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Akademische Arbeit, 2020
24 Seiten, Note: A
Chapter One: Introduction
1.1 Background of the Study
1.2 Statement of Problem
1.3 Objective of the study
1.3.1 General objective
1.3.2 Specific objective
1.4 Significance of the study
1.5 Scope of the study
1.6 organization of the paper
1.7 Definition of terms
Chapter Two: Review of the literature
2.1 Micro and Small Enterprises’ Definition
2.2 Challenges and Opportunities facing MSMEs in Ethiopia
2.3 Factors Affecting Growth of MSEs in Ethiopia
Chapter three: - Research Methodology
3.1 Research Approach and design
3.2 Description of the study area
3.3 Study population
3.4 Data Sources
3.4.1 Primary sources
3.4.2 Secondary sources
3.5 sampling methods and techniques
3.6 Methods of data Collection and instruments
3.7 Method of Data Processing and Analysis
3.8 Ethical consideration
4. Data analysis and interpretation
4.1 The socio economic conditions of respondents
4.2 The Challenges of youth small micro enterprises /SMEs/ development in boditi town
4.3 The opportunities of youth small micro enterprises /SMEs/ development in boditi town
4.4 The responsible bodies to sole those challenges in small micro enterprises /SMEs/ development
5. Recommendation and conclusion
The micro and small business sector is recognized as an essential component of economic development and a crucial element in the effort to lift countries out of poverty. External and internal factors are known to affect the growth of MSEs. The most important external factors influencing growth of MSEs include access to finance, competition, limited production/market place, lack of market for the product or service; and other barriers to trade. The aim of this study was to assess challenges and opportunities of youth small micro enterprises /SMEs/ development in boditi town in generally but specifically it helped to identify challenges of youth small micro enterprises /SMEs/ development in boditi town, indicate the opportunities of youth small micro enterprises /SMEs/ development in boditi town and explain who were responsible bodies to sole those challenges in small micro enterprises /SMEs/ development. In this study both qualitative and quantitative method were employed. Cross-sectional study design was employed in line with sampling method which is purposive. Based on Yamane formula totally 394 respondents participated in this study through using employed methods such as in depth interview, key informant interview, FGD to collect qualitative data in detail and survey method to collect quantitative data through employing instruments such as interview guideline, checklists, questioners etc. with audio recorder, note pads and camera. Data analyzed both qualitative and quantitative way and finding states that many challenges including skills and financial gaps and others but this limited with opportunities delivered from town administration and others stake holders. This includes. Providing youth revolving fund in form of loans and work places by municipality for youth SMEs. Also those and NGOs work in town to solve those pronouncing challenges for development of youth SMEs.
The micro and small business sector is recognized as an essential component of economic development and a crucial element in the effort to lift countries out of poverty (Wolfenson, 2007). According to Ibrahim, Angelidis and Parsa ( 2008), ‘ ’the dynamic role of micro and small enterprises (MSEs) in developing countries as engines through which the growth objectives of developing countries can be achieved has long been recognized ’’. Small businesses play an important role in the development of a country and serve as a means to sustain and grow economies. It is estimated that MSEs employ 22% of the adult population in developing countries (Fisseha, 2006).MSEs are known by their greater utilization of local raw materials, employment generation, take part in rural and urban development, development of entrepreneurship, mobilization of local savings, linkages with bigger industries, provision of regional balance by spreading investments more evenly, provision of avenue for self-employment and provision of opportunity for training managers and semi-skilled workers (Taiwo et.al.,2012).
The developed as well as developing countries are taking extreme benefits from MSEs that enable them to accelerate their economy. They play considerable responsibility in providing further employment and conversion of economy. The roles of MSEs in the creation of productive employment are concerned with its position in the centre of the range of sizes and resource intensities in a rising economy. Accordingly developing economies have started to focus on the crucial role that MSEs can play in their development (Maad, 2008). External and internal factors are known to affect the growth of MSEs. The most important external factors influencing growth of MSEs include access to finance, competition, limited production/market place, lack of market for the product or service; and other barriers to trade. On the other hand, the internal (firm-specific) factors that inhibit the growth of MSEs include management competency, ‘lack of skilled labor, poor marketing strategies, innovation level and investments on technology, etc. Moreover, a number of sector specific policy reforms and restructuring of regulatory institutions may have contributed to the process of creation of micro and small enterprises. One of the frameworks was related to issuance of the National Micro and Small Enterprises Development Strategy in 1997 and the issuance of Proclamation No. 33/98 to provide for the establishment of the Federal Micro and Small Enterprises Development Agency (Addis ReMSEDA 2009).
The role of Micro and Small Enterprises (MSEs) is indispensable in poverty reduction through employment generation. Cognizant of this, a national MSEs Development Strategy was formulated in 1997. Ethiopia’s MSE Policy envisages not only reducing poverty in urban areas but also nurturing entrepreneurship and laying the foundation for industrial development. The strategy was revised in 2010/11 with renewed interests and more ambitious targets on employment and number of entrepreneurs and transition to medium size level (Addis ReMSEDA 2009).
in woliata zone youth MSEs found with multiple challenges even if opportunities found in limited amount related with natural resources and others like governmental lands etc. a zonal report on youth SMEs in area crealy stipulates that mainly youths begun to get breads and earn income become out of dependency in family due to well organized youth SMEs establishment with experts. This is similar in a study area but there are challenges. So researcher interested to made investigation on topic to have better understanding and intervention.
In Ethiopia, a study undertaken by the Central Statistical Agency (CSA) disclosed that there were about 974,679 micro enterprises, generating a means of livelihood for about 1.3 million people (CSA, 2002). Another study conducted in 2003 by CSA also revealed that 1,863 SMEs had created employment opportunities for about 97,782 citizens (CSA, 2003). Study report of FEMSEDA of year 2014 shows there were 8593 Micro Enterprises and 10,061 Small Enterprises in Addis Ababa (FeMSEDA, 2014).
In Ethiopia, MSEs Sector is the second largest employment-generating sector following agriculture (CSA,2005). According to CSA (2005) the sectors contributes 3.4% of GDP, 33% of the industrial sector’s contribution and 52% of the manufacturing sector’s contribution to the GDP of the year 2001. In spite of the enormous importance of the micro and small enterprise (MSE) sector to the national economy with regards to job creation and the alleviation of abject poverty in Ethiopia, the sector is facing financial challenges, which impeded its role in the economy. These challenges are lack of access to credit, insufficient loan size, time delay and collateral (Wolday and Gebrehiwot, 2006). Moreover, although MSEs, as compared to their larger counterpart businesses, can create more employment per unit of scarce capital, there are many MSEs which dissolve after a short period of time of their establishment rather than growing. Their dissolution will result in a vicious circle in that they won’t be able to take owners out of unemployment, poverty, and economic growth remains weak as the dissolution of an established MSEs is a cost to both regional as well as national level governments.
There is no study conducted in boditi town with concern of topic under investigation before. So researcher interested to fulfill existing literature gaps in conducting on Assessment of challenges and opportunities of youth small micro enterprises /SMEs/ development in boditi town
The core objective of this study is to Asses challenges and opportunities of youth small micro enterprises /SMEs/ development in boditi town.
Specifically, the objective of this study is
- To identify challenges of youth small micro enterprises /SMEs/ development in boditi town.
- To indicate the opportunities of youth small micro enterprises /SMEs/ development in boditi town.
- To explain who were responsible bodies to sole those challenges in small micro enterprises /SMEs/ development.
This research has different benefits after its accomplishment by the researcher. One of this is that it will be used as secondary sources for researcher who conducts further study on topic. Also, it will be served as references for policy makers and other who works in area of youth SMEs development.
This study has both thematic and geographical scope. Geographically it touches all kebele in boditi town but thematically its focuses on assessing the challenges and opportunities of youth SMEs development.
This paper will be organized under five chapters that chapter one is all about introduction and chapter two is all about review of related literature. Also chapter three discusses about research methodology and chapter four is data analysis and interpretation. Final part is chapter five discuss about conclusion and recommendations.
Youth is a segment population with energy and skills to transform world and categorized under age of 35 and above 15.
Small Micro-Enterprises /SME s/ is a sector of development that everyone can get employment opportunity with limited capital and ideas changes the future in creating job within that sectors.
Although many countries around the globe seem to use common factors in their definitions, the degree of emphasis and measures used differ quite considerably. These factors include number of employees, volume of sales, and the capital value of the business. Generally there are two types of definitions. The first is operational definition, which are largely used for working purposes and the other is theoretical definition, which are generally, employed to characterize the sector (Zemenu and Mohammed 2014).
A definition of MSEs in the developed world would differ from how MSEs are defined in the third world. An enterprise categorized as micro enterprise in USA may be treated as medium enterprise in Africa for the fact that the definition of MSE is relative to economic development. The other factor commonly used in defining MSEs is annual turnover. Again, the acceptable figures differ from country to country, depending among other factors on population and stage of economic development. For example, the accepted definition of small enterprises in USA is “an entity with average annual gross revenues for the preceding three years not to exceed $15 million, and very small enterprises (Micro enterprises) as an entity with average annual gross revenues for the preceding three years not to exceed $3 million”. This shows that there is no common definition of MSEs and that the definitions vary from country to country depending largely on the size of the economy, the levels of development, culture and population size of a country involved.
The Ethiopian government defines MSEs based on the size of the capital and level of automation (Solomon,2004). Accordingly micro enterprises are those small business enterprises with a paid up capital of not exceeding Birr 20,000 and excluding high-tech consultancy firms and other high-tech establishments and Small enterprises are those business enterprises with a paid up capital of above Birr 20,000 and not exceeding Birr 50,000. In the improved definition of MSEs of Ethiopia (MSE strategy, 2011), Ethiopian Ministry of Trade and Industry and Central Statistical Authority (CSA) define MSEs according to the number of employees and capital. Ministry of Trade and Industry adopted official definition of Micro and a Small enterprise in Ethiopia is as follows.
Table 1: Definition of MSEs according to Ethiopian Trade and Industry Office
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Source: Ethiopian Micro and Small Enterprises Strategy (2011)
Looking at the Ethiopian scenario, we found studies having similar challenges with few exceptions and little/no opportunities. Given their role and the attention they took, the performance of MSMEs in Ethiopia has not been satisfactory. The level and quality of MSME employment is still a concern (Solomon Tarfasa et al., 2016); large and older firms are still the important sources of net new jobs than small and younger firms (World Bank, 2015).
Using the 2011 Enterprise Survey data, WB (2015) identified that almost half of microenterprises, 40% of small firms, and 18.5% of medium firms reported access to finance in Ethiopia to be a major constraint to daily operations.
In Ethiopia women owned enterprises are challenged by bad price for the product and service/selling at less price compared with other similar enterprises, shortage of raw material and lack of experience in own business were challenging factors for women entrepreneurs” (Tadesse Demeke, 2016). In another study conducted by Singh & Belwal (2008), Ethiopian Women owned MSEs faced challenges that can be described as lack of capital,limited access to markets, to network, to premise, lack of training and cultural oppressions.
Another study in Ethiopia conducted by Hagos Yared (2012) revealed that high competition as a result of open entry to the business affected newly born MSEs. Besides, the country’s development strategy and policy focusses on agriculture which in turn discourage MSEs operating in other sectors.
Region wise various studies were conducted and provided plenty of challenges. According to Yonas Abera (2016) unfair practices, unattractive market, lack of advertisement and market linkage were identified as market challenges of MSEs in Diredawa city administration. In a survey conducted by FDRE Minstry of Urban Development and Construction (2013) SMEs in Addis Ababa were challenged by lack access to finance, premises and training.
In Hawassa city the major challenges facing SMEs were shortage of electricity and unscheduled power cuts, market access, lack of selling premises, Insufficient credit facility and bureaucratic working procedure (Bereket Teklehimanot, 2017).
According to Berhanu et. al (2015) MSEs in Gedeo Zone were challenged by high tax, high collateral requirement, bureaucratic burden, lack of credit access, inefficient tax administration, high interest rate and lack business premises. In another study Desalegn Berhane (2016) found that MSEs in Tigray faced Low infrastructure, lack of technology, weak performance leading to absence of growth thinking challenges. Similarly, Zemenu A. and Mohammed M. (2014) revealed that MSEs in Mekelle City suffered from intensive competition, inadequate credit facility, starting business without conducting survey, inappropriate tax imposition, inappropriate tenure,lack of business training, shortage of working capital, absence of appropriate technology, uncollectible receivables and lack of financial management skill. These challenges led the enterprises to dissolve early rather than growing. According to Belay et. al (2015) lack of finance, Youth’s adverse attitude towards working under umbrella of MSEs agency and failure of Zonal MSE agency to serve as broker between MSEs and other supporting institutions were the major challenges. With regard to the opportunities of MSEs, Tadesse Demeke (2016) revealed that business consultation services, premises, training for the beginner, loan facilities, moral or encouragement, peace and security, area specific features, support and reward like training, fund, and certificate play a role for expansion and growth of women entrepreneurs in particular and MSE owners in general.
Additionally, MSEs are allowed to participate in government bid without providing CPO, however many of them disappear when they are approved to provide the materials. Besides, MSEs are given chance to take government projects as a contractor or sub-contractor that will make them beneficiary.
Although several challenges inhibit the growth of MSEs, the critical problem is damaging rent-seeking behaviors, which are manifested in different forms. Other challenges that undermine the growth of MSEs are access to technology, skills, capital financing and markets” (FDRE MUDC, 2016). The NBE directive no. SBB/53/2012 restricts commercial banks to go beyond 25% of their capital for single borrower and 15% of their total capital for a related party. Similarly, the NBE directive no. MFI/18/06 limits MFIs not to go beyond 1% of their capital for individuals who can provide collateral and not more than 4% of their capital for group collateral. These lending restrictions were imposed on private banks and then replaced by an NBE directive (MFA/NBE Bills/001/2011) which obliges commercial banks to allocate 27% of total loan disbursed during the month for the purchase of low interest bearing NBE bills. The NBE bill purchase requirement continues to severely constrain private commercial bank operations which in turn results in favoring existing, established clients when allocating loans as opposed to newer, riskier SMEs ” (Fredu Nega and Edris Hussein.2016).