Addis Ababa University

School of Graduate Studies

Department of Public Administration and Development Management

Assessing Factors Affecting Transitional Development of Small Scale to

Medium Scale Enterprise in Sebeta Town: Challenges,
Opportunities and Prospects

Prepared by: Mekonnen Lenjisa

June, 2014
Addis Ababa
 Addis Ababa University
School of Graduate Studies
Department of Public Administration and Development Management

Assessing Factors Affecting Transitional Development of Small Scale to

Medium Scale Enterprise in Sebeta Town: Challenges,
Opportunities and Prospects

A Thesis Submitted to Addis Ababa University, Department of Public

Administration & Development Management, in Partial Fulfillment of the
Requirements for the Degree of Masters of Arts in Public Administration

Prepared by: Mekonnen Lenjisa

Advisor: Tefer Regessa

June, 2014
Addis Ababa
 Addis Ababa University
College of Business and Economics
Department of public Administration and Development
Management

Assessing Factors Affecting Transitional Development of Small Scale to

Medium Scale Enterprise in Sebeta Town: Challenges,
Opportunities and Prospects

By: Mekonnen Lenjisa

Approved by Board of Examiners

__________________________________ ____________________
Chairperson, School of Graduate Committee Signature

__________________________________ ____________________
Advisor Signature

_________________________________ ____________________
Internal Examiner Signature

__________________________________ ____________________
External Examiner Signature
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Acknowledgements

It is the loveliness, charity, forgiveness, help and kindness of the enormous God that
made me achieve this success, strength and to go through all the difficult time.

I am highly indebted to my advisor Ato Tefer Regessa, who gave me all the invaluable
guidance throughout the course of this work.

I would like to express my heartfelt appreciation to w/ro Zerfe Bekele, my beloved wife,
and to my children who were my insight to work hard throughout my studies for the last
two years.

I am indebted to all staff members of Federal Micro and Small Scale Enterprise Agency,
Oromia Micro and Small Scale Enterprise Agency and Sabeta Micro and Small Scale
Enterprise office for their collaborative and helpful support. In particular, I would like to
regard my heartfelt appreciation to Ato Milkesa Jagema, Ato Alemu Regassa, Ato Worku
Debele, Ato Abaineh Bacha, and Ato Belay Zeleke for their initiation and motivation to
successfully complete this study.

Furthermore, my special thanks go to Oromia Regional State for its support to make this
study actual.

I also want to address my deepest gratitude to Boru Godana, Adem Kedir, Wadajo Wami
and Debebe Barud who exerted their priceless assistance throughout my study.

i
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Table of Content

Contents Page no.

Table of Content .......................................................................................................... ii

LIST OF TABLES ...................................................................................................... vi

LIST OF FIGURES ................................................................................................... vii

List of Appendices .................................................................................................... viii

List of Abbreviations and Acronyms .......................................................................... ix

ABSTRACT ................................................................................................................ xi

CHAPTER ONE

Introduction ................................................................................................................ 1

1.1Background of the Study ..........................................................................................1

1.2. Statement of motivation ..........................................................................................3

1.3 Statement of the problem .........................................................................................4

1.4 Research Questions ..................................................................................................6

1.5Objective of the study ...............................................................................................6

1.5.1 General Objective .................................................................................................6

1.5.2 Specific Objectives ...............................................................................................6

1.6 Significance of the study..........................................................................................7

1.7 Scope of the study ....................................................................................................8

1.8 Limitations of the study ...........................................................................................8

1.9 Organization of the thesis ........................................................................................9

CHAPTER TWO

Review of Related Literature ................................................................................. 10

ii
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

2.1Theoretical Literature Review ................................................................................10

2.1.1 Introduction .........................................................................................................10

2.1.2 Definitions and concept of MSE‟s in Global Context ........................................10

2.1.3 Definition of SME‟s in Ethiopian context ..........................................................13

2.1.4 Concepts of Transitional Developments of Small Scale Enterprises..................14

2.1.5The impact of the different phases of the production process in MSEs ..............17

2.1.6 MSEs Growth measures ......................................................................................19

2.1.7 The role of micro and small enterprise ...............................................................19

2.1.8 Theories on Micro and Small Scale Enterprises .................................................21

2.1.9 MSE‟S Experience in Ethiopia ...........................................................................23

2.1.10 Challenges and problems of MSEs development .............................................26

2.1.11 Conceptual framework ......................................................................................29

2.2 Empirical Literature Review on MSEs ..................................................................30

2.2.1 Empirical studies of MSE‟S on other lands ......................................................31

2.2.2 Empirical studies of MSEs in Ethiopian .............................................................32

CHAPTER THREE

Description of the Study Area and research Methodology .................................. 34

3.1 Description of the Study Area................................................................................34

3.1.1Study Area ...........................................................................................................34

3.1.2 Location ..............................................................................................................34

3.1.3Shape and Position ...............................................................................................35

3.1.4 Relief Features ....................................................................................................35

3.1.5Climatic Condition ...............................................................................................35

3.2 Research Methodology ..........................................................................................36

iii
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

3.2.1 Data sources ........................................................................................................36

3.2.2 Data collection Techniques .................................................................................36

3.2.3. Sampling techniques ..........................................................................................37

3.2.4 Data Analysis and Presentation ..........................................................................39

3.2.5 INSTRUMENT DEVELOPMENT ....................................................................40

3.3Ethical Considerations ............................................................................................41

CHAPTERFOUR

Data Presentation, Interpretation and Analysis .................................................. 42

4.1INTRODUCTION ..................................................................................................42

4.2 General information of the respondents .................................................................42

4.2.1 Sex of respondents ..............................................................................................43

4.2.2 Age of Respondents ............................................................................................44

4.2.3 Educational Status ...............................................................................................45

4.2.4 Marital Status of Respondents ............................................................................46

4.3 GENERAL CHARACTERISTICS OF THE ENTERPRISES .............................47

4.3.1 The Stage of business enterprise .........................................................................47

4.3.2 Plan in enterprise future operation ......................................................................47

4.3.3 Record Keeping and Financial Control Practice of the Enterprises ...................48

4.3.4 Management Experience of Principal Owners ...................................................49

4.3.5 Marketing Skill of Business Owners ..................................................................50

4.4. FACTORS AFFECTING TRANSITIONAL DEVELOPMENT OF SMALL SCALE

TO DEVELOPMENTAL MEDIUM SCALE ENTERPRISES ..................................51

4.4.1. Legal Factors ......................................................................................................51

4.4.2 Financial Factors .................................................................................................54

iv
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.4.3. Management Factors ..........................................................................................56

4.4.4. Marketing Factors ..............................................................................................58

4.4.5. Working Place Factors .......................................................................................60

4.4.6 Entrepreneurial Factors. ......................................................................................62

4.4.7. Infrastructural Factors ........................................................................................64

4.4.8 Technological Factors .........................................................................................65

4.4.9. General Factors ..................................................................................................66

4.5. Opportunities, and threats, ....................................................................................68

4.6 Possible Solutions for the Problems ......................................................................68

CHAPTER FIVE

5. Summary, Conclusions and Recommendations ................................................ 71

5.1 Introduction ............................................................................................................71

5.2. Summary ..............................................................................................................60

5.3 Conclusions ............................................................................................................74

5.4 Recommendations ..................................................................................................76

References

Appendices

v
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

LIST OF TABLES
Page

Table: 2.3. Definitions and supports for stages ----------------------------------------------- 24

Table: 3.1 sample size ---------------------------------------------------------------------------- 35

Table: 4.1 Educational levels of the respondents -------------------------------------------- 39

Table: 4.2 marital statuses of the Respondents ----------------------------------------------- 40

Table: 4.3 Stage of business enterprise -------------------------------------------------------- 41

Table: 4.4 Plan in enterprise future operation------------------------------------------ ------ 41

Table: 4.5 Record Keeping and Financial Control Practice of the Enterprises-----------42

Table: 4.6 Management Experiences of Principal Owners ---------------------------------- 43

Table: 4.7 the Marketing Skill of Business Owners ----------------------------------------- 43

Table 4.8: Legal Factors -------------------------------------------------------------------------- 46

Table4.9: Financial Factors ---------------------------------------------------------------------- 48

Table 4.10: Management Factors --------------------------------------------------------------- 50

Table 4.11: Marketing Factors ------------------------------------------------------------------ 52

Table 4.12: Working Place Factors ------------------------------------------------------------- 53

Table 4.13: Entrepreneurial Factors ------------------------------------------------------------ 55

Table 4.14: Infrastructural Factors -------------------------------------------------------------- 56

Table 4.15: Technological Factors ------------------------------------------------------------- 57

vi
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

LIST OF FIGURES
Page

Figure 2.1 Factors affecting the development Of Small Scale

Enterprise, outcomes and Prospects -------------------------------------------- 26

Figure 4.1 Gender of the respondents ------------------------------------------------------- 38

Figure 4.2 Age of the respondents -------------------------------------------------------- 38

Figure 4.3: degree of influence of main Factors ------------------------------------------ 58

vii
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

List of Appendices

Appendix 1: questionnaire used in the research

Appendix 2: interview used for Government officials

Appendix 3A: list of micro and small enterprises of the six centers

Appendix 3B: list of members of micro and small enterprises of the six centers

viii
MEKONNEN LENJISA BIRATE
Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

ABBREVIATIONS

AAU Addis Ababa University

AEMFI Association of Ethiopian Microfinance Institutions

BDS Business Development Service

BOFED Bureau of Finance and Economic Development

CSA Central Statistics Authority

EC European Commission

ETB Ethiopian Birr

FeMSEDA Federal Micro and Small Enterprises Development Agency

GDP Gross Domestic Product

GTP Growth and Transformational Plan

ILO International Labor Organization

IMF International Monitory Fund

LDCs less Developed Countries

MFI Micro Finance Institute

MOFED Ministry of Finance and Economic Development

MOI Ministry Industry

MOTI Ministry of Trade and Industry

MOUDC Ministry of Urban Development and Construction

MSEDA Micro and Small Enterprises Development Agency

ix
MEKONNEN LENJISA BIRATE
Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

MSEDS Micro and Small Enterprises Development Strategy

MSEs Micro and Small Enterprises

MSMEs Micro Small and Medium Enterprises

NBSSI National Board of Small Scale Industries

NGOS Non-Governmental Organizations

OFED Office of Finance and Economic Development

PCG Partial Credit Guarantee

SBOs Small Business Owners

SMEs Small and Medium Scale Enterprise

SMIEIS Small and Medium Industries Enterprises Investment Scheme

SPSS Statistical Package for Social Science

SSIs Small Scale Industries

TVET Technical and Vocational Education Training

UK United Kingdom

UNIDO United Nations Industrial Development Organizations

US United State

USD United States Dollar

x
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Abstract

This research aims to investigate Factors Affecting Transitional Development of Small

Scale to Medium Scale Enterprise in Sebeta Town: Challenges, Opportunities and
Prospects Hence, the situation whether the objective of these MSEs is met merits special
consideration of transitional development of small scale Enterprises. This study tries to
answer three important questions: What are the major internal and external challenges,
opportunities and prospects in transitional development of Small Scale to medium scale
enterprise? What are the key strategies used to develop MSEs and to solve the
challenges faced by the SMEs transitional development of Small Scale to medium scale
enterprise? Do all MSEs actors in government sectors play their role according the
MSEs strategy? With the above objectives in mind, data was gathered through
Questionnaire, Interview and Review of both published and unpublished materials. The
information gleaned through questionnaire from a sample of 358 operators and face-to-
face interviews were conducted with 5 officials of MSEs actors in oromia region and
sebata Town. Eventually, using a mix of qualitative and quantitative tools, the study
found out major challenges which seem to affect transitional development of small scale
Enterprises in Sabete Town which include: implementation problems related to
government bodies at each level, inadequate finance. For the above challenges the
Oromia regional government bodies should provide affordable alternative sources of
finance and should be strength the government institutions at different levels, to play a
major role in positively influencing the development of MSEs. Hence, there is a need for
strengthening the MSEs growth, based on findings, recommendations to government
bodies, to operators of MSEs and suggestions for other researchers are forwarded.

xi
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

CHAPTER ONE
Introduction
1.1 Background of the Study

From global point of view, it has been recognized that Micro and small scale enterprises
(MSEs) play a vital role in economic development, as they have been the primary sources
of Job/employment creation, output growth and the central focus of the industrial
development strategy, not only in less developed countries (LDCs) but also in developed
countries.

Studies conducted by Syed and Mohammed (2009) shows that the MSEs play a vital role
in the progress of the economy of the developed nation due to the fact that it reduces the
unemployment problems by using lower capital per employment, avoid extra costs
for development of industrial infrastructure, reducing the risk of the investments,
check imbalance between different sections of the economy and maximize the use
of locally available resources.

According to the study of Boaten (2012), the dynamic role of micro and small-scale
enterprises (MSEs) in developing countries as “necessary engines for achieving
national development goals such as economic growth, poverty alleviation,
employment and wealth creation, leading to a more equitable distribution of
income and increased productivity is widely recognized.” In an attempt to
accelerate growth rates in low-income countries, particularly in Africa, many
development partners and donors have made the promotion and development of MSEs a
major concern. This shows that MSEs are seen as essential facilitator for economic
growth, job creation, industrial development and poverty alleviation, equitable
distribution of income both in developed and developing countries.

In Ethiopia until 1997, there were no organized policy and support systems catering to
the development of the MSEs sector, so structural, institutional, and policy barriers were

1
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

not being addressed. Premises, markets, finance, supply arrangements, regulatory barriers
and legitimization of entrepreneurial activity are among the most urgent. (ILO, 2005)

Recognizing the significance of this sector, the Ethiopian Government issued the
National Micro and Small Enterprises Strategy in 1997 and established the Federal Micro
and Small Enterprises Development Agency in 1998. The country‟s industrial policy in
2003 and the poverty reduction strategy in 2006 have singled out MSEs as major
instruments to create a productive and vibrant private sector and reduce poverty among
Rural and urban dwellers. The Micro and Small Enterprises Sectors contribute to the
economy of nations‟ by creating employment opportunities, production of goods and
services and other value added activities.

The five year Growth and Transformation Plan envisages ensuring faster and sustained
development of the industrial sector and enabling the sector to gradually play a key role
in the economy. To this end, particular emphasis is given to the promotion of micro and
small enterprises as well as supporting the development of medium and large scale
industries. Focus is laid on creating favorable conditions to export oriented and import
substituting industries so as to accelerate structural changes in the sector. (MOFED,
2012)

In a normal process micro and small scale enterprise have to develop from one level of
growth to the next level of growth that means from micro to small, from small to
medium, and from medium to large scale enterprise by fulfilling the criteria needed.
When it is developed from small scale to medium scale, creates employment opportunity,
facilitates industrial development, it becomes independent from government support and
leave the place for new micro enterprise. So, if this process is continues, the development
of industries will be fast and its contribution for economic growth also increases. But for
some different reason this process is not properly applicable especially from small scale
to medium.

2
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

The transitional development of small scale to medium scale enterprises, changes over
time in their employment and output shares, market orientation and location are usually
thought to be related to many factors, including the level of economic development,
changes in real income per capita, population growth, and progress in technology. Given
this thought, the most important question addressed in this paper is the factors affecting
transitional development of Small Scale to medium scale enterprise in Sebeta Town.
More specifically, challenges, opportunities and prospects.

Sebeta is one of the Oromia towns and located 24 km far from the capital Addis on the
Addis Ababa Jimma road. The total population of this town for the year 2003 E.C & 2004
E.C was 131,123 (68,258 males & 62,865 females) and 136,368 (70,988 males &
65,380 females) respectively. (OFED, 2013)

Micro and small enterprise operates in five kebele‟s, when the Town administration
developed a business plan on MSEs throughout the Town in 2003. Therefore, this thesis
will try to review some empirical studies based on primary and secondary data on the
development of small scale enterprises (ibid).

1.2. Statement of motivation

Ethiopia has different natural resource potential, out of which human resource is the vital
one but it has more than 1.2 million unemployed populations of urban areas (CSA, 2012).
Approximately 162,178 micro and small scale enterprises are not working in all their
potential. Moreover, 216,237 small scale enterprises have not been transformed to the
medium level enterprise or only 0.64 % and 1.2 % of MSEs transformed to medium level
of growth in Federal and Oromia regional state respectively (FeMSEDA, 2014). It is also
the Oromia MSEs is large in number and accounts for 34.94% of operators from the
country‟s total MSEs. For this reasons the researcher motivate to assess the Challenges
and opportunities of transitional development of small scale enterprise particularly in
Sebeta Town of Oromia Regional state.

3
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

1.3 Statement of the problem

In Ethiopia, MSEs sector is the second largest employment-generating sector following

agriculture (CSA, 2005). A national survey conducted by Ethiopian Central Statistical
Authority (CSA) in 2005 in 48 major towns indicates that nearly 585,000 and 3,000
operators engaged in micro and small scale manufacturing industries respectively, which
absorb about 740,000 labor forces. Accordingly, the whole labor force engaged in the
micro enterprises and small scale manufacturing industries is more than eight folds
(740,000 persons) to that of the medium and large scale manufacturing industries (90,000
persons). This is a contribution of 3.4% to GDP, 33% of the industrial sector‟s
contribution and 52% of the manufacturing sector‟s contribution to the GDP of the year
2001 (CSA, 2005).

Even though the roles of micro and small enterprises in the Ethiopian economy are better
recognized, there is no adequate study on the sub sector. Although significant strides
have been made to allow micro and small enterprises to be created, there are formidable
obstacles militating against the development of both existing micro and small enterprises
and those aspire to start up a new.

Equally, there may be some opportunities that need to be realized. The objective of this
study is assessing factors affecting transitional development of small scale to medium
scale enterprise in sebeta town: challenges, opportunities and prospects and come up with
recommendations that will promote the sector.

Moreover the existence of a strong small business sector is necessary for the boosting of
the economy. However, the transition of small scale enterprise to medium enterprise is as
crucial to preserve the flow of new small businesses into the economy. In addition, such
transition or growth will further reduce the unemployment rate and increase the number
of products or services offered to the society.

The Ethiopian government adopted the national Micro and Small Enterprise
Development Strategy for the first time in November 1997. The policy identified a

4
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

number of constraints hampering the development of MSEs. The policy serves as

guideline to all stakeholders to stimulate the establishment of new enterprises and
enabling the existing ones to grow and become more competitive. This policy identified
un-favorable legal and regulatory frameworks, underdeveloped infrastructure, poor
business development services, limited access to finance, ineffective and poorly
coordinated institutional support as the key constraints that hinders the development of
the sector (MSEs strategy for Ethiopia, 1997). In addition, the reviewed empirical studies
with regard to the sector focused on socio-economic determining factors of MSEs success
and its major challenges and constraints (Solomon, 2004; Girmay, 2006).

Most studies, in academic and non-academic institution, focus on factors that hinder the
growth of MSEs and the outcome of the program in aggregate forms. Regarding the role
of micro and small enterprises in the process of industrial development, empirical studies
fail to investigate the transitional development of small scale enterprise to medium scale
enterprises. .

For instance, the research conducted by Solomon (2004) also tried to analyze growth
determinants of MSEs and found that product diversification is a major determinant
factor for the growth of small enterprises in Addis Ababa. The finding revealed that
business experience is associated with new start-ups calls for the promotion of the culture
of apprenticeship and intern experience sharing for the young as a possible area of
intervention in employment generation schemes to minimize the extent of unemployment
The researcher holdup to see MSEs contribution in the development of medium scale
enterprise by solving their challenges and using their opportunities.

Girmay (2006) study on the title of Managerial Performance Measurement in Small Scale
Industries, focus more on investigates whether SSIs can operate as successful and
surviving firm and to formulate database model of managerial performance measurement.
The researcher also tried to identify the challenges faced by MSEs in Addis Ababa. Some
of the factors identified are: lack of access to capital and credit, lack of clear and
pragmatic national policy to enhance the development of SSIS, lack of premises and land,
5
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

lack of entrepreneurial, managerial and other skills, lack of skilled workforce, lack of
information about separate supportive organization socio-cultural constraints, lack of
sufficient marketing and promotional support. However, the study failed to investigate
how small scale enterprise can develop to medium scale enterprise.

From the above mentioned studies, it is possible to learn that factors affecting transitional
development of Small Scale to medium scale enterprise are not studied. Therefore, this
study tries to assess factors affecting transitional development of Small Scale to medium
scale enterprise in Sebeta Town and also tries to identify challenges, opportunities and
prospects for the sector and come up with policy recommendations.

1.4 Research Questions

On the bases of the above statements of the problem this research attempts to address the
following questions.

 What are the major internal and external challenges in transitional development of Small
Scale to medium scale enterprise?
 What are the major opportunities and prospects in transitional development of Small
Scale to medium scale enterprise?
 What are the key strategies used to develop MSE and to manage the challenges faced by
the MSEs transitional development of Small Scale to medium scale enterprise?
 Do all MSEs actors in government sectors play their role according the MSEs strategy?

1.5. Objective of the study

1.5.1 General Objective

The general objective of the study is assessing factors affecting transitional development
of small scale to medium scale enterprise in sebeta town: challenges, opportunities and
prospects.

6
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

1.5.2 Specific Objectives

 To investigate the external and internal Challenges of transitional development of small

scale enterprise to medium scale enterprise particularly in Sebeta Town.
 To identify the key strategies used to develop MSEs and to solve the challenges faced by
the SMEs transitional development of Small Scale to medium scale enterprise.
 To identify the major Opportunities and prospects of transitional development of small
scale enterprise to medium scale enterprise particularly in Sebeta Town.
 To assess the role to be played by all MSEs actors according to the MSEs strategy
 Based on the finding of study to provide policy implication as to how to better the
transformation process of small-scale to medium scale enterprise in the study area.

1.6 Significance of the study

1.6.1 Future researchers

The importance of this study is it may serve as springboard for other studies, which may
focus on similar topics and issues, related to micro and small business challenges and
opportunities.

1.6.2 Actors of MSEs

Consequently, the study can be used to show the transitional development of small scale
in to medium level growth, their problems in the study area and help the government and
other actors to focus on MSEs as one of the intervention for the fight against poverty. The
study could also assist the planners and practitioners to give emphasis on MSEs in their
development programs and projects and to arrive at appropriate solutions to the problems
on MSEs.

7
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

1.6.3 Policy makers

Accordingly the finding of the study may help policy and strategy makers and
practitioners in designing and implementing appropriate policies that would enhance the
transitional development of small scale enterprise to medium scale enterprise in Ethiopia.

1.6.4 Sebeta Town Administration

It may also be helpful for Sebeta Town Micro and Small Scale Enterprise to take
corrective measures so as to overcome the challenges and search opportunities for their
transitional development. Furthermore, the outcome of the study will give important
insight for further studies.

1.7 Scope of the study

In order to address the research objectives, the study is enclosed spatially and
operationally. The study is limited to Oromia Regional state, Sebeta Town as a research
setting. It is also delimited to those MSEs who have been registered under the MSE
development strategy of Ethiopian government and licensed by each centers of MSEs
service center in the Town. However, there are various private MSEs, the researcher not
included, in the study. The reason for excluding private MSEs is that, it is difficult to get
their list which would help for sampling.

1.8 Limitations of the study

The main problem during the survey period was most of the documents that are
concerned with micro enterprises are written in Afan Oromo and Amharic. To translate in
to the required instruction language (English) took longer period. Another problem
encountered in the study was shortages of data. Therefore, what the researcher did was,
try to manage his time properly and instead of concentrating only on the survey data, he
cross check the data that is gathered through survey with the interviews, and different
reports (published and unpublished concerning the issue under study) so as to make the
data representative and the outcome of the research findings credible. Because of the

8
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

above effort, It is very important to note that these limitations did not have any significant
interference with the outcome of the study

1.9 Organization of the thesis

The paper has five chapters. General introduction were offered in the first chapter of this
study. The relevant literature in the field was reviewed in the second chapter. Research
design and methodology were presented in the third chapter. Following this, Chapter four
contained data presentation, analysis, discussion of data and summery. Finally,
conclusions and recommendations are presented in the fifth chapter. Following
references and appendices were presented.

9
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

CHAPTER TWO

Review of Related Literature

2.1Theoretical Literature Review

2.1.1 Introduction

In this chapter, the number of theoretical and empirical works on Micro and Small Scale
Enterprises which has received a great deal of attention in development literature, and in
the leading programmes of the most development patterns are presented.

Accordingly, numerous development programmes and projects have been launched in

many developing countries and emphasis is now shifting towards the development of
Micro and Small Enterprises in order to increase the productivity, purchasing power and
standard of living of their people so as to achieve economic growth and development.
This is because it has been realized that most countries should have programs to develop
this sector of the economy since it is the engine of growth for every economy especially
in all developing countries like Ethiopia. In addition to this there will be some conceptual
work which will be used to support the study.

This chapter comprises of two main sections. These are Theoretical Literature review and
Empirical Literature Review on MSEs

2.1.2 Definitions and concept of MSE‟s in Global Context

Regarding the definition of the term MSEs universally accepted definition is not yet
given. This is because of the heterogeneity of MSEs themselves and the nature of the
economy in which they operate. This become the agent for the absence of establishing
feasible global definitions that can be used everywhere in the same manners
http://www.cgp.org /.

10
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Due to this and the other related factors, different countries use different criteria such as
number of employees, assets, employed capital, sales turn over, or combination of the
above factors to determine the size of the enterprises. For instance the most common
definitions used by regulators are based on the number of employees, sales and/or loan
size. Accordingly this study indicated that sixty-eight countries provided information on
the SME definition criteria used by the financial regulator. Fifty of them use the number-
of-employees criterion and 29 out of these 50 also use the other two criteria. In this form
a total of 41 regulators use maximum sales value criteria and 15 of them use maximum
loan value criteria to define MSE (ibid).

Meanwhile Bolton Committee (1971) first formulated an “economic” and “statistical”

definition of a small firm. Under the “economic” definition, a firm is said to be small if it
meets the following three criteria: It has a relatively small share of their market place; It
is managed by owners or part owners in a personalized way, and not through the medium
of a formalized management structure; and it is independent, in the sense of not forming
part of a large enterprise.

The Bolton Committee applied different definitions of the small firm to different sectors.
Whereas firms in manufacturing, construction and mining were defined in terms of
number of employees (in which case, 200 or less qualified is considered to be a small
firm), those in the retail, services, wholesale, etc. were defined in terms of monetary
turnover (in which case the range is 50,000-200,000 British Pounds to be classified as
small firm). Firms in the road transport industry are classified as small if they have 5 or
fewer vehicles. The given definition of Bolton committee for the concept small and
micro enterprise is not without criticisms. It is highly criticized on the apparent
inconsistencies between defining characteristics based on number of employees and those
based on managerial approach.

In addition to this in Nigeria, the Small and Medium Industries Enterprises Investment
Scheme (SMIEIS) defines MSEs as any enterprises with a maximum asset based of N200

11
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

million excluding land and working capital and with a number of staff employed not less
than 10 or more than 300 International Finance corporation publication (2001).

According to the National Board of Small Scale Industries (NBSSI) in Ghana, both fixed
asset and number of employees are applied as criteria in the definitions of micro and
small scale enterprise. It defines a Small Scale Enterprise as one with not more than 9
workers, has plant and machinery (excluding land, buildings and vehicles) not exceeding
10 million Cedis (US$ 9506, using 1994 exchange rate) http://www.man ac.Uk /idpm/.

The European Commission (EC) coined the term `Small and Medium Enterprises
(SMEs)‟ based on the following three components. According to this commission where
Firms with 0 to 9 employees are considered as micro enterprises the one with 10 to 99
employees are categorized under small scale enterprises. Mean while firm with 100 to
499 employees are indicated as medium enterprises (ibid).

In other ways World Bank since 1976 indicated that firms with fixed assets of less than
US$ 250,000 in value (excluding land) are Small Scale Enterprises.

As it is indicated above micro and small scale enterprise can be defined based on the
economic statuses of the country. For instance according to UNIDO (1983) for
developing countries while firms with 100+ workers are considered as large, the one
with 20 - 99 workers are categorized under medium firms. Adding to this it categorized
firms with 5 - 19 workers under small scale firm and firms with < 5 workers under micro
firms.

For Industrialized Countries the source indicated that firms with 500+ workers are large
and medium firms are those firms with 100 - 499 workers. According to the same source
firms with ≤ 99 workers are categorized under small (ibid). From this, it can be said that
there is no unique definition for micro and small scale enterprise.

12
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

In general the definition for the concept micro and small scale enterprise is different from
country to country based on socio –economic status. This indicated the absence of clear
cut and universally accepted definitions for this concept since different criteria are used.

2.1.3 Definition of MSE‟s in Ethiopian context

In the case of Ethiopia, there is also lack of uniform definition at the national level to
have a common understanding of the MSEs Sector. Even though difficulty is there in
having clear cut definitions, the country wide used definition of MSEs according to MoTI
and CSA is based on level of paid-up capital/fixed asset, size of employment, the
technological establishment used and consultancy services. This categorization is
important for functional and promotional purposes to achieve the desired levels of
development. However, three mostly used definitions of MSEs are the definition by
Ministry of trade and industry (MoTI) on the basic criteria of capital investment and on
the other hand by central statistical authority (CSA) that uses employment and MSEDS
use the capital investment and employment. In addition to the above mentioned definition
currently, the revised MSEs Strategy divided MSEs in terms of product and service.

According to the definition of Ministry of Trade and Industry MSEs sector are
categorized into micro enterprises and small enterprise for the purpose of a strategy
(MoTI, 1997). Accordingly; Micro Enterprises are those small business enterprises with a
paid-up capital of not exceeding Birr 20 000, - and excluding high technical consultancy
firms and other high technological establishments. Whereas, Small Enterprises are those
business enterprises with a paid-up capital of above 20,000 and not exceeding Birr 500
000 and excluding high technical consultancy firms and other high technical
establishments (Haftu et al. 2009).

The other definition in Ethiopian context is the definition used by CSA which categorized
MSEs in to different scales of operation depending on the above mentioned yardsticks.
According to CSA a micro enterprise is one with fewer than 10 workers; those with 10-

13
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

50 workers constitute small enterprises while medium and large scale enterprises are
those with more than 50 employees.

In addition to the above mentioned definition currently, based on the gathered experience,
by identifying the gaps of the existing definition of MSE, ignoring the size of employee
and by taking total asset as criteria and by dividing it in to industry and service sector;
and considering the coming 5 years inflation and fluctuation/irregularity of currency the
improved definition is presented as follows: Micro Enterprises are those enterprises
having 5 workers including family members and its total asset not exceeding Birr
100,000 for manufacturing enterprises and Birr 50,000 for service providing enterprises.
Small enterprises are those enterprises having 6-30 workers and its total capital not
exceeding Birr 1.5 million for manufacturing enterprise and Birr 500,000 for service
providing enterprises.
When ambiguity is encountered between manpower and total assets as explained above,
total asset is taken as primary yardstick. (MSEDS, 2011)

2.1.4 Concepts of Transitional Developments of Small Scale Enterprises.

2.1.4.1 Growth stages, constraints and transitions

Micro and small scale enterprises remain the very important agent in the economic
developments of one country. They become the bench mark for the transitional
development of economy in most developing countries. The study undertaken by Boaten
(2012) affirmed this idea. According to this study the dynamic role of micro and
small-scale enterprises MSEs in developing countries is indicated as a “necessary
engines for achieving national development goals such as economic growth, poverty
alleviation, employment and wealth creation, leading to a more equitable distribution
of income and increased productivity. That is why an attempt to accelerate growth
rates in low-income countries, particularly in Africa gets the attentions of partners
and donors of the world . This shows that MSEs are seen as essential facilitator for
economic growth, job creation, industrial development and poverty alleviation, equitable
distribution of income both in developed and developing countries (ibid).
14
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

In light of the foregoing for economic growth and development, it would appear that a
reasonably large and vibrant SME sector would be highly desirable, especially for
underprivileged economies, which characteristically appear to have smaller and less
vibrant SMEs sectors. Size and vibrancy in turn require that start–up, micro and smaller
firms (MSEs) are able to „transit‟ to the next stage that is into SMEs (Galbraith, 1982;
Kazanjian, 1988).

The Hanks et al. (1993) propose four stages model and has received a lot of attention in
literature. Where the first stage is characterized as startup, young and small enterprises
with simple organizational structures, the second stage is expansion stage which is
slightly older and larger enterprises with more complex organizational structures. The
third is maturity stage. At this stage enterprise become larger than in the previous stage
with more complex structures. The last and fourth stage is diversification stage at which
the enterprise reached the highest level of entrepreneurship. These stages indicate the
evolutionary developments of micro and small scale enterprise.

Essentially, stage models commonly propose that enterprises „transit‟ gradually from one
stage to another such that most, if not all, firms do start small. However, the models also
claim that the transitional process can often be highly challenging since firms experiences
different problems typical of a particular stage of growth. Those firms that are able to
resolve the problems are usually able to transit to the next stage, others may be forced to
exit the business environment altogether or remain ever small. This phenomenon appears
well articulated by Berger and Udell (1998). This model is frequently referred financial
growth model in the literature. The authors propose a three stage firm growth: very small;
medium–sized, and large firms.

According to this model, the transition from the very small to the large firm stage is
determined largely by access to „confined‟ sources of finance. For instance, in the case of
a very small firm, survival and transit to the medium stage would be determined
importantly by the availability, and the firm‟s accessibility to insider (founder capital,
trade credit, etc.) and angel finance. Thus, in the absence of angels, a very small firm
15
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

must rely only on insider finance; the model predicts that at this stage, external debt, such
as a bank loan, is highly unlikely due mainly to the firm‟s size, age and operational
opacity (ibid).

2.1.4.2 Financial constraints and the MSE–SME transition

In spite of the debate on firm characteristics in comparison with financial constraints, the
MSE to SME transition is likely to be importantly constrained by the lack of access to
external finance (Beck et al., 2005). In a worldwide survey of 80 countries and 10,000
executives, Schiffer and Weder (2001) show that smaller firms report higher levels of
growth obstacles compared to medium or larger firms.

More recently, Beck eta al (2010) note that while domestic credit to the private sector has
generally been increasing in most developing countries, anecdotal and statistical evidence
suggest that smaller enterprises continue to be largely left out. According to this source
the higher financial obstacles reported by smaller firms across developing and developed
economies is consistent with both anecdotal evidence as well as theory‟s predictions.

In addition Beck et al. (2005) suggested that smaller firms typically need smaller loans
but greater opacity and collateral problems usually translate into higher risk premiums.
Consequently, smaller firms grow much more slowly. The survey also shows that the
level of access to external finance may differ across countries that mean the share of
small firms with no external finance ranged from 19 to 73%.

While these studies confirm that smaller firms may have more difficulties in accessing
external finance, they neither do not purse show nor suggest that smaller firms are
completely deprived of external finance. In this respect, a large number of studies have
also attempted to examine and understand the reasons for the lower degree of access to
external finance by smaller firms (ibid).

16
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Accepting its economic significance on one hand and appreciating its generic financing
constraints on the other, governments around the world have assumed the responsibility
of providing and facilitating financial assistance to the SME sector.

According to Beck et al. (2010).A common strategy has been the partial credit guarantee
(PCG) scheme. Designed to expand lending to SMEs, a PCG is essentially a risk transfer
and diversification mechanism seeking to lower the risk to the lender by substituting part
of the counterparty risk by the issuer, which guarantees repayment of part of the loan in
case of a default

To solve this financial problem Multilateral organizations such as the World Bank
strongly support government efforts to assist local SMEs sectors. According to the World
Bank (2002, 2004) the Bank itself allocates billions of dollars to support SMEs programs
worldwide; more than $10b over the 1998–2002 period and $1.3b in 2003 alone has been
allocated. The Bank is also actively involved in assisting governments design strategies
for alleviating financing constraints of SMEs.

2.1.5 The impact of the different phases of the production process in MSEs

The different phases of the production process in MSEs are mention in

http://www.ueapme.com as follows:

Environmentally-friendly raw materials: Micro and small businesses find it difficult to

use this kind of raw materials because, it is generally hard for them to give documented
evidence of its origin and its properties and it tends to be more expensive and, therefore,
it has an impact on the price of their final products.

Planning/design of the products: In this case, the cause of the problem faced by micro
and small businesses relies both on the cultural attitude in the necessity to recruit
technicians and engineers able to judge the planning and design of products from an
ecological and energy efficient perspective.

17
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Production phase: Minimizing the negative impact on the environment and increasing
energy efficiency of the manufacturing phase often requires the adoption of new, more
advanced technologies. This means micro and small businesses are faced with the
problem of finding the external financing for that. In this framework, it should be
considered the investments in new production facilities have to be calculated very
carefully and must be used during the whole amortization period and any investment in
eco and/or energy efficiency has to compete against other investments that may be more
important for competitiveness or have a higher potential for cost saving. In addition, most
SMEs have a very low equity ratio and depend mainly on debt finance, which reduces the
possibility to invest and forces SMEs owners to prioritize the most important investments
from a business point of view.

Transport phase: This phase has important repercussions on the quality of the
environment, both for the emissions and the congestion caused by road transport. Also in
this case, micro and small businesses tend to choose the best transport option on the basis
of its influence on the final price of their product without taking care of environmental
aspects. The road transport option is, consequently, the classic solution due to their
traditional approach to this issue.

End of use phase: Waste is a particularly growing problem and a more sustainable
production process should aim at avoiding or reducing its production to the minimum.
Moreover, products should be designed in a way to be easily dismountable by customers
in their end-of-life phase in order to facilitate reuse and recycling. These concepts are
particularly difficult to apply for micro and small businesses because of the already
mentioned problems related to the lack of EMS and eco-friendly design.

As a whole, therefore, the implementation of concept such as eco-efficiency, eco-design

and energy efficiency in a classic micro and small business corresponds to a revolution in
its production process. It should be well prepared in advanced and introduced with care
avoiding “overnight” implementation http://www.ueapme.com.

18
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

2.1.6 MSEs Growth measures

There is a little agreement in the existing literature on how to measure growth thus most
previous studies have used a variety of different measures such as total assets, sales,
employment size, profit and capital (Davidsson & Wiklund, 2000). Moreover, growth has
been measured in absolute or relative terms. Perhaps the most common means of firm
growth is through relatively objective and measurable characteristics such as growth in
sales turnover, total assets and employment size.

These measures are relatively uncontroversial, the data tend to be easily available and it
increases the scope for cross study comparability (Freel & Robson, 2004). But it is
difficult to get reliable time series data on growth of fixed assets/sales (better indicator of
growth) and MSEs owners would be unable to report their sales or profits even at the
present time expecting that their guesses as to sales of ten years ago would be accurate is
folly. Hence, the measurement of growth in terms of changes in the numbers of workers
is objective. Interestingly, Evans (1987) reports that estimates using employment size is
similar to those that use sales besides growth in sales and growth in the number of
workers are highly correlated. Therefore, this study measures the growth of MSEs using
employment size.

2.1.7 The role of micro and small enterprise

The role played by MSEs, through the various socio-economic benefits emanating from
the sector was found to be important in the overall development effort and process of
nations. In other words, by generating larger volumes of employment as well as higher
levels of income, the MSEs will not only have contributed towards poverty reduction, but
they will also have enhanced the welfare and standard of living of the many in the society
(Mukras, 2003).

Employment creation: To reduce unemployment micro and small enterprises make

unquestionably a huge contribution, especially in the developing world. Most studies
conclude that small enterprises are more labor intensive than larger ones, and some even

19
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

finds that the smaller firms also produce more output (or value added) per unit of capital
and thus generate more output as well as employment for a given investment than do
larger firms (Haggblade et al., 1990).

When we look at the share of employment in MSEs and large industries for lower and
higher income countries, 62%, and 38% of employment opportunity in lower income
countries created small scale and large scale enterprise respectively. However, the share
of employment in MSEs in higher income countries is still considerable and it accounts
for 41% of the total employment and the rest51% by large industries (Workneh, 2007).

Poverty reduction: For micro and small scale enterprise the chance to operate their own
business at a very low startup capital, and expand from that point will help them support
themselves and their family. This intern will operate to a reduced nationwide poverty
(Benyam, 2008).

In addition to the above role of MSEs, according to the study of Liedholm and Mead
(1999), the basic contributions of MSEs are also believed to be income generation and
employment creation and they identified and summarized the contribution of MSEs as the
following: Contribution to household income and welfare; which Providing income
maintenance for those with few options; Providing basis for growth in income and
welfare through asset accumulation, skill development and access to more rewarding
economic opportunities; and Providing employment opportunities; Contribution to self
confidence empowerments of the individuals to Recognition of the dignity of individuals;
and Spreading the vision, that change is possible. Contribution to social change, political
stability and democracy through increasing confidence in local representative community
based institutions, through developing of individuals feelings of responsibility and
participation in governance; also through creating institutional structure reflect, people‟s
needs and objectives. Contribution of distributional or developmental objectives by
providing new for the opportunities Poor; and by means of providing new opportunities
for the woman Contribution to demographic change, through reduction of birth rate and
through reduction in rural-urban migration
20
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

2.1.8 Theories on Micro and Small Scale Enterprises

Different theories were developed on the development of MSEs at different times. In this
session some theories related to micro and small scale enterprises are presented.

For instance, according to Tambunan (2006), two theories were developed in connection
with micro and small scale enterprise. These are: classical and the modern theories.

The Classical theory - states that poverty and the importance of MSEs development
correlate positively. In the course of rapid economic development, the economic share of
MSEs declined; while those of large and medium enterprises dominate the economy. In
other words, the higher the proportion of people living in poverty, the more will be the
contribution of MSEs in reducing poverty. This theory however, is criticized for
neglecting the economic growth of MSEs through networking and clustering,
agglomeration. It only focused on the relationship between levels of income and the
growth of MSEs. Because of these short coming of the theory, the modern view was
developed in 1980s.
The Modern Theory- postulates that the major reason for the emergence of the notion of
flexible specialization was the long debate of how to interpret the new global pattern of
production caused by globalization forces and industrial restructuring. Global production
had transformed from mass to individual production system and flexible specialization is
the result of this debate. Hence, according to Tambunan (2006) the modern theory has
three characteristics:

Flexible and Specialization -firms in the community form part of a bounded community
which outsiders are largely excluded.

High level of competitive innovation - there is a continuous pressure on firms in the

community to promote innovation in order to keep an edge of their competitors and;

High level of cooperation - there is a limited competition among firms in the community
over wages and working conditions encouraging greater cooperation among them.

21
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

In general, according to Tambunan (2006), the flexible specialization on MSEs states

those MSEs grow faster than large enterprises with the process and are important source
of invention, efficiency and innovation. They are also capable of standing the competition
with large enterprises. Hence, in the courses of development, the economic share of
MSEs increases or in other words, MSEs contribute a lot for poverty alleviation; while, it
declines in the classical theories. The other theories are the firm growth theory, and the
economic theory.

The firm growth theory-The firm growth theory asserts that MSEs are more likely to
disappear and be replaced by modern large-scale industry. This theory has, however,
been shown to be inaccurate in the sense that MSEs do not normally compete directly
with large enterprises; rather, they often tend to remain micro and small, co-existing with
large multi-national companies, which phenomenon the World Bank, 1989 has identified
as the „missing middle‟ (Ryan, 2005).

The most obvious activity where these niches exist is in distribution to areas or income
groups where their costs would be prohibitively high for large enterprises. However, in a
literature survey on macro analyses of micro enterprises in developing countries,
Liedholm and Mead (1993) came to the conclusion that macro-level empirical evidence
indicates that, as aggregate per capita income increases, there is a systematic pattern of
evolution of MSEs towards larger firms based in larger localities, producing more
modern products.

The economic theory of the growth of small firms has been concerned with the
relationship between growth and firm size. The conventional wisdom in economic theory
has long held that, due to economies of scale and scope, the growth of firms is positively
related to their size. Large firms were typically expected to have advantages over small
firms and so grow more rapidly. This process was expected to lead to a growing
concentration of industry. This partly explains the emphasis on large scale industry in the
former centrally planned economies (Scase, 1997).

22
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

But to some extent it no doubt also explains the fascination of economists from both east
and west with the newly privatized firms in those countries. It was expected by many that
all that was needed to release the forces of growth were a transfer of ownership from the
state to “outside owners” who would engage in a process of strategic restructuring which
would lead inevitably to rapid growth of the privatized firm sector. It was also thought
that the small firm sector would play a relatively insignificant role in regeneration and
transition growth (ibid).

2.1.9 MSE‟S Experience in Ethiopia

Recognizing the significance of this sector, the Ethiopian government issued and
established the National Micro and Small Enterprises Strategy and the Federal Micro and
Small Enterprises Development Agency in 1997 and 1998 respectively. The country‟s
industrial policy in 2003 and the poverty reduction strategy in 2006 have singled out
MSEs as major instruments to create a productive and vibrant private sector and reduce
poverty among urban dwellers (Mulu, 2009).

The Ethiopian government released the country‟s first MSEs Development strategy in
November 1997 E.C. The primary objective of the national strategy framework is to
create an enabling environment for MSEs. In addition to this basic objective of the
national MSE strategy framework, the MOTI has developed a specific objective which
includes, facilitating economic growth and bring about equitable development, creating
long-term jobs, strengthening cooperation between MSEs, providing the basis for
medium and large scale enterprises, promoting export, and balancing preferential
treatment between MSEs and bigger enterprises (MOTI, 1997).

The implementation of the strategy is planned to follow five stages. These are awareness
creations, needs identification and implementation planning, resource identification,
training of support agency staff and strengthening the business and entrepreneurial
culture. The strategy indicated criteria for prioritizing MSEs for support. MSEs which are
based on local raw materials and labor intensive having greater inertia and inter-sect oral

23
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

linkages (particularly with agriculture), import substitution and export capacity, MSEs
engaged in activities that facilitate and promote tourism (ibid).

In general, according to MoTI (1997) and MoI (2006), governmental bureaus, Micro
Financing Institutions, Technical and Vocational Training Centers, productivity
empowerment units, different NGOS, MSEs Councils, the project support units etc are
made to work for the promotion of MSEs in Ethiopia. As a result, it is possible to
understand from the above discussed policies that the current government is giving great
attention for the sector to alleviate the abject poverty, unemployment and to achieve
better income distributions. But recently in March 2011, a task force headed by the
Ministry of Urban Development and Construction (MoUDC) and the Federal Micro and
Small Enterprises Development Agency(FeMSEDA) published a new strategy for the
development of MSEs. The strategy identified and analyzed key MSE development
constraints namely, financial, training/consultancy, market, and infrastructure, and
technology transfer, institutional and cross-cutting issues

According to the new strategy (2011), the overall vision of the strategy is to create a
“competitive” MSE sector that lays the groundwork for industrial development. To
realize this vision, three objectives have been identified, which are: To increase the
employment and wealth creation capability of MSEs, to enable the MSE sector to become
more competitive and link with agricultural development and to ensure MSE
development by creating a large entrepreneurial base in towns and cities throughout the
country.

The major output of the new MSE Development Strategy is the creation of support
packages that relate to the areas identified as constraints to the sector. The target areas for
the new strategy are manufacturing sector (textile, leather and leather products, food
processing and beverage, metal works and engineering, wood work including, agro-
processing), construction, trade, services and urban agriculture.

24
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

According to the strategy there are two forms of development level of MSE. While the
first is transition from small to medium, the second is a step to be competent within the
level they have. The developmental support of government to MSE is also on the basis of
these transition levels of growth. Hence, based on the experiences of other countries
developmental stages of MSE in Ethiopia within the level can be divide into three stages
that is Start-up, growth and maturity.

Table: 2.3. Definitions and supports for stages

Stages Definitions Supports provided

Individuals, groups or Initial capital, legal support, business

associations are organized management, entrepreneurship idea,
legally, start production and are accounting skill and technical training
provided services which increase productivity and quality
Start-up
The enterprise is competent in Financial support, well founded skill and
Growth terms of price, quality and technical support, market, workplace and
supply in the market. legalization of the enterprise

The enterprise is competent and Creating competent enterprise (through

profitable in the market; using KAIZEN, expanding market
establish new enterprises; fulfill destination etc); identifying and providing
the definition of the sector and equipments that can help MSE to promote
promoted to medium or to Medium level enterprise; providing
competent and profitable while certificate that shows their (MSE)
it is in MSE stage. promotion to growing enterprise stage
Maturity

Source: MSEDS, 2011

25
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

The key principles in the strategy are to:

sustain growth path through accumulating capital in a short period of time;

create a fertile breeding ground for “developmental investors”
strengthening the limited capital and technology of MSEs;
create “developmental investors” and “developmental politics” in cities;
make industry and city development areas as a direction of government priority;
develop the capacity of youth skills and their job creation ability,
improve the saving culture of university and TVET graduates and assign them in
the sector;
Ensure “industrial extension services” in TVETs will provide sustainable human
capacity and technology development, based on the specific industry development
strategy direction.

Generally according to the Micro and Small Enterprise Development Strategy, 2011, 1.5
million job opportunities were created, more than 4billion loan was given through MFI,
about 34million square mater lands was supplied, 8000 sheds and 380 buildings were
constructed for production and sales purpose. A lot of job opportunities were created and
income of the MSE‟s rose in the past 5 years as considerable attention was given to the
sector. It also enabled to acquire best experiences in addition to stimulating the
development of socio-economic of towns.

In Ethiopia an enterprise to be transformed from small to medium level of growth is

when it enabled to be competent in price, quality, and supply using the support given to
the level. In addition, if they have greater than 30 workers and its total capital were
exceeding Birr 1.5 million for manufacturing enterprise and Birr 500,000 for service
providing enterprises.

2.1.10 Challenges and problems of MSEs Development

To achieve the desired objectives for MSEs, there are a number of barriers that hinders
the attainment of the enterprises. Of special importance here is the set of barriers which
26
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

hinder the growth of potentially fast growth enterprise which have the greatest capacity to
generate jobs and introduce innovations and new technologies http://www.man.com .

Despite the wide-ranging economic reforms instituted in the sectors, SMEs face a variety
of constraints owing to the difficulty of absorbing large fixed costs, the absence of
economies of scale and scope in key factors of production, and the higher unit costs of
providing services to smaller firms& value added per unit of capital invested (Steel and
Webster. 1990).

A set of constraints identified with the sector shows as follow:

Fagge, (2004) asserted that the following problems militate against the effective
operation of small and medium enterprises:

Poor Implementation of Policies: there have been many good policies formulated in the
past by the government to improve, but weak implementation has made it impossible to
realize the goal.

Lack of Continuity: most small scale establishments are sole proprietorship and such
establishment often ceases to function as soon as the owner loses interest or dies. This
raises the risk of financing such business.

Poor Capital Outlay: inadequate capital outlay has often affected small scale business
adversely. Financiers often regard the sector has high risk area and therefore feel
skeptical about committing their fund to it.

Poor Management Expertise: Management has always been a problem in this sector as
most small scale businesses do not have the required management expertise to carry them
through once the business start growing. The situation gets compounded as training is not
usually accorded priority in such establishments.

Inadequate Information Base: Small scale business enterprises are usually

characterized by poor record keeping and that usually starve of necessary information
27
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

required for planning and management purposes. This usually affects the realization of
the sector.

Lack of Raw Materials: In some small scale business enterprises, raw materials are
sourced externally, hence the fate of such enterprises to foreign exchange behavior. The
fluctuation of foreign exchange may therefore make it difficult to plan and that may
precipitate same stock that may destabilize the setup.

Poor Accounting System: the accounting system of most small scale business
enterprises lack standard and does not make room for the assessment of their
performances. That creates opportunity for mismanagement, which consequently may
lead to enterprise failure.

Unstable Policy Environment: Government policy instability has not been helpful to
small scale businesses. That has been destabilizing and has indeed sent many SMEs to
early fold-ups.

According to International Finance corporation publication (2001) the economic

development in developing economy as a result of the contribution of SMEs is not really
noticeable due to multifarious reasons that will be considered below:

Inadequacy of infrastructural base: Infrastructural facilities are very inadequate. The

power supply is so epileptic this has contributed to folding up of many SMEs. Others are:
Unreliable telecommunication facilities, Poor state of road network, Water supply etc.

Low entrepreneur technical skill: Many entrepreneurs rush out to establish SMEs
without having good and adequate technical skills. They covet the progress and profit of
existing ones without good technical background. No wonder many collapses.

Lack of database: They lack good record keeping and so do not have necessary
information required for planning and management purposes. This usually affects the
realization of the objectiveness of the sector.

28
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Wrong attitude of Entrepreneur and their workers: The attitude of some entrepreneur
to loans and that of their workers to work is counterproductive. Some entrepreneur when
offered credit facilities, believes that this is their share of the “national cake”. They
therefore mismanage such. Since salaries or wages of those in SMEs are smaller
compared to those in large-scale multinationals, some of the workers engage in eye
service and are not productive

Legal: High start-up costs for firms, including licensing and registration requirements
can impose excessive and unnecessary burdens on MSEs. The high cost of settling legal
claims and excessive delays in court proceedings adversely affect MSE operations.
Prohibitive laws like The Business Licensing Act, The Electricity Act, The Control of
Goods Act, and The Export Incentives Act, have severely constrained MSE development
5.3% of proprietors in Malawi mentioned this as a constraint (Daniels & Ngwira, 1993).

The cumbersome procedure for registering and commencing business were key issues
often cited. However, Aryeetey et al. (1994) found that this accounted for less than 1% of
their sample. Meanwhile, the absence of antitrust legislation favors larger firms, while the
lack of protection for property rights limits SME access to foreign technologies.

2.1.11 Conceptual framework

Since transitional development of small scale enterprise to medium scale enterprise is

important for job opportunities, economic development and base for industrial
development. This transitional development is influenced by both internal and external
factors; operators need to understand what influences MSEs to develop to the next stage.

In this section, through reviewing the previous works, the researcher attempted to
develop a conceptual framework for this study. The variables that this study focused on
are the transitional development of small scale enterprise to medium scale enterprise.
Appropriate MSEs Strategies, institutional support, working place, technology,
infrastructure, market linkage, finance, management, attitude change, and product quality
are among the factors that have an influence for the sustainable development of MSEs in
29
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

different sectors so as to reach to the needed outcomes. Further more if the outcomes of
MSEs achieved positively, the enterprises under study will expand, diversify their
product and may finally transform themselves to medium enterprises.

To align the conceptual framework with the research objectives, MSEs Performance is
the dependent variable whereas Government sectors support, working place,
technological, infrastructural, marketing, financial, management and entrepreneurial
factors are all independent variables. The relationship can be expressed and shown in
Figure 2.1.

Figure 2.1 Factors affecting the development Of Small scale enterprise, outcomes and
Prospects

Factors outcomes Prospects

 Intended Objectives
Institutional  MSEs Capital of MSEs will be
increase achieved
support  Numbers of  Transformed in to
Input MSEs supported medium scale
Market linkage by government  Leave work place
decrease for other micro
Product quality
 Employments  Expansion of the
Appropriate opportunity enterprise
MSEs strategies enhanced  improvement of
productivity

Source: Conceptual frameworks (Own Model), 2014

30
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

2.2 Empirical Literature Review on MSEs

2.2.1 Empirical studies of MSE‟S in other countries

Beck et al. (2006) find, in a study spanning 80 countries and 10,000 firms, that there was
a 39% probability that a small firm would rate financing as a major obstacle (as opposed
to minor, moderate, or no obstacle) compared to 38% for medium and 29% for large
firms. Further, compared to large firms, small firms finance, on average, 13 percentage
points less of their investments with external finance.

Access to finance remained a dominant constraint to small scale enterprises. According to

the study of Aryeetey et al. (1994) reported that 38% of the SMEs surveyed mention
credit as a constraint. This stems from the fact that SMEs have limited access to capital
markets, locally and internationally, in part because of the perception of higher risk,
informational barriers, and the higher costs of intermediation for smaller firms. As a
result, SMEs often cannot obtain long-term finance in the form of debt and equity.

According to the study of Aryeetey et al. (1994) found that 7% of their respondents
indicated that they had problems finding skilled labor, and 2% had similar problems with
unskilled labor. However, only 0.9% of Malawian firms were reported to have had labor
problems.

This seems a less important constraint to SMEs considering the widespread

unemployment or underemployment. SMEs generally use simple technology which does
not require highly skilled workers. However the skilled workers are required, an
insufficient supply of skilled workers can limit the specialization opportunities, raise
costs, and reduce flexibility in managing operations.

SMEs have difficulties in gaining access to appropriate technologies and information on

available techniques. This limits innovation and SME competitiveness. Besides, other
constraints on capital, and labor, as well as uncertainty surrounding new technologies,
restrict incentives to innovation. 18% of the sampled firms in Aryeetey et al. (1994)

31
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

mentioned old equipment as one of the four most significant constraints to 18.2% (Parker
et al, 1995).

Access to finance remained a dominant constraint to small scale enterprises in Ghana and
Malawi. Credit constraints pertaining to working capital and raw materials were cited by
respondents between 24% and 52% (ibid).

SMEs in Ghana and Malawi emphasized the high cost of obtaining local raw materials;
this may stem from their poor cash flows (Parker et al, 1995).

Mbroh (2011) in his study of the methods of accounting practices by small business
owners within the Cape Coast Metropolitan area of Ghana, concluded that, 34% of his
respondents studied did not practice any form of accounting in addition to a seeming
problem with the specific types of accounts frequently kept by the SBOs.

Relating to the study conducted by Lawal (2010) to the one conducted by Okpetu (2002)
it follows that for SMEs irrespective of the nature of their business ideology, key success
factors such as proper planning, good financial control, technology, sustainable improved
employee productivity are germane to success of the organizations whether such SMEs
are with international presence or only domesticated in Nigeria.

2.2.2 Empirical studies of MSEs in Ethiopian

Eshetu and Zeleke (2008) conducted a longitudinal study to assess the impact of
influential factors that affect the long-term survival and viability of small 25 enterprises
by using a random sample of 500 MSMEs from 5 major cities in Ethiopia. According to
this research, that lasted from 1996-2001, the factors that affect the long term survival of
MSEs in Ethiopia are found to be adequacy of finance, level of education, level of
managerial skills, level of technical skills, and ability to convert part of their profit to
investment.

This is so because the findings of the study revealed that businesses that failed, during the
study period were characterized by inadequate finance (61%), low level of education
32
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

(55%), poor managerial skills (54%), shortage of technical skills (49%), and inability to
convert part of their profit to investment (46%).(ibid).

According to the study of Mulugeta (2011) ,the critical problems of MSEs has recognized
and classified in to market-related problems, which are caused by poor market linkage
and poor promotional efforts; institution-related problems including bureaucratic
bottlenecks, weak institutional capacity, lack of awareness, failure to abide policies,
regulations, rules, directives, absence of training to executives, and poor monitoring and
follow-up; operator-related shortcomings like developing a dependency tradition,
extravagant and wasting behavior, and lack of vision and commitment from the side of
the operators; MSE-related challenges including lack of selling place, weak accounting
and record keeping, lack of experience sharing, and lack of cooperation within and
among the MSEs and finally society-related problems such as its distorted attitude about
the operators themselves and their products.

In addition to the above study, Workeneh (2007) in his study entitled Constraints of
Micro and Small Enterprise in addressing employment opportunity found that MSEs
operators in Addis Ababa face lack of adequate training, unfavorable regulatory policy of
the government institutions, problem of premise, and inadequate training in the area of
marketing and bookkeeping affect the performance and contribution of the sector.

33
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

CHAPTER THREE

3. Description of the Study Area and research Methodology

3.1 Description of the Study Area

According to the reports of Oromia Finance, Economic and Development Bureau (2013)
and Office of Finance Economic and Development of Sebeta Town (2013), the
description of the study area shown as follow:

3.1.1 Study Area

Oromia is one of the 9 national regional states of Ethiopia; its estimated area is about
363,378km2, which is about 34.3% of the country's total area. Also it is the largest
National Regional State in Ethiopia in terms of population size and areal coverage. In
2003EC the total population of the region was 31,179,949 both Out of which about
13.2% is dwelling in the urban and the rest large percentage of the people of the region
are yet living in the rural. The region is classified into 18 zones, 304 districts (265 rural
districts and 39 urban centers under reform) and more than 6412 rural kebeles and Urban
Kebeles.

Sebeta is one of the Oromia towns that emerged before the Italian invaded Ethiopia in
1935; it is the capital town of Sebeta Awas District of Oromia special Zone surrounding
Finfinne situated at about 24 km south west of Addis Ababa along Jimma road.
According to the master plan of the town which was prepared in 1999, Sebeta has 99 km2
or 9900 hectares of a reserved total area. The total population of this town for the year
2003 E.C & 2004 E.C was 131,123 (68,258 males & 62,865 females) and 136,368
(70,988 males & 65,380 females) respectively.

3.1.2 Location

Geographically, Oromiya region extends from: 3024'20" North to 10023'26" North

latitudes (extending for about 7o north to south and 34007'37"E to 42058'51"E longitudes
34
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

(extending for about 9o west to east). Sebeta Town extends from:

0
53”38.50”N_8059‟58.17”N latitude and 38035‟11.91”E_38039‟33.75”E longitude.

3.1.3 Shape and Position

The longest and shortest axes of Sebeta boundaries measured from topographic map are
16.97 km and 8.64 km respectively. With regard to relative location, it shares common
boundaries with Addis Ababa on the North, north east and east, Burayu town on the
North and rural villages of Sebeta Hawas district to the south and west.

3.1.4 Relief Features

Oromiya is a region of great physiographic diversity, having Mountain ranges and

massifs that culminate into Tullu Dimtu (Bale zone), i.e., the highest peak of the Region
with 4377masl, Plateaus, gorges and river valleys, Rolling plains-are generally found in
the Region, it holds about 49% of the Region's land surface is above 1500mas1 (i.e.
Highlands), The lowlands and Rift Valley systems account for the remaining 51% of the
Region's total land surface.

Sebeta area has an altitudinal range of 2060 and 2670 meters above sea level. The
northern part of the town is characterized by mountains ranges land form having an
altitude lying between 2600_2670 M.A.S.L. However, the southern part of the town lies
between 2060_2120 M.A.S.L. showing that it is the lowest elevated part, as a result of
this vast area of Sebeta (Dima,Roge,Atebla .etc) are considered as flat and intermediate
plateau that are highly recommended for Expansion.

3.1.5 Climatic Condition

Oromiya National Regional State has diverse climatic condition, determined mainly by
two important climatic elements via latitude and longitude. Average annual rainfall of the
Region varies from: 400mm in parts of Borena in Southern Oromiya to over 2400mm in
parts of Ilubabor Zone or over its Western Highlands. The Region has characterized by
four season‟s such as; summer, autumn, winter and spring.

35
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

The temperature of the Region varies in the Highlands 7.50c to over 220c and, in the
lowlands from 220c to over 300c. It experiences overhead sun twice a year. In general,
average annual temperature ranges from less than 7.5oC to greater than 27.5oC in the
Region. The Sebeta Town area lay in the temperate climatic zone with a temperature
range of 12.70c to 24.40c.

3.2 Research Methodology

This study used both quantitative and qualitative approaches of research design. The
study mainly used descriptive researches to describe the existing situation and as well
used survey method so as to accurately and precisely describe the research population
which commonly utilized under descriptive type of research.

3.2.1 Data Sources

To undertake this research, the researcher used both primary and secondary sources of
data. In order to realize the target, the study used well-designed questionnaire as best
instrument. This was completed by the owner managers/or operators of the enterprises.
Besides, face-to-face interviews with the members of management and director of
Oromia MSE Agency and with the actors of the Sebeta Town MSE officials. The
interview method of data collection is preferred due to its high response rate. Through
interviews, clarification of issues is easily achievable leading to accuracy of data.
Secondary data were collected from published and unpublished reports were referred to.

3.2.2 Data Collection Techniques

In this study, primary data were collected from operators/management of MSEs,

management member and director of Oromia MSE Agency and with the actors of the
Sebeta Town MSE officials. The researcher has collected the primary data at the time of
field survey.
To collect necessary information from the sample population, sampling was carried out
using questionnaire. One set of questionnaire containing both open-ended and close-
36
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

ended types were designed and administered to a total of 379 managements/members of

the enterprises. Initially the questionnaires prepared in English but it was translated into
Amharic, to make more understandable for respondents. The survey was also conducted
through face to face interview between the 5 respondents and interviewer. Of course, the
comment of experienced people was conducted prior to the survey. This has helped the
researcher to see whether or not there were any difficulties in relation to questionnaire
and to modify based on the feedback of the comment to check the validity of the data that
the researcher collected.
The secondary sources of data were gathered from files, pamphlets, office manuals,
circulars and policy papers were used to provide additional information where appropriate. In
addition, variety of books, journals, published and/or unpublished government documents,
websites and reports were reviewed to make the study fruitful.

3.2.3. Sampling Techniques

3.2.3.1. Sampling Frame

Both probability and non-probability sampling design were used to get information about
the larger study of population. From non- probability, purposive sampling was used to
conduct interview with members of management and director of Oromia MSE agency
and with the actors of the Sebeta Town MSE officials; because they have information
about the sector.
In the case of probability sampling, simple random sampling and systematic sampling
were employed. Simple random sampling particularly purposive sampling was used to
select Sebeta Town from the 12 towns of Oromia regional state. These Town was
selected with the consultation of the regional officials and data obtained from the
organizational profile of different enterprises operating in the Region. The officials of
region told the researcher and the researcher analyzed from the data that these Town has
ample experience on micro and small enterprise activities and there is also problem of
transitional development from small scale to medium scale enterprise when we compare
with the rest town.

37
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

There are six MSEs centers in Sebeta Town, three centers were selected purposely. The
researcher decided to select the three centers i.e. first center, second center and third
center,- for the reason that these centers consist of more than 66.65% ( 1525) of the total
MSEs of the Town, which are 2288. Hence, these centers could be a good representative
for analyzing the transitional development of MSEs in the town.

Within each selected center, there are five sectors of MSEs. These are: manufacturing;
Service; Construction; Urban Agriculture and Trade. Within these five sectors, there are a
number of MSEs in each center. The researcher in this regard tries to take proportional
number of MSEs

3.2.3.2 Sample Size

The study population was composed of MSEs operators in the sixty enterprises working
in manufacturing, construction, Service, Urban Agriculture, and Trade operating in the
three MSEs centers. Probability sampling technique of systematic sampling method was
applied for selection of operators for data gathering through questionnaire.

Table: 3.1 sample size

sample population of the field
MSEs No. of Popul Sample
Manufac Urban
centers Enterprises ation population Construction Service Trade
turing agriculture
1st 456 3380 149 25 23 42 19 40
2nd 641 3481 153 26 23 44 19 41
3rd 428 1762 77 13 12 22 10 20
Total 1525 8623 379 64 58 108 48 101
Source: - Own field survey, 2014

The total number of the respondent for questionnaire selected in the following ways:
The total population of the study is 1525 enterprises which include manufacturing (178),
construction (40) Service (119), Urban Agriculture (58) and trade (118). The sample size
selected here is considered as representative of manufacturing, construction, Service,

38
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Urban Agriculture, Trade and also large enough to allow for precision, and confidence of
the research findings. The following formula was used for the calculation of the sample
size since it was relevant to studies where a probability sampling method was used
(Watson, 2001).

P [1-P]
2
n= A + P [1-P]
Z2 N
R

Where, n = sample size required = 379

N = number of population = 8623
P = estimated variance in the population = 50%
A = margin of error = 0.05
Z = confidence level = 1.96 for 95% confidence
R = estimated response rate = 97%
Accordingly, 379 respondents were selected from the total of 1525 MSEs. These 379
respondents were selected from manufacturing, construction, Service, Urban Agriculture
and Trade on proportional basis. Therefore, [(178/1525) x 379] = 44 manufacturing out
of 178, [(162/1525) x 379] = 40 construction out of 162, [(479/1525) x 379] = 119
Service out of 479, [(233/1525) x 379] =58 Urban agriculture out of 233 and [(473/1525)
x 379] =118 trade out of 473 were selected

3.2.4 Data Analysis and Presentation

For analysis of the data both quantitative and qualitative methods were employed.
Quantitative data generated from the survey questionnaire were analyzed using SPSS.
Descriptive statistics like frequencies, percentage, and average were applied to facilitate
meaningful analysis and interpretation of research findings. The results of processed data

39
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

were presented in tables, charts and pie charts. Qualitative data obtained through
questionnaire and interviews were analyzed through descriptive method of analysis.

3.2.5 Instrument Development

Basically, the instruments were developed based on the objectives of the study and
research questions. The principles of questionnaires such as, use simple and clear
languages, statements should not be too long and use of appropriate punctuations is also
considered when developing the instrument. In addition, interviews can be used.

3.2.5.1 Design of the Instruments

The instruments were designed in such ways that can help for viability of the study. The
questionnaires were designed both in English and Amharic languages. The purpose of
translating from English in Amharic language is to utilize those who cannot clearly
understand English language so that respond easily. The interview questions were
designed in English language only, because the discussion was in Afan Oromo while
making interviews with officials.

3.2.5.2 Instrument Validity

Remark by different people, was conducted to refine the methodology and test instrument
such as a questionnaire before administering the final phase. Questionnaires was
commented with experienced people to make the data collecting instruments objective,
relevant, suitable to the problem and reliable as recommended. Comments raised by
people were corrected and questionnaires were refined. Besides, proper detection by an
advisor was also taken to ensure validity of the instruments. Finally, the improved
version of the questionnaires were printed, duplicated and dispatched.
The instruments selected can help to show factors that affect transitional development of
small scale Enterprise to medium Enterprises. It can clearly address how these factors
affect the transitional development of small scale Enterprise in Sebeta Town. The
relevant data were collected on the factors of the transitional development of small scale
Enterprise.

40
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

3.3 Ethical Considerations

All the research participants included in this study were appropriately informed about the
purpose of the research and their willingness and assent was secured before the
commencement of distributing questionnaire and asking interview questions. Concerning
the right to privacy of the respondents, the study maintained the secrecy of the identity of
each participant. In all cases, names are kept secret thus collective names like
„respondents‟ were used.

41
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

CHAPTER FOUR

4. Data Presentation, Interpretation and Analysis

4.1 Introduction

Under this chapter, the data collected through different data collection methods and tools
are discussed and analyzed carefully in order to show and assess the transitional
development of MSEs from small scale to medium enterprise in the study area.
4.2 Response Rate
Three hundred seventy nine questionnaires were distributed across the five sectors in
three MSEs centers, out of which 358 were completed and retrieved successfully,
representing 94.45% response rate. Out of the 379 questionnaires administered 64, 58,
108, 48 and 101 were distributed to Manufacturing, Construction, Service, urban
Agriculture and Trade respectively. The numbers of questionnaires retrieved from
Manufacturing, Construction, Service, urban Agriculture and Trade are 61, 58, 98, 48 and
93 respectively. This represents a response rate of 95.3 Percent, 100 Percent, 90.7
Percent, 100 Percent and 92 Percent for Manufacturing, Construction, Service, urban
Agriculture and Trade respectively. Generally, this section is organized in the following
manner: First, the general information about MSEs was presented. Second, data collected
through questionnaires and interviews were analyzed concurrently.

4.3 General information of the respondents

In this section, the study provides details of the gender, age, marital and educational
status, of Managers/Operators are discussed and presented which is relevant for the
respondents.

42
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.3.1 Sex of respondents

Figure: 4.1 Gender of the respondents

Femal
37%

Male
63%

Source: - Own field survey, 2014

As far as sex of the respondents is concerned, a result indicates that there is low
proportion of women compared to men in the MSEs. In the Town the proportion of men
in MSEs covers 224

(62.6%) and women constitute only 134 (37.4%), demonstrating that there is a clearly
observable gender gap (Pie chart 4.1). There are some constraints for this variation such
as cultural norms regarding „appropriate‟ works of men and women. However, that
proportion is adequate to capture the interests of females.

43
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.3.2 Age of Respondents

Figure: 4. 2 Age of the respondents

2%
4%
7%

Blow 20
18%
20-30
31- 40
41- 50
51&above
69%

Source: - Own field survey, 2014

Regarding the age structure, 6(1.7 %) of respondents were found blow 20 age categories
while 249 (69.6%) of the respondents were found in the range of 20-30 years age group.
Age groups 31- 40, 41- 50 and 51 and above years constituted 64(17.9%), 25 (7 %) and
14 (3.9 %) of respondents, respectively. The majority of the respondents i.e. 96 Percent
were found in the age range of blow20-50 years and the remaining 3.9 Percent of
respondents were found in the age range of 51 and above years. This result shows that the
most included sample respondents are the active sections of the societies, that are
expected most to benefit from the MSEs and urban development strategies (MOTI,
1997). In other words, the finding of this research indicates that the MSEs accommodate
the most active and productive age group of people as shown in Pie chart 4.2 above.

44
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.3.3 Educational Status

Table: 4.1 Educational levels of the respondents

Educational level Frequency Percent
Read and write 27 7.5
Elementary 54 15.1
secondary 91 25.4
Certificate 43 12
Diploma or TVET 112 31.3
Above Diploma or TVET 31 8.7
Total 358 100
Source: - Own field survey, 2014
For enhancing the productivity and transitional development of MSEs, education and
skills are important. As indicated in Table 4.1, Managers/Operators of the enterprises are
found in different levels of education status. Of the 358 respondents, 7.5 Percent of
respondents can only read and write. Furthermore; about 15.1 Percent of sample
respondents were elementary. As can be seen from the figure, 25.4 Percent and 12
Percent of sample respondents have completed secondary and Certificate level of
education, respectively, where as 31.3 Percent of respondents got Diploma or TVET and
8.7 Percent has Above Diploma or TVET level education. This implies that most of the
respondents 68.7 Percent attended from secondary up to Diploma or TVET level
education. While the remaining 7.5 Percent, 15.1 Percent and 8.7 Percent of respondents
attended Read and write, Elementary and Above Diploma or TVET respectively.

Hence, from the educational levels of the managers/ Operators of the enterprises, it is
possible to generalize that large proportions of the participants in MSEs are those who
completed their secondary school education and above. The other benefiting groups are
below secondary schools and those who can only read and write. Those who have
secondary and above level education can have adequate record keeping and financial
control system and proper planning system, while, the other group who attended lower
45
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

than secondary level educations have lack of record keeping and financial control system
and proper planning system.

4.3.4 Marital Status of Respondents

Table: 4.2 Marital Statuses of the Respondents

Percent
Marital status Frequency
Single 159 44.4
Married 193 53.9
Divorced 6 1.7
Widowed 0 0
Total 358 100

Source: Own Field survey 2014

With respect to marital status, out of the 358 respondents in the selected enterprises, 53.9
Percent of the respondents are married while 44.4 Percent of respondents are single. The
divorced sample respondents accounted for about 1.7 Percent. Hence, these figure shows
that most proportions of married and single are able to participate in MSEs, and the sector
is capable of absorbing both single and married individuals indiscriminately and is
increasing their income. The proportion of divorced is also not that large and widowed
individual not seen at all in the demography of the Town.

46
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.4. General Characteristics of the Enterprises

4.4.1 The Stage of Business Enterprise

Table: 4.3 Stage of business enterprise

Stage Frequency Percent

Small scale 351 98
Medium scale 7 2
Total 358 100
Source: - Field survey 2014
Also from Table 4.3 above, one can easily identify the stage of the business that the
enterprises engaging in, from the total respondents, Majority of the enterprises i.e. 98
Percent involved in a small scale enterprise stage. While the rest of the enterprises in the
sample 2 Percent are found in Medium scale enterprise stage. These help the researcher
to get appropriate information from appropriate enterprise. Because to get Factors
Affecting Transitional Development of Small Scale to Medium Scale Enterprise the
proper information is found from small scale level and from medium level the experience
and challenge they face after they developed to medium scale Enterprise.

4.4.2 Plan in enterprise future operation

Table: 4.4 Plan in enterprise future operation

plan frequency percent

Yes 351 98
No 7 2
Total 358 100
Duration of the plan
Blow 1 year 149 41.6
1 -2 years 101 28.2
3-5 years 44 12.2
Above 5 years 57 15.9
Total 351 100
Source: - Field survey, 2014
47
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

The other variable of this study which is expected to have relation to the transitional
development of small scale enterprise is the internal practice of planning in advance for
different activities to be executed in the day to day operation of the enterprises for
attaining pre established goals.

As it is indicated in Table 4.4, from the total sample enterprises in this study, 98 Percent
of respondents in the sample taken have planning practice in their day to day business
operation, even if the duration of the plan is different. The possible justification to the
importance of using plan is that, planning in advance what needs to be done helps
enterprises to act strategically to realize established development goals rather than
moving in a random and unsystematic way to the opportunities as well as unfavorable
situation that will happen in their business operations. This proactive move of the
enterprises increases their chance of success in the dynamic environment.

4.4.3 Record Keeping and Financial Control Practice of the Enterprises

Use of formal record keeping and financial control mechanism in the enterprises day to
day business operation is considered as another variable that would result difference in
transitional development between those use the system and those do not use.

Table: 4.5 Record Keeping and Financial Control Practice of the Enterprises
Record keeping frequency Percent
Yes 346 96.6
No 12 3.4
Total 358 100
Kind of record keeping and financial control system
Daily transaction 261 75.4
Balance sheet 38 11
Income statement 20 5.8
More than one 27 7.8
Total 346 100
Source: - Field survey, 2014
48
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

As it is depicted in Table 4.5 above from the total sample respondents considered in this
study,. 96.6 Percent respondents use record keeping and financial control system to
facilitate their day to day business activities by applying different Kind of record keeping
and financial control system
4.4.4 Management Experience of Principal Owners

The other variable in this study is the management experience of the principal owners of
the business which is expected to create variations on the transitional development of
MSEs.

Table: 4.6 Management Experiences of Principal Owners

Experiences frequency Percent
Yes 158 44.1
No 200 55.9
Total 358 100

Source: - Field survey, 2014

From Table 4.6, 55.9 Percent respondents in this study respond that have no any prior
management experience acquired either being employed in other organizations and
working in a management position or managing their own independent enterprises before
the current one.

Generally from the results in Table 4.6, the performance of those enterprises owned and
managed by those individuals having management experience is better than the others.
This is because, management experience may provide entrepreneurs with prior
knowledge of markets, ways to serve markets, and of customer problems and this kind of
exposures in turn increases the chance of the enterprises‟ success in their business
environment.

49
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.4.5 Marketing Skill of Business Owners

Last variable considered in this study is the marketing skill of the business owners‟ which
is expected to create variations in the MSEs transitional development.

Table: 4.7 the Marketing Skill of Business Owners

Marketing Skill Frequency Percent

Yes 180 50.3
No 178 49.7
Total 358 100
Specific advantage gained
Knowledge of products price 8 4
Knowledge of customers handling 60 33
Knowledge of product sale 28 16
Knowledge of market linkage 57 32
More than one advantages 27 15
Total 180 100

Source: - Field survey, 2014

As indicated from Table 4.7, from the total sample 50.3 Percent respondents respond in
this study as MSEs owned and run by individuals with marketing skill acquired from
their formal education or informal ways like training.

From this we can say that better performance of those enterprises owned by owners
without any marketing skill is an exceptional to the common wisdom that marketing skill
and knowhow helps businesses to a better performance in their operation.

50
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.5. Factors Affecting Transitional Development of Small Scale to Growth

Medium Scale Enterprises

Respondents were asked different questions regarding the factors affecting transitional
development of small scale to growth medium scale enterprises. Their responses are
organized one by one in the following approach.

4.5.1. Legal Factors

Table 4.8: Legal Factors

Strongly Strongly
agree undecided Disagree Total
Factors agree disagree
f % f % f % f % f % f %
Bureaucracy in
company registration
and licensing 108 30.2 109 30.5 37 10.3 61 17 43 12 358 100
Lack of government
support 95 26.6 154 43 32 8.9 45 12.6 32 8.9 358 100
Lack of accessible
information on
government
regulations that are
relevant to my
business 87 24 121 33.9 52 14.2 61 17 37 10.9 358 100
Lack of appropriate
policy 86 24 90 25.1 65 18.2 73 20.4 44 12.3 358 100
Total average
94 26.2 118.5 33.1 46.5 12.9 60 16.8 39 11 358 100
Source: - Own field survey, 2014

51
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

As Table 4.8 shows that the respondents were asked whether they had faced Bureaucracy
in enterprises registration and licensing. As a result, out of the total respondents, 30.2
Percent and 30.5 Percent strongly agreed and agreed, about the problem of Bureaucracy
in company registration and licensing respectively. From this result we see that, the
majority of the respondents i.e. 60.7 Percent agreed on the problem. Therefore, it may be
concluded that bureaucracy in Enterprises registration is the factor that affects the
transitional development of small scale Enterprise to medium scale Enterprise in the
study area.

The second question asked the respondents in legal factors were lack of government
support, out of the total respondents in the selected enterprises 26.6 Percent strongly
agreed and 43 percent agreed on the problem. While the rest of the respondents in the
sample undecided, and Disagree. From this we can say that the majority of respondents
agree as there is a gap in government support. The third question is about lack of
accessible information on government regulations that are relevant to their business. In
this question 24 Percent, 33.9 Percent respondents, strongly agreed and agreed,
respectively. The fourth and the last questions in legal factors were lack of appropriate
policy. In this question, 49.1 Percent respondents were agreed i.e. (24 Percent strongly
agreed and 25.1 Percent agreed). When we see this respond about half of respondents not
agree on lack of appropriate policy.

In general this implies that legal factors are affecting the transitional development of
small scale Enterprise but not strong in policy case.

When the above responses compared with the interview conducted with management and
director of Oromia MSE agency and with the actors of the Sebeta Town MSE officials, it
was confirmed that there are problems related to government bodies at each levels. The
interviewees are pointed out the implementation problems widely observed in the side of
the heads and lower level experts and employees of government sector offices such as
lack of knowledge, lack of attitudinal changes, and lack of responsiveness to the demands
of the operators. This arises either from the given priority for their office work and see

52
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

the MSEs work as secondary or their lack of awareness about the peculiar procedures,
policies and proclamations that favor MSEs. The other possible explaining factor for this
non-responsiveness to the operators can be the fact that the concerned government offices
are overburdened with other routine activities of their respective offices, which resulted
in abandoning or being irresponsive to the issues of the MSE operators.

According to interviewees, even when opportunities have been created, MSEs have not
been able to draw the full advantage due to lack of coordination between actors and lack
of facility for growth medium enterprise according the strategies. For the reason that lack
of coordination between actors, week supports and follows up, make difficult to know
MSES weakness; and strength entirely.

In addition the strategy clearly show that, support can given in related to the level of
growth MSEs arrived but officials/experts not define and identify the types of supports
according to the enterprise level arrived. Also there is lack of support for the medium
level growth enterprise. For example, as interviewee explanation from the total of 352
medium enterprises in the town only two gets full package input. By seeing these
problems the rest enterprises not want develop to growth medium enterprises. They not
tell the amount of their capital and human resource, which is the measurement of
transitional development.

When we see the legal issue, high start-up costs for firms, including licensing and
registration requirements can impose excessive and unnecessary burdens on MSEs. The
high cost of settling legal claims and excessive delays in court proceedings adversely
affect MSE operations. Prohibitive laws like The Business Licensing Act, The Electricity
Act, The Control of Goods Act, and The Export Incentives Act, have severely
constrained MSE development 5.3% of proprietors in Malawi mentioned this as a
constraint (Daniels & Ngwira, 1993).

53
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.5.2 Financial Factors

Table 4.9: Financial Factors

Strongly Strongly
agree undecided disagree Total
Factors agree disagree
f % f % f % f % f % f %
Inadequacy of
credit institutions 176 49.2 81 22.6 13 3.6 51 14.3 37 10.3 358 100
Lack of cash
management skills 114 31.8 132 36.9 --- --- 78 21.8 34 9.5 358 100
Shortage of
working capital 123 34.4 148 41.3 22 6.2 32 8.9 33 9.2 358 100
Fear of High
collateral
requirement from
banks and other
lending institutions
on medium scale
Enterprises 147 41.1 95 26.5 39 10.9 18 5 59 16.5 358 100
Fear of High
interest rate
charged by banks
and other lending
institutions on
medium scale
enterprises 142 39.7 82 22.9 32 8.9 45 12.6 57 15.9 358 100
Loan application
procedures of
banks and other
lending institutions
are too
complicated on
medium scale
Enterprise 144 40.2 121 33.8 19 5.3 29 8.1 45 12.6 358 100
Total average 141 39.4 109.8 30.7 20.8 5.8 42.2 11.8 44.2 12.3 358 100
Source: - Own field survey, 2014

54
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

As it shown in Table 4.9, the majority of respondents 71.8 Percent reported that they have
the problem related to inadequacy of credit institutions i.e. 49.2 Percent strongly agreed,
and 22.6 Percent agreed on the problem. Similarly most of respondents 31.8 Percent and
36.9 Percent are strongly agreed and agreed on the lack of cash management skills
respectively. With regard to shortage of working capital out of the total respondents 34.4
Percent and 41.3 Percent of the respondents strongly agreed and agreed on the problem
respectively.

Regarding Fear of high collateral requirement from banks and other lending institutions
41.1 percent and 26.5 Percent of respondents strongly agree and agree on the problem
respectively. By the same token 40.2 Percent of respondents strongly agreed, and 33.8
Percent of respondents agreed with the complexity of loan application procedures of
banks and other lending institutions. Moreover, Fear of High interest rate charged by
banks and other lending institutions are a serious problem of MSEs as the table below
shows very well. The respondents strongly agreed with 39.7 Percent and agreed with 22.9
Percent.

In general, the results of Financial Factors indicated that there are Inadequacy of credit
institutions, lack of cash management skills, Shortage of working capital, Fear of High
collateral requirement from banks and other lending institutions, loan application
procedures of banks and other lending institutions Fear of High interest rate charged by
banks and other lending institutions, which hinder the transitional development of small
scale Enterprises in the study area.

In addition, during the interview of management and director of Oromia MSE agency and
with the actors of the Sebeta Town MSE officials, they all agreed the existence of the
problems and explained the measures that the government is undertaking to lessen them
such as lack of finance for credit, .and gap to address all MSEs cash management skill.;
however, they all agrees the measurements taken to alleviate these problems are not
sufficient and so that a lot has to be done in the future.

55
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Related to this result, Beck et al. (2010) noted that while domestic credit to the private
sector has generally been increasing in most developing countries, anecdotal and
statistical evidence suggest that smaller enterprises continue to be largely left out.

4.5.3. Management Factors

Table 4.10: Management Factors

Strongly undecide Strongly

agree agree d Disagree disagree Total
factors f % f % f % f % f % f %
Lack of clear
division of duties
and responsibility
among employees 137 38.2 94 26.3 32 8.9 64 17.9 31 8.7 358 100
Poor organization
and ineffective
communication 97 27.1 116 32.4 20 5.6 62 17.3 63 17.6 358 100
Poor selection of
associates in
business 117 32.7 80 22.3 31 8.7 85 23.7 45 12.6 358 100
Lack of well trained
and experienced
employees 111 31 119 33.2 17 4.8 74 20.7 37 10.3 358 100
Lack of low cost
and accessible
training facilities 111 31 108 30.2 38 10.6 64 17.9 37 10.3 358 100

Total average 114.2 31.9 105.2 29.4 32 8.9 65.1 18.2 41.5 11.6 358 100
Source: - Own field survey, 2014

56
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

As shown in table 4.10, lack of clear division of duties and responsibility among
employees is the problems that hinder the transitional development of small scale
enterprise to medium scale enterprise. It shows that 38.2 Percent, and 26.3 percent of
respondents strongly agreed, and agreed respectively. With regard to Poor organization
and ineffective communication, of the total respondents (27.1 Percent strongly agreed
and 32.4 Percent agreed) i.e. 59.5 Percent of respondents reported as they agreed on the
problem mentioned above. Likewise to Poor selection of associates in business, the
majority of respondents 32.7 Percent strongly agreed and 22.3 Percent agreed as there is
poor selection of business field.

Regarding to lack of well trained and experienced employees, of the total respondents,
31 Percent strongly agreed and 33.2 Percent agreed as there are a problem. In relation to
costly and inaccessible training facilities, the table below shows that, 31 Percent of
respondents strongly agree and 30.2 Percent of respondents agree as there is a problem.
In general 61.2 Percent of respondents reported the problem.

In general, it was investigated that most of them were responding that Management
Factors are hinders the transitional development of small scale Enterprises. The
agreement on this factor is justified by the total average 70.1 Percent of respondents were
consented, on the problem.

In this regard in an interview conducted with management and director of Oromia MSE
agency and with the actors of the Sebeta Town MSE officials, it was confirmed that they
had lack of coordination between actors; attitude and capacity problem in the officials,
and experts to support operators. Because of this, many management problems face
enterprises such as Poor selection of associates in business, Poor organization and
ineffective communication.

According to Fagge, (2004) the Management problems militate against the effective
operation of small and medium enterprises. Management has always been a problem in
this sector as most small scale businesses do not have the required management expertise

57
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

to carry them through once the business start growing. The situation gets compounded as
training is not usually accorded priority in such establishments.

4.5.4. Marketing Factors

Table 4.11: Marketing Factors

Strongly Strongly
agree Agree Undecided Disagree disagree Total
Factors f % f % f % f % f % f %
Inadequate market for
products 192 53.6 80 22.3 44 12.3 6 1.7 36 10.1 358 100
Lack of knowledge
Searching new market 128 35.8 139 38.8 54 15.1 13 3.6 24 6.7 358 100
Lack of demand
forecasting 128 35.8 138 38.6 37 10.3 38 10.6 17 4.7 358 100
Absence of relationship
with an organization that
conduct marketing
research 138 38.5 136 38 36 10.1 26 7.3 22 6.1 358 100
Lack of promotion to
attract potential users 96 26.8 121 33.8 52 14.5 51 14.3 38 10.6 358 100
Poor customer
relationship and
handling 120 33.5 122 34.1 19 5.3 59 16.5 38 10.6 358 100
Poor product quality to
attract market 130 36.3 136 38 21 5.9 39 10.9 32 8.9 358 100
Lack of society
understanding about
small scale enterprise 140 39.1 113 31.6 28 7.8 39 10.9 38 10.6 358 100

Total average 134 37.4 123.1 34.4 36.4 10.2 33.9 9.5 30.6 8.5 358 100

Source: - Own field survey, 2014

58
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

As indicated in the Table 4.11, eight questions were designed to gather information about
Marketing Factors. According to the responses for Inadequate market for their product,
Out of the total respondents 53.6 strongly agreed and 22.3 Percent agreed on the problem.
Regarding to demand forecasting the majority of respondents 35.8 Percent strongly
agreed and 38.6 Percent agreed as there is Lack of demand forecasting.

In Table 4.11 above, it can be seen that, lack of knowledge Searching new market is
another marketing factor that affect the transitional development of MSEs. AS a result
shows 35.8 Percent and 38.8 Percent of respondents strongly agreed and agreed on the
problem respectively.

Moreover, the table shows that Absence of relationship with an organization that
conducts marketing research hinders transitional development of MSEs. This is
warranted by the 38.5 Percent respondents strongly agreed and 38 Percent agreed on the
problem. Similarly, majority of respondents agreed with they have lack of promotion to
attract potential users. This agreement is justified by the 26.8 Percent strongly agreed and
33.8 Percent agreed.

On the other hand, of the total respondents 33.5 Percent strongly agreed and 34.1 Percent
agreed with poor customer relationship and handling problem.

Regarding to Poor product quality to attract market, of the total respondents 36.3 Percent
strongly agree and 38 Percent agree. Likewise, in relation to lack of society
understanding about small scale enterprise, the majority of the respondents 39.1 Percent
strongly agree and 31.6 Percent agree as there is a problem on society understanding
about small scale enterprise.

As we show from the table, it is possible to conclude that the total average 71 Percent are
agreed on the Marketing Factors are problem on the transitional development of small
scale Enterprises in the study area.

59
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.5.5. Working Place Factors

Table 4.12: Working Place Factors

Strongly
Strongly agree ` Undecided Disagree disagree Total
Factors 1 f % f % f % f % f % f %
Absence
of own
premises 105 29.3 129 36 23 6.4 63 17.6 38 10.7 358 100
Current
working
place is
not
convenient 53 14.8 90 25.1 58 16.2 107 29.9 50 14 358 100
Facilitatio
n of
governm
ent 71 19.8 153 42.7 6 1.7 77 21.5 51 14.2 358 100
Total
average 76.3 21.3 124 34.6 29 8.1 82.3 23 46.3 13 358 100

Source: -Own field survey, 2014

The result of respondents in table 4.12 above shows, the premises factors that hinders
their transactional development are absence of their own premises, the current working
place is not convenient for their business. As the score of absence of own premises
indicate 29.3 Percent and 36 Percent of respondents strongly agreed and agreed on the
problem respectively.

60
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

As opposed to this, the table shows that convenient of Current working place is not a
serious problem of operators. From the result, of the total respondents only 14.8 Percent
strongly agreed and 25.1 Percent are agreed with their current working place is not
convenient. In relation to Facilitation of government, of the total respondents 19.8
Percent strongly agreed and 42.7 Percent agreed on Facilitation of government is not
sufficient.

Generally, it is possible to conclude that the highest proportion of the total average 55.9
Percent of respondents agreed as Working Place Factors are the hinder of transitional
development of small scale Enterprises in the study area.

In an interview conducted with management and director of Oromia MSE agency and
with the actors of the Sebeta Town MSE officials, it was confirmed that according to the
strategy, industrial zone should be established in all Town for the growth medium
enterprise, but there is no industrial zone established for medium enterprises. Because of
this, the medium enterprise can‟t get service and it creates fear for the new move toward
medium enterprises.

61
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.5.6 Entrepreneurial Factors

Table 4.13: Entrepreneurial Factors

Strongly
Strongly agree Agree Undecided Disagree disagree Total
Factors f % f % f % f % f % f %
Lack of
motivation
and drive 111 31 94 26.2 20 5.6 70 19.6 63 17.6 358 100
Lack of
tolerance to
work hard 111 31 130 36.3 32 8.9 49 13.7 36 10.1 358 100
Lack of
persistence
and courage
to take
responsibility
for ones
failure 124 34.6 126 35.3 33 9.2 37 10.3 38 10.6 358 100
Absence of
initiative to
assess ones
strengths
and weakness 105 29.3 125 35 32 8.9 71 19.8 25 7 358 100
Lack of
entrepreneurs
hip training 136 38 101 28.2 35 9.8 61 17 25 7 358 100
Lack of
information
to exploit
business
opportunities 148 41.3 95 26.5 52 14.5 16 4.5 47 13.2 358 100
Lack of
choice in
business type
according our
interest 121 33.8 125 34.9 39 10.9 44 12.3 29 8.1 358 100
34.
Total average 122.3 34.1 113.7 31.8 7 9.7 49.7 13.9 37.6 10.5 358 100
Source: - Own field survey, 2014

62
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Among the entrepreneurial factors, lack of motivation and drive is one. This factors had
got the result from the total respondents 31 Percent and 26.2 Percent are strongly agreed
and agreed respectively. The second most important factor that affects the transitional
development of small scale enterprise is lack of tolerance to work hard. This factor score
31 percent strongly agree 36.3 percent agreed on lack of tolerance to work hard. This
shows that more than 67 Percent of respondents agreed with that they have the problem
of tolerance to work hard.

Furthermore, the result of respondents indicates that lack of persistence and courage to
take responsibility for ones failure is the third entrepreneurial factors that hinder the
transitional development of small scale enterprises. As indicated in the table 34.6 Percent
of respondents strongly agreed and 35.3 Percent of them agreed on the problem.

Regarding Absence of initiative to assess ones strengths and weakness, the result of
respondents shows that 29.3 Percent and 35 percent strongly agree and agree
respectively. Thus, it may be concluded that Absence of initiative to assess ones strengths
and weakness is the main factor that hinder the transitional development of small scale
enterprise. With similar to this, the table shows that Lack of entrepreneurship training is a
problem of small scale development. The agreement on this factor is justified by the 38
percent strongly agreed and 28.2 Percent of agreed.

Similarly, the table indicates that Lack of information to exploit business opportunities
hinders the transitional development of small scale enterprises. This is justified by 41.3
Percent of strongly agreed and 26.5 Percent of agreed respondents.

Regarding lack of choice in business type according their interest, of the total respondents
33.8 Percent strongly agreed and 34.9 Percent are agreed on the problem.

When we see from the table, the total average 65.9 Percent of the respondents‟ .agree as
Entrepreneurial Factors affect the transitional development of small scale Enterprises.
From this result, it is possible to say that Entrepreneurial Factors contributed for
hindering transitional development of small scale Enterprises in the study area.
63
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

According to interview conducted with management and director of Oromia MSE agency
and with the actors of the Sebeta Town MSE officials, it was confirmed that the main
problem is dependency syndrome, lack of attitudinal change. They don‟t want to lose
government supports i.e. audit service, credit, working place and market linkage, which
became lease and asked to pay after transition. For the reason that they do not show
interest to develop in to growth medium enterprise, instead they hidden their capital, and
human resource, they lose motivation, lock of initiative.

According to (Fagge, 2004), lack of entrepreneur technical skill is one of the most often
cited reasons for effective operation of small and medium enterprises. The author stated
that low entrepreneur technical skills are problems militate against the effective operation
of small and medium enterprises. Many entrepreneurs rush out to establish SMEs without
having good and adequate technical skills.

4.5.7. Infrastructural Factors

Table 4.14: Infrastructural Factors

Strongly Undecide Strongly

agree Agree d disagree disagree Total
factors f % f % f % f % f % f %

Power interruptions 220 61.4 69 19.3 19 5.3 6 1.7 44 12.3 358 100
inadequate and
irregular water
supply 175 48.9 89 24.9 31 8.7 18 5 45 12.5 358 100
Lack of business
development
services 159 44.4 74 20.7 40 11.2 46 12.8 39 10.9 358 100

Total average 184.7 51.6 77.3 21.6 30 8.4 23.3 6.5 42.7 11.9 358 100

Source: Own field survey, 2014

64
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Concerning Infrastructural Factors, as table 4.14 indicated, 61.4 Percent and 19.3 Percent
of respondents reported that they strongly agreed, and agreed on the problem of Power
interruptions respectively. On the question inadequate and irregular water supply, 48.9
Percent strongly agreed and 24.9 Percent respondents agreed on the problem. The
respondents were also asked about lack of business development services. Accordingly,
44.4 Percent and 20.7 Percent of the respondents replied that they strongly agree, and
agreed on the problem respectively.

As indicated in the table, the total average of respondents 73.2 agreed as Infrastructural
Factors is the problem of transitional development of small scale Enterprise. Hence, from
this fact it is possible to say that the Infrastructural Factors is the main problem for the
transitional development of small scale enterprise.

Fagge,(2004) asserted that Inadequacy of infrastructural base such as epileptic power

supply, Unreliable telecommunication facilities, Poor state of road network, Water supply
etc are problems militate against the effective operation of small and medium enterprises.

4.5.8 Technological Factors

Table 4.15: Technological Factors

Strongly
Strongly agree Agree Undecided Disagree disagree Total
Factors f % f % f % f % f % f %
Lack of
appropriate
machinery and 11.
equipment 143 39.9 81 22.6 26 7.3 68 19 40 2 358 100
Lack of skills to
handle new
technology 99 27.7 126 35.2 39 10.9 69 19.2 25 7 358 100
Lack of capital to
acquire new
technology 150 41.9 113 31.6 43 12 19 5.3 33 9.2 358 100
Unable to select
proper technology 102 28.5 95 26.5 33 9.2 97 27.1 31 8.7 358 100
Total average
123.5 34.5 103.7 29 35.2 9.8 63.3 17.7 32.3 9 358 100
Source: - Own field survey, 2014
65
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

As it can be seen in table 4.15 above, lack of appropriate machinery and equipment is the
problem of transitional development of Small scale Enterprise. The result of respondents
shows that 39.9 percent and 22.6 Percent are strongly agreed and agreed, on the problem
respectively. With regard to Lack of skills to handle new technology, the scores of
respondents‟ shows that 27.7 Percent are strongly agreed and 35.2 Percent are agreed.

According to table 4.15 lack of capital to acquire new technology is affects transactional
development of Small Scale Enterprises. The result of respondents shows that 41.9
Percent are strongly agreed and 31.6 percent are agreed as there is a problem of capital to
obtain new technology, On the other hand, the result for Unable to select proper
technology, 28.5 Percent are strongly agreed and 26.5 percent are agreed, these result
describes that 55 Percent of the respondents said there is a problem to select proper
technology for their work.

To conclude, all these: Technological Factors were confirmed by the respondents in this
survey who indicated that their businesses were constrained by Lack of skills to handle
new technology, Lack of capital to acquire new technology, Unable to select proper
technology, Lack of appropriate machinery and equipment.

It was also indicated during the interview with the officials offices of MSEs are indicated
that there is a problem of capital to buy the proper technology (equipment, machinery,
tools, etc). Because of shortage of money from saving and credit institution and the
matured credit not collected on time.

4.5.9. Degree of Influence of Main Factors in Transitional Development of

Small Scale Enterprise

Even if, all the legal, financial, management, marketing, working place, entrepreneurial,
infrastructure, and technology, factors affect the transitional development of small scale
enterprise, this does not necessarily mean that all factors have equal impact. The
following table clearly compares the overall impact of all key factors discussed in detail
as the following.
66
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

Figure 4.3: Degree of Influence of Main Factors

80

70

60

50

40

30

20

10

Source: - Own field survey, 2014

It can now be seen that Infrastructural, Marketing and financial factors has the biggest
potential to contribute to hinder the transitional development of small scale, followed by
entrepreneurial, technological, management, legal and Working Place factors. In other
words, the result shows that Infrastructural, Marketing and financial factors are the three
topmost factors that affect the transitional development of small scale Enterprise in the
selected area.

The closer analysis of the result leads to the conclusion that the above main factors affect
the transitional development of small scale enterprise. According to ILO (2005) premises,
markets, finance, supply arrangements, regulatory barriers and legitimization of
entrepreneurial activity are among the most urgent.

67
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

4.6. Opportunities, and Threats,

According to result of respondents and interview conducted with management and

director of Oromia MSE agency and with the actors of the Sebeta Town MSE officials
were confirmed that the main Opportunities is suitable government policy and strategy
for the development of MSEs. There is also wide market and work opportunities for
MSEs. The other opportunities mentioned by interviewees are supports from government
i.e. working place, market linkage, training and credit facility.

It was also indicated during the interview with the management and director of Oromia
MSE agency and with the actors of the Sebeta Town MSE officials are shows that the
main thereat for small scale Enterprise transitional development are lack of credit,
attitudinal problem, corruption in the area my hinder the development of MSEs.

4.7. Possible Solutions for the Problems

Respondents were asked to propose possible solutions to cope up with the mentioned
problems in MSEs. Accordingly, they provided the solutions that the government should
arrange easy access for capital with appropriate interest rates. There should also have
provision of enough production and selling place for the growing enterprises. The
problem of market should be solved not only by the participants in the enterprises but
also primarily by the government through market linkages with governmental
organizations. Provision of assistances in market research and should have support in
relation to promotion of MSEs from the government and other stakeholders; also
mentioned by the respondents as a solution for achieving the intended goal, i.e. MSEs to
be base for industries. They also strictly suggested that the government, is also
responsible to strong support, follow-up.the other proposed solution is the government
body have to help the enterprises in the area of planning, to develop saving culture and
proper finance handling, strong coordination and trust among members of the
Enterprises.

68
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

It was also indicated during the interview with the management and director of Oromia
MSE agency and with the actors of the Sebeta Town MSE officials are indicated that
solving the problem of dependency syndrome in operators, and lack of attitudinal change
in all level. Government has give attention for institutional capacity building.

4.8. Prospects for the transitional development of small scale in the

study area

In strengthening the contribution of MSEs for industrial development in the form of

technologies development, employment opportunity, income generation and technical
assistance from government have been facilitated. The incumbent government due
attention for the growth and development of micro and small enterprises through different
mechanisms and develop workable strategy for the sector, is playing a positive role.
Among different mechanisms from the strategy, in providing necessary supports for
entrepreneurs, facilitating market linkage, training, provision of working premises and
different kinds of business development services might be considered as some of the
working strategic mechanisms.

The five-year Growth and Transformation Plan also gives particular attention to the
growth, expansion and strengthening of micro and small-scale enterprises. The sector is
believed to be the base for industrial development, major sources of employment and
income generation for a wider group of the society.

According to the Ministry of Finance and Economic Development Annual Progress

Report for F.Y. 2010/11 around 542,000 jobs were created at the end of 2010/11. It
shows that micro and small enterprises is given due attention in growth and development
plan and it's also considered as one of the opportunities the sector gets from the
government. Through time the micro and small enterprises changes into small industrial
level and hence government from federal to local administration should attempt to
supports the growth of the sector.

69
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

According to an interview made with officials from the Sebeta Town and region MSEs
Agency, the officials said, the government is providing the necessary support for the
growth of MSEs in urban areas. Since unemployment is the major obstacle for the urban
societies, as official said, appropriate MSEs strategies has been developed to satisfy the
urban dwellers to support economy development through, employment creation, income
generation, changes into small industrial level and enhancing entrepreneurship. The local
governments, especially Town, provides working premises for the entrepreneur because
having working land was one major obstacle for the growth and development of the
sector.

Providing working premises, as officials said, improve the problem of capital of the
entrepreneurs. From the result of respondents we can assume that most of the operators
want to develop their business, because the working environment made them to do more.
In the future MSEs can play its role successfully by solving its problem.

Ethiopian federal democratic republic government has paid due attention to the
development of micro and small enterprises because they are important vehicles to the
industrial development, economic growth and equity within the country. Considering the
well importance of MSEs in base for industrial development, job creation, increasing
income of households, reducing level of poverty, all stakeholders should make their own
efforts in order to remove the constraints that have encountered in the MSE operators.

70
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

CHAPTER FIVE

5. Summary, Conclusions and Recommendations

5.1 Introduction

This chapter deals with the summary, conclusions and recommendations. For
transparency purpose, the summary from Major Findings and the conclusions are based on
the research objectives of the study. Recommendations are made to government bodies,
to operators of MSEs and suggestion for other researchers.

5.2. Summary

 The study revealed that the internal practice of planning in advance for different
activities executed in the day to day operation of the enterprises for attaining pre
established goals.
 It is understood from the study that MSEs strongly Use formal record keeping and
financial control mechanism in the enterprises day to day business operation.
 The Principal Owners have lack of Management Experience for different
activities performed in the enterprises.
 More than half of MSEs involved in this study are owned and run by individuals
with marketing skill, but still the need for training and development remains a
high priority
 There are problems related to government bodies at each level. The
implementation problems widely observed in the side of the heads and lower level
experts and employees of government sector offices It was found that factors like
lack of coordination between actors, lack of knowledge, need of attitudinal
changes, lack of support, problem of bureaucracy in Enterprises registration, lack
responsiveness to the demands of the operators and lack of accessible information

71
MEKONNEN LENJISA BIRATE
Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

on government regulations that are relevant to their business are identified as

focus areas of MSEs in study area..
 Regarding to the MSEs in the position of growth development stage, there is no
clear policy which sector can follow up. For the reason that and lack of
coordination between actors Week supports and follows up, make difficult to
know their weakness and strength entirely. In addition Officials/experts not define
and identify the types of supports according to the enterprises level arrived.
 As it is confirmed by the interview held with key informants management and
director of Oromia MSE agency and with the actors of the Sebeta Town MSE
officials, according to the strategy, industrial zone should be established in all
Town for the growth medium enterprise, but there is no industrial zone
established for growth medium enterprises. Because of this, it makes difficult to
fulfill input for medium enterprise and it also creates threat on the new MSEs
developing to medium enterprises.
 in relation to the financial factors there are inadequacy of credit institutions, lack
of cash management skills, shortage of working capital, fear of high collateral
requirement, loan application procedures and interest rate charged by banks and
other lending institutions, are recognized as strategic focus part for government
bodies in the study area. Since, it hinders the transitional development of small
scale enterprises.
 It was found that factors like Poor organization, and selection of associates in
business, ineffective communication, lack of inaccessible training facilities, and
strategic business planning, lack of clear division of duties and responsibility
among employees, Lack of well trained and experienced employees is the main
problem for hindering the transitional development of small scale Enterprise in
study area.
 In relation to the Marketing Factors it is found that there is lack of demand
forecasting, Inadequate market for their product, lack of knowledge searching
new market, absence of relationship with an organization that conducts marketing
research, lack of promotion to attract potential users, with poor customer
72
MEKONNEN LENJISA BIRATE
Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

relationship and handling, poor product quality to attract market, and lack of
society understanding about small scale enterprise are a visible support and
training gape from government sectors in market area,.
 According to the result of the study there is a visible working place problem in
MSEs in the study area. These are justified by absence of own premises,
inconvenient of Current working place and lack of facilitation of government
 Entrepreneurial is very important for the growth of business Enterprises but It was
found that factors like lack of motivation and drive, absence of initiative to assess
ones strengths and weakness, lack of tolerance to work hard, lack of persistence
and courage to take responsibility for ones failure, lack of entrepreneurship
training, lack of information to exploit business opportunities, lack of choice in
business type according their interest is the main problem in the operators of the
Enterprises in the study area..
 As it is confirmed by the interview held with key informants management and
director of Oromia MSE agency and with the actors of the Sebeta Town MSEs
officials, the most operators in MSEs do not show interest to develop in to
medium enterprise, they hidden their capital, and human resource which is a
criterion for transitional development. Because they don‟t want to lose
government supports i.e. audit service, credit, working place and market linkage,
which became lease and asked to pay after transition. According to the
interviewees the main problem is dependency syndrome, and lack of attitudinal
change on which they have worked hard.
 It was found that factors like problem of power interruptions, lack of business
development services, inadequate and irregular water supply are the main
infrastructural factors in the study area which need government attention
 Technological Factors were confirmed by the respondents in this survey indicated
that their businesses were constrained by lack of skills to handle new technology,
lack of capital to acquire new technology, unable to select proper technology, lack
of appropriate machinery and equipment for their business.

73
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

 The main Opportunities are suitable government policy and strategy for the
development of MSEs. There is also wide market and work opportunities for
MSEs. The other opportunities mentioned by interviewees are supports from
government i.e. working place, market linkage, training and credit facility by
using these support properly MSEs can meet their objective.

5.3 Conclusions

Taking the data analysis and the findings in to account the following conclusions could
be reached.

Since the transition of small scale enterprise to medium enterprise is as crucial to

preserve the flow of new small businesses into the economy and it will further reduce the
unemployment rate and increase the number of products or services offered to the
society. This research was conducted in Sebeta Town of Oromia Regional state with the
main objective of critically assessing the factors affecting the Transitional Development
of Small Scale to Medium Scale Enterprise: Challenges, Opportunities and Prospects.
Specifically, the study attempted to investigate contextual factors, to assess the internal
and external factors. The study used both quantitative and qualitative approaches of
research design; mainly used descriptive researches and recommend possible solution to
alleviate the problem of MSEs. Based on the objectives and findings of the study, the
following conclusions are worth drawn.

According to the findings, it is possible to conclude that, the Principal Owners have lack
of Management Experience and about half of MSEs involved in this study are owned and
run by individuals with, need for marketing skill training and development for different
activities performed in the enterprises.

There are problems related to government bodies at each level. The implementation
problems widely observed in the side of the heads and lower level experts and employees
of government sector offices. It was found that factors such as lack of coordination
between actors, need of attitudinal changes, lack of knowledge, problem of bureaucracy

74
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

in Enterprises registration, lack of support, lack responsiveness to the demands of the

operators and accessible information on government regulations that are relevant to their
business are the main problem which hinders the transitional development of small scale
Enterprise in the study area.

There is no clear policy to the MSEs in the position of growth development stage, which
sector can follow up. For the reason that and lack of coordination between actors Weak
supports and follows up, make difficult to know their weakness and strength entirely. In
addition officials/experts not define and identify the types of supports according to the
enterprises level arrived in the study area. Because of no industrial zone established for
growth medium enterprises according to the strategy in all towns, it makes difficult to
fulfill necessary input and it also creates threat on the new small scale Enterprises
developing to medium enterprises.

The statistical result indicates that, there is the problem of dependency syndrome, and
lack of attitudinal change in most operators in MSEs. They do not show interest to
develop in to growth medium enterprise and hidden their capital, and human resource
which is a criteria for transitional development. Also this study indicates that, factors like
problem of power interruptions, lack of business development services, inadequate and
irregular water supply are the main infrastructural factors in the study area which need
government attention. According to the findings of the research MSEs businesses were
constrained by lack of skills to handle new technology, lack of capital to acquire new
technology, unable to select proper technology, lack of appropriate machinery and
equipment for their business.

The most important appropriate factors identified are financial, Marketing, working
place, Entrepreneurial, technological, infrastructures, managerial factors and choice in
business type according their interest is the main problem for hindering the transitional
development of small scale Enterprise in study area. The main cause for this problems are
lack of coordination between actors, lack of attitudinal changes and knowledge, lack of
support and responsiveness to the demands of the operators, in the side of government

75
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

structure and problem of dependency syndrome, and lack of attitudinal change in most
operators in MSEs.

In general, the findings of this research show that the MSEs have great roles in industrial
development by playing a base position. There are different constraints which hinder the
transitional development of MSEs in the study area which can be solved in government
body and operators themselves. Therefore, it is important to draw some recommendations
that can help to reduce the problems on MSEs and to encourage the development and
expansion of the sectors.

5.4. Recommendations

The main interest of this paper was assessing factors affecting transitional development
of small scale enterprise to medium scale enterprise. On the basis of the major findings
of the study, the following recommendations have been drawn with the view to improve
the contributions of MSEs in Oromia in general and in the study area in particular.

It is better if Oromia regional government bodies provide affordable alternative

sources of finance for MSEs. This can be done by communicating with the credit
institutions to lessen their requirements.
The regional government should strengthen the government institutions capacity
at different levels, to play a major role in positively influencing the development
of MSEs.
The types of supports need for the MSEs in each level of growth should be
identified and define to help according to their stage.
Responsible bodies should act to tackle the lack of attitudinal change and
knowledge or any motivational mechanism of officers by providing training and
motivational mechanism.
To avoid problems of appropriate selection of business type according to their
interest, the officials working in MSEs should allow the operators to select type of
business based on their preference and interest.

76
MEKONNEN LENJISA BIRATE
 Assessing Factors Affecting Transitional Development of Small Scale to Medium Scale
Enterprise in Sebeta Town: Challenges, Opportunities and Prospects

To solve marketing problems the government body is better to, provide selling
and display places, linking the MSEs with other market, developing market
research to predict about the future market trends and changing the perception of
the general public through extensive awareness creation mechanisms are very
important.
To make MSEs competitive and profitable, increasing the capacity, knowledge,
and skill or attitude that enables operators to prepare for production activities,
through continuous trainings, experience sharing from successful enterprises, and
provision of advice and consultancy should be crucial.
To play MSEs their roles properly, the government body should strength
coordination between actors in all level and Improve provision of necessary
infrastructure.

Finally, investigating different factors based on the right information are vital for the
good performance of any business venture. This can be achieved by conducting more
researches in related areas. The focus for this study was on the transitional development
of Small scale to medium level of growth. It is the researcher‟s view that future research
could therefore investigate the other stage development like from Micro to small, from
medium to large and come up with specific findings which will potentially contribute a
lot in the development of the country in general. This study dealt with internal and
external factors that affect the transitional development of MSEs. Further research could
target the medium and larger firms that have dominated the markets having graduated
from the MSEs. The field of MSEs is large and very diverse. It is an interesting area with
many unresolved issues. It would be encouraging to get more solutions to many issues
arising.

77
MEKONNEN LENJISA BIRATE
 Bibliography

Aryeetey. E, et al. (1994). `Supply and Demand for Finance of Small Scale
Enterprises in Ghana‟, World Bank Discussion Paper No. 251. Bank:
Washington, DC.

Beck, T., A. Demirgüç-Kunt, and V. Maksimovic (2005). Financial and legal

constraints to growth: does size matter? , Journal of Finance, Vol. 60, pp.
137-177.

Beck, T., and A. Demirgüç-Kunt (2005). Small and medium-size enterprises:

overcoming growth constraints, Policy Research Working Paper, No.
WPS3127, World Bank, Washington, D.C.

Beck, T., et al. (2006). The determinants of Financing obstacles, Journal of

International Money and Finance, vol. 25, pp. 932-952.

Beck, T.L.F. Klapper, and J.C. Mendozae (2010).The typology of partial credit
guarantee funds around the world, Journal of Financial Stability, vol. 6, pp. 10-
25.

Benyam Aragaw (2008).Financial and Operating Performance of Women Operated

Micro and Small Enterprises Organized under Wise, Addis Ababa University,
Addis Ababa.

Berger, A, and G. Udell (1998). The economics of small business _Nance: the roles of
private equity and debt markets in the financial growth cycle, Journal of
Banking and Finance, vol. 22, pp. 613-673.

Boaten, N. (2012). Promoting rural enterprise growth and development: Lessons

from four projects in sub-Saharan Africa, International Fund for Agricultural
Development (IFAD) , Ides de Willebois.

BOFED (April, 2013). Oromiya in Brief , Vol. V, Oromia.

Bo Central Statistical Agency. (20012:206-207). Stastical report on the 2012 urban
employment unemployment survey round 2, Statistical Bulletin 301

Central Statistical Authority. (2005:13-15). Report on Bi – annual Employment,

unemployment survey. 1st round 2, Statistical Bulletin 301.

lton, J. E. (1971). Report of the Committee of Inquiry on Small Firms, HMSO,

London.

Daniels, L and Ngwira A.(1993). Results of a Nation-wide Survey on Micro, Small

and Medium Enterprises in Malawi, GEMINI Technical Report No 53.
PACT (John Kwaning Mbroh, 2011) Publications, New York.

Davidsson, P. and Wiklund, J. (2000). Conceptual and empirical challenges in the

study of firm growth‟, In Sexton, D. and Landstrom, H. (Eds.), the blackwell
handbook of entrepreneurship [Online]. Oxford: Blackwell.
http://eprints.qut.edu.au/5571/ (accessed on 13 January 2014).East-West
Perspective, Cambridge: Cambridge University Press.

Eshetu Bekele & Zeleke Worku. (2008). Factors that Affect the Long-term Survival of
Micro, Small, and Medium Enterprises in Ethiopia, South African Journal of
Economics, Vol. 10, No. 2, pp. 76-81.

Evans, D. S. (1987).Test of alternative theories of firm growth, Journal of Political

Economics, Vol.95, No.4, pp.657-674.

Fagge, T. A. (2004). Grassroots approach to poverty alleviation in Nigeria: Nigeria

goals (MDG), Journal of Business and Social Studies, Vol. 1, No. 1, pp. 2035,
Government publication Press.

Federal Democratic Republic of Ethiopia (FDRE), Micro and Small Enterprise

Development Agency. (2014:50-53).The Micro and Small Scale Enterprise
Development yearly bulletin (2003-2005E.C) (2005:13-15). Report on Bi – annual
Employment, unemployment survey. 1st round 2, Statistical Bulletin 301
Freel, M. and Robson, P. (2004). Small firm innovation, growth and performance,
International Small Business Journal, Vol.22,No. 6, pp. 561-575 [Online]
http://icc.oxford journals.org/content/20/4/1049.full.pdf+html (Accessed on
January 9,2014).

Galbraith, J. (1982). The stages of growth. Journal of Business Strategy, vol. 3, No. 1,
pp .70-79. GEMINI: Bethesda, Maryland.

Girmay Gebrehiwot, (JUNE, 2006), Managerial Performance Measurement in Small

Scale Industries, Addis Ababa Ethiopia

Government of the Federal Democratic Republic of Ethiopia (2011). Micro and Small
Enterprise Development Strategy.

Haftu Berehanu et al. (2009).Financial needs of Micro and Small Enterprise

operators in Ethiopia, Association of Ethiopian Micro Finance institution,
occasional paper No.24, and Addis Ababa.

Haggblade, Steve /Liedholm, Carl / Mead, Donald (1990).The effect of policy and
policy reforms on non-agricultural enterprises and employment in
developing countries: A review of past experiences, in France Stewart.

Hanks, S.H., and others (1993). Tightening the life-cycle construct: a taxonomic study
of growth stage configurations in high-technology organizations,
Entrepreneurship Theory and Practice, vol. 8, No. 2, pp. 5-29.

http:// www.cgp.org/ financial indicators accessed on 2/1/2014

http://www.man . ac. Uk /idpm/ accessed on 1/2/2014

http://www.man.com accessed on 1/2/2014

http://www.ueapme.com. Accessed on 2/2/2014

ILO (2005) .Support for Growth-oriented Women Entrepreneurs in Ethiopia, ILO

Publications, Geneva.
International Finance corporation publication (2001). International Journal of
Entrepreneurship and Innovation, Vol.4, No. 1, pp. 46-58.

Kazanjian, R.K. (1988). Relation of dominant problems to stages of growth in

technology-based new ventures, Academy of Management Journal, vol. 31, No.
2, pp. 257-279.

Lawal, a. A. and Bello, M. A. (2010). Strategic Importance of Nigerian Small and

Medium.

Lied Holm, Carl and Mead, Donald C. (1999). The Dynamics of Micro and Small
Enterprises in Developing Countries, World Development, Vol. 26, No. 1.
pp.61-74.

Liedholm C, Mead D. (1993). Structure and growth of micro enterprises in southern

and eastern Africa: Evidence from recent surveys.,GEMINI Working Paper
No. 36.

Mbroh, J.K. (2011). Methods of Accounting Practices by Small Business Owners in

the Cape Coast Metropolitan Area of Ghana, Journal of Polytechnics in
Ghana, Vol.5, No.1, pp-129-151.

MOFED. (2012).GTP (2010/11-2014/15). Annual Progress Report for F.Y.

2010/11 Addis Ababa.

MOI (2006). Agro-Industrial potential in Ethiopia, Press and Audio visual Department
of Ministry of Information, Addis Ababa.

MOTI (1997). Micro and Small Enterprise Development strategy, The Federal
Democratic Republic of Ethiopia Ministry of Trade and Industry: Addis Ababa.

Mukras, M.S. (2003). Poverty Reduction through Strengthening Small and Medium
Enterprises, Botswana Journal of African Studies, Vol. 17, No. 11, pp.58-69.
Mulu Gebreeyesus (2009). Innovation and Microenterprises Growth in Ethiopia,
Word Institute for Development, Economic research, United Nations University,
No. 51.

Mulugeta Yohanes Firasew (2011). The Livelihoods Reality of Micro and Small
Enterprise Operators: Evidences from Woreda One of Lideta Sub-city, Addis
Ababa. Master‟s Thesis Submitted to the Center for Regional and Local
Development Studies, Graduate School of Development Studies, Addis Ababa
University, Ethiopia.

OFED (April, 2013). Socio-Economic development of Sebeta. Oromia

Parker R.L, Riopelle R, Steel W.F (1995). Small Enterprises Adjusting to

Liberalisation in Five African Countries, World Bank Discussion Paper No.
271, African Technical Department Series.

Ryan P. (2005). The implications of the „one size fits all‟ microfinance lending model
on enterprise formation and growth: an analysis of the liquidity problems of
microenterprise in Uganda. Kampla.

Scase, R. (1997). The role of small businesses in the economic transformation of

eastern Europe: real but relatively unimportant?”, International Small
Business.

Schiffer, M., and B. Weder (2001). Firm size and the business environment:
worldwide survey results. Discussions Paper, No. 43, International Finance
Corporation. Washington, D.C.

Solomon Worku (2004). Socio Economic Determinants of Growth of Small

Manufacturing Enterprises in Addis Ababa, Addis Ababa University. Addis
Ababa.

Steel W.F and Webster L (1990). `Ghana‟s Small Enterprise Sector: `Survey of
Adjustment Response & Constraints, Industry Series Paper 41, World Bank,
Industry and Energy Dept, Washington D.C
Syed M. Q. and Mohammed N. A. (2009). Constraints to MSEs: A Rotated Factor
Analysis Approach. A research Journal of South Asian Studies, vol. 24, No. 2

Tambunan, Tulus (2006). Development of Small and Medium Enterprises in

Indonesia from the Asia-Pacific Perspective: A Literature Review and Case
Study of Indonesia, Jakarta, and University of Trisatki, Indonesia. Working
Paper No. 42 pp.111-160.

UNIDO, (1983). The Potential for Resource-based Industrial Development in the

Least Developed Countries, No.5 - Malawi.

Watson, Jeff. (2001). How to Determine a Sample Size: Tipsheet #60, University Park,
PA Penn State Cooperative Extension. Accessible from: http:// www. extension.
psu. edu/ evaluation/pdf/TS60.pdf [Accessed 12/2/ 2014]

Workeneh Fisseha (2007).The constraint of micro and small enterprise in addressing

employment opportunity: the case of Kolfe-keranio sub- city, Addis Ababa
University.

World Bank (2002). Review of Small Business Activities. Washington, D.C.

World Bank (2004). Review of Small Business Activities. Washington, D.C.

 Appendix 1: Questionnaire used in the Research
QUESTIONNAIRE
ADDIS ABABA UNIVERSITY
COLLEGE OF BUSINESS AND PUBLIC ADMINISTRATION
DEPARTMENT OF PUBLIC ADMINISTRATION
Research questionnaire
Dear respondent,

My name is Mekonnen Lenjisa and I am a graduate student in Addis Ababa University.

Currently, I am undertaking a research entitled ‘Assessing Factors Affecting
Transitional Development of Small Scale to Medium Scale Enterprise in Sebeta
Town: Challenges, Opportunities and Prospects’. You are one of the respondents
selected to participate on this study. Please assist me in giving correct and complete
information to present representative finding. Your participation is entirely voluntary.

Finally, I confirm you that the information that you share me will be kept confidential
and only used for the academic purpose. No individual‟s responses will be identified as
such and the identity of persons responding will not be published or released to anyone.
Thank you in advance for your kind cooperation and dedicating your time.

At last, if you have any questions or comments on this research work, please participate
via the following addresses

Mekonnen Lenjisa

E Mail: burkamoke2005@gmail.com

Phone No: +251-911407482

Sincerely,
Mekonnen Lenjisa
 Instructions
 No need of writing your name
 For scale type statements and multiple choice questions indicate your answers with a
check mark (√) in the appropriate block.
To be filled by the small scale enterprises Operators and principal

SECTION I -General information of the respondents

1. Gender:
A. Male B. Female

2. Age:
A. Blow 20 B. 20-30 C. 31- 40 D. 41- 50 E. 51 &
above
3. Education levels
A. Illiterate B. Read and write C. Elementary
D. Secondary E. Certificate F. Diploma or TVET
If your education level is not included in the above levels, please write the highest grade
level you have completed……………………………………………………………..
4. Marital Status?
A. Single
B. Married
C. Divorced
D. widowed

SECTION 2: GENERAL INFORMATION ON BUSINESS ENTERPRISES

5. In which stage of business you are involved in?
A. micro scale B. small scale C. medium scale D. large scale
6. Do you prepare a plan for your future operations of the enterprise?
A. Yes B. No
7. If your response for question 11 is yes, what is the time span your plan covers?
A. below 1 year B. 1 to 2 years C. 3 to 5 years D. above 5
years
8. Do you have a record keeping and financial control system?
A. Yes B. No
9. If your response for question 21 is yes, what kind of record keeping and financial
control system you are using?
A. Recording the daily transaction B. Balance sheet
C. Income statement D. more than one
10. Do (es) the principal owner manager(s) of the enterprise have/has any management
experience before establishing this business?
A. Yes B. No
11. Do you have any marketing related skill that you obtain either through your formal
education or any kind of informal education and marketing training?
A. Yes B. No
12. If your response for question 18 is yes, what is the specific advantage you gained?
A. Know how to price your products B. know how to handle customers
C. Know how to sale your products D. Know how to create market linkages
E. More than one

SECTION 3: FACTORS AFFECTING TRANSITIONAL DEVELOPMENT OF

SMALL SCALE TO MEDIUM SCALE ENTERPRISES
The major factors that affect transitional development of small scale enterprise are listed
below. Please indicate the degree to which these factors are affecting the transitional
development of your business enterprise. After you read each of the factors, evaluate
them in relation to your business and then put a tick mark (√) under the choices below.
Where, 5 = strongly agree, 4 = agree, 3 = undecided, 2 = disagree and 1= strongly
disagree.
13. Please show the degree to which you consent with the following statements about
legal factors.

S. No. Legal Factors 5 4 3 2 1

13.1 Bureaucracy in company registration and licensing

13.2 Lack of government support
13.3 Lack of accessible information on government
regulations that are relevant to my business
13.4 Lack of appropriate policy

14. Please point to the degree to which you agree with the statements of financial factors.

S. Financial Factors
No. 5 4 3 2 1

14.1 Inadequacy of credit institutions

14.2 Lack of cash management skills
14.3 Shortage of working capital
14.4 Fear of High collateral requirement from banks
and other lending institutions on medium scale
Enterprises
14.5 Fear of High interest rate charged by banks and
other lending institutions on medium scale
enterprises
14.6 Loan application procedures of banks and
other lending institutions are too complicated on
medium scale Enterprise stage
15. Please indicate the degree to which you agree with the statements concerning
management factors
S.
No. Management Factors
5 4 3 2 1
Lack of clear division of duties and responsibility
among employees
15.1
Poor organization and ineffective communication
15.2
Poor selection of associates in business
15.3
Lack of well trained and experienced employees
15.4
Lack of low cost and accessible training facilities
15.5

16. Please indicate the degree to which you agree with the statements relating to
marketing factors.

S. No.
Marketing Factors
5 4 3 2 1
16.1 Inadequate market for our product
16.2 Lack of knowledge Searching new market
16.3 Lack of demand forecasting
16.4 Absence of relationship with an organization
that conduct marketing research
16.5 Lack of promotion to attract potential users
16.6 Poor customer relationship and handling
16.7 Poor product quality to attract market
16.8 Lack of society understanding about small scale
enterprise
17. Please indicate the degree to which you agree with the statements relating to working
place factors

S. No.
Working Place Factors
5 4 3 2 1
17.1 Absence of own premises
17.2 Current working place is not convenient
17.4 Facilitation of government

18. Please indicate the degree to which you agree with the statements concerning
entrepreneurship factors
S. No.
Entrepreneurial Factors
5 4 3 2 1
18.1 Lack of motivation and drive
18.2 Lack of tolerance to work hard
18.3 Lack of persistence and courage to take responsibility for
ones failure
18.4 Absence of initiative to assess ones strengths
and weakness
18.5 Lack of entrepreneurship training
18.6 Lack of information to exploit business opportunities
18.7 Lack of choice in business type according our interest
19. Please indicate the degree to which you agree with the statements relating to
infrastructural factors.
S. No. Infrastructural factors
5 4 3 2 1
19.1 Power interruptions
19.2 inadequate and irregular water supply
19.3 Lack of business development services

20. Please indicate the degree to which you agree with the statements of technology
factors.
S. No. Technological Factors
5 4 3 2 1

20.1 Lack of appropriate machinery and equipment

20.2 Lack of skills to handle new technology
20.3 Lack of capital to acquire new technology
20.4 Unable to select proper technology

21. Please indicate the degree to which you agree with the factors that have a direct
influence on the performance of your business?
S.
No. General Factors 5 4 3 2 1
21.1 legal factors
21.2 Working space factors
21.3 Technological factors
21.4 Infrastructural factors
21.5 Marketing factors
21.6 Financial factors
21.7 Managerial factors
21.8 Entrepreneurial factors
22. What are the Opportunities and threats for the transitional development of small scale
Enterprise --------------------------------------------------------------------------------------.

--------------------------------------------------------------------------------------.

23. Please explain some Possible Solutions for the above Problems?
-------------------------------------------------------------------------------------------.
------------------------------------------------------------------------------------------
 አዱስ አበባ ዩኒቨርሲቲ
የቢዝነስና ህዝብ አስተዲዯር ት/ቤት
የህዝብ አስተዯዯር ት/ክፍሌ
የህዝብ አስተዯዯር ድህረ ምረቃ ት/ቤት
መግቢያ

ስሜ መኮንን ላንጅሳ ስሆን፣ በአዱስ አበባ ዩኒቨርስቲ የህዝብ አስተዯዯር ትምህርት ክፍሌ የህዝብ አስተዯዯር ድህረ
ምረቃ ተመራቂ ተማሪ ነኝ፤ በአሁን ሰዓት የመመረቂያ ፅሑፌን በማዘጋጀት ሊይ እገኛሇሁ፡፡ የጥናቴ ርዕስም
„በሰበታ ከተማ የሚገኙ አነስተኛ የንግድ ተቋማት ወዯ መካከሇኛ የንግድ ተቋማት እንዲያድጉ ተፅእኖ የሚያሳድሩ
ተግዲሮቶች እና ሚቹ ሁኔታ‟ ይመሇከታሌ፡፡ እርስዎም በዚህ ጥናት እንዱሳተፉ ተመርጠዋሌ፡፡ እርስዎ የሚሰጡትን
ትክክሇኛውን መረጃ ሇጥናቱ ውጤታማነት በጣም አስፈሊጊ መሆኑን በመገንዘብ መጠይቁን በጥንቃቄ እንዱሞለ
እጠይቃሇሁ፡፡ ተሳትፎዎ በእርስዎ በጎ ፈቃዯኝነት ሊይ የተመሰረተ ነው፡፡ በመጨረሻም ማንነቶ በማንኛውም መሌኩ
የማይታተምና የማይሰራጭ ይሆናሌ፡፡ሁለም መረጃዎች ሇትምህርታዊ ዓሊማ ብቻ ይውሊለ፡፡ ጊዜዎን ሰውተው
ስሇሚያዯርጉሌኝ ትብብር በቅድሚያ አመሰግናሇሁ፡፡

በመጠይቁ ሊይ አስያየት ወይም ጥያቄ ካልት በሚቀጥሇዉ አድራሻ ይሳተፉ

ከምስጋና ጋር !
መኮንን ላንጅሳ
ማሳሰቢያ - በመጠይቁ ሊይ ስም መፃፍ አያስፈሌግም፡፡
- መሌስዎትን በሳጥኑ ውስጥ (√ ) ምሌክት ያስቀምጡ፡፡
 ክፍሌ አንድ፡ ስሇመሊሾች አጠቃሊይ መረጃ
1 . ጾታ ፡- ሀ. ወንድ ሇ. ሴት
2. እድሜ ፡- ሀ. ከ20 በታች ሇ. ከ20-30 ሐ. ከ31-40 መ. ከ41-50 ሠ. 51 እና
ሊይ
3. የትምህርት ዯረጃ ፡- ሀ. ያሌተማረ ሇ. ማንበብና መጻፍ ሐ. አንዯኛ ዯረጃ
መ. ሁሇተኛ ዯረጃ ሠ. ሰርተፍኬት ረ. ዱፕልማ
የትምህርት ዯረጃዎት ከሊይ ከተጠቀሰዉ ዉጪ ከሆነ ይጥቀሱ -------------------------------
4. የጋብቻ ሁኔታ ፡- ሀ. ያሊገባ(ች) ሇ. ያገባ (ች) ሐ. የፈታ (ች)
መ. በሞት የተሇየ (ች)
ክፍሌ ሁሇት፡ ስሇቢዝነስ ተቋማት አጠቃሊይ መረጃ
5. በየትኛዉ ዯረጃ ሊይ ትገኛሊችሁ ? ሀ. በጥቃቅን ሇ. በአነስተኛ
ሐ. መካከሇኛ መ. በከፍተኛ
18. የተቋሙ የወዯፊት ዕቅድ ይዘጋጀሌ ? ሀ) አ ዎ ሇ) አይዯሇም
19. ሇተራ ቁጥር 18 ጥያቄ መሌስ አ ዎ ከሆነ ሇምን ያህሌ ጊዜ ነዉ ?
ሀ. ከ 1 አመት በታች ሇ. 1-2 አመት
ሐ. 3-5 አመት መ. ከ5 አመት በሊይ
20. የመረጃ አያየዝ እና የገንዘብ ቁጥጥር ስርዓት አሊችሁ? ሀ. አ ዎ ሇ. አይዯሇም
21. ሇተረ ቁጥር 20 ጥያቄ መሌስ አ ዎ ከሆነ ምን አይነት የመረጀ አያያዝ እና የገንዘብ ቁጥጥር ሥርዓት
ትጠቀማሊችዉ ?
ሀ የእሇት እሇት ሂሳብ ምዝገባ ሇ የሀብት ና እዲ ምዝገበ
ሐ የሀብት ገቢና እዲ ምዝገበ
ላሊ ካሇ ይጥቀሱ ---------------------------------------------------------
22 የተቋሙ አመራር እና ባሇቤቶች ተቋሙን ከመምሰረታቸዉ በፊት የአመራር ሌምድ ነበራቸዉ ?
ሀ. አዎ ሇ.አይዯሇም
25. በመዯበኛ ትምህርት ; መዯበኛ ባሌሆነ ትምህርት ወይም በስሌጠና ያገኙት የገበያ እውቀት አልዎት?
ሀ. አዎ ሇ. አይዯሇም
26. ሇተራ ቁጥር 25 ጥያቄ መሌስዎ አዎ ከሆነ ያገኙት ጥቅም ምንድነው ?
ሀ. የምርት ዋጋ እውቀት ሇ. የዯምበኛ አያያዝ እውቀት
ሐ. የምርት ሽያጭ እውቀት መ. የገበያ ትስስር እውቀት
ላሊ ካሇ ይጥቀሱ -----------------------------------------
ክፍሌ ሶስት፡ ሇአነስተኛ ተቋማት ወዯ መካካሇኛ ተቋማት እንዲያድጉ ተፅእኖ የሚያሳድሩ
ጉዲዮች
ከዚህ በታች ሇአነስተኛ ተቋማት ሽግግር ችግር ሉሆኑ የሚችለ ነገሮች ተዘርዝረዋሌ፡፡ ከተዘረዘሩት ችግሮች
በድርጅቱ ስራ ይበሌጥ ተፅእኖ የሚያሳድሩትን በዯረጃ ያመሊክቱ፡፡ ሇእያንዲንደ ጥያቄ ከአማራጮቹ አንድ ጊዜ
ብቻ የ (√ ) ምሌክት በማድረግ ምሊሽ ይስጡ፡፡
5 = በጣም እስማማሇሁ 4 = እስማማሇሁ 3 = ሇመወሰን እቸገራሇሁ 2 = አሌስማማም 1 = በጣም
አሌስማማም

27. እበኮን ህጋዊ ጉዲዮችን በተመሇከተ በሚስማሙበት ቦታ ምሌክት ያድርጉ

ተ.ቁ ህጋዊ ጉዲዮች 5 4 3 2 1

27.2 በቢሮክራሲያዊ ማነቆ የተተበተበ የምዝገባና የንግድ ፈቃድ አሰጣጥ

ሂዯት፡፡
27.3 የመንግስት ማበረታቻ አነስተኛ መሆን፡፡
27.5 ከስራዉ ጋር ተዛማጅ የሆኑ ህጎች፣ ዯንቦችና አዋጆች ተዯራሽ
አሇመሆን፡፡
27.6 ሇስራዉ ተገቢ የሆነ ፓሉሲ ችግር

28. እበኮን የስራ ቦታና ተዛማጅ ችግሮች በተመሇከተ በሚስማሙበት ቦታ ምሌክት ያድርጉ

ተ.ቁ የስራ ቦታ ችግሮች 5 4 3 2 1

28.1 ስራዉን የሚያካሂድበት የግሌ ቦታ አሇመኖር፡፡

28.2 አሁን ያለበት ቦታ ሇስራ አመቺ አሇመሆን፡፡
28.4 የመንግስት ድጋፍ አነሳ መሆን
29 እበኮን ቴክኖልጂ በተመሇከተ በሚስማሙበት ቦታ ምሌክት ያድርጉ

5 4 3 2 1
ተ.ቁ ቴክኖልጂ ችግሮች

29.1 ሇስራው ተገቢ የሆነ ቴክኖልጂ ግብዓት አሇመኖር፡፡

29.2 በቂ የሆነ የቴክኒክ ክህልት አሇመኖር፡፡
29.3 በገንዘብ እጥረት ምክንያት አዲዱስ የቴክኖልጂ ውጤቶችን
አሇማግኘት፡፡
29.4 ሇስራው ተገቢ የሆነ የቴክኖልጂ ውጤት መምረጥ አሇመቻሌ፡፡

30 እበኮዎን ከመሰረተ ሌማት ጋር የተያያዙ ችግሮች በተመሇከተ በሚስማሙበት ቦታ ምሌክት ያድርጉ

ተ.ቁ ከመሰረተ ሌማት ጋር የተያያዙ ችግሮች 5 4 3 2 1

30.1 የኤላክትሪክ ሀይሌ መቆራረጥ
30.2 የተቆራረጠና በቂ ያሌሆነ የውሃ አቅርቦት
30.3 የቢዝነስ ሌማት አገሌግልት እጥረት

31 እበኮዎን ግብይት ችግሮችን በተመሇከተ በሚስማሙበት ቦታ ምሌክት ያድርጉ

ተ.ቁ ግብይት ችግሮች 5 4 3 2 1

31.1 በቂ የሆነ የገበያ እድሌ አሇመኖር፡
31.2 አዱስ የገበያ አማራጭን የመፈሇግ አዲጋችነት፡
31.3 የወዯፊት የገበያ ፍሊጎትን መተንበይ አሇመቻሌ፡
31.4 የምርት ጥራት ማነስ
31.5 ግብይትን በተመሇከተ ጥናትና ምርምር ከሚያካሂደ ተቋማት ጋር
ግንኙነት አሇመፍጠር፡
31.6 ምርቶችን በአግባቡ አሇማስተዋወቅ፡
31.7 ዯካማ የሆነ የዯንበኛ አያያዝ፡
31.8 ሇጥቃቅን ና አነስተኛ ተቋመት የህብረተሰቡ ግንዛቤ አናሳ መሆን
32 እበኮን ከገንዘብ ጋር የተያያዙ ችግሮችን በተመሇከተ በሚስማሙበት ቦታ ምሌክት ያድርጉ

ተ.ቁ ከገንዘብ ጋር የተያያዙ ችግሮች 5 4 3 2 1

32.1 በቂ የሆኑ የብድር ተቋማት አሇመኖር፡፡
32.2 የብር አያያዝ ክህልት ችግር፡፡
32.3 የስራ ማንቀሳቀሻ ብር እጥረት፡፡
32.4 ባንኮችና ላልች አበዲሪ ተቋማት ሇማበዯር የሚጠይቁት ከፍተኛ
የማስያዣ መጠን፡፡
32.5 ባንኮች እና ላልች አበዲሪ ተቋማት የሚጥለት ከፍተኛ የብድር
ወሇድ መጠን፡፡
32.6 ባንኮች እና ላልች አበዲሪ ተቋማት ሇማበዯር የሚከተለት
ውስብስብና አሰሌቺ ሂዯት፡፡

33 እበኮን የስራ አመራር ክህልት ጋር የተያያዙ ችግሮችን በተመሇከተ በሚስማሙበት ቦታ ምሌክት ያድርጉ

ተ.ቁ የስራ አመራር ክህልት ጋር የተያያዙ ችግሮች 5 4 3 2 1

33.1 በሰራተኞች መካከሌ ግሌፅ የሆነ የስራና ሀሊፊነት ክፍፍሌ
አሇመኖር፡፡
33.2 ዯካማ አዯረጃጀትና ውጤታማ ያሌሆነ የግንኙነት አሰራር፡፡
33.3 ዯካማ የሆነ የስራ ባሌዯረቦችን መምረጥ፡፡
33.4 የሰሇጠኑ እና ሌምድ ያሊቸው ሰራተኞች አሇመኖር፡፡
33.5 በዋጋቸው ተመጣጣኝና ተዯራሽ የሆኑ የስሌጠና እጥረት፡፡
33.6 የረዥም ጊዜ የቢዝነስ እቅድ አሇመኖር፡፡
34 እበኮን የስራ ፈጠራ ክህልት ችግሮችን በተመሇከተ በሚስማሙበት ቦታ ምሌክት ያድርጉ

ተ.ቁ የስራ ፈጠራ ክህል ችግሮች 5 4 3 2 1

34.1 ሇስራ ፈጣሪነት አሇመነሳሳት፡፡
34.2 ጠንክሮ አሇመስራት፡፡
34.3 ሇሚፈጠሩ ጊዜያዊ ውድቀቶች ፀንቶ ሀሊፊነትን አሇመውሰድ፡፡
34.4 የራስን ጠንካራና ዯካማ ጎን አሇመፈተሽ፡፡
34.5 በቂ የሆነ የስራ ፈጠራ ስሌጠና አሇማግኘት፡፡
34.6 በተመሳሳይ ዘርፍ በስራ ፈጣሪነታቸው ውጤታማ ከሆኑ ተቋማት ሌምድ
አሇመቅሰም፡፡
34.7 የምንፈሌገዉንና የምንወዯዉን የስራ አይነት ያሇመምረጥ ችግር

35 እባክዎትን ከዚህ በታች ከተዘረዘሩት አጠቃሊይ ጉዲዮች በቀጥታ የተቋሙን ስራ ተፅዕኖ የሚያሳድሩት አፈፃፀም
ያመሊክቱ፡፡
ከመንግስት ህጎች፣ ፖሉሲዎችና ዯንቦች ጋር የተያያዙ ጉዲዮች፡፡
ተ.ቁ 5 4 3 2 1
35.1 የስራ ቦታ እና መሰሌ ጉዲዮች፡፡
35.2 ቴክኖልጂ እና መሰሌ ጉዲዮች፡፡
35.3 የመሰረተ ሌማት አቅርቦት፡፡
35.4 ገበያ እና መሰሌ ጉዲዮች፡፡
35.5 ፋይናንስ እና ብድር ጉዲዮች፡፡
35.6 የአመራር ክህልት እና መሰሌ ጉዲዮች፡፡
35.7 የስራ ፈጠራ ክህልት እና መሰሌ ጉዲዮች፡፡
35.8 ህጋዊ ጉዲዮች

36. በጥቃቅንና አነስተኛ ሽግግር ሊይ ያሇውን መሌካም አጋጣሚና ስህተት ምን እንዯሆነ ቢገሌፁ?

37. ከሊይ ሇተጠቀሱት ችግሮች መፍትሄው ምንድን ነው ይሊለ?

 Appendix 2: Interview used for Government officials

Interview questions with MSE leaders and actors in different level

Thank you for your cooperation to the interview
Date of interview ___________________________
Name of the Organization _________________________________________
Name of interviewee _____________________________________________
Position in the institution _________________________________________
Time of interview: Started at __________________
Ended at __________________

1. What problems did/are you face/facing in your office in the process of developing small
scale to growth medium scale enterprise?
2. What are the opportunities and threats in the process of developing small scale
Enterprises to growth medium scale Enterprises?
3. How you see the coordination of different sectors works on small scale enterprise?
4. How do you describe the general situation of MSEs in view of the goal set by the
government in developing small scale to growth medium scale enterprise?
5. According the strategies of small scale enterprise all sectors work on small scale
enterprise play their role properly? If not, what is the problem?
6. From which government bodies do growth medium Enterprises get support?
7. How do you monitor the activities of MSEs in your sub-city?
8. What are the solutions for the problem?
 Appendix 3A: list of micro and small enterprises of the six
centers
SEBATA TOWN ADMINISTRATION
MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY
LIST OF MICRO AND SMALL ENTERPRISES OF THE SIX CENTERS IN THE
FIVE SECTORS UPTO MARCH

MSEs SECTORS

N CONSTR
O. Urban UCTION manufact
CENTERS TRADE agriculture service uring Total

1 First center 34 50 29 2 19 134

2 Second center 124 63 132 79 58 456
3 Third center 245 33 254 54 55 641

4 Fourth center 104 137 93 29 65 428

5 Fifth center 146 27 150 35 35 393
6 Sixth center 48 48 64 22 54 236
Total 701 358 722 221 286 2288
 DECLARATION

I, the undersigned, declare that this study entitled “Factors Affecting Transitional
Development of Small Scale to Medium Scale Enterprise in Sebeta Town” is my
original work. I have undertaken the research work independently with the guidance and
support of the research advisor. This study has not been presented for a degree in any
other University, and that all the sources of materials used for the thesis have been duly
acknowledged.

Declared by:

Name: Mekonnen Lenjisa Birate

Date: ______________

Signature: ______________

Advisor: Ato Tefer Regessa

Signature: ______________

Date: __________________

Place and Date of Submission: Department Of Public Administration and

Development Management, Master of Public
Administration (Development management) June, 2014
 Appendix 3B: list of members of micro and small enterprises of the six centers
SEBATA TOWN ADMINISTRATION
MICRO AND SMALL ENTERPRISE DEVELOPMENT AGENCY
LIST OF MEMBERS OF MICRO AND SMALL ENTERPRISES OF THE SIX CENTERS IN THE FIVE SECTORS UPTO
MARCH
MSEs SECTORS

NO. Urban
CENTERS TRADE service CONSTRUCTION Manufacturing
agriculture

members members members members Members

M F T M F T M F T M F T M F T
1 First center 84 64 148 115 109 264 120 53 173 20 - 20 88 35 123
2 Second center 315 461 776 252 158 410 408 328 736 606 112 718 369 371 740

3 Third center 435 726 1161 126 97 223 740 536 1276 360 74 434 226 161 387
4 Fourth center 162 196 358 247 202 449 286 163 449 128 53 181 217 108 325
5 Fifth center 306 335 641 101 63 164 411 343 754 211 117 328 285 189 474
6 Sixth center 66 103 169 149 125 274 132 151 283 195 37 232 228 95 323

Total 1368 1885 3253 990 754 1784 2097 1574 3671 1520 393 1913 1413 959 2372