BONGA UNIVERSITY

COLLEGE OF NATURAL AND COMPUTATIONAL SCIENCE

DEPARTMENT OF STATISTICS

RESEARCH PROPOSAL ON: THE ROLE AND FACTOR

DETERMINING THE GROWTH OF MICRO AND SMALL SCALE
ENTERPRISES IN BONGA TWON

GROUPMEMBER

NAME ID NUMBER

1, FENTAHUN AGUMAS 0656 \13 R

2, ALEBACHEW SHUMET 0771 \ 13 R

3, ABEBE BEKELE 0681\13 R

4, ZIYADA KELIL 2817 \ 13 R

ADVISOR TEGEGNE T. (MSC) JANUARY,2024

BONGA, ETHIOPIA
TOGETHER WE CAN!!

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 ACKNOWLEDGEMENT
First of all I would like to say almighty thanks to GOD for his permission to do my daily
activities as well as breathing fresh air .I would like to give my heartfelt gratitude to my advisor
Mr.TegegneT.(MSc) for sharing his experience to do this research and for his patience
invaluable advice, suggestions, useful comments and suggestions throughout the preparation of
this paper. Word cannot express the gratitude I have for my family without their support and
tolerance this undertaking will not be possible. Last but not least unreserved acknowledgement to
my sincerely friends, and my colleges of Natural and computational science, department of
statistics who devoted their precious time on editing and typing the paper, and I would like to
thank all staff members of statistics department who directly or indirectly participated for the
accomplishment of this paper and all my department students.

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 Table of Contents

Contents page

ANKOWLEGEMETNT...................................................................................................................i

Abstract.............................................................................................................................................i

CHAPTER ONE..............................................................................................................................1

1. INTRODUCTION.......................................................................................................................1

1.1 Background of the study.....................................................................................................1

1.2 Statement of the problem...................................................................................................4

1.3 Objective of the study.........................................................................................................5

1.3.1 General objective.............................................................................................................5

1.3.2 Specific objectives...........................................................................................................5

1.4 Significance of the study....................................................................................................5

1.5 scope of the study...............................................................................................................6

1.6 Limitation of the study.......................................................................................................6

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CHAPTER TWO.............................................................................................................................7

2. REVIEW OF RELATED LITERATURE...................................................................................7

2.1 Conceptual Framework and Definitions.............................................................................7

2.2. Importance of Micro and Small Enterprises......................................................................7

2.3. Problems of Micro and small enterprises..........................................................................8

2.2 Historical Role of Small Enterprises..................................................................................9

2.3 MSEs: A Brief International Comparison........................................................................10

2.4 MSE’S Policy and Strategy in Ethiopia...........................................................................11

CHAPTER THREE.......................................................................................................................12

3. METHODOLOGY....................................................................................................................12

3.1 Description of the Study Area and Population.................................................................12

3.3 Study design.....................................................................................................................13

3.4 Method of Data Collection...............................................................................................13

3.5 Sampling design and Technique.......................................................................................14

3.6 Sample Size Determination..............................................................................................14

3.7 Variables in the study.......................................................................................................15

3.8 Statistical Analysis...........................................................................................................16

3.8.1 Descriptive statistics......................................................................................................16

3.8.2 Inferential statistics........................................................................................................16

3.8.2.1 Chi-square test of independency................................................................................17

3.8.2.2 Multiple linear regressions.........................................................................................19

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 CHAPTER FOUR..................................................................................................................20

4. RESULT AND DISCUSSION..........................................................................................20

4.1 Descriptive Analysis.........................................................................................................20

4.3 INFRENCIAL ANALYSIS.............................................................................................23

4.3.1 Chi-square test of independence....................................................................................23

4.3.1 MULTIPLE LINEAR REGRESSION ANALYSIS.....................................................27

4.3.2 Model summary.............................................................................................................28

CHAPTER FIVE...........................................................................................................................32

CONCLUSION AND RECOMMENDATIONS..........................................................................32

5.1 CONCLUSION................................................................................................................32

5.2 Recommendations............................................................................................................33

REFERENCE.........................................................................................................................34

APPENDIX...........................................................................................................................36

QUESTIONNAIRE...............................................................................................................36

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 List of tables.

Table3.1Description of independent variable……………………………………….…………16

Table 4.1 Descriptive analysis of the whole variables………………………………………….20

Table 4.2 Test of association between the dependent variable (current capital) and independent
variables………………………………………………………………………………….………24

Table 4.3 Result of multiple linear regression analysis…………………………….……………27

Table 4.4 Result of model summary…………………………………………………………......29

List of figures.

Figure 4.1; Histogram chart for test of normality………………………………………………30

Figure 4.2: Normal p-p plot standardized residual………………………………………….…...3

ACRONYMS

MSEs= Micro and small scale enterprises

SRS= simple random sampling

IDO = integrated development program

TQM= Total quality management

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DCS = Developed countries

SPSS=Statistical Product and Service Solution

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 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the study

It is very well known fact that poverty is a serious problem in Ethiopia. Its multi dimensional and
deep rooted nature made the struggle to reduce it very difficult. Like all others cities in Ethiopia
bonga is also suffering from a very acute problem of poverty.(Woldie A.1989)

Understanding these problems of poverty and unemployment in urban areas and with the
objective of reducing them, the federal government of Ethiopia designed different policy,
strategy and program to achieve continuous fast and sustainable economic development in the
major cities in the country including in bonga (Woldie A.1989)

Through achieving economic development the government of Ethiopia aimed at reducing

unemployment and poverty, so that the socio-economic problems in the urban areas will be
tackled. Urban development policy, industry development strategy and micro and small scale
enterprise development program were designed by the government to satisfy the above
mentioned objective. (Paul B.1996)

It was clearly stated in the urban development policy and strategy that micro and small scale
enterprises are the key in reducing unemployment and poverty in urban areas. In this time,
generating economic growth in developing countries while reducing poverty is fundamental
development challenge. To ensure that the contribution of micro enterprises to key sub sectors
and national economies is maximized, and ensure that the poor are not left out of economic
development ,MSEs need access to finance , business services and improved input , they also
needs a conductive enabling environment that facilitates rather than inhibits their participation
in markets.(Paul B.1996)

The Bonga town administrative council designed its own program called integrated development
program (IDO) (1999-2003).the program contains three sub-programs for the objective of
eradicating if not reducing poverty and unemployment in bonga.

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This paper tries to assess the poor performance micro and small enterprise. This poor
performance of the enterprises in reducing unemployment has created nothing and is also another
important factor that contributes for future of bonga micro and small enterprise. Now it is time to
give priority to combat the problem of unemployment in urban areas of Ethiopia like bonga this
is due to a simple reason that the labor force of low-income countries including Ethiopia is
growing rapidly. In a country in such a state of affair, the need for a pertinent policy intervention
to combat the problem of unemployment is as essential strategy that worth serious consideration.

1.2 Statement of the problem

Micro and small enterprises are considered as one of the principal driving force in the economic
development of a given country. They stimulate private ownership and entrepreneurial skills.
They also flexible and can adapt quickly to changing market demand and supply situation.
Further, they are the main ground for the generation of employment opportunity. Besides their
growth contribution, there are so many problems that affect their growth and expansion which
include, lack of initial capital, lack of business development services, lack of access to market,
lack of raw material, delay of credits and etc are some of them. So with the presence of the above
problems it is very difficult for the sector to achieve their primary goal of including poverty and
unemployment. Micro and small enterprises in bonga town are also one of the enterprises
supposed to be faced with the above listed problems. (IDP report, 2003)

By using these research proposals try to figure out the national Micro and small scale enterprises
strategic policies, structural and institutional related problems that constrain the role of the micro
sector in and contribution to nation economy. Thus primarily aims at creation enabling legal and
other supportive environments for the developments of national MSEs.

Research Question

1. What are factors affecting the growth of micro and small enterprises in bonga town?

2. Is there any financial problems faced by micro and small enterprises in bonga town?

3. Is there demand for the products of micro and small enterprises in bonga town?

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 4. What are the possible solutions that can be applied to solve the problem?

5. Is the performance of the MSEs satisfactory or not?

1.3 Objective of the study

1.3.1 General objective

 The General objective of this study is to know the performance of micro and small scale
enterprises based on the implementation of micro and small scale enterprises
development program.

1.3.2 Specific objectives

The researcher’s specific objectives are;

 To identify major constraints that micro and small scale enterprises face in bonga town,

 To provide predictive models for the future performance of micro and small scale
enterprises,

 To investigate whether the performance of the MSEs is satisfactory or not.

1.4 Significance of the study

The study would be expected to;

 Provide basic information concerning the role and determinants of growth of micro and
small scale enterprises.

 Develop certain strategies to up lift or at least to minimize those problems.

 The result would also bring some improvement on the problems those micro and small
scale enterprises supporting institution and the sector as whole.

 The finding of the study hopes to be significant in identifying the various problems of
micro and small enterprises that hinder their growth.

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  The researcher hopes that suggestion and recommendation of the study would help the
concerned body by providing high light of the information about the sector.

 Provide valuable information for government and their interested body to take some
corrective action.

 The finding of the study would be important to the academicians and researcher’s who
can use it as a springboard for other researches/studies.

The outcome of this study would help the bonga town administration to give more emphasis for
the growth and development of micro and small scale enterprises to medium and large scale
enterprises. The result would also shade some light on the problems that MSEs, supporting
institution and the sector as whole in bonga facing. The result of this study could also be used to
encourage other researchers to do further and better studies on the same issues of this paper.

1.5 scope of the study

The objective of this study is to know the performance of micro and small scale enterprises based
on the implementation of micro and small scale enterprises development program. It conduct the
research paper in many organization is impossible because of there is shortage of time and
finances. There are different issues that can be research in relation to MSEs, but this study is
delimit to the factors are: access to finance, technical and managerial skills, accessibility of
business/ marketing information, working premises and infrastructural facilities. Besides this, the
researcher focused on the following MSEs Activities like manufacturing, construction, trade,
services and urban agriculture. For the purpose of selecting target respondents from the total
population, the researcher used simple random sampling method. The areas to be included in this
study during data collection would be Agricultural sectors, Trade group, construction organized,
services and the like.

1.6 Limitation of the study

The study faces the following problems.

Lack of money Lack of available reference book

Shortage of time Shortage of computer access

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 CHAPTER TWO

2. REVIEW OF RELATED LITERATURE

2.1 Conceptual Framework and Definitions

One of the major consequences of rapid urbanization process has been the burgeoning supply of
job seekers in both modern (formal) and in formal sectors of the urban economy. In many
developing countries the supply of workers far exceeds the demand the result being extremely
high rates of unemployment and under employment in urban areas Todaro and smith (2006)

Models of developments that stress complementarities are related to some of the models used in
the endogenous growth approach, but coordination failure approach was valued relatively
independents and offer some significant and distance insight .put simply the coordination failure
was a state of affairs in which agents inability to coordinate their behavior leads to an outcome
that leaves all agents worse off than in alternative situations that is also equilibrium, Tovaro and
smith (2006)

In their model, Todaro and smith (2006) emphasized the need for coordinating the effort of
different enterprises in order to maximize the benefit they can generate from the economic
activity. Ehresman (2008) purpose the concept of TQM is essential for the success of small
business. Before getting in to top’s of implementation we need to get organized, Ehreman
(2008). For successful implementation of total quality management, small businesses need to
follow a structure, Ehresman (2008)

Human resources of employees are important for managements and organizational science but
they are widely ignored in small scale entrepreneurs of small scale enterprises and an efficient
utilization of employee’s skills, motivation and behaviors are essential for business success,
Rauch and Frese (2001).in their study Rauch and Frese (2001) emphasizes the need for human
resource management’s strategies for the success of small business.

2.2. Importance of Micro and Small Enterprises

According to Balve (2003)in a labor abundant and capital scarce country Ethiopia small business
have came to occupy a significant position in providing employment opportunities and increase

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capital formation in the country. The following are some of the importance of micro and small
enterprises.

The employment potential

Micro and small enterprises are labor intensive comparatively and thus create more job
opportunities per unit of capital employed. It is therefore that leaving a side highly capital
intensive industries involving most sophisticated technological and the building up of economic
and social infrastructural facilities it was which help enlargement of job opportunities (ibid
2000).

Distribution of income

The income generated in large number of micro and small enterprises is depressed more widely
in community than income generated in a few large enterprises. Thus, the income benefit of
micro and small enterprises is derived by a large segment of population while the large
enterprises encourage monopoly capital and concentration of economic power in this way, micro
and small enterprises about an equal distribution of income and wealth (ibid, 2000).

Foreign exchange earnings

Small businesses facilitate substantial foreign exchange savings and earnings. A wide variety of
consumer and simple procedure good can be procedure economically on micro and small
enterprises basis.

Economic transformation

Micro and small enterprises play strategic role in the progress of a country. These include the
industries by large represent a stage in economic transition from traditional to modern

2.3. Problems of Micro and small enterprises

According to Balu (2000) small face many problems in the area of their operation.

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Shortage of raw material

Procurement of raw materials of required quality and quantity competitive price is the most
serious faced by this sector. Though the institutional arrangements regard to the allocation
mechanism often work against the interest of these. This is more pronounced in the case of scare
raw materials that have to be imported. Besides, frequent interruptions in the availability of
essential raw materials prevent fuller and economic utilization of productive capacity of small
units (Simon Bridge, Ken O’Neil and Stan Cromie, 2003)

Inadequate finance

Most of the micro and small enterprises depend on external finance or non-institution. Financial
assistance by the various agencies, like financial corporations and commercial bank, often falls
much short of their requirements. In order to supplement the institutional finance micro and
small enterprises have to approach the unorganized money

2.2 Historical Role of Small Enterprises

The history of small business (enterprises) has been one of the most controversial stories in
economic development in the world. The role of small business in an economy has frequently
been undermined and even misinterpreted. In the past, small businesses were believed to impede
economic growth by attracting scarce resources from their larger counterparts (Act and audretch
1993).

Starting from the industrial revolution up to the 1960s large corporations capitalizing on
economies of scale was considered as the driving force of growth and development (ACS, 2003).
The emergence of computer based technology in production, administration and information has,
however, reduced the role of economies of scale in many sectors. ACS and audretch (1993) have
shown a shift towards an increased role for small business. Enterprise. This was mainly due to
changes in production technology, in consumer demand, labor supply, the pursuit of flexibility
and efficiency. These factors, in turn led to the restructuring and downsizing of large enterprises
and entry of new firms. More and more evidence became available to indicate that economic

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activity moved away from large enterprises (firms) to micro and small enterprises. Mayoux
(2003), for example, provided the changing role of small business in both developed countries
(DCs) and developing countries. Parallel with this literature, the changing patterns of consumer
expenditure, and demand patens that resulted from rising living standards has contributed for the
development of small business in many DCs and developing countries.

It is now well accepted both among academicians and policy makers that small business play a
vital role in contributing to overall economic performance in any country (assefa, 2004) Small
business play a vital role in community development by arousing hope of the operators to invest
(i.e. private investment) back into lagging areas and spread the benefits of economic growth to
the people. Through their capital investments private small business and micro enterprises create
jobs and new opportunities that promote community building and social activities in urban areas.

2.3 MSEs: A Brief International Comparison

The issue of definition of MSE’S is more than simply semantics Efforts to define MSE’S has led
to different set of definitions and unresolved debates. Policy makers, researchers and other
involved in the promotion and development of small business use different terms like micro
enterprises, informal sector. Small business, small scale industries, small and medium enterprises
and the like (andualem. 2004) Far from being homogeneous there is a great diversity amongst
enterprise. The requirement and support for enterprises should take into account the different
sizes and characteristic of enterprises so, careful definition of micro, small and medium sized
enterprises is very crucial Due to this, countries adopt their own working definition.

As explained above, it is impossible by any means to provide clear and universally acceptable
definition of small enterprises As Andualem argued (2004) the scale of business in any one
country clear and agreed national definition are needed for focusing discussions on the sector for
research purposes and above all for facilitating appropriately tailored supports and assistance to
the sector.

Usually, MSE’S are defined based on either quantitative criterion or on qualitative criterion or on
qualitative criterion Nonetheless. Many developing countries apply the first one Quantitative
definitions of MSE’S are based on some specific parameter like, for example, the numbers of

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employees, the value of fixed assets and turnover of the enterprises. This definition clearly
identifies which enterprise requires special treatment. The size of the market commanded, type
of ownership, type of technology and equipment used and profit etc. are also used as criteria for
classification (Andualem,2004), In some counties, MSE’S can be defined.

2.4 MSE’S Policy and Strategy in Ethiopia

Economic policies, strategies and legal and regulatory frame work are prerequisite in order to
create a conductive environment to promote MSE’S. Gebrehiwot (2004) has argued that in
Ethiopia deliberate effort to promote MSE’S in relatively a recent phenomenon. During the Derg
regime due to its ideology, policies and regulations the environment was not conductive for the
private sector. Restrictive polices favoring state/parastal organization in availing foreign
exchange and bank loans, limits on single borrower loans, restriction on license and investment,
absolute priority given to the public sector in access to trained qualified manpower etc…were in
place. In general, during the Derg regime the legal requirements to obtain license were
bureaucratic, and in affect discouraged the participation of MSE’S operators. The tight foreign
exchange control and heavy import and rent seeking business community (Gebrehiwot, 1997)
The 1997 National MSE’S strategy figure out the various policy, structural and institution related
problems that constrained the role of the MSE sector in and contribution to national economy. It
thus primarily aims at creation enabling legal, institutional and other supportive environments for
the development of MSE’S.

The specific objectives of the MSE’S strategy include;

 Facilitating economic growth and bring about equitable development

 Creating long term (sustainable) jobs

 Strengthening cooperation between MSE’S

 Providing the basis for medium and large scale enterprises

 Promoting exports and balancing preferential treatment between MSE’S and bigger
enterprises

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 CHAPTER THREE

3. METHODOLOGY

3.1 Description of the Study Area and Population

The study area of our research proposal was on Kaffa Zone (one part of recently part of south
west Ethiopia region) it has a latitude and longitude of 7°16N 36°14E with an elevation of 1,714
meters above sea level. It has estimated total area were12739.25 square kilometers. Kaffa is
homeland of coffee Arabica and many natural resource prosperity areas which is suitable for
investments that come in groups and solely to invest their capitals and become profitability. It is
449 kilometers far away from Addis Ababa, capital of Ethiopia. This study would be conducted
on Bishaw W/Johannes high school students. Bishaw W/Johannes high school is found in Bonga
town. It was located on the south western part of Ethiopia along the Kaffa zone.

3.2 Study population

The study population under this study was the population that participated in the growth and
development of small scale enterprises operating in the bonga town. In this study, the main target
population is the number of MSEs in bonga town.

3.3 Study design

The design of this study is descriptive and cross-sectional. It is descriptive because the study
aims to explain and describe factors that affect the growth and development of small scale
enterprises operating in the bonga town. The study is cross-sectional because data is collected
from the participants who take part in the study once only. According to Babbie (2005), a
descriptive study design is suitable for an exploratory study of this kind.

3.4 Method of Data Collection

The method of data collection would be determined by the following factors .Objective of the
study nature of information, operational possibility cost. Basically, there are different methods of
data collection. Among them self administered questionnaire and direct investigation were
appropriate for this study.

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Based on the origin of data, statistical data can be classified as primary and secondary data.
Among them, this proposal project will conducted by using primary source of data this will
collecting information from respondents through some specific questionnaires.

The target population for this study is such as construction enterprises, Trade group, Services
group, Agricultural group and the like.

3.5 Sampling design and Technique

The sampling techniques would simple random sampling (SRS) to select the representatives
from target population. In this case the units in the populations are numbered from 1 to N.A
series of a random number between 1 to N would then drawn by means of lottery method. At any
draw, the process used must give an equal chance of selection at any number in the population.

3.6 Sample Size Determination

Determining the sample size is the key step on the overall statistical process. For this study we
use simple random sampling is used to determine the population size of the enterprise is because
determining the sample size is the key step on the overall statistical process. An appropriate
sample size is means of gaining high precision, accuracy and confidence with minimum cost.

To determine the sample size we made the following notations and assumption.

The level of precisions or margin error is denoted error by d and assumed to be 10%

Level of significance or probability of making certain error is denoted by α and it is assumed to

be 0.05or5%

Size of total enterprises is denoted by N.

Assume that the variance of the observation with mean and variance of some respondents by
distributes the questionnaire.

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Therefore, by using simple random sampling size determination formula simple size, n

, no=z2s2/d2

(S = 0.3 from pilot survey of 5 sample of microenterprises).

=1.962*0.3/0.01=116. Since no/N≥5% =116/100 = 1.16 >5% we use the normal

formula of n to calculate it.

Becomes,

n = 116/1+1.16 = 54

At 95% confidence interval the total sample size of the respondent is given by the formula of
proportional sample size determination. (Cochran, 1967)

3.7 Variables in the study

Dependent variable

• Current capital

Independent variable

a) Age of enterprises in year d) beginning capital

b) Profitability of business e) sex of manager

c) Habit of receiving feedback from customer f) Government motivation

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Table 3.1 Description of independent variable.

Variable Description of the variable Code

Age Age of enterprises in year 1=1-3,2= 4-6,3=7-9,4=10-

12,5=13-15

Profitability Profitability of business 0=unsatisfactory, 1=averagely,

2=very

Satisfactory

Habit receiving feed back Habit of receiving feedback 0=no,1=yes

from customer

Beginning capital Beginning capital of business lessthan$100=0, greater than

or equal$100=1

Sex sex of manager 0=female,1=male

Motivation Motivation of government 0=no,1=yes

3.8 Statistical Analysis

3.8.1 Descriptive statistics

Descriptive statistics consists of the collection, organization, summarization and presentation of

data in some meaning full, from such charts, graphs or tables. Since variable under study is
qualitative variable, the bar graph is appropriate for the study.

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In this study the data was analyzed using descriptive statistics such as mean, range, standard
deviation and frequency with the use of Statistical Product and Service Solution (SPSS).

3.8.2 Inferential statistics

In this way a set of methods would use to generalize from sample to population by performing
hypothesis testing, determining the relationships among estimate variables and making
prediction by data inferential methods such as Chi-square test (Test of homogeneity or
independency) and multiple linear regressions.

3.8.2.1 Chi-square test of independency

Chi-square used to test; Statistical analysis used

 To identify difference between groups

 To test goodness of fit used to find out closeness and fit. e.g. age

 To determine association between attributes

Chi-square is the measure of the concordance between the observed and expected frequency.
This means, chi-square would be small when there is agreement and large when there is
disagreement between observed and expected frequency. A chi-square distribution is the
function of its degrees of freedom. This distribution is skewed to the right and random variable
can never take a negative value.

The chi-square square test is given by;

Where, =chi-square

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 =is the observed class frequencies and

=is the corresponding expected class frequencies.

Since oi and ei are observed from a single sample of size n sum of the observed and expected
class frequencies is the same.

That is

Chi-square test of independence

The test procedure;

Step1; The hypothesis:

H0: The two attributes are independent or not significantly associated between two
attributes

H1: The two attributes are dependent or significantly associated between two attributes

Step 2; Determine α-level of significance

Step 3;Evaluate the chi-square (calculated) test statistics and the tabulated value by taking
the degree of freedom associated with contingency table possessing r-rows and c-
columns=(c-1)(r-1).

Step 4; Decision Rule

If or if P value less than α, we reject H0 and other wise do not reject.

Step5; Making conclusion based on the decision.

Assumption of chi-square test of independences

 The observation must independent of each other.

17
  Each member qualifies for one and only one cell in the table.

 Each member every individual (objective) is independent of each other.

 The expected frequency for each category must be 5 or greater than 5.

 The sample is large.

3.8.2.2 Multiple linear regressions

The primary objective of regression is to develop a regression model, to explain the association
between one or more variables in a given population.

A regression model is a mathematical education provides prediction of values of dependent

variable based on the known values of two or more independent variable. A particular form of
regression model depends up on the nature of the problem under study and the tape of data
variables.

Multiple linear regressions contain one dependent variable and two or more independent
variables. In this our project there are six independent variables and one dependent variable. That
means.

Y= βo+β1X1+β2X2+β3X3+ β4X4+β5X5+β6X6+ϵі

Where Y=current capital

Assumption of regression

 Regression model linear(current capital) verses age of enterprises in year, Beginning

capital, habit of receiving feedback, government motivation and profitability of the
business have linear relationship.

 The dependent variable (current capital) is containing random variables.

 Variance of the error terms at different period is constant.

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  An error term is normally distributive with mean 0 and variance 1. Errors from
different observation are unconcluded.

CHAPTER FOUR

4. RESULT AND DISCUSSION

The main objective of this study is assisting to identify factor that determines the Growth of
micro and small scale enterprises in Assosa twon. The data were collected on the respondents of
the factor and their activities. The sample size determined for this study was 54 and the analysis
was based on the information and the data obtained from total of 100.

4.1 Descriptive Analysis

Table 4.1 Descriptive analysis of the whole variables.

variables Category Frequencies Percent

Age of enterprises 1-3 16 29.6
4-6 16 29.6
7-9 12 22.2
10-12 7 13.0
13-15 3 5.6
sex of manager Male 27 50.0
Female 27 50.0
Yes 25 46.3
government
No
29 53.7
motivation
marital status Married 26 48.1
Single 28 51.9
beginning capital lessthan$100 31 57.4
Greater than or
23 42.6
equal$100

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profitability of very satisfactory 13 24.1
business Averagely 22 40.7
Unsatisfactory 19 35.2
habit of receiving Yes 33 61.1
feedback No 21 38.9

According to this table shows that in this study population the age of enterprises mostly high in 2
years and have 22.2%.

From the above frequency table we observed that the sex of manager participated by equal
50%of males and females

According to this table shows that in this study population the government motivation is less.
That means 53.7%says no and 46.3%says yes.

From the above frequency table we observed that the marital status of the workers high in single
persons and with 51.9% and married less by 48.1%.

From the above frequency table we observed that the beginning capitals of the micro enterprises
are highly less than $100(in birr) and have 57.4% and greater than or equal to $100 have 42.6%.

According to this table shows that in this study population the profitability of the business is high
averagely by 40.7%, very satisfactory 24.1% and unsatisfactory 35.2%.

The result of the data analysis presented in this above tables the habit of receiving feedback is
high. That means 61.1% says yes and 38.9% say no.

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4.3 INFRENCIAL ANALYSIS

4.3.1 Chi-square test of independence

Drawing conclusion or making inference is the main part of the research project. When we
justify the appropriate test statistics of test of independency it’s as follows.

Ho; there is no association between dependent (in our case current capital), and independent
variables

H1; not Ho (there is association between the dependent variable and independent variable)

Table 4.2 Test of association between the dependent variable (current capital) and
independent variables.

Value df Asymp. Sig. (2-

Sex of manager vs. current capital sided)

Pearson Chi-Square 8.005a 2 .018

Likelihood Ratio 8.331 2 .016
Linear-by-Linear Association 7.791 1 .005
Beginning capital vs. current capital

Pearson Chi-Square 1.674a 2 .433

Likelihood Ratio 1.664 2 .435
Linear-by-Linear Association .195 1 .659
Profitability of business
vs. current capital

Pearson Chi-Square 4.432a 2 .109

Likelihood Ratio 4.473 2 .107
Linear-by-Linear Association 4.185 1 .041

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Age of enterprises vs. current capital

Pearson Chi-Square 11.498a 8 .175

Likelihood Ratio 12.064 8 .148
Linear-by-Linear Association 1.765 1 .184
Marital status vs. current capital

Pearson Chi-Square .345a 2 .841

Likelihood Ratio .346 2 .841
Linear-by-Linear Association .330 1 .565

Government motivation vs current capital

Pearson Chi-Square 6.036a 2 .049

Likelihood Ratio 6.216 2 .045
Linear-by-Linear Association 1.327 1 .249

From the above table we conclude that there is association between current capital and sex of
manager as well as government Motivation. But Age of enterprises, Profitability of business,
Habit of receiving feedback and beginning capital are statistically insignificant.

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4.3.1 MULTIPLE LINEAR REGRESSION ANALYSIS

Table4.3 Result of multiple linear regression analysis.

The statistical model that was used in this study is multiple linear regression model. The
mathematical notation of model is given by Y= βo+β1X1+β2X2+β3X3+ β4X4+β5X5+β6X6+ϵі

Y= 0.902+-0.99*Age of enterprises + -0.16*Profitability of business+ 0.113*Habit of receiving

feedback+-0.480* Beginning capital +0.656*Sex of manager + -0.01 government Motivation

Where;

βo = 0.902 value of dependent variable when each explanatory variables are zero(mean of
dependent variable if the value of all independent variables are zero)

β5 = 0.656 this value is positive mean that there is direct relationship between current capital and
Sex of manager. Means that If one female manager is replaced by one male manager the current

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capital of the enterprises changes by 0.656.And this value is significant or important variable to
analyze the response variable (current capital).

β1 = -0.99 this value is negative. This means that there is indirect relationship between current
capital and age of enterprises. And one unit decrease in age of enterprises cause the change in
current capital by -0.99.

β2 = -0.16 this value is also negative. This means that there is indirect relationship between
current capital and Profitability of business. And one unit decrease in Profitability of business
cause the change in current capital by -0.16.

β3 = 0.113 this value is positive mean that there is direct relationship between current capital and
Habit of receiving feedback. If the value of Habit of receiving feedback changes by one unit the
value of current capital by 0.113.

β4 = -0.480 this value is also negative. This means that there is indirect relationship between
current capital and Beginning capital. And one unit decrease in beginning capital that cause the
change in current capital by -0.480.

β6 = -0.01 government Motivation this value is also negative. This means that there is indirect
relationship between current capital and government Motivation. And one unit decrease in
government Motivation cause the change in current capital by -0.01.

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4.3.2 Model summary

Table 4.4 Result of model summary.

From the above table we can observe that the R-square and adjusted R-square were good.
Because R-square = 0.239 and adjusted R-square = 0.142, this implies that R-square is 23.9%
and adjusted R-square is 14.2%. From this value of adjusted R-square 14.2% of the variations in
the distributions of the current capital of enterprises is explained by Age of enterprises,
Profitability of business, Habit of receiving feedback, Beginning capital, Sex of manager and
government Motivation. Therefore the model for the data that collected from 100 totals is good
fit.

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Figure 4.2: Normal p-p plot standardized residual.

The above figure shows that, the residual of scatter plot of result of current capital are distributed
randomly, which guarantees the variance of response variable is constant for predictor variables.
Hence the variable of dependent variable is homoscedastic. so the residual are normal
distributed. This shows that approximately linear pattern that is consistent with the normal
distribution. Therefore the linearity assumption is satisfied.

26
Figure 4.1;Histogram chart for test of normality.

As one can see from the above figure 4.1 normality assumptions is satisfied. This means the
residual of the result of current capital is normally distributed. This checks the normality
assumption of the residual term as well as the normality assumption of the model in this project
study about statistical analysis determinants of current capital of micro and small scale
enterprise.

27
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATIONS

5.1 CONCLUSION
The main objective of this study was to determine factor that influence or determine the growth
of micro and small scale enterprises in Assosa town. The conclusions made on the analysis are as
follows.

Based on the analysis of the role and factors that determine the growth of micro and small scale
enterprises, the response variables current capital was found to be significantly associated with
the explanatory variables; Age of enterprises, Profitability of business, Habit of receiving
feedback , Beginning capital ,Sex of manager and government Motivation.

Profit is the primary objective of running businesses; any business owner expects its operational
result to exceed its cost and expense incurred in the course of business operation. Business
planning is a continual process of making entrepreneurial decisions, with a focus made to the
failure and systematically organizing and coordinating the effort needed to execute those
decisions. Most of the business don’t follow business plan in carrying out their operational
activities because lack of ability and skill of constructing business plan. The study indicates that
micro and small scale business owners have no clear concept of marketing as they prefer to
emphasize on proper customer visit. According to the information received from the respondents
the government motivation is medium. That means out of the 54 respondents of micro
enterprises members, 27 respondents say yes and 27 respondents says no.

5.2 Recommendations

Explanatory variables such as age of enterprises, Profitability of business, Habit of receiving

feedback, Beginning capital(in birr), Sex of manager and government Motivation where some of
the factors most probable affects growth of micro small scale enterprises. Bearing this in mind
we make the following recommendations;

Education should be extended or provided to the owners of micro and small scale enterprises to
develop entrepreneurial and managerial skills so that they can plan the operation of their business

28
identify and exploit the opportunities available to them. The owners should be educated on
marketing concepts so that they can get clear view of the role of proper customer services. To
make effective the businesses, the owners should facilitate conditions in which the applicant can
get sufficient consultancy concerning the nature of the business they want start, location of the
business, identification of target customer groups, marketing conditions and ways to seek market
information.

The analysis revealed that the owners have to develop the habit of seeking feedback from their
customer, because lack of awareness about its importance keeping their customer in touch with
them.

So as to have successful business operation, any business owners should develop customer
relationship management.

29
 REFERENCE

Audretsch 1988,“Innovation in Large and Small Firms,” TheAmerican Economic Review,

78,678-690.

Andualem 2000, Small Business Enterprises 2nd edition. Addis Ababa: Mega press Enterprises
Asseffa 2004, DairyDevelopment inEthiopia. Environment and production Technology,
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Babbie 2005, European Journal of Business, Economics and Accountancy Vol. 3, No. 3, 2015
ISSN 2056-6018.
Balu (October2000), pacific Edge projects Itself, fast company, 371-381

Balve V.(2003). Entrepreneurship3rd edition, New York: United Nation University press

Cochran w.g, (1997) sampling techniques 3rd edition.

Ehresman, 2008 Reusable Learning Objects Trough Peer Review, the Expertise Approach,
Innovate (3)5

Gibrehiwot, A (2005).Micro and small Enterprises.Addis Ababa Bole Press

Ibid, (2000) - ‘Measuring what matters, Industrial management.12 (3), 31

IDP report 2003, provisional report, January 2003

Mayoux, 2003. ‘Sustainable Learning for Women’s Empowerement; Ways for Ward in Micro
Finance’, NewDelhi; Samscriti

Paul B, (1996).Business research, ’The Distribution of Occupation Asacity Yardstick, New

York; Columbia University Press’

Rauch and Frese, 2001, ‘International Review of Industrial and Organizational Psychology’
(vol.15, pp.101-141), New York

Todaro and smith, 2006 ‘Economic Development 12th Edition’ University Of Ottawa Press

30
Simon Bridge, Ken O Neil And Stancromie (2003) ‘The Knowledge of System Of A firm;
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Woldie A. (1989).’ Small Scale Industries in Developing Countries; Empirical Evidence and
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Lansing.

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 APPENDIX

QUESTIONNAIRE

The purpose of this questionnaire is to undertake a research on Micro and Small Enterprises in
Assosa Town, for partial fulfillment of the requirements for Degree in Statistics. So your frank
and honest opinion will have a positive contribution for the success and reliability of this study.
Finally, I thank you in advance for your time and kind cooperation to answer the question.
Answer the question by using symbols “X”.

II. Personal Information

1. Age --------------------------
2. Sex of manager: Male  Female 
3. Level of education of manager?
Read and write apply (illiterate)  Grade 1-8 

Grade 9-12*  Above Grade 12 

4. Marital status
Married  never married/single  If other specify ------------

5. Age of enterprises in year 1 1 2 3 4 above

6. What is your beginning capital (in birr)?

Less than $500

> = $500

7. How can you explain profitability of your business?

Very satisfactory averagely unsatisfactory

8. Do you have habit of receiving feedback from customers? Yes No

9. Is the government motivates your business operations in this town? Yes No

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10. What is the lower education level of workers? Primary secondary diploma

33