(40%) of respondent were used treating customer in good manner in
buying and selling activities, 10(25%) of the respondent were provide high quality
production ,9(20%) of the respondent were sale at low price and 8(15%) of respondent were
used to extending service on the time.

Becoming fulfilment or successful of competitors in the market is one of the majority of the
characteristics of a good market.

From the above table majority of the respondent of MSE in the town were used treating
customer goods manner in buying and selling activities and followed by providing high quality
production.

Table 4.10. The Cooperation with other person.

Is the activities of MSE Frequency Percentage

cooperating with other?
Yes 27 64.5
No 13 35.5
Total 40 100
Source; survey questionnaire 2018.

Is difficult that one can independently live alone, people directly or indirectly create relationship
with each other, also relationship other save person play role important every activity.

On the above table 27(65.5%) of the respondent of MSE were responded that they can cooperate
with other sales person, and 13(35.5%) of respondent of MSE were responded that they cannot
cooperate with each other.

From the above table the researcher can conclude that the majority of the respondent of MSE
were cooperate with other.

Table 4.11. Purpose of the cooperation.

What is the purpose of the Frequency Percentage

cooperation of the MSE?
For borrowing 25 65.5
For sharing experience 15 34.5
Total 40 100
Source; survey questionnaire 2018.

18
According to the above table 25(65.5%) of respondent of were used to borrowed money from
each other and 15(34.5%) of respondent of MSE were used to share experience.

The researcher can concluded that most of the owners of the MSE were cooperated with each
other for the purpose of borrowing money from each other and least for the purpose of sharing
experience for each other.

Table4.12. Initial Capital to run their business.

What is your initial capital Frequency Percentage

to start business?
5000-15000 12 33
15000-25000 11 26
25000-35000 10 23
35000-50000 7 18
Total 40 100
Source; survey questionnaire2018

On the above table 12(33%) of respondent of MSE were between 5000-15000 birr, for initial
capital to run their business .11(26%) of respondent were between 15000-25000 of initial capital
to run their business .10(23%) of the respondent were between 25000-35000birr of birr of initial
capital to run their business, and the 7(18%) of the respondent were between 35000-50000 of
initial capital to run their business.

The researcher can conclude that from above table the majority of owner of MSE were their
initial capital to run business between 5000-15000.

Table 4.13. Initial Capital of Respondent .

Is your initial capital is Frequency Percentage

enough to run your
business?
Yes 10 25
No 30 75
Total 40 100
Source; primary survey 2018.

On the above table 10(25%) of the respondent of MSE were had enough capital to run the
business and 30(75%) of the respondent of MSE were not enough capital to run business.

From the above table the researcher can conclude that most MSE characterised by not enough
capital to run their business.

Table 4.14. The Reason of Business Failure

What is cause for failure of Frequency Percentage

MSE?
High interest 19 47.5
Fear of bankruptcy 10 25
Lack of awareness about 11 27.5

19
credit association
Total 40 100
Source; survey Questionnaires, 2018.

On the above table 19(47.5%) of the respondent were responded that high interest rate, 10(25%)
of respondent were responded that fear of bankruptcy, and 11(27.5%) of respondent were
responded that lack of awareness about credit association. From the above table the researcher
can concluded the most of the problem that made not borrowing from credit association were
high interest rate and the least reason that made not borrowing from credit association were fear
of bankruptcy.

Table 4.15 the attitude of owners of MSE toward the enterprise.

What is the attitudes of the Frequency Percentage

owners of SE?
Excellent 8 20
Very good 10 30
Good 16 35
Bad 6 15
Total 40 100
Source; survey questionnaire 2018.

On the above table, 8(20%) of respondent were responded excellent, 10(30%) of respondent
were responded very good, 16(35%) of respondent were responded good and 6(15%) of
respondent of MSE were responded badly.

From the above table the researcher can understand that most of the owner of MSE were
interested (good) in a business.

The Result of questionnaire from micro and small business enterprise in Yirgalem town.

 Do you think that is there easy access of finance to run your

business?
The respondent answered NO, the reason so why there is lack of credit association and
there is lack of infrastructure, not only this many reason is there among those some are
mentioned above.

√ How do you look like the activities of the business in the Yirgalem?

The micro and small business enterprise in Yirgalem was established for the aim of the growth
and expansion of micro and small business activities in the town.

Micro and small business enterprise were established in 1997 with five sectors, such as
manufacturing, construction, service sector, trade, and agriculture it was responded that the
activities of micro and small business were very good there also many new established of MSE
during the current time and the activities of the business in the town is increasing from time to
time by quality and quantity .As much as possible we can encourage based on their business
activities
20
.

Table 4.16 is there infrastructure problem in the town, the yes and No, of the respondent.

Do you think that is there Frequency Percentage

essay access of
infrastructure?
Medium 8 20
No infrastructure 12 30
Very good 20 50
Total 40 100
Source; survey questionnaire 2018

According to the above table 8(20%) of the respondent were responded that there was very good
infrastructure service to the business, 12(30%) of the respondent were of the MSE responded
that there were medium infrastructure problem to run the business and 20(50%) of the
respondent of MSE were responded that we had infrastructure problem to run the business.

From the above table the researcher can understand that most of the MSE respondent have
infrastructure problem to run their business.

Is there any education given for those owners of business activities in the town regarding to
business activities.

In these town they have many educational opportunity when they are run the business .As the
business owner they know full earning of the wisdom that time money .Education and training
program often scheduled for evening and weekend .Totally , government after educational
opportunity for business owners and offered able staff training for personnel .

21
 CHAPTER FIVE

5. Summary of Finding, conclusion and Recommendations

This chapter focus in summarizing the major finding obtained from result drawing conclusion
based on the results and in suggesting recommendation based on the conclusion.

5.1 Summary of the Finding

 The age depression of the owner MSE where between 15-35that were dominated the
business .This indicates the participation of young people were dominant on the other age
groups and the least participants were the age interval above65 which account only two
percent.
 The participation of male and female of MSE were balanced but the number of male
people were greater than female which accounted 25

 The educational level of the owner were between 11-12 students that had major
participant on the business of MSE in the town which accounted 10(24%) of the
respondent.
 The marital status of the owner were unmarried people which actively participant in the
business of MSE in the town.
 From the five sectors of the micro and small business ;trade ,service and manufacturing
is
 The highly contribute to the micro and small business enterprise in the town.
 Participation of owners MSE in recent time were greater than the ancient time.
 Majority of owner of MSE were initial to start the business for the purpose of creating
their own job and willingness to earn profit.
 Main problem that cause lack of managerial skill were lack of education level because
the majority were between 11-12 students.
 More or less the MSE were generating profit from their business activities from the total
respondent of MSE in the town.
 From the total number of respondent were used their profit run running other business
and consumption purpose.
 The major cause that failure business unprofitable was lack of managerial skill and low
quality production.

 To successful competitors in the market and gain market share, majority of respondent
were attracted customer in buying and selling activities.
 The owner of MSE were attracted their customer by different means such as, extending
service on time, sale at low price, provides high quality production, treating customer
with good manner.

22
  Most of the owner of MSE were used to attract their client by treating customer in the
good manner and providing quality production and service for successful in the
completion in the market.
 The purpose of cooperation of MSE with the other sale person were for borrowing from
each other which accounted 25(65.5%).
 The owner of MSE initial capital to the business were very little or not enough to run the
business the majority of them were between 5000-15000.

5.2 CONCLUSION.

Finance is the most problem that affect the expansion of micro and small business enterprise in
the town .This is due to lack of awareness about borrowing money from credit association ,fear
of high interest rate and fear of bankruptcy and other problem is the main hindrance factor to
affect this MSE activities.

 As the finding show that the activities of micro and small business enterprise in
Yirgalem town .were affected by lack of enough capital ,lack of managerial skill and
lack of awareness about the expansion of micro and small business.

 Managerial skill was another problem of the owners of MSE .This was due to lack of
high teaches establishment ,lack of education and lack of awareness about importance
of managerial skill and lack of capital to hire goods managers.
 The owner of MSE were also lack of awareness about the expansion of MSE because, of
low level of education, lack of appropriate manager, to give awareness for the
owner ,lack of finance to hire manager and employee and to change the attitude and
norms of society towards the business idea.
 As the owners of SE lack of awareness about the business the government body that
were founded MSE were create awareness toward the owners by the giving regular
training program to strength the skill of the business owner made and the government
body that organize small scale enterprise in the town.

Generally, the business has been affected by the absence of financial access, lack of managerial
skill, lack of awareness about the business and other problem that hindered micro and small
business to expand their business.

5.3. Recommendation

Based on the above conclusion the following possible recommendation has been forwarded by
the researcher.

 the finance is the life blood of any business but the owner of MSE faces lack capital in
order to minimize this problem, micro finance is usually understand to entail the

23
 provision of finance service to MSE, which access from bank and related service due to
the high transaction cost associated with serving these client categories .
 Management skill to micro and small sized business has a good grasp of the growth
challenges. Smaller companies face solution can be assigning the responsibility to
existing manager with a requirement to watch for the obvious pit falls, to hearing
professional manager and delegates more duties to other. Even take a lesser role in the
management and organization may be restructured to suit growth of the achievement
business goal and objectives.

 As the owners of MSE lack of awareness about the business the government body that
were found MSE were create awareness toward owners by giving regular training
program to strength the skill of business owner made and the government body that
organize small scale enterprises work with other concerned department and officials, so
as to eradicate the problem created by their skill of micro and small scale enterprises of
the business.

 As the owners of SE lack of awareness about the business the government body that
were founded MSE were create awareness toward the owners by the giving regular
training program to strength the skill of the business owner made and the government
body that organize small scale enterprise in the town.

Generally the owner of MSE its they use these and other solution to overcome the problem of
financial, managerial skill, lack of education and other problem.

24
 REFERENCES

Donald F.kurrato and Richard M.hodgetts (1998).

Floral Richard; Gustafson (2003).

 Hailey Gebre Tisane Beyene (2003-2007).

 : http://businesscasestudies.co
 Hit/www/bit/y/is/Ro/R.

 Paul and Dews Hurst (1998); Entrepreneurships and small business

management.
 Richard, Donald (1998).Title. Place: Publisher.
 Siropolis Nicholas (1997) Title.place.publisher.

Author Name (year). Title. Place. Publisher.

25
 Appendix

Hawassa University

Faculty of Business and Economics

Department of Accounting and Finance

This questionaries’ is prepared by a graduate student of Hawassa University in accounting and
finance. Currently l am taking research entitled in subject to factor that affect expansion of micro
and small business enterprises in Yirgalem town.Therfore your corporation in filling out
questionnaires carefully and genuinely will contribute a lot toward are enable out.so, I want to
assure you that all the information is to be used for academic purpose only .so l would like to
thank for your cooperation as request respondent to give attention for question.

PART ONE

A Background information of Respondent

1. Sex male-------- female----------

2. Age 15-35-------- 36-50---------- 51-65---------- above-------

3. Education status 10 completed---- 11-12----- 1degree------ above-------

4. Marital status married------- single------ divorced-----------

PART TWO

26
 B .Basic question

1. What is your source of capital to start up your business? Saving----- bank loan--------

Donation from family and friend -------------------

2. What kinds of business your business you are running------------------------------------------

3. When did you start your business?------------------------------------------------------------------

4. What encourage you to start business-------------------------------------------------------------

5. Have you managerial skill to run the business? Yes ------- no------------

6. How do measure the performance of your business? Using sale--------- using

number of worker----------- using number of customer ---------------------

7. Do you get profit, from your business? Yes---------- no------------

8. If get profit, for what purpose you use it?

1. for consumption purpose

2. for using other purpose

3 .for saving purpose.

9. What makes it unprofitable?

1. Lack of capital

2. Lack of management skill

3. Lack of customers

4. High taxation

10 .Have you satisfy your customer or have you attract have you smooth relation with your
customer? Yes……….No…….

11. What system you use to be successful completion of your market?

27
 1. Provide high quality production

2. Treat customer in good manner

Sale of low price

4. Sale of high price

12. What purpose of your cooperation?

1. For exchange experience

2. For borrowing money for other
3. For lending money for other

13. What is your initial capital to start business? 0-15000………15000-25000……….25000-

35000…….35000-50000

14. Is your initial capital enough to run your business? Yes………No……..

15. Do you think that is there easy access f finance to run your business? Yes…….No……

16. Is there a facilitate of working place for MSE from town? Yes……..No……….

To what extent…………

17. Is there any training for MSE from time to time concerning body? Yes ………..No…..

18. If you have lack of capital why you not borrow from credit association?

1. High interest rate

2. Lack of credit association

3. Fear of bankruptcy

4. Lack of having information

19. How do you look like the activities of small business enterprise in the
town? ................................................................................................................................................
...........................................................................................................................................................
...........................................................................................................................................................
............................................................................................................

28
20. Is activities appreciate or interest in the town or in this small business activity interested in
the town? Yes…….No……………..To what
extent………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………….

29