Growth Potential and Business Constraints of Micro and Small Enterprises in South Wollo Zone, Amhara Region, Ethiopia

Course ID
Ethiopian Economics Association (EEA)
Addisu Molla

The governmental institutions and NGOs involved in the promotion and growth of MSE sector can identify the solutions to increase the survival and growth rates of enterprise if they have more information about the factors that constrain enterprises growth. Thus, this study utilized the data collected on 224 MSEs in the south Wollo zone of Amhara region using stratified sampling method to analyze the business constraints faced by these enterprises. It examined the extent to which the growth of MSEs is associated with business constraints, while also controlling for owner-managers’ attributes and enterprises’ characteristics. Three sets of models were utilized so as to make the analyses. The first set of model, principal component analysis (PCA), is a multivariate technique of analysis used as variable reduction technique in which the original large set of explanatory variables (potential constraints) are transformed into smaller set of variables which helps for further analyses in the next two sets of models: multiple regression and logistic regression. PCA identified six dimensions of constraints on growth of enterprises, namely: limited access to premises; limited access to finance; limited access to business services; limited access to market; unfavorable government policy and weak institutional linkage. The multiple regression result revealed that the MSEs employment growth was significantly and negatively affected by business constraints: limited access to finance, limited access to business services, and limited access to market. On the basis of the logit estimates, limited access to premises, limited access to finance and limited access to business services were significantly and negatively affect the operators’ perception on growth potential of enterprises income. Therefore, the results highlight that the growth of MSEs in the study area are highly influenced by the specified business constraints. This condition may, on the one hand, limit physical capital accumulation and hence investment. On the other hand, it may constrain enterprise’s ability to undertake its daily operations. Thus, the importance of accesses of various productive resources and assets for the sector is worth considering for policy makers and other stakeholders as a positive knock on effect for growth of MSEs

Corporate Author:Demirew Getachew; Getenet Alemu; Worku Gebeyehu (Editors) and Ethiopian Economic Association
Publisher:Ethiopian Economic Association
Primary Descriptors:business constraints

Secondary Descriptor:Growth potential, principal components

Geographic Descriptors:Ethiopia, Amhara Region
Broad Subject heading: MSEs
Call Number:330.963 PRO 2013
Serial Key Title: Proceeding of the Tenth International Conference on the Ethiopian Economy
Publication catagory: International Conference
Content type: EEA Publication
Publication date: 2013-06-03 00:00:00
Conference Place: EEA Multi-Purpose Building Conference Hall, Addis Ababa
Place of publication: Addis Ababa
Type of material: Book
Current frequency: Annually
Author: Addisu Molla
Conference date: July 19 – 21, 2012