YARDSTICK INTERNATIONAL COLLEGE

ONLINE POSTGRADUATE PROGRAMS

MASTER OF BUSINESS ADMINISTRATION (MBA)

FACTORS AFFECTING PERFORMANCE OF MICRO AND SMALL

SCALE ENTERPRISE IN CASE OF GOFA ZONE SAWLA TOWN

BY

RAHEL ERMIAS SADMO

ID No MBAO/10003/14A

A Thesis Submitted to School of Online Post Graduate Study of Yardstick

International College in Partial Fulfillment of the Requirements for the Award of a
Master’s Degree in Master of Business Administration/leadership(MBA)

July, 2023

Addis Ababa
 YARDSTICK INTERNATIONAL COLLEGE
ONLINE POSTGRADUATE PROGRAMS
MASTER OF BUSINESS ADMINISTRATION (MBA)

FACTORS AFFECTING PERFORMANCE OF MICRO AND SMALL

SCALE ENTERPRISE IN CASE OF GOFA ZONE SAWLA TOWN

BY

RAHEL ERMIAS SADMO

A Thesis Submitted to School of Online Post Graduate Study of Yardstick

International College in Partial Fulfillment of the Requirements for the Award of a
Master’s Degree in Master of Business Administration/leadership(MBA)

ADVISOR: MELKAMU ADAMU

July, 2023

Addis Ababa

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 Declaration

I Rahel Ermias, have by declare that this thesis entitled; factors affecting the performance of Micro and
small enterprises (MSEs) the case of Gofa Zone SAWLA Town based on my original work except for
quotations and citations which have been duly acknowledged. I also declare that it has not been
previously or concurrently submitted to any other University. This thesis has been submitted for final
examination.

.Rahel Ermias Sadmo . . . . 29/08/23 .

Name of Candidate Signature Date

Melkamu Adamu . . . . 29/08/23 .

Name of advisor Signature Date

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 Approval

We, the undersigned certify that we have and here by recommendation to the yardstick International
College to accept the thesis submitted by Rahel Ermias Sadmo entitled Factors affecting the
performance of Micro and small enterprises (MSEs) the case of Gofa Zone SAWLA for the fulfillment
of the requirement for the award of a Master’s degree in Master of Business Administration/MBA/.

Examiners:

Advisor: Name. . Signature . . Date. .

External examiner: Name . . Signature . .Date. .

Internal examiner: Name.. . Signature . .Date. .

iv
 Acknowledgement

First, I am grateful to Almighty God for keeping his eyes on me, giving me health, strength, and termers
to continue and finish this study. I deeply grateful to my advisor, MELKAMU ADAMU, for his endless
support and assistance for the duration of this thesis, he has been a continual font of ideas, stimulating
suggestions, and pushing me to my limit all the time. I have learned a lot from him about all aspects of
carrying out research and writing a thesis.

I would like to take this opportunity to thank the respondent who has been given by my family; there is
no one else I would rather have in my corner.

Last but not last, I would like to express my deepest gratitude to all those who gave me the possibility to
complete this program.

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 Table of Contents
Acknowledgement...............................................................................................................................................v
List of tables.......................................................................................................................................................ix
List of figures......................................................................................................................................................x
Acronyms............................................................................................................................................................xi
Abstract.............................................................................................................................................................xii
CHAPTER ONE.....................................................................................................................................................1
INTRODUCTION..................................................................................................................................................1
1.1. Introduction............................................................................................................................................1
1.2. Background of the Study........................................................................................................................1
1.3. Statement of the Problem.......................................................................................................................6
1.4. Research Questions.................................................................................................................................8
1.5. Objectives of the Study...........................................................................................................................8
1.5.1. General Objective...........................................................................................................................8
1.5.2. Specific Objectives..........................................................................................................................8
1.6. Research hypothesis...............................................................................................................................9
1.7. Significant of Study................................................................................................................................9
1.8. Scope and Limitations of the Study.....................................................................................................10
1.8.1. Scope of the study.........................................................................................................................10
1.8.2. Limitation of the study.................................................................................................................11
1.9. Organization of the Study....................................................................................................................11
CHAPTER TWO..................................................................................................................................................12
LITRATURE REVIEW.......................................................................................................................................12
2.1. Conceptual Literature Review..................................................................................................................12
2.1.1 DEFINITIONS: INTERNATIONAL AND ETHIOPIAN EXPERIENCES............................12
2.1.2. MSE DEVELOPMENT: CONCEPTUAL AND SITUATION OVERVIEW................................16
2.2. Theoretical literature............................................................................................................................23
2.2.1. Resource Based View Theory (RBV)...........................................................................................23
2.2.2. Signaling Theory...........................................................................................................................23
2.2.3. The Balanced Scorecard...............................................................................................................24
2.2.4. The Pecking Order Theory..........................................................................................................24
2.3. Empirical Literature Review...............................................................................................................24

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 2.4. Synthesis of the Review........................................................................................................................27
2.5. Conceptual Framework........................................................................................................................27
CHAPTER THREE.............................................................................................................................................29
RESEARCH METHODOLOGY........................................................................................................................29
3.1. Introduction..........................................................................................................................................29
3.2. Research design....................................................................................................................................29
3.3. Research Approach..............................................................................................................................29
3.4. Sampling Design...................................................................................................................................29
3.4.1. Population, sampling unit and sampling frame..........................................................................30
3.4.2. Method and Procedure of sampling............................................................................................30
3.4.3. Sample size determination...........................................................................................................31
3.5. Data type and sources...........................................................................................................................31
3.5.1. Primary Sources............................................................................................................................31
3.5.2. Secondary Sources........................................................................................................................31
3.6. Methods of data collection...................................................................................................................32
3.7. Method of data analysis........................................................................................................................32
3.8. Validity and Reliability........................................................................................................................33
3.8.1. Validity..........................................................................................................................................33
3.8.2. Reliability......................................................................................................................................33
3.9. Ethical Considerations.........................................................................................................................33
CHAPTER FOUR................................................................................................................................................34
DATA PRESENTATION, ANALYSIS, AND INTERPRETATION...............................................................34
4.1. Introduction..........................................................................................................................................34
4.2. Demographic Characteristics of the respondents...............................................................................34
4.3. Reliability Test......................................................................................................................................37
4.4. Presentation and Analysis of results....................................................................................................38
4.4.1. Descriptive Statistics Analysis......................................................................................................38
4.4.2. Correlation analysis......................................................................................................................48
4.4.3. Multiple Regression Analysis.......................................................................................................52
CHAPTER FIVE..................................................................................................................................................58
CONCLUSION AND RECOMMENDATION..................................................................................................58
5.1. INTRODUCTION................................................................................................................................58

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5.2. Summary of findings............................................................................................................................58
5.3. Conclusions...........................................................................................................................................59
5.4. Recommendations.................................................................................................................................60
Reference...........................................................................................................................................................62
Appendix A...........................................................................................................................................................I
Appendix B.........................................................................................................................................................IX
Appendix C..........................................................................................................................................................X

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 List of tables

Table 2.1 The 1997 Definition of Micro and Small Enterprises in Ethiopia ………………………….12
Table 2.2 The Revised Definition of Micro and Small Enterprises …………..……….……………….13
Table 3.1 Sawla Town MSE Population Data 2022 ………………..……………….…………………24
Table 4.1 Sex Composition of the Respondents ………………..…………………….……………….. 27
Table 4.2 Age of the Respondents ………………………………………………………………………27
Table 4.3 Marital Status of the Respondents ……………………………………………………………28
Table 4.4 Educational Level of the Respondents ……………………………………………………….28
Table 4.5 Work Experience of the Respondents ……………….……………………………………….29
Table 4.6 Number of Respondents by Enterprises Sector ………………………………………………29
Table 4.7 Reliability analysis (Cronbach's alpha) ………………………………………………………30
Table 4.8 Descriptive Statistics Analysis of Access to finance …………………………………………31
Table 4.9 Descriptive Statistics Analysis of Workplace factors ………………………………………..32
Table 4.10 Descriptive Statistic analysis of Infrastructure Factors ………………………………….….33
Table 4.11 Descriptive Statistics Analysis of Marketing Factors ………………………………………35
Table 4.12 Descriptive Statistics Analysis of Internal Management Factors …………………………..36
Table 4.13 Descriptive Statistics Analysis of Entrepreneurial Skill Factors……………………………37
Table 4.14 Descriptive Statistics Analysis of MSEs Performance ……………………………………..38
Table 4.15 Correlation between dependent and independent variables /N=140/…………………..…....39
Table 4.16 Model Summary …………………………………………………………………….………41
Table 4.17 ANOVA Result …………………………………….……………………………………….42
Table 4.18 Coefficients........................................................................................................................... 43

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 List of figures

Figure 2.1. Frame work of the research …................................................................................. 22

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 Acronyms

ETB - Ethiopian Birr

GDP - Gross Domestic Product

GoE - Government of the Federal Democratic Republic of Ethiopia

ILO - International Labor Organization

MFIs - Micro Finance Institutions

MoUDH - Ministry of Urban Development and Housing

MSEs - Micro and Small Enterprises

NGOs - Non-Governmental Organizations

SNNPR - South Nation, Nationalities and People Region

TVET - Technical and Vocational Education and training

ULGs - Urban local governments

USD - United States Dollar

FeMSEDA - Federal micro and Small Enterprises Development Agency

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 Abstract

The main objective of this study was to investigate factors that affect the business performance of MSEs
that currently working in Gofa Zone SAWLA Town Administration. This study was employed a
descriptive and explanatory research design and quantitative research approach. Both primary and
secondary data was employed. Questionnaire was that main data collection instrument. Among 968
MSE operators, 283 sample sizes were selected using stratified and simple random technique. After the
data has been collected, it was analyzed using simple statistical techniques. The descriptive and
inferential statistical tools were used; Pearson correlation and multiple linear regressions were used to
analyze the relationship and difference between independent and dependent variables. Statistical
Package for Social Science (SPSS) version 25 was used to analysis of quantitative data from
questionnaire questions. Furthermore, the research data suggests that several factors significantly
influence the performance of MSEs in Sawla Town Administration. Among these factors, "Access to
Finance," "Workplace Factors," and "Entrepreneurship Skill Factors" appear to have the most
substantial impact on MSEs' performance. Therefore, policymakers and stakeholders should prioritize
efforts to enhance access to finance, improve workplace conditions, and foster entrepreneurship skills to
promote the growth and success of MSEs in the region. Additionally, while infrastructure and marketing
factors also play a role, their impact seems to be relatively less significant compared to the
aforementioned factors. Nevertheless, addressing infrastructure and marketing-related challenges could
complement the overall efforts in supporting MSEs and further contribute to their development.
Keywords: Micro and Small Enterprises (MSE), performance, factors affecting, entrepreneurship, Gofa Zone, SAWLA

Town.

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 CHAPTER ONE

INTRODUCTION
1.1. Introduction
This chapter provided a brief explanation by introducing the key concepts in the background section
followed by problem statement, research questions, research objective, research hypothesis, the
significance of the research, scope of the study, limitations of the research as well as the organization of
the study.

1.2. Background of the Study

Micro and Small Enterprises (MSEs) are described and classified differently in different countries, and
also there was no widely agreed-upon definition (SHIFERAW, 2017). All country gave their
explanation based on the role of MSEs which were expected to play in the economic growth and their
strategies of assistance planned to achieve the goal. There is also different meaning among countries that
may arise from deference in their industrial organization at the deferent level of economic growth in
parts of the same country (Wangeci & Mathuva, n.d.).

According to the Ethiopian Micro and Small Enterprises Development Strategy (Seyoum et al., 2014),
MSEs are businesses with a paid-up capital of less than Birr 20,000 and excluding high tech consultancy
firms and other high-tech establishments, whereas small businesses have a paid-up capital of more than
Birr 20,000 but less than Birr 500,000 and excluding high-tech consultancy firms and other high-tech
establishments.

Micro and Small Enterprises (MSEs) are described as a key driving force of economic and social
development all over the world. (Debela, 2014) stated that the MSEs are critical to a country’s economic
and industrial growth. MSEs contribute significantly to a country's economic and social growth by
stimulating large scale-jobs, investment, the promotion of entrepreneurship and innovativeness,
increasing exports, and building an industrial base at different scales.

(Abera, 2012) stated that MSEs are widely acknowledged as an important component of economic
growth and a key component in the effort to left countries out of poverty. The dynamic role of MSEs in

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developed countries as engines for achieving country growth objectives has long been recognized. MSEs
employ 22 percent of the adult population in developing countries according to an estimate of
(Abdulmelike et al., 2018). This indicates that MSEs are significant means to increase the country’s
economy, industrial growth, to overcome unemployment problems, can facilitate the environment for
new job seekers and self-employment and poverty reduction.

MSEs are important sources of job and economic development in developed countries, accounting for
more than 50% of GDP and 60% of employment. However, in developing countries, MSEs account for
less than 30% of employment and 17% of GDP. According to ILO, 2002) study conducted in Africa,
just 20% of the total population of working age in many African countries were reported to have been
working in the small enterprises' sectors.

Following agriculture, MSEs are Ethiopians second most important source of employment (CSA, 2005).
According to (Statistical, 2012), the sector contributes 3.4% of GDP, 33% of the contribution of the
industrial sector, and 52% of the contribution of the manufacturing sector to the GDP in 2001. Despite
the importance of the micro and small enterprises (MSEs) sector to Ethiopia’s economy in terms of job
creation and poverty alleviation, the sector is facing many problems such as lack of access to finance,
insufficient infrastructure, a small loan size, etc., that have limited its ability to play a role in the
economy (Ageba & Amha, 2006).

The MSE sector has also been a means in contributing to economic change by providing goods and
services, which are acceptable quality and are equitably priced, to a huge number of people, and by
successfully using the skills and capacities of a large number of people without asking high-level
training, a large amount of capital or sophisticated technology (ILO, 2002). Similarly, (Asgedom, 2016)
stated that in many countries, the MSE sector generates significant employment and economic output.
MSEs agree that overall employment is higher in developing countries, which are primarily focused on
small-scale production. Micro and small businesses (MSEs) are undeniably important for economic
development.

Owners of small and medium-sized businesses face challenges such as changing markets, a wide range
of technologies, skills, and resource shortages (Gummesson, 1997). As a result, there are many
additional problems in MSE, such as political instability, a lack of human capital and infrastructure,
mistrust of authority, and the vulnerability of government police forces, which are all issues that small

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and medium-sized businesses face. Micro and Small Enterprises (MSEs) businesses need all
stakeholders' participation and managerial talent to overcome their depressive condition and achieve a
higher degree of competence to compete globally and for accelerated growth (Al-Haddad et al., 2019).

The success of the government and a country, in regard to business development, is related to small
business sustainability (Carrasco-Davila, 2005). Local and federal authorities had been developing
programs that promote the creation of new jobs thru the small business (Plan Nacional de Desarrollo,
2007). The small and medium business sectors are recognized as an integral component of economic
development and a crucial element in the effort to lift countries out of purveys. The dynamic role of
micro and small enterprises (MSEs) in developing countries as engines through which the growth
objectives of developing countries can be achieved has long been recognized. Small businesses play an
important role in the development of a country and serve as a means to sustain and grow economies
(Ibrahim, Angelidis, & Parsa, 2008). Due to the ease in starting and simplicity in operation, small
businesses are initiated for various reasons depending upon entrepreneur motives and traits (Kozan et
al., 2006). Small businesses contribute to lowering unemployment as well as generate new sources of
employment.

Policies to promote the development of MSEs are common in both developed and developing countries
(Storey, 1994; Levitsky, 1996; Hallberg, 2000). In the case of developed countries, it has become
commonplace for governments during the last two or three decades to implement policies or programs
designed to promote aspects of micro and small-sized enterprises (MSEs). This has coincided with an
increase in the importance, in terms of contribution to employment and GDP growth, of SMEs in most
of the developed economies (Storey, 1994). In the case of developing economies, policies designed to
assist MSEs have been an important aspect of industrial policy and multilateral aid programs such as
those of the United Nations since the 1950s (Levitsky, 1996). However, while there are wide variations
across countries the traditional picture is one where the relative importance of SMEs tends to decline as
a country moves up the developmental ladder (Hallberg, 2000; and Liedholm and Meade, 1999).

In addition, they also comprise a significant proportion of the business enterprises. It may therefore be
argued that, purely from the viewpoint of their significance in their economies, MSEs warrant attention
from governments. Storey (1994) has argued, in the UK context, that the increased importance of MSEs
means that public policies towards them cannot be considered in isolation from other influences in the
economy and cannot be left to those with a particular interest in MSEs. The significance of SMEs in

3
their economies makes it important for policymakers to ensure that these enterprises do not face
impediment that hamper their ability to operate efficiently and do not face tedious administrative
compliance costs. As Lattimore et al. (1998) note, while economic importance provides a strong basis
for public policy consultation with small business, in itself it provides little justification for specific
interventions.

Despite a long history of development efforts, MSEs were perceived rather as a synthetic construction
mainly of "social and political" importance (Hallberg, 2000), especially throughout the 1980's and up to
late 1990's. Although domestic MSEs constituted most of what could be and what are still deemed as the
private business activity in most developing countries, private sector development strategies advocated
for and implemented in these countries were skewed towards the needs of large-scale business,
including foreign invested ones. This type of policy advice was partly motivated by the rather
disappointing (Meyer-Stamer, Jörg and Frank Waltering, 2000) results achieved through extensive MSE
support systems operated in developed countries since the 1970's.

While contributions of MSEs were recognize, many programs and policies were developed to support
them, their journey in many instances is short-lived with high rate of failure mostly in Africa due to
several factors (Michael and Jeffrey, 2009; Lussier, 1996;Honjo, 2000;ILO,2007;Wiboonchutikula,
2001; Zewde and Associates, 2002). There are many obstacles hindering their growth like competitions,
lack of access to credit, cheap imports, insecurity, debt collection, marketing problems, lack of enough
working space, identical products in the same market, change in demand and absence of market
linkages, lack of raw material accessibilities (Wiboonchutikula,2001).

Okpara & Wynn (2007) research on small business development has shown that the rate of failure of
MSEs in development countries is higher than the developed world. According to Geberhiwot and
Wolday, (2006) more than 11,000 MSEs were surveyed and about 5 percent of them admitted having
main constraints like lack of working space for production and marketing, shortage of credit and
finance, regulatory problems (licensing, organizing, illegal business), poor production techniques, input
access constraints, lack of information, inadequate management and business skill, absence of
appropriate strategy, lack of skilled human resource, low level of awareness of MSEs' as job area, low
level of provision and interest for trainings and workshop. These constraints confirm with other
developing countries, especially poor management, corruption, lack of training and experience, poor
infrastructural development, insufficient profits and low demand for product and services.

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Shiffer and Weder (2001) clearly show that there are size-based policy biases against MSEs, and more
so against smaller firms in the microeconomic environment. These biases cover all areas: legal and
regulatory frameworks, governance issues, such as bureaucracy and corruption, access to finance and
property rights. Governmental interventions on all fronts are required. The existence of such biases point
out to either market or government failure and is closely related to the capacity of the stakeholders
involved. At times, markets may correct these failures. However, in some cases, removal of failures in
the business environment may require adopting structuralist (selective intervention) approaches rather
than market-friendly approaches, as market forces may not be sufficient to remedy the capacity deficits
in the system. The choices made will be political, but they should be based on sound analyses (Lall,
2001).

Even though in the past decades the focus of Ethiopian government was mainly on large organizations,
particularly on manufacturing sector, the recent wave of private sector development initiatives however
shifted the policy efforts to MSEs and SMEs. This new orientation has been possible because of poor
performance in most state owed companies and the tension introduced by globalization and the
increased need for competiveness (Zewde & Associates, 2002; Hamilton and Fox, 1998). Thus, the
health of micro and small business sectors is very important for the overall economic growth potential
and future strength of an economy since they utilize local resources, satisfying vital needs of large
segment of the population with their products and services, serve as sprees of technological, marketing
and management capacity and skill acquisition, and enable technological process via adoption
technology (FeMSEDA, 2004).

Gofa Zone is endowed with ample natural resource. MSEs make productive use of resources and
improved the efficiency of domestic markets, thus facilitating long-term economic growth. MSEs also
seem to have advantages over other large scale competitors in that they are able to adapt more easily to
market conditions and utilize the ample resources. The sector has the potential to contribute towards
creating employment opportunities and reducing poverty. However, even if ample resource is available
in the Zonal administration MSEs have not performed creditably well and hence have not played the
expected vital role in the economic growth and development of the region as well as the country. This
situation has been of great concern to the government, citizenry, operators, practitioners and the
organized private sector groups.

5
Therefore, this study was aimed to investigate factors that affect the performance of micro and small
enterprises (MSEs) concerning accesses to finance, Working place, Marketing, Internal Management,
infrastructural, and entrepreneurship skills problems (factors) in the study area.

1.3. Statement of the Problem

Empirical studies show that MSEs contribute to over 60% of GDP and over 70% of total employment
in low-income countries, while they contribute over 95% of total employment and about 70% of GDP in
middle-income countries. Therefore, an important policy priority in developing countries is to reform
the policies that divide the informal and formal sectors, so as to enable the poor to participate in markets
and to engage in higher value added business activities (Ayyagari, Beck and Demirgüc-Kunt, 2003).

The current Ethiopian government considers MSEs as one of the core development strategies through
which it believes to achieve social and economic prosperities for its citizens. In Ethiopia, the incumbent
government has geared its efforts towards the development of MSEs. Several policy measures and
financial support instruments were introduced. The government over the years demonstrated its
commitment to support the development of SMEs through various initiatives including financial and
industrial policy measures (MoUDC, 2013).

Despite of the fact that, there are various initiatives which have been undertaken by the Sawla Town
Administration and non-governmental organization to promote MSEs development, yet their
performance is still low in which MSEs owners get low income from them and living under poor
condition and therefore, the sector’s contribution to economic growth in the country is still low.

Very recent studies shows that SMEs in Ethiopia are constrained and failed to succeed by a number of
factors (Washiun & Paul, 2011 :233-246; Gurmeet & Rakesh, 2008 :120-136) such as unfavorable legal
and regulation condition, lack of access to market, poor access to quality business infrastructure,
problems of raw materials and lack of working capital are among many factors.

According to (Tiruneh, 2011:3) in Ethiopia there are only few empirical studies that deals with the
factors that affects the performance of SMEs. This indicates the need to conduct study related with the
mentioned topic. Wijewardena and Tibbits, (1999: 89-95) Noted, “As such, the empirical investigation
of those factors leading to the success and failure of the small business economy in different nations is a
mandatory requisite for a better healthier economic development. The findings of such research are

6
helpful and useful to individual entrepreneurs as well as to economic development planners.” This
supports the relevance of conducting the mentioned study.

According to Alasadi and Abdelrahim (2007: 1-2) research that can lead to the identification of those
factors that are associated with small business performance is a great interest to policy makers, owner
manager and advisor, associated with the importance of small business to the economy. He added that
the survival, success and performance of these enterprises in this sector are an issue of continuous
concern.

Even though scholars note that, the safe way is to have comprehensive measures of success than relying
on a single indicator in dealing with the success/growth of small and medium enterprises, studies
(Gebreeyesus, 2009: 46; Solomon, 2004: 51) conducted so far in line with this issue give more emphasis
to single measurement criteria of success/performance as methodology and even special focus is given
to the determinants of performance of manufacturing enterprise, but such assessment do not guarantee to
conclude about determinant factors of success of SMEs in whole sector. In addition, though there are
some studies, which directly or indirectly assessed the success/performance determinants of SMEs, they
have reached to different conclusions for similar research issue for example concerning the effect of
firm’s initial size (Garoma, 2012: 177; Tiruneh, 2011: 12) which is necessitated to have further study. It
implies that the studies conducted in other specific area do not guarantee to conclude about the picture
of the rest parts of the world, especially at town level.

Furthermore, previous studies conducted in Ethiopia focused on the regional level and sub cities of
Addis Ababa - Ethiopia. So that, this work contribute to fill the research gap of MSEs existed at Gofa
Zone Sawla Town and what factors mostly affecting at this micro and small level. In light of the above-
mentioned fact, it is vital to investigate the factors that affect the performance of micro and small
enterprise in Sawla town. So that to find timely and the real performance determinants of MSEs at the
town and in dealing with success determinants this study tries to answer the important question of why a
most SMEs graduate to the upper level while others stay as start-up as mentioned in the background
part.

Therefore, this study focused on investigating factors affecting the performance of MSEs regarding the
six independent variables which are financial factors, Working Place, Marketing, Internal Management
infrastructural, and entrepreneurship skill factors in the study area. In doing so, this study addressed the

7
factors affecting the performance of MSEs in three sectors namely; industry, service, and urban
agriculture sectors.

1.4. Research Questions

Based on the above objectives, the following are research questions that attempt to answer the issues
raise in the research.

 To what extent the performance of MSEs influenced by finance/capital in Gofa Zone Sawla town?

 How can performance of MSEs impacted by the entrepreneur in Gofa Zone Sawla town?

 To What extent management experience hinder performance of MSEs in Gofa Zone Sawla town?

 To what extent working place affect performance of MSEs in Gofa Zone Sawla town?

 To what extent marketing activity impacted on performance of MSEs in Gofa Zone Sawla town?

 To what degree basic infrastructure affect performance of MSEs in Gofa Zone Sawla town?

1.5. Objectives of the Study

1.5.1. General Objective

The general objective of the study is to scrutinize the main factors affecting the performance of micro
and small scale enterprise in SNNPR Gofa zone in the case of Sawla town.

1.5.2. Specific Objectives

Specifically the study is sought to:

 To identify the effect of finance/startup capital on performance of MSEs in Gofa Zone Sawla
Town.

 To determine the extent of marketing on MSEs development in Gofa Zone Sawla Town.

 To identify the effect of management experience on MSE growth in Gofa Zone Sawla Town.

 To determine the effect of entrepreneurial skill on performance of MSE in Gofa Zone Sawla
town.

 To identify the influence of working place on performance of MSEs in Gofa Zone Sawla town.

8
  To examine basic infrastructure on performance of MSEs in Gofa Zone Sawla town.

1.6. Research hypothesis

With the help of appropriate empirical data on the factors affecting the performance of MSEs, this study
would test the following hypothesis:

 Access to finances has positive influences on the performance of Micro and Small Enterprises
(MSEs) in the study area.

 Workplace Factors has positive influences on the performance of Micro and Small Enterprises
(MSEs) in the study area.

 Infrastructural Factors has positive influences on the performance of Micro and Small Enterprises
(MSEs) in the study area.

 Marketing has positive influences on the performance of Micro and Small Enterprises (MSEs) in the
study area.

 Enterprises Internal Management has positive influences on the performance of Micro and Small
Enterprises (MSEs) in the study area.

 Entrepreneurship Skill has positive influences on the performance of Micro and Small Enterprises
(MSEs) in the study area.

1.7. Significant of Study

MSEs are one of the government priority areas in the struggle towards growth and development. It is
widely agreed that micro and small enterprise used to play a crucial role in achieving the industrial and
economic development. Especially the Five growth sector in micro and small enterprise the most
priority has given by the government through the recent growth and transformation plan, intended to
bring about the industry led economy and the agenda of poverty reduction and sustainable development
in the Ethiopia calls a transformation from heavy reliance on traditional agriculture to commercial
agriculture and manufacturing sector. The study also contributes to the body of knowledge on the factors
affect the performance of manufacturing sector in MSEs Taking into consideration in the SAWLA
Town.

9
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 performance of MSEs
in the study area.

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 performance
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.

In addition to that, the study will have the following significance:

1. It can serve as an input to existing Entrepreneurs, potential entrepreneurs, Micro and Small Enterprise
Development Agency to alleviate the bottlenecks facing MSEs

2. The study indicated important areas for different actors in the field to address the challenges the
MSEs are facing

3. It also add to the existing literatures by identifying and documenting the challenges impeding the
SMEs development in Ethiopia

1.8. Scope and Limitations of the Study

1.8.1. Scope of the study

The study assessed factors influencing the performance of MSEs in SNNPR, GOFA ZONE particularly
in SAWLA TOWN. There are 4 Town Administrations GOFA ZONE where a number of MSEs were
operating. But, three of them are found recently and there is a data constraint the researcher limited to
only in SAWLA TOWN which is the capital of Zonal Administration. The scope of this research was
being delimited to its scope only to those enterprises which are categorized as Micro and Small
Enterprises according to the revised definition of MSEs.

The sources of difficulties encountered in this study were described as follows: most of the documents
that are concerned with micro enterprises are written in Amharic. To translate in to the required
instruction language (English) takes longer period. Another problem encountered in the study has to do
with the operator’s reluctance to cooperate due to suspicion that disclosing information may lead to

10
negative effect on their business. It is very important to note that these limitations did not have any
significant interference with the outcome of the study.

1.8.2. Limitation of the study

First the independent variables which were only assumed to be common to all operators under SAWLA
Town business environment were chosen for this study. Hence it doesn’t exhaust all the factors affecting
performance of MSEs. These are the Political-legal, Marketing, Infrastructural, Working place,
financial, management and entrepreneurial factors. Secondly, profitability, sales volume, firm size is
considered as measure of performance this is because the majority of MSE are profit focused and it was
attempted to measure profitability based on the respondent’s perception, this is mainly due to the
majority of operators doesn’t keep record and the business are survival based. The study also less
committed to adopt all population in the study instead used sampling.

1.9. Organization of the Study

The study is organized into five major chapters. The first chapter is comprised of the information
concerning the background of the study, statement of the problem, objectives of the study, significance
of the study, scope, and limitation of the study, hypothesis, and organization of the study. The second
Chapter focused on reviewing related literature. It includes a brief description of the literature review
such as theoretical reviews and empirical findings, the conceptual framework of the study which served
as subsequently related to the study. The third chapter is divided into sub-sections such as research
design and methods (data sources, target population, sampling techniques, data collection methods,
reliability and validity, and ethical consideration, and analysis of the study. The fourth chapter presented
Data Presentation, Analysis and Interpretation and the last chapter five presented a summary of findings,
major conclusions, and sets recommendations on how to enhance small and micro-enterprise challenges.

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 CHAPTER TWO

LITRATURE REVIEW
As components of the review of related literature have four major sections, the first part begins with
conceptual literature like defining what micro and small business enterprises are in general and in
Ethiopian context in particular. The second part discusses the relevant and enough theoretical
perspective related to factors influencing SME performance, the third part empirical literature review
based on previous research evidence regarding those factors and the fourth part synthesizing the
reviewed literature and draws conclusion in terms of existing knowledge base, research gap.

2.1. Conceptual Literature Review

2.1.1 DEFINITIONS: INTERNATIONAL AND ETHIOPIAN EXPERIENCES
As per Quartey and Kayanula 2000, there is no single and universally acceptable definition of a small
enterprise. This is so because the criteria and ways of categorizing enterprises as micro and small differ
from institution to institution and from country to country depending essentially on the country’s level
of development.
A definition forwarded for MSE differs from country to country, depending on the stages of economic
development and population. In USA and Europe MSE defined on the bases of number of employment
and turnover. European Commission and Organization for Economic
Cooperation and Development defines MSE as having below 250 employees (Habtamu, 2010). In
developing countries, the definition is a little bit different from developed nations. For instance, in
Tanzania to be MSE the major variables are level of employment and capital investment; in Zambia
annual revenue and capital investment are major requirement. Likewise, the definition given to MSE in
Ethiopia includes the variables such as employment, capital investment, production capacity, level of
technology and sub sector (World Bank, 2010) Even within the same country, definitions also change
overtime due to changes in price levels, advances in technology or other considerations (Emma, 2009).
.International Definitions of Micro and small Enterprise
International definitions of micro and small enterprises use three basic criteria:

a) Number of full time employed persons (staff headcount),

b) Total assets, net assets and paid up capital, and
c) Total annual sales turnover.

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 These three criteria may be applied either jointly or separately.

In addition to these three basic criteria, some countries and international organizations also use the legal
status of enterprises (legal entity) as a supplementary criterion. The most widely practiced approach is
the use of the three basic criteria and, depending on the economic conditions of individual countries the
weight to be attached to each criterion varies from country to country. In general, on the basis of the
review of experiences of other countries, the following key points are identified:

I. Definitions of micro, small and medium enterprises as well as the frameworks for support to be
provided to such enterprises are used in all countries;
II. Each country's definition of small, micro and medium enterprises is tailored to its economic
condition and overall level of development;
III. In most of the countries, the definitions of small, micro and medium enterprises are uniformly
implemented by all institutions and have legal backing;
IV. The principal criteria that are applied either separately or in combination to define small, micro
and medium enterprises include the size of employment, total assets, net assets and paid up
capital with annual sales turnover;
V. Some countries (e.g. China, U.S.A and South Africa) apply different definitions for different
types of industry, such as for manufacturing, construction, transport, wholesale/retail trade and
services;
VI. Most countries follow uniform definitions for all small and medium enterprise sectors (European
Union);
VII. Some countries (e.g. India, the Philippines and Tanzania) use different definition for different
sectors, including for micro enterprises;
VIII. Some countries (India and Japan) define the sector by classifying into manufacturing and
services; and
IX. Some countries (European Union).revise the definitions by taking into account the experience of
other countries, price inflation and improvements in productivity.
Definition of MSEs in Ethiopia

In Ethiopia, two different definitions of micro and small enterprises were adopted, namely:

A. The definition used in the 1997 (EC 2005) micro and small enterprises development strategy;
and
B. The definition used by the Central Statistics Authority.

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A. The Definition Provided in the 1997 MSE Strategy
The formulation of the 1997 Micro and Small Enterprise Development Strategy (EC 2005) took into
account the experiences of South Africa and other countries. During that time, the use of a single
criterion, namely paid up capital, was preferred as it was thought that there were difficulties in obtaining
information on the numbers employed in MSEs as most of the enterprises were operated by family
members. As a result, the definition had the following limitations:
i. Given the fact that employment creation is one of the objectives of promoting MSEs, the absence
of criteria related to employment creation in the definition meant that it was not possible to use it
for comparing changes in employment creation. In addition, from the perspective of the
international experience, it was difficult to estimate the amount of capital for the different
categories of enterprises.
ii. The use of paid up capital as a criteria in the existing definition does not take into account the
realities on the ground. Since enterprises are established by paid up capital financed by own
contributions and in most cases bank loans, the definition does not give a full picture of
enterprises.
iii. The existing definition, it being more than 13 years since it was first adopted, is found now to be
incompatible with current realities. For instance, significant foreign exchange rate and inflation
related changes have taken place since the definition was set. The paid up capital definition of
MSEs, which was ETB 20,000 (about USD 2,300 in GC 2005), is incompatible with the current
foreign exchange equivalent of about USD 925 (EUR 824). Similarly, the definition of small
enterprises that was ETB 500,000 (USD 58,000) is about USD 23,800 (EUR 20,600) under the
current exchange rate. Thus, the expected amount of paid up capital in foreign exchange
equivalent thirteen years ago is 250% higher in GC 2005 than in GC 2012.
iv. While the definition is based on paid up capital, the transition from micro to small and from small
to medium were to be measured in terms of total assets.
v. Although small enterprises also include high-tech and consulting enterprises the definition did not
include them; this needs to be reconsidered in view of the current significance of the sector.

Table 2. 1. The 1997 Definition of Micro and Small Enterprises in Ethiopia

No Sector Paid up Capital
1 Micro Enterprise ≤ ETB 20,000 (USD 1,200)
2 Small Enterprise ≤ETB 500,000(USD 30,000)
Source: Ethiopian Micro and Small Enterprise Development Strategy (Second Edition March 2012, edit April 2016)

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The Central Statistics Agency's Definition
Government of Ethiopia’s Central Statistics Agency definition of MSEs is based on the type of
technology adopted and the size of manpower:
1. Handicraft and cottage industries in which a single person or family members perform their
activities mainly by hand and using non-power driven machineries; and
2. Small scale manufacturing enterprises engaging less than 10 persons and using motor driven
machinery.
The above mentioned definitions adopted by the Central Statistical Agency have the following
limitations:
 Focus on the manufacturing sector (i.e., it does not refer to other sectors); and
 No use of the amount of capital as criteria.
The Central Statistics Agency definition is also different from the one adopted by Minster of Urban
Development and Housing in the 1997 MSE Strategy. In the absence of a standard definition, the
Central Statistics Agency did not collect data and conduct surveys of micro, small and medium
enterprises. The absence of a uniform definition also makes it difficult to conduct scientific studies to
evaluate the impact of the existing strategy as well as the frameworks put in place to provide support to
MSEs.
The Revised Definition of Micro and Small Enterprises
After identifying the limitations of the existing definitions and reviewing international experience, the
definition of MSEs is revised. A new set of definitions is provided that takes into consideration: the
number of employed workers, total assets and two broad sectorial classifications (industry and service)
as well as taking into account inflation and exchange rate related changes that might occur over the next
five years.
The Revised Definition of Micro Enterprises
Enterprises employing up to 5 persons including the enterprise owners and family members, with total
assets of not more than ETB 100,000 (USD 4,630).
1. For the industrial sector (including manufacturing, construction and mining): Enterprises
employing a maximum of five persons, including the enterprise owners and family members, with a
total asset of not more than ETB 100,000 (USD 4,630); and

15
2. For the service sector (retail trade, transport, hotel, tourism, and information technology and
maintenance services): Enterprises employing a maximum of five persons, including the enterprise
owners and family members, with a total asset of not more than ETB 50,000 (USD 2,310).
The Revised Definition of Small Enterprises
3. For the industrial sector (manufacturing, construction and mining): This refers to enterprises
employing 6-30 persons and with a total asset of from ETB 100,001 up to ETB 1,500,000 (USD
4,630 up to USD 69,500); and
4. For the service sector (retail trade, transport, hotel, tourism, and information technology and
maintenance services): This refers to enterprises that are employing 6-30 persons, and with total
asset of at least ETB 50,001 and up to ETB 500,000 (USD 2,310 up to USD 23,150).
Table 2.2. The Revised Definition of Micro and Small Enterprises
Level of Sector Head Total Asset Total Asset
Enterprise Count ETB USD
Staff
Micro Industry ≤5 ≤ 100,000 ≤ 4,630
Service ≤5 ≤ 50,000 ≤ 2,310
Small Industry 6 – 30 101,000−1,500,000 4,630−69,500
Service 6 – 30 50,001−500,000 2,310−23,150
Source: Ethiopian Micro and Small Enterprise Development Strategy (Second Edition March 2012, edit April 2016)
2.1.2. MSE DEVELOPMENT: CONCEPTUAL AND SITUATION OVERVIEW
Micro and small enterprise development hold a strategic place within Ethiopia’s Industrial Development
Strategy. All the more so as MSEs are the key instruments of job creation in urban centers, whilst job
creation is the centerpiece of the country’s development plan. The role of MSEs as the principal job
creators is not only promoted in low income countries like Ethiopia, but also in high income countries
including the United States of America. Accordingly, because MSEs play a pivotal role in employment
creation, stimulating and strengthening MSE development should be one of Ethiopia’s top development
priorities.( MoUDH, 2016)

MSEs are yet to be key players in the manufacturing sector. The potential to fill this gap provides
justification for the priority given to MSE development. In Japan - the home of major international
companies such as Toyota and Sony - for example, more than half of manufacturing output is generated

16
by MSEs. In Ethiopia, the need to support MSE development goes beyond the current priorities given to
employment creation as, in addition, they have a critical role to play in the country’s industrial
development, especially when the rapid expansion envisaged for the manufacturing sector under the
ongoing renaissance program is taken into account.

Experience shows that, while many MSE start-ups may survive, many others fail in a few years leaving
only a small percentage to grow into medium and large enterprises. Nevertheless MSE operators still
serve as the most important pool of growth oriented investors engaged in developing entrepreneurial
attitudes and skills. For example, if there are half a million MSEs, and 99% are not able to develop into
medium or large enterprises or fail completely, this still means that 1% - or 5,000 – become medium
sized enterprises, and eventually may become large scale businesses. MSEs should be recognized as
incubators of developmental investors. This rational is not limited to low income countries like Ethiopia,
but also holds true in high income industrialized countries. (MoUDH, pp3 2016)

There is also a political justification for providing policy and strategy related support to MSEs. Just as
farmers are the basis for a developmental state (developmental administration) in rural areas that will
fulfill the interests of rural residents whereby a crucial role is to be played by rich farmers, achieving
this would give impetus (for the governing party) to achieve progress in terms of democracy and
development and muster the support of the urban population. MSE operators in urban centers, which
normally constitute a significant segment of the urban population, also share similar characteristics with
rural farmers. The MSE operators in urban centers not only strive to create wealth by providing their
labor and mobilizing other resources but are also susceptible to rent seeking behavior. Hence they are
expected to benefit from the Micro and Small Enterprise Development Policy and Strategy and become
the basis for political support. Among the major benefits from provision of priority support to MSE
development is the strategic advantage of mobilizing the remaining sections of the population to support
general urban development efforts.

The idea that MSEs are merely a means of survival or a choice to be made in the absence of other
alternatives needs to be changed. On the contrary, MSEs are a means of lifting people out of poverty as
well as accelerating development. It is also worthwhile to note that the range of MSE typologies goes
even up to those supplying high-tech spare-parts for spacecraft. Recognizing the strategic importance of
MSEs will give leverage to the realization of Ethiopia’s renaissance.

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While offering appropriate recognition of the strategic importance of MSEs and providing appropriate
policy support to their growth constitute important first steps, it is imperative to take additional actions.
It is necessary to identify the constraints faced by MSE development and design appropriate strategies to
overcome them. Although several challenges inhibit the development of MSEs, the critical problem is
damaging rent-seeking behaviors, which are manifested itself in different forms. Other challenges that
undermine the growth of MSEs are access to technology, skills, capital financing and markets . (MoUDH,
pp 4 2016)

The generally negative attitude towards MSEs is the core challenge and takes different manifestations of
which the most important are.

o Lack of knowledge of the potential of MSEs. The attitude that considers engagement in MSEs a
sign of poverty and backwardness and discounts their potential role because of this narrow
perspective - their size and use of simple technologies, rather than their operations and potential.
o Preference for paid employment. Most of the graduates from Ethiopia’s higher education and
technical and vocational training (TVET) institutions seek paid secure employment rather than
an entrepreneurial path.
o Dependency. The dependency syndrome is common and is expressed in an expectation of
receiving subsidies and charity rather than working and investing in one’s own future.
These attitudes and the behavior that results undermine the attractions and benefits of hard work and
self-reliance as the main routes out of poverty. The practice of selling poor quality products and the
desire to make quick profits is more widespread than the practice of making modest profits by producing
and selling good quality products and services. The key factor explaining these and other manifestations
of attitudinal and behavioral constraints to MSE development is the lack of a development oriented
democratic culture.

Inadequate start-up capital is another major constraint most MSEs face during their establishment. It is
caused partly by operators that lack the confidence to use their own savings to start a business and
persevere through hard work. On the other hand, there is evidence of loans that can serve as start-up
capital not being fully utilized and this indicates problems in MSEs’ capacity limits to absorb funds. The
prevalence of unused technology and limited willpower to reverse the situation is also not uncommon
among MSEs. The market related constraints for MSEs’ products and services are another area of
concern. Among the factors that explain marketing-related challenges include examples of MSEs who

18
have made products or provided services without first identifying customers’ needs through a market
surveys, use weak marketing strategies (i.e., quality and pricing) and are reluctant to take their own
initiative to expand their market access.

Notwithstanding the aforementioned factors, whatever efforts MSEs’ make to alleviate their problems,
they do not get effective institutional support.

The issues described are starting points for analysis of MSEs’ development-related challenges. It is also
necessary to recognize that the main problem is the presence of rent seeking attitudes and practices in
the society and within GoE. It is imperative to overcome rent seeking behavior through collaborative
efforts. Replacing inappropriate attitudes and work practices with positive attitudes requires continuous
education, training and frank discussion. This should be complemented by day to day engagement in
development work, taking into account the knowledge and experience of the population. This basic
principle provides the strategy for dealing with inappropriate attitudes. (MoUDH pp 5 2016)

Concerning government institutions, in line with the aforesaid principle, it is essential to organize
information and knowledge about job creation, including understanding MSE development, the
development challenges and approaches to overcome them. This can be achieved through continuous
engagements in education, training and using different methods to develop supportive attitudes towards
MSE development. These initiatives should be combined with improved leadership and managerial
qualities recruited from the civil service to lead urban local governments (ULGs) and those institutions
established to support and develop MSEs. Once the right people are in place, there will be continuous
learning and improvement using practical experiences from the field. The current situation is that the
leadership in ULGs is not better than that in rural areas. The main reasons being that: a) a rent seeking
political economy has gained the upper hand in urban centers, and b) there have been inadequate efforts
to build strong leadership and management in MSE development. Notwithstanding the efforts to
eliminate rent seeking behavior, more emphasis must be given to building strong leaders in ULGs.

The effort to root out rent seeking behavior in MSEs is inseparable from the overall effort to change
attitudes and behavior within society as a whole. Efforts to bring about attitudinal changes are also
inseparable from day to day MSE development initiatives. The efforts to improve the performance of
MSE promotion institutions need to be synchronized with the drive to change attitudes among the
general population. In an effort to bring about attitudinal changes GoE shall make use of all available

19
means ranging from civic and moral education in schools to the use of public forums. The establishment
and strengthening of MSEs’ organizationally should also be at the center of the struggle to bring about
attitudinal change. Women’s and youth organizations as well as other MSE organizations should serve
as the main catalysts for change. These organizations should be involved in periodic MSE related plan
and implementation reviews (evaluation) organized at various levels. The discussions at these
performance review meetings should be seen as opportunities to influence attitudes. An initiative to
influence attitudes and behavior shall be mainstreamed and coordinated with education and training
activities.

The process of influencing changes in attitude among MSE operators and support providers can be
successful if it is interwoven with practical actions whereby guidelines to be followed by MSEs are
developed and disseminated among MSEs. These guidelines should discourage rent seeking practices.
Implementation plans and guidelines need to take into consideration the values they should be moving
attitudes towards, for MSEs and larger enterprises. As an example, taxes to be collected from MSEs may
not have significant impact in terms of boosting GoE revenues; the amount of taxes collected from
500,000 or so MSEs is very small when compared with taxes that can be collected from two or three big
businesses, nevertheless, keeping systematic records on financial transactions and nurturing a taxpaying
mindset should be given utmost importance so that, when MSEs’ tax relief period elapses, they are
encouraged and prepared to pay whatever tax may be due in accordance with the tax laws.

Strategic plans and working manuals have been produced for MSE development and actions taken to
familiarize MSE operators with them. In addition it is essential to identify those MSEs and operators
that have achieved success and place them at the center of the MSE development policy and strategy.
Though they might be few at the beginning, as long as the selections are done carefully, they can be
popularized as role models, while incentives can be provided for others to equal their achievements.
This will make it possible to create conditions to encourage others to follow suit. It is necessary to
attract and build the capacity of successful operators so that they become models of success that
motivate others to follow their examples. Where those involved with MSEs engage in rent seeking
activities, the preferred approach, when possible, is rehabilitation by giving them a second chance
thereby helping them, and others, to learn from their mistakes. The practice of selecting exemplary
achievers, strengthening and using them as role models needs to be integrated with the main task of
building positive and supportive attitudes toward the development of the MSEs. (MoUDH, pp 6 2016)

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The right approach to alleviate the lack of financial resources is to build on the self-help efforts of MSE
operators and their families and, in case of expenses that are beyond their means, to help them access
finance from government financial institutions. As this is the right path to the development of MSEs, it
should be adopted as a general direction for provision of financial support for MSE development. Those
who cannot make a contribution from their own savings to their start-up capital should not be permitted
access to credit. It is also possible that, although some young persons may not have sufficient savings of
their own, they may be able to mobilize start up resources from parents and families in rural areas. GoE
believes that it is parents, rather than GoE, that have primary responsibilities for their children’s future .
Nonetheless, there are still young people and their families, including women, who may not have
sufficient means of daily survival let alone be able to make savings. Such individuals need to engage in
activities that do not require startup capital such as employment in cobble stone road construction,
mining of precious minerals and construction activities. In these cases, priority should be given to those
who do not discriminate between jobs, whether they are university graduates or have little or no formal
education. GoE should help young people from poor families as long as they are willing to take up
employment and start their own savings.

On this basis, GoE will facilitate access to start-up capital for those who are willing to work and where
possible contribute savings, provided that they organize themselves, come up with feasible business
ideas (proposals) and contribute part of the required start-up capital. Contributions to start-up capital
would include compulsory savings requirements attached to employment schemes, own savings and/or
family contributions. In this regard, as a significant part of start-up capital is intended to cover the costs
of arranging production and sales premises as well as investment in machines and equipment, an
alternative solution is to provide assistance that will reduce the amount of startup capital requirement.
Urban local governments should promote the construction of affordable production and sales premises
that meet basic standards - this will help reduce development of slum areas. The fact that MSE related
public expenditures in urban centers are given priority immediately after education and training
demonstrates the high priority given by GoE to MSE development and supports the high priority that
should be given by ULGs to the construction of production and sales premises. Given the tendency for
medium and large industries to concentrate in a few urban centers, the majority of smaller Ethiopian
cities are unlikely to attract medium and larger enterprises. For this reason the preferred alternative for
industrial development in most cities will be MSEs as they have the potential to be replicated across all
cities. It is, therefore, crucial to give emphasis to constructing infrastructure and facilities that support

21
MSEs, as well as making other needs-based improvements, so that MSEs can get access to the facilities
at affordable prices and thereby reduce their start-up costs.

The process of constructing and delivering MSE production and marketing premises requires careful
planning and management. Cities should avoid building corrugated iron sheds for MSEs - be overly
concerned with cost reduction. If MSE facilities are built in a quantity that exceeds demand and of high
quality that results in high cost2, it is likely that they will not be fully occupied. A more effective
approach is to build a limited number of premises that are affordable to MSEs and build more as demand
arises. The sites to be chosen should be appropriate to the needs of MSEs. Sites should not be placed in
peripheral locations or in city centers; both locations that may limit MSEs’ expansion potential. A
transparent system should be created for allocation of MSE production and sales premises, involving
regular and on time payment of rents as well as appropriate measures for noncompliance. Putting such
procedures in place will discourage rent seeking practices; accelerate MSE development effort and
contribute to the development of urban centers. The building and renting of MSE production and sales
premises should be a top priority for ULGs. This strategy has to be executed effectively with
commitments for continuous improvement based on experience and good practices.

Machinery leasing is a second direction to be adopted in alleviating start-up capital shortages.

Establishing and strengthening capital leasing companies in the country can create opportunities for
MSEs to start with lower start-up capital. This will be possible as they can lease machinery and rent
spaces, which will also enable them to accumulate capital for further growth.

The third type of support is to facilitate access to finance for those who take their own initiatives
towards enterprise start-up. The first option is to exert maximum effort to reduce the amount of start-up
capital required. The second is for prospective entrepreneurs to make their own contributions or savings.
As long as the preconditions mentioned are fulfilled, credit can be provided after checking the financial
performance of enterprises and that loan repayments are collected in time, the provision of credit will
serve its developmental purpose and is unlikely to entail rent seeking behavior. Thereafter, the task of
MSE support is to improve the performance of existing micro financing institutions (MFIs) identify new
financial sources and ensure the operational procedures of MFIs support MSEs’ development. (MoUDH
pp 7 2016)

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 2.2. Theoretical literature
This study is based on four theories: resource based view theory, signaling theory, the balanced
scorecard and the pecking order theory. These theories are explained in detail below:

2.2.1. Resource Based View Theory (RBV)

Wernefelt (1984) came up with the Resource based view theory to advance the idea that strategy of a
firm as a function of the complement of the resources held. The core of the Resource Based Model is
that competitive advantage is created when resources that are owned exclusively by the firm are applied
to developing unique competencies. The resulting advantage can be sustained due to lack of substitution
and imitation by the firm’s competitors. Firms have different collections of resources (tangible and
intangible assets) and no two firms are similar in terms of the resources they hold, moreover, the
resources a firm holds determine how well that firm would carry out its operations. A company would
be posited to succeed if it has the best and most appropriate stock of resources relevant for its business
and strategy and therefore Competitive advantage ultimately can be attributed to ownership of valuable
resources that enable the firm to perform its activities better than competitors thereby improving its
performance. RBV describes a firm in terms of the integrated resources and that resources are limited to
those attributes that enhance efficiency, effectiveness and performance of the firm (Wernerfelt, 1984).
Miller and Shamsie (1996) refer that resources should have some capability to generate profits or to
avoid losses.

2.2.2. Signaling Theory

Signaling theory is based on the transfer and interpretation of information at hand about a business
enterprise to the capital market and the requisition of the resulting perceptions into the terms on which
finances made available to the enterprise. In other words, flows of funds between an enterprise and the
capital market are dependent on the flow of information between them (Beck et al, 2008). Watson,
Keasey and Baker (2000) assert that of the ability of small enterprises to signal their value to potential
investors, only the signal of the disclosure of an earnings forecast were found to be positively and
significantly related to enterprise value amongst the following: percentage of equity retained by owners,
the net proceeds raised by an equity issue, the choice of financial advisor to an issue (presuming that a
more reputable accountant, banker or auditor may cause greater faith to be placed in the prospectus for
the float) and the level of underpricing of an issue.

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 2.2.3. The Balanced Scorecard
The balanced scorecard (BSC) suggests that managers should consider the organization’s performance
from four dimensions, financial perspective, customer perspective, innovation & learning perspective,
internal perspective (Kaplan and Norton 1996). BSC integrates financial and non-financial measures
into one measurement system. The objectives and standards of BSC are obtained from the organization’s
vision and strategy.

The Balanced Scorecard provides managers with a comprehensive framework that translates a
company’s vision and strategy into a coherent set of performance measures. Kaplan & Norton (1996)
showed that the balanced scorecard not only allows the monitoring of present performance, but also tries
to incorporate information about how well the organization is positioned to perform in the future. In
addition, the Balanced Scorecard has evolved to become a core management tool, in that it helps the
management of firms to clarify, communicate and manage strategy. In practice, companies use the BSC
approach to accomplish four critical management processes, clarify and translate vision and strategy,
communicate and link strategic objectives and measures, plan, set targets, and align strategic initiatives
and enhance strategic feedback and learning.

2.2.4. The Pecking Order Theory

This is another financial theory, which is to be considered in relation to SMEs financial performance and
management. It is a finance theory which suggests that management prefers to finance first from
retained earnings, then with debt, followed by hybrid forms of finance such as convertible loans, and last
of all by using externally issued equity; with bankruptcy costs, agency costs, and information
asymmetries playing little role in affecting the capital structure policy (Norton, 1991). A research study
by Zoppa and McMahon (2002) revealed that 75% of the small enterprises used seemed to make
financial structure decisions within hierarchical or pecking order framework. According to Cassar and
Holmes (2003), the Pecking Order Theory is consistent with small business sectors because they are
owner managed and do not want to dilute their ownership. Owner managed businesses usually prefer
retained profits because they want to maintain the control of assets and business operations.

2.3. Empirical Literature Review

Conferring to Mead &Liedholm (1998) and Swierczek and Ha (2003), the main factors that affect the
performance of SMEs in developing countries is not their small size but their isolation, which hinders
access to markets, as well as to information, finance and institutional support. The argument that small

24
businesses in Africa are crucial in the role they play in employment creation and general contribution to
economic growth is not new. Although this may be true, many new enterprises tend to be one person
establishments (Mwega, 1991). This has tended to ensure that the journey of the SME entrepreneur in
many instances is shortlived, with the statistic of MSE failure rate in Africa being put at 99 per cent
(Rogerson, 2000).

Various reasons for these failures have been proposed by scholars including lack of supportive policies
for SME development (McCormick 1998), intense competition with replication of micro-businesses
(Manning &Mashego, 1993; manager characteristics including lack of skills and experience
(Katwalo&Madichie, 2008 and Verhees, F. M., &Meulenberg, M. G., 2004).

A study by Hall (1992:237-250) has identified two primary causes of small business failure appear to be
a lack of appropriate management skills and inadequate capital (both at start-up and on a continuing
basis). The research undertaken in Tanzania by surveying 160 micro enterprises showed that high tax
rates, corruption, and regulation in the form of licenses and permits, are found to be the most important
constraints to 24 business operations of micro enterprises (Fjeldstad et al, 2006 cited in Mulugeta, 2011).

According to JS Wiese (2014) who conducted a study on the determinant factors of sustainability shows
owners or managers with more experience (managerial, sector or previous SME experience) tend to
have a greater inclination towards growth and was also considered essential criteria for sustainability.
Woldie, et al., (2008) and Mbugua, et al., (2014) contend that SMEs owners or managers with more
experience (managerial, sector or previous small businesses experience) tend to have more growth
potential than those with a lack of expected potential and also the higher the level of education attained
by the owner/manager, the higher the likelihood of growth of the enterprise. Managerial skills and
experience affect businesses performance at certain level. Since small businesses account for sizeable
proportions of economic activity, therefore, and since they are an importance source of dynamism and
innovation, small business management skills should be a primary focus for economic policy in general
and for innovation strategies (Keith, 2001).

As per Simeon and Lara (2005) SMEs appear to be disproportionately afflicted by the underdeveloped
nature of financial institutions in developing countries. For various reasons ranging from a lack of
collateral to bias against small firms, SMEs tend to face greater financial constraints than do larger
firms. The study done in Kenya related to financial management of SMEs identified the heavy

25
investment in inventory ties up capital which in the end reduces firm‟ profitability therefore; there is
need for a tradeoff between receivables and holding inventory if the firm is to attain the required profits
(Charles et al., 2014). Marketing activities such as product/service marketing, marketing research and
information and promotion impact negatively on the performance of SMEs due to lack of marketing
skills by SMEs owners. The study conducted in Nigeria by Ebitu et al., (2015) identified most of
problems encountered MSEs are marketing related some of which include inability to apply modern
marketing techniques and strategies, difficulty in managing the firm’s advertising and other promotional
tools, competition from large firms, lack of adequate research, poor and mundane production
technology, lack of adequate financing of marketing activities, poor quality products and problems of
standardization, warehousing, inventory control, and poor transportation facilities, branding/packaging,
financing and credit facilities, and risk bearing among others. These problems are capable of impeding,
disrupting and hindering the growth, development and expansion of the firms in its effort to satisfy its
target market and also create value for the organizations. According to Noghor (2015), SMEs are facing
challenges brought about by changes in technological environment; hence they are failing to keep
abreast of these changes.

Large businesses, because they have the advantage of being technologically advanced, end up poaching
the SME market niche and resulting in MSEs being kicked out of the game. Failure not to employ the
latest technology means producing at higher cost than do competitors in the market thus, eventually
exiting the market due to tough competition.

Though SMEs are considered an important source of job creation and economic growth, their survival is
a difficult task for managers for they have typical characteristics that end up becoming barriers to their
development. According to Olawale, (2014) reason for failure are lack of management experience, lack
of functional skills, poor staff training and development, poor attitudes towards customers,
unavailability of a logistics chain and a high cost of distribution, competition, rising costs of doing
business, lack of finance and crime. The reason for failure of

SME identified by Mariana, (2014) lack of customer, previous experience in the field of business, lack
of knowledge or managerial experience, lack of government policies to support small business, the lack
of bank credit.

26
As clearly stated in Terfasa et al., (2016) access to finance appears to be a very severe or major obstacle
as reported by about 55% and 64% of micro and small scale enterprises respectively. The problem of
access to finance is more severe for small enterprises compared with micro enterprise as the latter often
have access to microfinance institutions (MFIs) as their loan requirement is within the capacity of MFIs.

2.4. Synthesis of the Review

Majority of those who run SMEs are ordinary lot whose educational background is lacking. Hence they
may not well be equipped to carry out managerial routines for their enterprises (King & McGrath, 2002).
Management experience related to the owner/manager and the enterprise. Desouza and Awazu (2006)
argue that management is concerned with the deployment of material, human and finance resources with
the design of organization structure. Hayton (2003) observes that the growth of many enterprises of all
sizes, suggest that the scarcity of competent managers is a more serious constraint on economic
development. As the enterprise becomes larger, the more need for managers to plan, coordinate and
control the activities of the enterprise. Keyser et al. (2000) found that in Zambia lack of starting capital
was a common problem for entrepreneurs, as only 24% received a loan to start their business. Another
study by Koop et al (2000) established that the amount of starting capital was positively related to
business success.

Other negative factors that have been identified include corruption, poor infrastructure, poor location,
failure to conduct market research and the economy (Kiggundu, 2002). The study therefore seeks to
establish factors that influence the performance of micro and small business enterprises' performance in
GOFA ZONE SAWLA Town

2.5. Conceptual Framework

According to Mugenda and Mugenda (2003) conceptual framework is a diagrammatic presentation of
the relationship between dependent and independent variables. In this study, the dependent variable is
performance of SMEs while independent variables are access to finance, working places, government
policy, marketing, internal management, infrastructure and entrepreneurship as presented in figure 1
below.

27
 Government
Access to Policy
Finance Working
Places

Performance of
Entrepreneurship SMEs Marketing

Infrastructure Internal
Management

.Figure 2.1. Frame work of the research that shows the relation between the independent variables with
dependent variable

28
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1. Introduction
Under this chapter, the study tried to discuss the research methodology which includes the research
design, research approach, research methods, data sources, sampling design and techniques, research
instruments as well as data processing, and methods of data analysis.

3.2. Research design

Research design is the blueprint for fulfilling research objectives and answering the research questions.
According to (Kothari, 2004) research design is the arrangement and structure used to regulate the study
to attain the research objectives and answer the research questions. It ensured that the study was relevant
to the problem and that it uses economical procedures. The research design employed under this study
was descriptive and explanatory. The reason for using descriptive research design was; to describe the
state of affairs as it exists at present and explanatory research design was better to connect ideas to
understand the cause and effect of the variables (Kothari, 2004).

3.3. Research Approach

To answer the proposed research questions, the study were employed a quantitative research design. It
was tried to address the descriptive and explanatory research approaches. According to (Kothari, 2004) a
quantitative research approach was used to describe the numerical aspects and quantitative data was
collected and analyzed in an integrated manner. The basic reason for choosing the quantitative research
approach for this particular study lies in the fact that it was allowed to come through the respondent’s
objective. This was in turn contributes much to the inferences of the study results.

3.4. Sampling Design

Sample design refers to the process of selecting a subset of individuals or units from a larger population
for the purpose of conducting a study or survey. The design of the sample is crucial as it determines the
representativeness and validity of the findings.

29
The choice of sample design depends on factors such as the research objectives, available resources, and
the characteristics of the population. Each design has its advantages and limitations, and it is important
to select a design that suits the specific research needs and ensures generalizability of the findings.

3.4.1. Population, sampling unit and sampling frame

Population refers to all elements (individuals, objects, and events) that meet the sample criterion for
inclusion in a report. The target population for this study comprised MSEs Operators of the Sawla Town
administration. As indicate by Sawla Town administration Enterprises and Industry development Office
have a total population of 181 MSEs and 968 MSEs Operators in the following three sectors which are
Industry, Service, and Urban Agriculture sectors.

Table: 3.1 Sawla Town MSE Population Data 2022

No Name of the Sector Number of Enterprises Operators under this

enterprise/Population
1 Industry 75 423
2 Service 47 235
3 Urban Agriculture 59 310
Total 181 968
Source: Sawla Town Enterprises and Industry Development office annual report June 2023

3.4.2. Method and Procedure of sampling

To get information from different sizes of the MSEs, the researcher was applied stratified and simple
random sampling techniques. This technique was preferred because it assisted in minimizing bias that
may come because of the high cost and the long time it needs when dealing with the population. Before
picking items for the sample, the sampling frame can be arranged into generally homogeneous groups
(strata) using this procedure. According to (Dawson, 2013), this step increases the probability that the
final sample would be represented in terms of the stratified groups. The stratus is sectors including
Industry, service, and Urban Agriculture sectors.

Although there are no general rules, the sample size usually depends on the population to be sampled. In
this study to select sample size, a list of the total operators’ population registered under SAWLA Town
Enterprises and Industry development Office on 2023 was used. A list containing names sectors, total
numbers of enterprises under this sectors and the total operators (members) of the enterprises.

30
 3.4.3. Sample size determination
The optimal sample size in a study is determined by the characteristics of the population and the
study's goal, according to (Dawson, 2013). Although there are no hard and fast standards, the sample
size is usually determined by the population being sampled. There are several methods to determining
sample size. Given the total population, the number is known; Yamane’s (1967) formula is used to
calculate a sample size that could accurately represent the total 968 MSEs operators in the SAWLA
Town administration in the following three sectors which are, Industry, Service, and Urban Agriculture
sectors. The formula in the figure was used to calculate the sample size. 95% confidence level and p
= .05 were assumed to be appropriate for this equation.

N
n= 2
1+ N (e )

Where n = the sample size, N= population size, and e = level of precision.

968
n= 2
=283
1+ 968(0.05 )

The sample size for the study was 283 MSEs.

3.5. Data type and sources

To achieve the research objective, both primary and secondary data sources were used in the study.

3.5.1. Primary Sources

Primary data was collected through a structured closed-ended questionnaire from the representative of
the total population of MSEs operators in SAWLA Town. The survey questionnaire in this study
contained a five-scale points rating from (1) strongly disagree to strongly agree (5). These continuous
scales are the scales that are used to weigh the objects/measurement on the instrument.

3.5.2. Secondary Sources

Secondary data was collected from both published and unpublished materials includes SME reports,
reviewed literature, research papers, circulars, and policy papers to provide additional information where
appropriate.

31
 3.6. Methods of data collection
To achieve the objectives of the study, the researcher used quantitative research methods through a
questionnaire to cover larger target groups of MSEs. The adopted questionnaires were prepared using
Close Ended or Structure questionnaires and 5 Point Likert-scale approaches. It was prepared in the
English language and translated into Amharic to facilitate the response. A letter of verification was
provided for the respondents to maintain the confidentiality of the information as an attachment to the
questionnaire.

3.7. Method of data analysis

The method the researcher used to analyze the data is quantitative analysis, such as percentage,
tabulation representation, and description method. The collected data was organized, analyzed,
interpreted, and discussed using a Statistical Package for Social Science (SPSS) version 25. All collected
quantitative data was analyzed using descriptive statistics like frequency, percentage, mean and standard
deviation. Whereas, statistics (Pearson correlation and multiple linear regression) Pearson correlation
was applied to observe the relationship between independent and dependent variables. Multiple linear
regressions are also applied to show the effect of independent variables on the dependent variables.

The study adopted the following functional specification and a linear regression model to determine the
relationship between variables;

Y = β0+β1x+β2x+β3x+ β4x + β5x+ β6x+Ԑ0

Where; Y(x) is MSEs performance.

β0 is the constant term, β1 is the correlation coefficient of financial factors, β2 is the correlation
coefficient of work place factors, β3 is the correlation coefficient of infrastructural factors, β4 is the
correlation coefficient of Marketing factors, β5 is the correlation coefficient of Internal Management
factors, and β6 is the correlation coefficient of entrepreneurship skill factors. Ԑ0 is a marginal error.

This coefficient shows that the units in the independent variables make variation independent variables
by units of coefficients.

32
 3.8. Validity and Reliability

3.8.1. Validity
The degree to which a test measures what it claims to measure is known as validity (Creswell, 2003).
Validity is defined as the accuracy and usefulness of inferences drawn from study findings. To make
sure the research’s validity, the researcher used reliable source such as published researches, books, and
recent articles which were written on the factors affecting the business performance of MSEs. Based on
the respondent’s response addition, omission, and modification of questions were undertaken. To further
refine the accuracy of the instrument, a questionnaire was administered and prepared with standardized
questions from different sources and the research advisor also provided valuable comments on the
prepared questionnaire.

3.8.2. Reliability
A measuring device is dependable, according to (Kothari, 2004), if it produces consistent results. A
reliability test was also performed to check the internal consistency and accuracy of the measurement
scale. For testing the reliability of the data instrument, Cronbach’s alpha was used. It is a popular
measure of internal consistency or reliability test score for a group of examinees. The measures between
0.8 and 0.95 are considered to have very well reliability. Scales with coefficient alpha between 0.7 and
0.8 are considered to have good reliability and coefficient alpha between 0.6 and 0.7 indicates fair
reliability (Kothari, 2004).

3.9. Ethical Considerations

The objective of ethics is to ensure that no one is harmed or suffers adverse consequences from the
research activities. All relevant data for this study was collected by issuing an official letter to the
concerned organizations. The researcher explained and informed the respondents about the importance
of the study and their willingness and consent commitment before distributing questionnaires. The
respondents also had the right to refuse or terminate at any point in the data collecting process.
Regarding the right to anonymity and confidentiality, the participants were not forced to write their
names on the questionnaire and confirmed that their responses were not in any way linked to them.

33
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS, AND INTERPRETATION

4.1. Introduction
This chapter focuses on the presentation, analysis, and interpretation of questionnaire data and contains
the reliability analysis, respondents profile, correlation analysis, overall MSE s performance analysis,
and multiple regression analysis. A total of 283 questionnaires were distributed and were collected from
SAWLA Town MSEs operators. Only 271 of the total 283 questionnaires were properly filled out and
collected. This represents 95.76% of the total number of people who responded. Since this is sufficient
enough to make the analysis and all the discussions below are made on these groups of respondents. The
collected data were analyzed by using the statistical package for social science (SPSS) version 25 to
answer the research questions.

4.2. Demographic Characteristics of the respondents

The following table generalizes the demographic characteristics of respondents by gender, age, marital
status, and educational status

Table 4.1: Sex Composition of the Respondents

Sex of the Respondents
Cumulative
Frequency Percent Valid Percent Percent
Valid Male 158 58.3 58.3 58.3
Female 113 41.7 41.7 100.0
Total 271 100.0 100.0
Source: Own Survey Data 2023
As shown in the above table 1588 (58.3%) respondents fall into the category of male. This is followed
by 113 (41.7%) of the respondents are in the category of Female. It indicates that female operators are
dominated by male operators in the study area. These shows that participation and benefit of women in
economic sector especially in MSE is not meet the government’s policy in the study area.

34
Table 4.2: Age of the Respondents
Age of the Respondents
Cumulative
Frequency Percent Valid Percent Percent
Valid 21-30 Years old 203 74.9 74.9 74.9
31-40 Years old 66 24.4 24.4 99.3
41-50 Years old 2 .7 .7 100.0
Total 271 100.0 100.0
Source: Own Survey Data 2023
As can be seen from the above table, the majorities of the respondents are within the age category of
21-30 years 203 (74.9%) and followed by the age category of 31 – 40 years which is 66 (24.4%) of the
total respondents. The remaining percentages of the age categories 41-50 years were about 0.7% (2,) and
there are no respondents in the category of less than 20 years of age and above 50 years age. It indicates
that the greatest number of respondents was young enough since the age of the respondents was
important to get relevant data from them and they can challenge in operating their businesses and they
can work effectively their business activities in the competitive market.
Table 4.3: Marital Status of the Respondents
Marital Status of the Respondents
Cumulative
Frequency Percent Valid Percent Percent
Valid Single 101 37.3 37.3 37.3
Married 169 62.4 62.4 99.6
Divorced 1 .4 .4 100.0
Total 271 100.0 100.0
Source: Own Survey Data 2023
Regarding marital status, the above table shows that majority of the respondents are married
169(62.4%) followed by unmarried 101 (37.3%). And the remaining 1 (0.4%) of the respondents are
divorced. From the finding, most of the respondents were married, since they are responsible to fill in
relevant data concerning the distributed questions.
Table 4.4: Educational Level of the Respondents
Educational level of the Respondent
Frequency Percent Valid Percent Cumulative Percent
Valid Able to Read and Write 5 1.8 1.8 1.8
5 - 8 Grade 37 13.7 13.7 15.5
9 - 12 Grade 122 45.0 45.0 60.5
Certificate Holder 14 5.2 5.2 65.7
Diploma Holder 56 20.7 20.7 86.3
Degree and Above 37 13.7 13.7 100.0
Total 271 100.0 100.0

35
Source: Own Survey Data 2023
As it can be viewed in the above table, educational level of the respondents within the grade level
category of 9 – 12th are constitutes 122 (45.0%) followed by those who have diploma holders
56(20.70%), degree and above and 5 – 8th grade are 37 (13.7%) each respectively, 14 (5.2%) are
certificate holders and only 5 (1.8%) respondent is able to read and write respectively. The above
finding indicates that most of the respondents had attained a different level of education. Since they are
literate, they can understand and fill the questionnaires.
Table 4.5: Work Experience of the Respondents
Work Experience of the Respondents
Frequency Percent Valid Percent Cumulative Percent
Valid 0 - 5 Years 186 68.6 68.6 68.6
6 - 10 Years 79 29.2 29.2 97.8
11 - 20 Years 4 1.5 1.5 99.3
Over 21 Years 2 .7 .7 100.0
Total 271 100.0 100.0
Source: Own Survey Data 2023
As shown in the above table the work experience of the respondents, majority of the respondents
186(68.6%) have 0 – 5 years of experience in their business work. While, 79(29.2%), 4(1.5%), and
2(0.7%) of them were in the category of 6-10 years, 11 – 20 years, and 21 and above years respectively.
This shows that majority of the respondents had operated in the market for a different period. Hence,
they are more informed on the factors affecting MSE’s performance and business operating activities.
Therefore, they can give relevant data to the researcher.
Table 4.6: Number of Respondents by Enterprises Sector
Respondents Category by Enterprise Sector
Frequency Percent Valid Percent Cumulative Percent
Valid Industry 115 42.4 42.4 42.4
Service 105 38.7 38.7 81.2
Urban Agriculture 51 18.8 18.8 100.0
Total 271 100.0 100.0
Source: Survey Data 2023
The above table show us among the sampled sectors of Micro Enterprises 115 (42.4%) of the
respondents were engaged in Industry sector (Manufacturing enterprises and Construction enterprises),
105 (38.7%) of the respondents were engaged on the Service sector of MSE and the remaining 51
(18.8%) of the respondents were engaged on the Urban Agriculture Sector. This division of MSEs by
sector type was believed to be helpful to study each sector critical factors that affect the performance of

36
MSEs. This is because firms in different sectors of the economy face different types of problems. That
means the degree of those critical factors in Service sector may differ from the factors that are critical to
Industry, and Urban Agriculture sectors.

4.3. Reliability Test

A measuring device is dependable, according to Kothari (2004), if it produces consistent results. A
reliability test was also performed to check the internal consistency and accuracy of the measurement
scale. For testing the reliability of the data instrument, Cronbach’s alpha was used. (Hamid et al., 2011)
suggested that the rule of thumb for good reliability estimated is 0.7 a high reliability estimated of
between 0.6 and 0.7 may be acceptable if other indicators of the model construct validity are good. The
study has used a questionnaire to investigate factors that affect the performance of MSEs. Then there
assess the model fit reliability and validity of the questionnaire to get confidence in comparing the
sample with the help of SPSS V-25 the most frequently used Cronbach's alpha. The reliability of the
item is presented in the table below.
Table 4.7: Reliability analysis (Cronbach's alpha)
Variables of the study Number of item Cronbach’s
Alpha
Access to Finance 10 0.670
Working Place Problems 4 0.818
Infrastructural factors 5 0.734
Marketing Factors 6 0.719
Internal Management 7 0.778
Entrepreneurship skill 5 0.860
MSE Performance 8 0.920
Source: Own Survey Data, 2023
As indicated in the table, Cronbach’s alpha values for Access to finance factors, working place factors,
infrastructural factors, marketing factors, internal management factors, entrepreneurship skill factors and
performance of MSE’s is 0.670, 0.818, 0.734, 0.719, 0.778, 0.860, 0.920 and (P= 0.00) respectively.
Hence, the reliability of the measurement used in this study can be considered as good and acceptable.
Therefore, the Cronbach’s alpha coefficient of each item is over 0.631. (Haur, 2017) suggested that the
rule of thumb for a good reliability estimate is 0.7 A high reliability estimate of between 0.6 and 0.7 may
be acceptable. If other indicators of the model construct validity are good. Hence, the above table shows
that the Cronbach’s alpha from 0.670 to 0.920 categories indicating that the survey instrument was
generally accepted as good and acceptable.

37
 4.4. Presentation and Analysis of results
4.4.1. Descriptive Statistics Analysis
Descriptive statistical analysis is a method used to summarize and describe basic features of a dataset. It
helps to provide a clear and concise understanding of the data through various statistical measures, such
as central tendency, dispersion, and distribution.

Overall, descriptive statistical analysis is crucial in summarizing and interpreting data in a concise and
understandable manner, allowing researcher, to draw meaningful conclusions and make informed
decisions.

Table 4.8: Descriptive Statistics Analysis of Access to finance

Descriptive Statistics
Std.
N Mean Deviation

The interest rate charged by banks or Microfinance institutions is reasonable 271 3.07 1.206

There is a high collateral requirement from banks and other lending institutions. 271 3.76 .680

There are complicated loan application procedures of micro finances and other lending institutions 271 3.75 .724

Most microfinance and other lending institutions are reluctant to provide long-term credit to MSEs 271 3.66 .846

There are governmental funds to support MSEs businesses. 271 2.38 1.458

I have my own enough source of finance to run my business. 271 2.39 .971

I am satisfied with the financial access given by microfinance and other lending institutions 271 2.41 .985

There are non-governmental organizations (NGOs) funds to support my business 271 2.15 .842

Access to finance is a major challenge that affects the growth of my business 271 3.93 .795

Inadequacy of credit institutions 271 3.70 .809

Valid N (listwise) 271

Grand Mean= 3.12 271 3.12 0.9316

Source: Own Survey Data 2023

From the above Table, presents an analysis of the descriptive statistics related to factors affecting the
performance of Micro and Small Enterprises (MSEs) in SAWLA Town. The data was collected on
various aspects of financial factors influencing MSEs' performance. The sample size was 271 MSEs.

38
The respondents rated the reasonableness of interest rates charged by banks or microfinance institutions
at an average of 3.07. This implies that on average, respondents perceive the interest rates charged by
banks or microfinance institutions as moderately reasonable. The relatively low standard deviation
(1.206) indicates that the opinions on this factor are not highly varied among the respondents.
Respondents perceived a high collateral requirement from banks and lending institutions, as indicated by
the mean of 3.76. The low standard deviation (0.680) suggests that there is a relatively consistent
opinion among the respondents regarding this factor. The complexity of loan application procedures of
microfinance and other lending institutions was perceived with a mean score of 3.75. The moderate
standard deviation (0.724) indicates some variability in respondents' perceptions. Most microfinance and
lending institutions' reluctance to provide long-term credit received a mean score of 3.66. The standard
deviation (0.846) suggests some diversity in opinions among the respondents. The availability of
governmental funds to support MSEs businesses was rated with a mean of 2.38. It implies that on
average, respondents perceive the availability of governmental funds to support MSEs businesses as
relatively low. The relatively high standard deviation (1.458) indicates a wide range of opinions on this
factor. Respondents' reliance on their own sources of finance for running their businesses yielded a mean
score of 2.39. The standard deviation (0.971) suggests varying degrees of self-funding across MSEs.
Satisfaction with the financial access provided by microfinance and lending institutions received a mean
score of 2.41. The standard deviation (0.985) suggests a range of satisfaction levels among the
respondents. The availability of non-governmental organization (NGO) funds to support businesses was
perceived with a mean score of 2.15. The standard deviation (0.842) indicates variability in awareness
and access to such funds. The challenge of access to finance affecting business growth was rated with a
mean score of 3.93. This means that respondents consider access to finance to be a significant challenge
that affects the growth of their businesses. The standard deviation (0.795) suggests that respondents'
views vary but are generally aligned on this challenge. The inadequacy of credit institutions to meet
MSEs' needs received a mean score of 3.70. The standard deviation (0.809) indicates some dispersion in
opinions regarding this inadequacy.
Finally, the total mean scores of financial factors were 3.12 while the standard deviation was 0.9316. It
implies that MSEs owners were faced financial constraints both at start-up phases and after their
establishment indicated in an average mean difference of related problems found full of agreement
among members of operators. The data presents various perceptions and challenges related to financial
access among MSEs. Respondents generally express concerns about collateral requirements, loan

39
application procedures, and reluctance of institutions to provide long-term credit. There is also a notable
perception of inadequacy in governmental and NGO funds to support businesses. Access to finance is
considered a major challenge. The analysis of the descriptive statistics reveals insights into the
perceptions of MSEs in SAWLA Town regarding various financial factors affecting their performance.
While there are consistent views on some factors, others exhibit a degree of variability in opinions.
These findings can serve as valuable inputs for policy and program development to enhance the
financial environment for MSEs in the region.
The research was done by (Shimelis, 2021) which factors affecting the performance of Micro and Small
Enterprises in Addis Ababa city administration, has similar conclusions on financial factors of business
performance of MSEs. In Africa, for example, the failure rate of MSEs is 85% out of 100 enterprises
due to a lack of access to capital (Lakew & Azadi, 2020).
Table 4.9: Descriptive Statistics Analysis of Workplace factors
Descriptive Statistics
N Mean Std. Deviation
The workplace we are currently working in is comfortable 271 3.06 1.096
The place where we are working now is near to the main road271 3.19 1.070
House rent is affordable 271 3.23 1.042
The government supported us workplace 271 3.35 1.112
Valid N (listwise) 271 1.08
Grand Mean = 3.2075
Source: Own Survey Data 2023
To analyze and interpret the descriptive analysis of workplace factors of Micro and Small Enterprises
(MSEs) in Table 4.9 above using a 5-point Likert scale, the mean value of The workplace we are
currently working in is comfortable is 3.06 and Standard Deviation is 1.096. This item is measuring the
perceived comfort level of the current workplace. On average, respondents rated the comfort as 3.06 on
a scale where higher values indicate higher comfort. The standard deviation of 1.096 indicates that there
is some variability in the responses, suggesting that opinions on workplace comfort vary among the
respondents. The place where we are working now is near to the main road Mean value is 3.19 and
Standard Deviation is 1.070. This item is assessing the proximity of the workplace to the main road. The
mean rating is 3.19, indicating that, on average; respondents consider the workplace to be somewhat
near the main road. The standard deviation of 1.070 suggests moderate variability in the responses,
implying that while there is a general consensus, some respondents might have rated it differently.
About the affordability of house rent to respondents the mean is 3.23 and Standard Deviation 1.042.

40
This item gauges the affordability of house rent. The mean rating of 3.23 suggests that, on average,
respondents find the house rent to be moderately affordable. The standard deviation of 1.042 indicates
some variability in opinions, meaning that there are differences in how respondents perceive the
affordability of house rent. The government supported us workplace the respondents mean is 3.35 and
Standard Deviation 1.112. This item evaluates whether respondents perceive government support for
their workplace. The mean rating is 3.35, indicating that, on average; respondents feel that the
government supports their workplace to some extent. The standard deviation of 1.112 signifies that there
is notable variability in opinions among respondents. The Grand Mean is 3.2075, this is the overall mean
calculated across all the items. It is the average of the mean ratings for each item. The value 3.2075
represents the average response across all items in the dataset.
In summary, the descriptive statistics provide insights into how respondents perceive different aspects of
their workplace environment. The means, standard deviations, and valid N values help you understand
the central tendencies and variability of responses for each item. The grand mean provides an overall
average assessment of the workplace environment
However, the respondents had varying opinions on the extent to which working place or working place
factor have on the businesses as evidenced by the significant value of varying standard deviation. MSEs
can benefit from proximity to industrial zones (Asefa, 2014). The issue of land provision and the land
lease system has greatly constrained the chances of micro, small and medium enterprises who aspire to
startup businesses (Eshetu & mamo, 2009).
Table 4.10 Descriptive Statistic analysis of Infrastructure Factors
Descriptive Statistics

N Mean Std. Deviation

Adequate road access in my business area. 271 2.43 .899

Technological support from a micro and small institute 271 2.28 .818

There is Sufficient electricity supply in my business area 271 2.39 .883

There is Sufficient and quick transportation service 271 2.04 .604

There are appropriate working materials such as types of machinery 271 2.24 .702
and other types of equipment for my business.

Valid N (listwise) Grand mean = 2.276 271

Source: Own Survey Data 2023

41
As indicated in the above table, shows the results of a descriptive analysis of infrastructure factors for
micro and small enterprises (MSEs) using a 5-point Likert scale. Descriptive Statistics Report on
Infrastructure Factors of MSEs in Sawla Town: This report analyzes the descriptive statistics of various
infrastructure factors affecting Micro and Small Enterprises (MSEs) in Sawla Town. The data provides
insights into the perceptions of business owners regarding the state of infrastructure in the area. The
analyzed factors include adequate road access, technological support from institutes, sufficient
electricity supply, quick transportation service, and availability of appropriate working materials. The
statistics include the number of responses (N), the mean, and the standard deviation for each factor. The
mean of adequate road access in my business area; is 2.43 and Standard Deviation is 0.899.
Interpretation: On average, respondents rated the adequacy of road access in their business area as 2.43
on a scale of 1 to 5. The relatively high standard deviation of 0.899 indicates a notable variation in
responses, suggesting differing opinions on road access among business owners. Technological support
from a micro and small institute; mean value is 2.28 and Standard Deviation: 0.818. Interpretation:
Respondents, on average, reported a moderate level of technological support from micro and small
institutes, with a mean score of 2.28. The standard deviation of 0.818 suggests a moderate degree of
variability in perceptions regarding technological support. While the mean of “there is sufficient
electricity supply in my business area” is 2.39 and Standard Deviation is 0.883. Interpretation: The
average rating for the sufficiency of electricity supply in the business area was 2.39. The standard
deviation of 0.883 indicates a notable range of opinions, possibly due to differences in experiences with
electricity availability. There is Sufficient and quick transportation service; mean is 2.04 and Standard
Deviation: 0.604. Interpretation: Respondents indicated a moderate level of agreement (mean = 2.04)
regarding the presence of sufficient and quick transportation services. The relatively low standard
deviation of 0.604 suggests a relatively consistent opinion among business owners in this aspect. The
mean value of “There are appropriate working materials such as types of machinery and other types of
equipment for my business” is 2.24 and Standard Deviation: 0.702. Interpretation: On average,
respondents reported a moderate level of agreement (mean = 2.24) regarding the availability of
appropriate working materials such as machinery and equipment. The standard deviation of 0.702
indicates some variation in perceptions. The grand mean across all five infrastructure factors was
calculated to be 2.276, suggesting a moderately positive overall perception of infrastructure factors
among MSEs in Sawla Town. The standard deviations for each factor highlight varying degrees of

42
agreement among respondents, indicating that certain factors, such as transportation service, received
more consistent opinions than others, like road access.
In conclusion, the finding of the study shows that there is a higher problem of physical infrastructure
facilities that are not adequately established and expanded in the study area to meet the growing demand
for MSEs activities. Conferring to a similar survey ( Shimelis 2021 and Mezgebe, 2012), most MSEs
face issues with their business premises, such as rising housing rents and a lack of basic amenities like
telephone lines, power, sewerage, and water. According to the Commission on Legal Empowerment of
the (Mulugeta, 2014), though not directly linked, the inadequacy of infrastructure (road, banking service,
electricity, telecommunication, and other services in facilitating the smooth operation of private
investment are serious impediments. This analysis provides valuable insights into areas that might need
improvement to support the growth and success of MSEs in the region. Further analysis and targeted
interventions can be undertaken based on these findings to address specific infrastructure challenges
faced by MSEs.
Table 4.11: Descriptive Statistics Analysis of Marketing Factors
Descriptive Statistics
N Mean Std. Deviation
Inadequate market for my product 271 3.88 .766
Searching new market is too difficult 271 3.85 .599
Lack of establishing a market network 271 3.86 .558
Lack of market information 271 3.80 .653
Poor customer relationship and handling 271 3.68 .801
Lack of promotion to attract potential users 271 3.80 .649
Valid N (listwise) 271
Grand mean = 3.81
Source: Own Survey Data 2023
Based on the above table 4.11, I have a descriptive analysis of marketing factors for Micro and Small
Enterprises (MSEs) using a 5-point Likert scale. The Likert scale ranges from 1 (Strongly Disagree) to 5
(Strongly Agree). Sure, let's analyze and interpret the descriptive statistics for the marketing factors that
affect Micro and Small Enterprises (MSEs) in Sawla town. The data you've provided is based on a 5-
point Likert scale, where participants were asked to rate various factors related to marketing. Here's an
interpretation of the descriptive statistics: Mean value of “Inadequate market for my product” is 3.88 and
Standard Deviation: 0.766. Interpretation: The average response for this factor is relatively high;
indicating that participants generally perceive that there is a significant issue with the adequacy of the
market for their products. The relatively low standard deviation suggests that responses are clustered
around the mean, indicating a consistent perception among the respondents. Searching new markets is

43
too difficult; mean value is 3.85 and Standard Deviation: 0.599. Interpretation: Participants, on average,
have indicated that they find searching for new markets to be quite challenging. The lower standard
deviation suggests a relatively consistent agreement among respondents about the difficulty of finding
new markets. The mean value of “Lack of establishing a market network” is 3.86 and Std. Deviation:
0.558. Interpretation: The average response suggests that participants perceive a significant barrier in
terms of establishing a market network. The low standard deviation indicates that the majority of
respondents share a similar viewpoint on this matter. Lack of market information; mean is 3.80 and Std.
Deviation: 0.653. Interpretation: Participants, on average, indicate a perception of insufficient market
information. The standard deviation suggests that there might be some variation in responses, but the
majority seem to share a similar sentiment. Poor customer relationship and handling; mean is 3.68 and
Std. Deviation: 0.801. Interpretation: The average response indicates that participants perceive there to
be some level of problem with poor customer relationship and handling. The relatively high standard
deviation suggests that opinions might vary more widely on this factor compared to others. The mean
value of “Lack of promotion to attract potential users” is 3.80 and Std. Deviation: 0.649. Interpretation:
The average response suggests that participants see a lack of promotion as a barrier to attracting
potential users. The standard deviation indicates a moderate level of agreement among respondents.
The grand mean of 3.81 indicates that, on average, the participants perceive marketing-related
challenges in the MSEs of Sawla town. The consistency in means across most factors suggests a shared
viewpoint among respondents, with a relatively low to moderate level of variation in their responses.
However, the factor of "Poor Customer Relationship and Handling" stands out with a somewhat higher
standard deviation, indicating more diverse opinions about this issue.
In conclusion, the descriptive analysis provides valuable insights into the marketing factors that Micro
and Small Enterprises (MSEs) perceive as important challenges. The results highlight specific areas
where businesses might need to focus on improving their marketing strategies and operations to
overcome the identified issues. For instance, addressing inadequate markets, difficulties in searching for
new markets, and improving customer relationships could lead to better market positioning and growth
opportunities for MSEs.

44
Table 4.12: Descriptive Statistics Analysis of Internal Management Factors
Descriptive Statistics
N Mean Std. Deviation
There is clear division of duties and responsibility among employees 271 2.36 .803
There is well organization and effective communication 271 2.34 .810
Good selection of associates in business 271 2.42 .873
There is well trained and experienced employees 271 2.44 .867
Affordable and accessible training facilities 271 2.34 .822
There is strategic business planning 271 2.24 .715
There is Sound financial management system in our enterprise 271 2.26 .790
Valid N (listwise) 271
Grand mean = 2.34

Source: Own Survey Data 2023

From the above table 4.12.The descriptive analysis presents data on the internal management factors of
Micro and Small Enterprises (MSEs) using a 5-point Likert scale. Certainly, I can help you analyze and
interpret the descriptive statistics for the Internal Management factors of Micro and Small Enterprises
(MSEs) in Sawla Town, based on a 5-point Likert scale. The data you provided includes the sample size
(N), the mean, and the standard deviation for each factor. Let's break down the analysis: Clear Division
of Duties and Responsibility (Mean = 2.36, Std. Dev. = 0.803). The mean of 2.36 suggests that, on
average, respondents have a slightly positive perception of the existence of clear division of duties and
responsibility among employees in MSEs. The standard deviation of 0.803 indicates that the responses
are somewhat spread out around the mean. This factor seems to have a relatively moderate level of
agreement among respondents. Well Organization and Effective Communication (Mean = 2.34, Std.
Dev. = 0.810). The mean of 2.34 indicates that respondents, on average, perceive the level of
organization and effective communication within MSEs as slightly positive. The standard deviation of
0.810 suggests some variability in responses, but it is still relatively close to the mean. This factor also
shows a moderate level of agreement among respondents. Good Selection of Associates in Business
(Mean = 2.42, Std. Dev. = 0.873). With a mean of 2.42, respondents tend to have a slightly positive view
regarding the selection of associates in business within MSEs. The standard deviation of 0.873 suggests
a bit more variability in responses compared to the previous factors. Overall, there seems to be a
moderate level of agreement among respondents for this factor. Well Trained and Experienced
Employees (Mean = 2.44, Std. Dev. = 0.867). Respondents, on average, have a slightly positive
perception of having well-trained and experienced employees in MSEs, as indicated by the mean of
2.44. The standard deviation of 0.867 suggests a moderate amount of variability in responses. There
45
appears to be a moderate level of agreement among respondents for this factor. Affordable and
Accessible Training Facilities (Mean = 2.34, Std. Dev. = 0.822). The mean of 2.34 suggests that
respondents perceive the availability of affordable and accessible training facilities in a slightly positive
light. The standard deviation of 0.822 indicates a moderate level of variability in responses. There seems
to be a moderate level of agreement among respondents for this factor. Strategic Business Planning
(Mean = 2.24, Std. Dev. = 0.715). Respondents, on average, have a somewhat positive perception of the
existence of strategic business planning in MSEs, as shown by the mean of 2.24. The lower standard
deviation of 0.715 indicates that responses are less spread out compared to some other factors. There is a
moderate level of agreement among respondents for this factor. Sound Financial Management System
(Mean = 2.26, Std. Dev. = 0.790). The mean of 2.26 suggests that respondents perceive the presence of
a sound financial management system in MSEs in a slightly positive manner. The standard deviation of
0.790 indicates moderate variability in responses. There is a moderate level of agreement among
respondents for this factor. Grand Mean: 2.34; The grand mean of 2.34 is the average of all the mean
values for the individual factors. This value is quite consistent with the individual means, suggesting
that, on average, respondents have a slightly positive perception of the internal management factors
within MSEs in Sawla Town.
In summary, based on the provided data, it appears that respondents generally have a slightly positive
perception of the internal management factors of MSEs in Sawla Town. The factors show moderate
levels of agreement among respondents, with some variability in responses indicated by the standard
deviations. Keep in mind that further analysis or context might be needed to make more concrete
conclusions or recommendations.
Table 4.13: Descriptive Statistics Analysis of Entrepreneurial Skill Factors
Descriptive Statistics
N Mean Std. Deviation
Motivation and drive to change 271 2.66 .952
Tolerance to work hard 271 2.54 .949
Persistence and courage to take responsibility for one’s failure 271 2.50 .914
Initiative to assess ones strengths and weakness 271 2.54 .905
Full of information to exploit business opportunities 271 2.58 .935
Valid N (listwise) 271
Grand mean = 2.56

Source: Own Survey data 2023

46
In this descriptive analysis of entrepreneurship skill factors of Micro and Small Enterprises (MSEs)
using a 5-point Likert scale, we have data on five different factors. Each factor is measured on a scale
from 1 to 5, with higher values indicating stronger agreement with the statements related to that factor.
The average score for "Motivation and drive to change" is approximately 2.66. The standard deviation of
0.952 suggests that the responses are somewhat dispersed around the mean. This factor has a relatively
higher mean of 2.66, indicating that on average, the respondents showed a moderate level of motivation
and drive to change within the MSEs in Sawla Town. The standard deviation of 0.952 suggests that the
responses were somewhat spread out around the mean, implying a certain degree of variability in the
levels of motivation among the respondents. The average score for "Tolerance to work hard" is about
2.54. The standard deviation of 0.949 suggests that there is considerable variation in responses regarding
this factor. The mean of 2.54 indicates a moderate level of tolerance to work hard among the MSEs in
Sawla Town. The standard deviation of 0.949 suggests that there was a noticeable range of responses,
implying that some respondents may have reported relatively higher tolerance levels while others
reported lower levels. The average score for "Persistence and courage to take responsibility for one’s
failure" is around 2.50. The standard deviation of 0.914 indicates that responses are somewhat close to
the mean, suggesting that most respondents may have expressed similar opinions on this factor. The
mean of 2.50 suggests a moderate level of persistence and courage to take responsibility for one's failure
within the MSEs in Sawla Town. The standard deviation of 0.914 indicates that there was some
variability in responses, suggesting differing attitudes toward failure and responsibility among the
respondents. The average score for "Initiative to assess one's strengths and weakness" is about 2.54. The
standard deviation of 0.905 indicates that there is a moderate level of variability in responses regarding
this factor. The mean of 2.54 suggests a moderate level of initiative to assess strengths and weaknesses
among the MSEs in Sawla Town. The standard deviation of 0.905 indicates that there was variability in
how respondents approached self-assessment. The mean of 2.58 suggests that, on average, the
respondents perceived themselves as having a moderate level of information to exploit business
opportunities within the MSEs. The standard deviation of 0.935 indicates variability in the respondents'
perceptions regarding their information levels. The grand mean is the average of the means of all the
factors and serves as an overall measure of the entrepreneurial skill factors. In this case, the grand mean
of 2.56 suggests that, on average, the MSEs in Sawla Town displayed a moderate level of
entrepreneurial skill factors based on the Likert scale responses.

47
 Overall, based on table 4.13, it can be inferred that the MSEs in Sawla Town generally show a moderate
level of various entrepreneurial skills, such as motivation, tolerance for hard work, persistence,
initiative, and access to information for exploiting business opportunities. The variability in responses
indicates that there is diversity in how these skills are perceived and practiced among the enterprises.
Table 4.14: Descriptive Statistics Analysis of MSEs Performance
Descriptive Statistics
N Mean Std. Deviation
My business profit is in a good position 271 1.79 .527
My business profit is increased from time to time 271 1.85 .490
My business has the potential to grow/expand 271 2.00 .333
The level of my business productivity is increased from time to time. 271 2.04 .270
I am satisfied with the growth of my business productivity. 271 2.04 .270
My business can provide verities of product/ service to care for the need of all types of customers 271 2.04 .270
Our business market share is highly increased in the last three years 271 2.04 .270
Our company can change the market or lead customers‟ needs in new directions. 271 1.85 .490
Valid N (listwise) Grand mean = 1.96 271
Source: Own Survey Data, 2023
From the study result Table 4.14 descriptive statistics analyzing the performance of MSE’s SAWLA
Town which their Profitability, productivity, and market share found lower indicated in a mean
difference of 1.96 depicted in standard deviations of 0.49. The result shows that the mean score was low
and their business profitability, productivity, and market share were poor. This was mainly due to many
reasons such as financial factors, infrastructural factors, Marketing Factors, workplace factors, internal
Management Factors and Entrepreneurship skills factors that hamper performance and growth of MSEs
and are affected by multiple factors that inhibited the sector. Due to these reasons, the performance of
MSE in Sub-Saharan Africa (SSA) is far 42 below that of the other developing countries in comparison.
The study by (Amare Habtemeskel., 2019) confirmed that the failure rate of MSEs in SSA was high.

4.4.2. Correlation analysis

Correlation analysis determines to explore the strength as well as the direction of the relationship
between the study variables specifically, Access to Finance factors, Workplace Factors, infrastructural
factors, Marketing factors, Enterprise Internal Management Factors and Entrepreneurship skill Factors
(independent variables), and performance of Micro and Small Enterprises (MSEs) which is the
dependent variable. The researcher was used Pearson’s production movement correlation coefficient-
Pearson’s r. According to (Chee & Queen, 2016) Pearson’s r is a measure of the linear relationship
between two interval or ratio variables and can have a value between -1 and 1. The benefit of using
48
 Pearson’s r is, it is a simple way to assess the association between two variables. Whether they share
valiance, if the relationship is positive or negative, and the degree to which they correlate. In this study,
Pearson’s product-moment correlation coefficient- Persons r was used to determine the independent and
dependent variables.

Table 4.15: Correlation between dependent and independent variables /N=271/

Correlations
1 2 3 4 5 6 7
**
1. Performance of Pearson Correlation 1 .703 .524** -.764** .789** -.680** .439*
MSEs Sig. (2-tailed) .000 .000 .000 .000 .000 .001
N 271 271 271 271 271 271 271
**
2. Access to Finance Pearson Correlation .703 1 -.427** -.225** .260** -.137* .504**
Factors Sig. (2-tailed) .000 .000 .000 .000 .024 .000
N 271 271 271 271 271 271 271
** **
3. Workplace Pearson Correlation .524 -.427 1 -.040 .093 -.174** -.529**
Factors Sig. (2-tailed) .000 .000 .515 .128 .004 .000
N 271 271 271 271 271 271 271
** **
4. Infrastructure Pearson Correlation -.764 -.225 -.040 1 -.326** .427** .106
Factors Sig. (2-tailed) .000 .000 .515 .000 .000 .082
N 271 271 271 271 271 271 271
** **
5. Marketing Pearson Correlation .789 .260 .093 -.326** 1 -.426** -.212**
Factors Sig. (2-tailed) .000 .000 .128 .000 .000 .000
N 271 271 271 271 271 271 271
**
6. Enterprise Internal Pearson Correlation -.680 -.137 -.174**
*
.427** -.426** 1 .261**
Management Sig. (2-tailed) .000 .024 .004 .000 .000 .000
Factors N 271 271 271 271 271 271 271
*
7. Entrepreneurship Pearson Correlation .439 .504 -.529**
**
.106 -.212** .261** 1
Skill Factors Sig. (2-tailed) .001 .000 .000 .082 .000 .000
N 271 271 271 271 271 271 271
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Source: Own Survey Data 2023

The result from the above table shown that the correlation analyses among all constructs for the
performance of MSE‟s. The result tells that there are significant positive correlations between access to
finance factors, work place problem, infrastructure problems, Market problems, enterprise internal

49
management factors and entrepreneurship skill factors and MSEs performance factors which is β =
0.703, 0.524, - 0.764, 0.789, - 0.680, and 0.439 respectively.

According to Hutcheson (2011) and Daniel (2014), if r is close to 1, the two variables have a strong
association. This indicates whether changes in one variable are strongly correlated with changes in the
other variable or whether the problem of Multicollinearity exists.

The correlation analysis conducted in this study aimed to examine the relationships between various
factors affecting the performance of Micro and Small Enterprises (MSEs) in the context of SAWLA
Town administration. The factors under consideration include Access to Finance, Workplace Factors,
Infrastructure Factors, Marketing Factors, Enterprise Internal Management Factors, and
Entrepreneurship Skill Factors. The correlations were assessed using Pearson's correlation coefficient,
and the results are presented in the correlation matrix.

Performance of MSEs vs. Other Factors; The correlation coefficient between the "Performance of
MSEs" and the other factors reveals interesting insights. The performance of MSEs demonstrates
significant positive correlations with "Access to Finance" (r = 0.703, p < 0.01), "Marketing Factors" (r =
0.789, p < 0.01), and "Enterprise Internal Management Factors" (r = 0.680, p < 0.01). This suggests that
as access to finance, effective marketing strategies, and strong internal management practices improve,
the performance of MSEs tends to increase. Conversely, the performance of MSEs displays significant
negative correlations with "Workplace Factors" (r = -0.524, p < 0.01), "Infrastructure Factors" (r = -
0.764, p < 0.01), and "Entrepreneurship Skill Factors" (r = -0.439, p < 0.05). These negative correlations
indicate that suboptimal workplace conditions, inadequate infrastructure, and weaker entrepreneurship
skills are associated with lower MSE performance.

Inter-factor Correlations: When examining the inter-factor correlations, several noteworthy

associations emerge. "Access to Finance" and "Marketing Factors" exhibit a positive correlation (r =
0.260, p < 0.01), suggesting that improved access to finance can facilitate better marketing efforts. On
the other hand, "Workplace Factors" and "Infrastructure Factors" show a negative correlation (r = -
0.326, p < 0.01), implying that challenges in infrastructure may affect workplace conditions. "Enterprise
Internal Management Factors" and "Entrepreneurship Skill Factors" also display a positive correlation (r
= 0.261, p < 0.01), indicating that effective internal management practices are linked to stronger
entrepreneurship skills.

50
This study presents the findings of a correlation analysis conducted to understand the relationships
between various factors affecting the performance of Micro and Small Enterprises (MSEs) within the
SAWLA Town administration. The study aims to provide insights into the correlations between the
performance of MSEs and factors such as Access to Finance, Workplace Factors, Infrastructure Factors,
Marketing Factors, Enterprise Internal Management Factors, and Entrepreneurship Skill Factors.

The data for this study were collected from 271 MSEs operating within the SAWLA Town
administration. Pearson's correlation coefficient was utilized to quantify the strength and direction of the
relationships between the performance of MSEs and the aforementioned factors. Correlation
significance levels were set at p < 0.05 and p < 0.01.

The analysis revealed significant correlations between the performance of MSEs and various factors.
Notably, the positive correlations with "Access to Finance" (r = 0.703, p < 0.01), "Marketing Factors" (r
= 0.789, p < 0.01), and "Enterprise Internal Management Factors" (r = 0.680, p < 0.01) emphasize the
importance of these factors in enhancing MSE performance. Conversely, negative correlations with
"Workplace Factors" (r = -0.524, p < 0.01), "Infrastructure Factors" (r = -0.764, p < 0.01), and
"Entrepreneurship Skill Factors" (r = -0.439, p < 0.05) underscore the adverse impact of suboptimal
workplace conditions, inadequate infrastructure, and weaker entrepreneurship skills on MSE
performance.

Based on the analysis of the correlation matrix, the following conclusions can be drawn regarding the
factors affecting the performance of MSEs in SAWLA Town: “Access to Finance”, “Marketing
Factors”, and “Entrepreneurship Skill Factors” show strong positive correlations with MSE
performance. This suggests that improved financial access, effective marketing strategies, and strong
entrepreneurial skills are crucial for enhancing MSE performance. “Workplace Factors” demonstrate a
moderate positive correlation with MSE performance, indicating that creating a conducive work
environment can contribute to better performance.

Conversely, “Infrastructure Factors” and “Enterprise Internal Management Factors” show strong
negative correlations with MSE performance. This highlights the importance of adequate infrastructure
and effective internal management practices to prevent hindrances to MSE performance.

In summary, the analysis indicates that various factors are interrelated and have different strengths of
correlation with the performance of MSEs in SAWLA Town administration. Access to finance,

51
workplace conditions, marketing efforts, entrepreneurship skills, and internal management are among
the key factors influencing MSE performance. Infrastructure factors have mixed correlations, and some
factors, like enterprise internal management, show negative associations with performance, suggesting
that addressing these areas could potentially improve MSE performance in the town. These results
suggest that there are statistically significant relationships between the performance of MSEs and the
mentioned factors.

4.4.3. Multiple Regression Analysis

Model 1: total regressions analysis of demographic and independent variables on PMSEs.

Table: 4.16. Model Summary

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .872a .760 .717 .26108

a. Predictors: (Constant), Entrepreneurship Skill Factors, Infrastructure Factors,

Marketing Factors, Workplace Factors, Enterprise Internal Management
Factors, Access to Finance Factors

Source: Own Survey Data 2023,

The given regression analysis aims to understand the factors that affect the performance of Micro and
Small Enterprises (MSEs). Let's interpret the key statistics presented in the Model Summary:

R (Multiple Correlation Coefficient): The R value, also known as the multiple correlation coefficients,
represents the strength and direction of the relationship between the dependent variable (MSEs'
performance) and the combination of independent variables (predictors) included in the model. In this
case, the value of R is 0.872. The range of the correlation coefficient is -1 to +1. A positive value
indicates a positive relationship, while a negative value indicates a negative relationship. The closer the
R value is to 1, the stronger the relationship. R Square (Coefficient of Determination): The R Square
value measures the proportion of variance in the dependent variable (MSEs' performance) that can be
explained by the independent variables (predictors) in the model. It is calculated by squaring the
multiple correlation coefficients (R). In this case, the R Square value is 0.760, which means that
approximately 76% of the variance in MSEs' performance can be explained by the included predictors.
Adjusted R Square: The Adjusted R Square adjusts the R Square value for the number of predictors in

52
the model. It penalizes the inclusion of irrelevant predictors to prevent over fitting. The Adjusted R
Square value is 0.717, which suggests that around 71.7% of the variance in MSEs' performance is
explained by the predictors after considering the model's complexity. Std. Error of the Estimate: This
represents the average difference between the observed values of the dependent variable (MSEs'
performance) and the predicted values from the regression model. It measures the accuracy of the
predictions made by the model. In this case, the Std. Error of the Estimate is 0.26108.

Entrepreneurship skill Factors: This predictor likely refers to the entrepreneurial skills possessed by the
MSE owners or managers. It could include attributes such as innovation, risk-taking ability, leadership,
and adaptability. Infrastructure Factors: This predictor may indicate the impact of infrastructure on MSE
performance, such as access to reliable utilities, transportation, and communication networks. Access to
Finance Factors: This predictor likely assesses the influence of financial accessibility on MSE
performance, including access to loans, credit, and financial resources. Workplace Factors: This
predictor might refer to factors related to the workplace environment, such as employee satisfaction,
safety, and work-life balance. Internal Management Factors: This predictor could involve aspects of
internal management, such as organizational structure, decision-making processes, and efficiency.
Marketing Factors: This predictor probably explores the effects of marketing strategies and efforts on
MSE performance, including advertising, branding, and customer outreach.

Overall, the regression model appears to be reasonably effective in explaining the variation in MSEs'
performance, as indicated by the moderate-to-strong R and R Square values. However, further
interpretation would require examining the individual coefficients, p-values, and other diagnostic
statistics to assess the significance and reliability of each predictor's impact on MSEs' performance.
Additionally, considerations such as multicollinearity, homoscedasticity, and normality should be
evaluated to ensure the model's validity.

53
Table: 4.17. ANOVA Result

ANOVAa

Sum of
Model Squares Df Mean Square F Sig.

1 Regression 7.080 6 1.180 17.311 .000b

Residual 17.995 264 .068

Total 25.076 270

a. Dependent Variable: Performance of MSEs

b. Predictors: (Constant), Entrepreneurship Skill Factors, Infrastructure Factors,

Marketing Factors, Workplace Factors, Enterprise Internal Management Factors,
Access to Finance Factors

Source: Own Survey Study Data, 2023

In the given ANOVA table, we have information about the factors that affect the performance of Micro
and Small Enterprises (MSEs) in the study area. ANOVA (Analysis of Variance) is a statistical method
used to analyze the differences between group means and determine if these differences are statistically
significant.

The ANOVA results show that there is a significant relationship between the performance of MSEs
(dependent variable) and the predictors: Entrepreneurship skill Factors, Infrastructure Factors, Access to
Finance Factors, Workplace Factors, Internal Management Factors, and Marketing Factors. The model's
F-value of 17.311 is highly significant (p < 0.05), indicating that the overall regression model explains a
significant amount of variability in the performance of MSEs in the study area.

The coefficients of the predictors can provide further insights into the direction and magnitude of their
impact on MSEs' performance. Additionally, other statistical measures like R-squared can be used to
determine the proportion of variance in the dependent variable explained by the predictors.

In summary, the ANOVA results suggest that the identified factors (entrepreneurship skills,
infrastructure, Access to finance, workplace conditions, internal management, and marketing) have a
statistically significant impact on the performance of MSEs in the study area. Further analysis of the
regression coefficients and other relevant statistics would help in understanding the specific contribution
of each factor and their practical implications.

54
Table: 4.18. Coefficientsa

Coefficientsa

Unstandardized Standardized
Coefficients Coefficients

Model B Std. Error Beta T Sig.

1 (Constant) 2.12 .360 5.87 .000

Access to Finance Factors .396 .064 .354 4.625 .000

Workplace Factors .296 .040 .366 4.948 .000

Infrastructure Factors .259 .046 .095 1.276 .002

Marketing Factors .317 .059 .101 1.299 .001

Internal Management Factors .150 .055 .207 2.713 .008

Entrepreneurship skill Factors .186 .052 .281 3.583 .000

a. Dependent Variable: Performance of MSEs

Source: Own Survey Data 2023

To interpret the coefficient research data on factors affecting the performance of Micro and Small
Enterprises (MSEs) in Sawla Town Administration, we have a regression model with the dependent
variable being "Performance of MSEs." The independent variables, or factors, that are studied are
"Access to Finance Factors," "Workplace Factors," "Infrastructure Factors," "Marketing Factors,"
"Internal Management Factors," and "Entrepreneurship Skill Factors." The coefficients table sought to
identify which predictors are significant contributors to the 71.7% of explained variance in Y (i.e., R2
=0.717) and which have the significant ones help strongly to explain Y-intercept established regression
equation was:

Y =2.12 β 0+0.396 β 1+ 0.296 β 2+0.259 β 3+ 0.317 β 4+0.150 β 5+0.186 β 6 … … … … … … … .+∑

The regression equation above has established that holding all influence indicator variable (factors
financial factors, Infrastructural factors, Institutional coordination, and Access to business information
service of MSE‟s) but, constant show to l performance of MSE‟s determined by negative 71.7% shows
the coefficient probability of indications starts from the scratch. The unstandardized coefficients of the
determination under the B column in the above table were used to substitute the unknown beta values of

55
the regression model. The beta values indicated the direction of the relationship. A positive or negative
sign indicates the nature of the relationship. The significant values (p-value) under the significance
column indicate the statistical significance of the relationship of the probability of the model giving a
wrong prediction. Constant: The constant (intercept) value in the model is 2.12. This value represents
the estimated Performance of MSEs when all the independent variables are zero. In this case, it suggests
that even when all the factors have no influence (value of zero), the MSEs' performance is estimated to
be 2.12. The significance level (Sig.) of 0.000 indicates that this constant value is statistically
significant. Access to Finance Factors: The coefficient for Access to Finance Factors is 0.396. This
coefficient represents the change in the Performance of MSEs for each one-unit change in the Access to
Finance Factors, keeping all other variables constant. The standardized coefficient (Beta) of 0.354
suggests that Access to Finance Factors has a moderately strong positive effect on MSEs' performance.
The t-value of 4.625 and a significance level of 0.000 indicate that this factor is statistically significant
in influencing MSEs' performance. Workplace Factors: The coefficient for Workplace Factors is 0.296.
This indicates that for each one-unit change in Workplace Factors, the Performance of MSEs is expected
to increase by 0.296 units, assuming all other factors remain constant. The standardized coefficient
(Beta) of 0.366 suggests a moderately strong positive relationship between Workplace Factors and
MSEs' performance. The t-value of 4.948 and a significance level of 0.000 indicate that this factor is
statistically significant. Infrastructure Factors: The coefficient for Infrastructure Factors is 0.259. This
means that a one-unit change in Infrastructure Factors is associated with a 0.259-unit change in MSEs'
performance, holding all other variables constant. The standardized coefficient (Beta) of 0.095 suggests
a weak positive effect of Infrastructure Factors on MSEs' performance. The t-value of 1.276 and a
significance level of 0.002 indicate that this factor is statistically significant. Marketing Factors: The
coefficient for Marketing Factors is 0.317. This implies that a one-unit change in Marketing Factors is
associated with a 0.317-unit change in MSEs' performance, with other variables held constant. The
standardized coefficient (Beta) of 0.101 indicates a weak positive relationship between Marketing
Factors and MSEs' performance. The t-value of 1.299 and a significance level of 0.001 suggest that this
factor is statistically significant. Internal Management Factors: The coefficient for Internal Management
Factors is 0.150. This means that a one-unit change in Internal Management Factors is associated with a
0.150-unit change in MSEs' performance, keeping other factors constant. The standardized coefficient
(Beta) of 0.207 suggests a weak positive effect of Internal Management Factors on MSEs' performance.
The t-value of 2.713 and a significance level of 0.008 indicate that this factor is statistically significant.

56
Entrepreneurship Skill Factors: The coefficient for Entrepreneurship Skill Factors is 0.186. This implies
that a one-unit change in Entrepreneurship Skill Factors is associated with a 0.186-unit change in MSEs'
performance, holding all other variables constant. The standardized coefficient (Beta) of 0.281 indicates
a moderate positive relationship between Entrepreneurship Skill Factors and MSEs' performance. The t-
value of 3.583 and a significance level of 0.000 suggest that this factor is statistically significant.

In summary, all the predictor variables (Access to Finance Factors, Workplace Factors, Infrastructure
Factors, Marketing Factors, Internal Management Factors, and Entrepreneurship Skill Factors) show
statistically significant relationships with the MSE performance.

57
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5.1. INTRODUCTION
In this chapter the conclusions and recommendations are discussed. For clarity purpose, the conclusions
are based on the research objectives of the study. Based on the findings of the study recommendations
are made to government bodies, to operators of MSEs and suggestion for other researchers.

5.2. Summary of findings

Concerning accesses to finance factors have a positive impact on the performance of MSEs. For every
one-unit increase in access to finance, the performance of MSEs is estimated to increase by 0.396 units.
This relationship is statistically significant since the p-value is less than 0.001, indicating strong
evidence that the relationship is not due to random chance. These findings are supported by (Shimelis,
2021), adequate financing access of a major positive impact on MSE, and if there is not enough access
to finance, micro and small enterprises would struggle to survive. Similarly, Hailemichael (2014)
argument also supported the finding of this study, that access to finance plays a vital role in employment
creation, and general contribution to economic growth.

On the other hand, Workplace factors have a positive impact on the performance of MSEs. For every
one-unit increase in workplace factors, the performance of MSEs is estimated to increase by 0.296 units.
This relationship is statistically significant (p < 0.001), suggesting that workplace factors play a crucial
role in enhancing MSE performance.

Infrastructure factors have a positive impact on the performance of MSEs, but the effect size is relatively
smaller compared to other factors. For every one-unit increase in infrastructure factors, the performance
of MSEs is estimated to increase by 0.259 units. Although statistically significant (p < 0.05), the effect
size is not as strong as access to finance or workplace factors. These findings are also supported by
(Shimelis, 2021) that the availability of infrastructure to micro and small enterprises (MSEs) operators
was relevant to their business performance. Having enough access to infrastructure helps them to change
their profitability, productivity and to be competitive in the market.

Marketing factors have a positive impact on the performance of MSEs, but like infrastructure factors,
the effect size is relatively smaller compared to access to finance and workplace factors. For every one-

58
unit increase in marketing factors, the performance of MSEs is estimated to increase by 0.317 units. This
relationship is statistically significant (p < 0.001). The finding of this study is supported by Hailemichael
(2014). According to his finding, Workplace factors and Marketing Factors plays an important role in
the performance of micro and small enterprise (MSEs) businesses

Internal management factors have a positive impact on the performance of MSEs. For every one-unit
increase in internal management factors, the performance of MSEs is estimated to increase by 0.150
units. This relationship is statistically significant (p < 0.01). The finding of this study concerning to the
internal management factors backed by Admasu Abera (2012), the main internal factors identified were
management factors which include poor selection of associates in business, lack of strategic business
planning, and costly and inaccessible training facilities.

Entrepreneurship skill factors have a positive impact on the performance of MSEs. For every one-unit
increase in entrepreneurship skill factors, the performance of MSEs is estimated to increase by 0.186
units. This relationship is statistically significant (p < 0.001).

5.3. Conclusions
Based on the finding and analysis, this research data suggests that all the factors mentioned (access to
finance, workplace factors, infrastructure factors, marketing factors, internal management factors, and
entrepreneurship skill factors) have a positive impact on the performance of MSEs in Sawla Town
Administration. However, the magnitudes of the effects differ, with access to finance, workplace factors,
and entrepreneurship skill factors having relatively larger effects compared to the other factors.

Based on the analysis of the coefficients, we can draw the following conclusions Access to Finance
Factors and Workplace Factors has a significant positive impact on the performance of MSEs in Sawla
Town Administration. The larger standardized coefficients suggest that these factors play a more critical
role in determining MSEs' performance compared to other factors.

Infrastructure Factors and Marketing Factors also have a positive impact on MSEs' performance, but
their effect is relatively weaker, as indicated by their smaller standardized coefficients.

Internal Management Factors and Entrepreneurship Skill Factors have significant positive effects on
MSEs' performance, with intermediate levels of impact compared to the previously mentioned factors.

59
Overall, the findings suggest that improving access to finance, workplace conditions, internal
management, and entrepreneurship skills can contribute to enhancing the performance of MSEs in Sawla
Town Administration. Policymakers and stakeholders should focus on addressing these factors to
promote the growth and success of MSEs in the region. However, it's essential to keep in mind that other
unmeasured variables might also be influencing MSEs' performance, and further research and analysis
may be needed to capture their full dynamics.

5.4. Recommendations
To improve the performance of MSEs, stakeholders should focus on enhancing access to finance, which
could be achieved through better credit facilities, easier loan approvals, or financial support programs.

Improving workplace conditions, providing a conducive work environment, and addressing employee
needs can lead to enhanced MSEs' performance.

Although infrastructure improvement can contribute to MSEs' performance, it may not be the most
critical factor. Balancing resources between infrastructure and other more influential factors is
recommended.

Strengthening marketing strategies, market research, and customer engagement can contribute to better
MSEs' performance. However, other more significant factors should also be considered in improving
performance.

Focusing on improving internal management practices, such as efficient resource allocation, effective
decision-making, and streamlined processes, can positively impact MSEs' performance.

Encouraging and supporting entrepreneurship skill development among MSE owners and employees can
lead to improved performance.

In summary, the research data suggests that several factors significantly influence the performance of
MSEs in Sawla Town Administration. Among these factors, "Access to Finance," "Workplace Factors,"
and "Entrepreneurship Skill Factors" appear to have the most substantial impact on MSEs' performance.
Therefore, policymakers and stakeholders should prioritize efforts to enhance access to finance, improve
workplace conditions, and foster entrepreneurship skills to promote the growth and success of MSEs in
the region. Additionally, while infrastructure and marketing factors also play a role, their impact seems
to be relatively less significant compared to the aforementioned factors. Nevertheless, addressing

60
infrastructure and marketing-related challenges could complement the overall efforts in supporting
MSEs and further contribute to their development.

It is important to note that the research findings are based on the data available at the time of the study
and may evolve over time. Therefore, continuous monitoring and assessment of the factors influencing
MSEs' performance in Sawla Town Administration would be valuable to ensure that the interventions
remain relevant and effective.

Furthermore, collaboration between government agencies, financial institutions, business associations,

and other relevant stakeholders is essential to create conducive environment for MSEs. This
collaborative approach can lead to the design and implementation of targeted policies, training
programs, and support mechanisms to strengthen the identified factors and remove barriers hindering
MSEs' growth.

By taking a comprehensive and well-informed approach, policymakers and stakeholders can contribute
significantly to the sustainable development of MSEs in Sawla Town Administration, fostering
economic growth, job creation, and poverty reduction in the region.

61
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Appendix A

YARDSTICK INTERNATIONAL COLLEGE

ONLINE POSTGRADUATE PROGRAMS

MASTER OF BUSINESS ADMINISTRATION (MBA)

This Questionnaire is for the survey on the analysis and description of the Factors affecting
performance of Micro and Small Enterprises in GOFA ZONE SAWLA Town.

Researcher: Rahel Ermias

Dear Respondents

The main purpose of this questionnaire is to gather information about the Factors that affects the
performance of micro and small business enterprises in GOFA ZONE SAWLA Town for the partial
fulfillment of the requirements for Masters of Business Administration (MBA).

The outcome of this study will be used for academic purpose only.

Therefore, your genuine response to the questions is vital for the quality and successful completion of
the study. The accuracy of the information you provide highly determine the reliability of the study.

Thank you in advance for your unreserved cooperation!!!

Part I: Demographic profile of respondents. Please tick (√) in the appropriate box.

1. Gender Male Female

2. Age under 20 years 21-30 years 31-40 years 41-50 years over 50
years

I
 3. Marital status Single Married Divorced Widowed
4. Educational Status Read and write Elementary complete High school complete
Certificate Diploma Degree and above
5. . Work experience 0-5 6-10 11-20 21 and above
Part II

The following are some states with regards to the factors of performance to business information,
Access to finance, Working place problem, infrastructural factors, Marketing Problems, Internal
management and Entrepreneurship on the performance of micro and small enterprises on Likert scale 1
up to 5 where;

1= strongly disagree (SD) 2= disagree (D) 3= Neutral (N)

4. Agree (A) 5= Strongly Agree (SA)

Please tick (√) in the appropriate number to indicate your level of agreement with the questions asked
below.

I. Access to Finance

No Items Agreement Scale

. 1 2 3 4 5
(SD) (D) (N) (A) (SA)
1 The interest rate charged by banks or Microfinance institutions
is reasonable.
2 There is a high collateral requirement from banks and other lending
institutions.
3 There are complicated loan application procedures of micro finances
and other lending institutions
4 Most microfinance and other lending institutions are reluctant to
provide long-term credit to MSEs
5 There are governmental funds to support MSEs businesses.
6 I have my own enough source of finance to run my business.
7 I am satisfied with the financial access given by microfinance and
other lending institutions
8 There are non-governmental organizations (NGOs) funds to support
my business
9 Access to finance is a major challenge that affects the growth of my
business
10 Inadequacy of credit institutions

II
 II. Working place problem

No. Items Agreement Scale

1 2 3 4 5
(SD) (D) (N) (A) (SA)
1 The workplace we are currently working in is comfortable
2 The place where we are working now is near to the main road
3 House rent is affordable
4 The government supported us workplace
III. Infrastructural factors

No. Items Agreement Scale

1 2 3 4 5
(SD) (D) (N) (A) (SA)
1 Adequate road access in my business area.

2 Technological support from a micro and small institute

3 There is Sufficient electricity supply in my business area

4 There is Sufficient and quick transportation service

5 There are appropriate working materials such as types of machinery

and other types of equipment for my business.
IV. Marketing Factors

No. Items Agreement Scale

1 2 3 4 5
(SD) (D) (N) (A) (SA)
1 Inadequate market for my product

2 Searching new market is too difficult

3 Lack of establishing a market network

4 Lack of market information

5 Poor customer relationship and handling

III
 6 Lack of promotion to attract potential users

V. Internal management

No. Items Agreement Scale

1 2 3 4 5
(SD) (D) (N) (A) (SA)
1 There is clear division of duties and responsibility among employees
2 There is well organization and effective communication
3 Good selection of associates in business
4 There is well trained and experienced employees
5 Affordable and accessible training facilities
6 There is strategic business planning
7 There is Sound financial management system in our enterprise
VI. Entrepreneurship Skill

No. Items Agreement Scale

1 2 3 4 5
(SD) (D) (N) (A) (SA)
1 Motivation and drive to change
2 Tolerance to work hard
3 Persistence and courage to take responsibility for one’s failure
4 Initiative to assess ones strengths and weakness
5 Full of information to exploit business opportunities
VII. Performance MSEs

No. Items Agreement Scale

1(SD) 2(D) 3(N) 4(A) 5(SA)
1 My business profit is in a good position
2 My business profit is increased from time to time
3 My business has the potential to grow/expand
4 The level of my business productivity is increased from time to
time.
5 I am satisfied with the growth of my business productivity.
6 My business can provide verities of product/ service to care for
the need of all types of customers
7 .Our business market share is highly increased in the last three
years
8 Our company can change the market or lead customers‟ needs
in new directions.

IV
 ያርድስቲክ ኢንተርናሽናል ኮሌጅ

የሪቀት (ONLINE) የድህረ-ምረቃ ፕሮግራም

ማስተር ቢዝነስ አስተዳደር (ኤምቢኤ)

ይህ መጠይቅ በጎፋ ዞን ሳውላ ከተማ የጥቃቅንና አነስተኛ ኢንተርፕራይዞችን አፈጻጸም የሚነኩ ምክንያቶችን
ለመተንተን እና ለዳሰሳ ጥናት የተዘጋጀ ነው።

መግቢያ

ዉድ የጥናቱ ተሣታፉዎች፡- እኔ በያርድስቲክ ኢንተርናሽናል ኮሌጅ የማኔጅመንት ትምህርት ክፍል የቢዝነስ

አስተዳደር የድህረ ምረቃ ተመራቂ ተማሪ ስሆን በአሁኑ ሠዓት የመመረቂያ ፅሁፋን በማዘጋጀት ሊይ እገኛለሁ፡፡
የጥናቴ ርዕስም “በጎፋ ዞን ሳውላ ከተማ የጥቃቅንና አነስተኛ ኢንተርፕራይዞችን አፈጻጸም የሚነኩ ምክንያቶችንና
ተፅዕኖ የሚያድሩ ተግዲሮቶችን” ይመለከታል፡፡ እርስዎም በዚህ ጥናት እንዱሣተፈ ተመርጠዋሌ፡፡ እርስዎ
የሚሠጡትን ትክክለኛ መረጃ ለጥናቱ ዉጤታማነት በጣም አስፈላጊ መሆኑን በመገንዘብ መጠይቁን በጥንቃቄ
እንዱሞሉ እጠይቃሁ፡፡ የዚህ ጥናት ውጤት ለአካዳሚክ ዓላማ ብቻ ጥቅም ላይ ይውላል፡፡

ጊዜዎን ሰዉተዉ ስለሚያደርጉልኝ ትብብር በቅድሚያ አመሠግናለሁ፡፡

ተመራማሪ፡ ራሄል ኤርሚያስ

ማሣሠቢያ፡- በመጠይቁ ላይ ስም አይፃፍም፡፡ መልስዎን በሣጥኑ ዉስጥ የእርማት ምልክት ( √ ) ያስቀምጡ፡፡

ክፍሌ አንድ፡ አነስተኛ የንግድ ኢንተርፕራዝ ባለቤቱ የግሌ መረጃዎችና አጠቃሊይ መረጃዎች

1. ፆታ፡- 1. ወንድ 2. ሴት

2. እድሜ፡- 1. ከ 20 ዓመት በታች 2. ከ 21–30 ዓመ 3. ከ 31- 40 ዓመት 4. ከ 41–50

ዓመት 5. ከ 50 ዓመት በላይ

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 3. የጋብቻ ሁኔታ፡- 1. ያላገባ 2.ያገባ 3.የፈታ/ች/ 4.በሞት የተለየባት/ችበት

4. የትምህርት ደረጃ፡- 1.ማንበብ መፃፌ የሚችል 2.ከ 1-4 ኛ ክፍል 3. ከ 5 - 8 ኛ ክፍል

4. ከ 9 – 12 ክፍል 5.ሰርተፌኬት 6.ድፕሎማ 7. ዲግሪ እና በላይ

5. የሥራ ሌምድ 0-5 6-10 11-20 21 በላይ

ክፍል ሁለት፡ በጥቃቅንና አነስተኛ ተቋማት የስራ እንቅስቃሴ ሊይ ተፅዕኖ የሚያሣድሩ ጉዳዮች ከዚህ በታች

የጥቃቅንና አነስተኛ ተቋማት የአፈፃፀም ችግር ልሆኑ የሚችለ ነገሮች ተዘርዝረዋሌ፡፡ ከተዘረዘሩት የዕርስዎን

የችርስዎን የስራ ዘርፌ ይበልጥ ተፅዕኖ የሚያሣድሩትን በደረጃ ያመልክቱ ለእያንዳንዱ ጥያቄ ከአማራጮቹ አንደ ጊዜ

ብቻ የ(√ ) ምልክት በማድረግ ምላሽ ይስጡ፡፡

1 =በጣም አልስማማም 2 = አልስማማም 3 = ለመወሰን እቸገራለሁ

4 = እስማማለሁ 5 = በጣም እስማማለሁ

1. ከገንዘብ ጋር ተከገናኝቶ ያሉ ችግሮች

ተ.ቁ ከገንዘብ ጋር ተከገናኝቶ ያሉ ችግሮች የስምምነት ደረጃ (መጠን)

1 2 3 4 5
1 በባንኮች ወይም በሌልች አበዳሪ ተቋማት የሚከፍሉት የወለድ መጠን ምክንያታዊ
ነው ፡፡
2 ከባንክ እና ከሌሎች የብድር ተቋማት ከፍተኛ የዋስትና መስፈርት አለ።
3 የማይክሮ ፋይናንስ እና ሌሎች የብድር ተቋማት ውስብስብ የብድር ማመልከቻ
ሂደቶች አሉ
4 አብዛኛዎቹ የማይክሮ ፋይናንስ እና ሌሎች አበዳሪ ተቋማት ለ ጥቃቅንና አነስተኛ
ኢንተርፕራይዞች የረጅም ጊዜ ብድር ለመስጠት ፈቃደኞች አይደሉም።
5 የጥቃቅንና አነስተኛ ንግድ ስራን ለመደገፍ የሚረዱ ከመንግስት የገንዘብ ድጋፍ
አግኝቻሇሁ
6 ንግዴን ለማስኬድ የራሴ በቂ የፋይናንስ ምንጭ አለኝ።
7 በማይክሮ ፋይናንስ እና በሌሎች አበዳሪ ተቋማት በተሰጠው የፋይናንስ አቅርቦት
ረክቻለሁ
8 መንግስታዊ ካልሆኑ ድርጅቶች/መያድ/ የንግድ ስራዬን ለመደገፍ የሚያስችል
የገንዘብ ድጋፍ ተደርጎልኛል፡፡
9 በቂ የሆነ የገንዘብ አቅርቦት አለመኖር የንግድ ሥራዬን እድገት የሚነካ ዋና
ተግዳሮት ነው ፡፡
10 በቂ የሆነ አማራጭ የብድር ተቋማት አለማኖር

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 2. ከመስሪያ ቦታ ጋር ተያይዞ የሚስተዋሉ ችግሮች

ተ.ቁ ከመስሪያ ቦታ ጋር ተያይዞ የሚስተዋሉ ችግሮች የስምምነት ደረጃ (መጠን)

1 2 3 4 5
1 አሁን እየሰራንበት ያለው የስራ ቦታ ምቹ እና በቂ አይደለም
2 አሁን እየሠራንበት ያለው ቦታ ከዋናው መንገድና ከገበያ ይርቃል
3 የቤት ኪራይ ለንግድዬ በጣም ከፍተኛ ነው።
4 የስራ ቦታው በመንግስት ድጋፍ አልተደረገልኝም።

3. ከመሠረተ ልማት አቅርቦት ጋር ተያይዞ ያለው ችግር

ተ.ቁ ከመሠረተ ልማት አቅርቦት ጋር ተያይዞ ያለው ችግር የስምምነት ደረጃ (መጠን)
1 2 3 4 5
1 በንግድ አካባቢዬ በቂ የመንገድ መዳረሻ አለ።
2 ጥቃቅንና አነስተኛ ተቋም የቴክኖሎጂ ድጋፍ አግኝቻለሁ
3 በንግድ አካባቢዬ በቂ የኤሌክትሪክ አቅርቦት አለ።
4 በቂና ተመጣጣኝ የማጓጓዣአቅርቦት አለ፡፡
5 እንደ ማሽነሪ አይነት እና ሌሎች ለንግድ ስራዬ የሚሆኑ መሳሪያዎች ያሉ በቂ እና
ተገቢ የስራ እቃዎች አሉኝ።
4. ከገበያ እና ምርት ሽያጭ ጋር የተገናኙ ችግሮች

ተ.ቁ ከገበያ እና ምርት ሽያጭ ጋር የተገናኙ ችግሮች የስምምነት ደረጃ (መጠን)

1 2 3 4 5
1 ለምርቴ በቂ የሆነ ገበያ የለም
2 አዲስ ገበያ ማፈላለግ በጣም ከባድ ነው።
3 የገበያ ትስስር መመስረት እጥረት
4 የገበያ መረጃ እጥረት
5 የገበያ ትስስር ስራ በመንግስት አይደገፍም
5. የኢንተርፕራይዙ የውስጥ አስተዳደር

ተ.ቁ የኢንተርፕራይዙ የውስጥ አስተዳደር የስምምነት ደረጃ (መጠን)

1 2 3 4 5
1 በሠራተኞች መካከል ግልጽ የሆነ የሥራ እና የኃላፊነት ክፍፍል አለ
2 ጥሩ አደረጃጀት እና ውጤታማ ግንኙነት አለ
3 በንግድ ውስጥ ጥሩ የአጋሮች ምርጫ
4 በደንብ የሰለጠኑ እና ልምድ ያላቸው ሰራተኞች አሉ።

VII
5 መጣጣኝ እና ተደራሽ የስልጠና ተቋማት
6 ስልታዊ የንግድ እቅድ አለ።
7 በድርጅታችን ውስጥ ጤናማ የፋይናንስ አስተዳደር ሥርዓት አለ።

6. ከሥራ ፈጣሪነት ጋር ያሉ ችግሮች

ተ.ቁ ከሥራ ፈጣሪነት ጋር ያሉ ችግሮች የስምምነት ደረጃ (መጠን)

1 2 3 4 5
1 ተነሳሽነት እና የለውጥ ተነሳሽነት
2 ጠንክሮ ለመስራት መቻቻል
3 ለአንድ ሰው ውድቀት ሃላፊነት ለመውሰድ ጽናት እና ድፍረት
4 ጥንካሬዎችን እና ድክመቶችን ለመገምገም ተነሳሽነት
5 ዕድሎችንና በእነሱ ጥቅም ለማግኘት እና ማንኛውንም አላስፈላጊ አደጋዎችን
ላለመውሰድ የምንችለውን ሁሉ በጥንቃቄ እናደርጋለን

7. የጥ/አ/ኢንትረፕራይዝ አፈፃፀም በተመለከተ

ተ.ቁ የጥ/አ/ኢንትረፕራይዝ አፈፃፀም በተመለከተ የስምምነት ደረጃ (መጠን)

1 2 3 4 5
1 የእኔ የንግድ ትርፍ በጥሩ ሁኔታ ላይ ነው
2 የእኔ የንግድ ትርፍ ከጊዜ ወደ ጊዜ ይጨምራል
3 የእኔ ንግድ የማደግ/የመስፋፋት አቅም አለው።
4 የእኔ ንግድ ምርታማነት ደረጃ ከጊዜ ወደ ጊዜ እየጨመረ ነው.
5 በቢዝነስ ምርታማነቴ እድገት ረክቻለሁ።
6 የእኔ ንግድ የሁሉንም የደንበኞች ፍላጎት ለመንከባከብ የምርት/አገልግሎት
ትክክለኛነትን ሊያቀርብ ይችላል።
7 የእኛ የንግድ ገበያ ድርሻ ባለፉት ሶስት አመታት በከፍተኛ ደረጃ ጨምሯል።
8 ኩባንያችን ገበያውን መቀየር ወይም የደንበኞችን ፍላጎት በአዲስ አቅጣጫዎች
መምራት ይችላል።

በፈቃደኝነት መልስዎን ስለሰጡን ከልብ እናመሰግናለን!!!

VIII
 Appendix B
Correlations

1 2 3 4 5 6 7

8. Performance of MSEs Pearson Correlation 1 .303** .224** -.164** .189** -.180** .139*

Sig. (2-tailed) .000 .000 .007 .002 .003 .022

N 271 271 271 271 271 271 271

9. Access to Finance Factors Pearson Correlation .303** 1 -.427** -.225** .260** -.137* .504**

Sig. (2-tailed) .000 .000 .000 .000 .024 .000

N 271 271 271 271 271 271 271

10. Workplace Factors Pearson Correlation .224** -.427** 1 -.040 .093 -.174** -.529**

Sig. (2-tailed) .000 .000 .515 .128 .004 .000

N 271 271 271 271 271 271 271

11. Infrastructure Factors Pearson Correlation -.164** -.225** -.040 1 -.326** .427** .106

Sig. (2-tailed) .007 .000 .515 .000 .000 .082

N 271 271 271 271 271 271 271

12. Marketing Factors Pearson Correlation .189** .260** .093 -.326** 1 -.426** -.212**

Sig. (2-tailed) .002 .000 .128 .000 .000 .000

N 271 271 271 271 271 271 271

13. Enterprise Internal Pearson Correlation -.180** -.137* -.174** .427** -.426** 1 .261**
Management Factors
Sig. (2-tailed) .003 .024 .004 .000 .000 .000

N 271 271 271 271 271 271 271

14. Entrepreneurship Skill Pearson Correlation .139* .504** -.529** .106 -.212** .261** 1
Factors
Sig. (2-tailed) .022 .000 .000 .082 .000 .000

IX
 N 271 271 271 271 271 271 271

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

Appendix C
Model Summary

Std. Error of the

Model R R Square Adjusted R Square Estimate

1 .872a .760 .717 .26108

a. Predictors: (Constant), Entrepreneurship Skill Factors, Infrastructure Factors,

Marketing Factors, Workplace Factors, Enterprise Internal Management
Factors, Access to Finance Factors

ANOVAa
Model Sum of Squares Df Mean Square F Sig.

1 Regression 7.080 6 1.180 17.311 .000b

Residual 17.995 264 .068

Total 25.076 270

a. Dependent Variable: Performance of MSEs

b. Predictors: (Constant), Entrepreneurship Skill Factors, Infrastructure Factors, Marketing Factors,

Workplace Factors, Enterprise Internal Management Factors, Access to Finance Factors

Coefficientsa

Unstandardized Standardized
Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 2.12 .360 5.87 .000

Access to Finance Factors .396 .064 .354 4.625 .000

X
 Workplace Factors .296 .040 .366 4.948 .000

Infrastructure Factors .259 .046 .095 1.276 .002

Marketing Factors .317 .059 .101 1.299 .001

Internal Management Factors .150 .055 .207 2.713 .008

Entrepreneurship skill Factors .186 .052 .281 3.583 .000

a. Dependent Variable: Performance of MSEs

XI