ADIGRAT UNIVERSITY

COLLEGE OF SOCIAL SCIENCE AND HUMANITIES

DEPARTMENT OF GEOGRAPHY AND ENVIRONMENTAL STUDIES

PROGRESSES, EFFECTS, AND CHALLENGES OF MICRO

AND SMALL SCELE ENTERPRISES AT WUKRO TOWN
BY: TRHAS TSEHAYE

APAPER SUPMITED IN PARTIAL FULFILMENT OF THE REQUIRMENTS FOR BSc

DEGREE IN GEOGRAPHY AND ENVIRONMENTAL STUDY

ADVISOR: ZUBIRAL ISLAM (PHD)

JUNE 2015
ADIGRAT, ETHIOPIA

CHAPTER ONE
1. Introduction
1.1.

Background of the Study

In developing countries like Ethiopia, where agriculture plays predominant role in the economy and
the countries demographic pressure marked by high population growth which is manifesting a negative
impact on the countrys socio-economic development. The formal industrial sector alone could not be
capable of creating sustainable economic development, generate large employment and alleviate
poverty. . Because of this, the importance role of Micro and Small Scale Enterprise(MSE) in the
process of economic development has now been widely acknowledged in many developing countries
including Ethiopia ((Ngatu Legse 2006).
Micro and Small Scale Enterprises in developing countries like Ethiopia have significant role in terms
of employment generation, quick production response, source of income of each households, their
adaptation to low level infrastructure, and use of local resources, a means of realizing equitable
income distribution & injecting a feeling of competition. Furthermore, Micro and Small Scale
Enterprises demands small capital requirements for starting the activity, low skill insuring food
security and private sector development, increase domestic savings, and investment, helps for balanced
development provision of goods and services which are better adapted to local market needs, access to
improved quality of work and working conditions which may contribute to a better quality, increased
economic participation of disadvantaged and marginalized groups in the society access for training and
development of human resources stimulating innovation, entrepreneurship technology development
research and powerful instrument in economic growth and eventually elimination of poverty (Ngatu
Legse 2006 ).
In the case of town Wukro administration consists of 3 kebeles with a population of 30,210 (based on
Central Statistics Agency 1999E.C) in there exists NGOs and governmental organizations. More of the
population is mainly stay with unemployment and other has engaged in informal sectors. There are
430 licensed and registered MSEs in the city, which have different challenges. But with their
challenges, they contribute important role in employment generation and economic growth in the town
as well as in the country level. But the towns MSE are not in a good position rather they have clear
information about MSEs existing situation is paramount important to make any decision regarding
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MSEs. Therefore, this study attempts to investigate the existing MSEs condition with particular
emphasis to the state of financial and non-financial challenges and the role of MSEs in the town under
discussion.

1.2 Statement of the Problem

Poverty in Ethiopia is deep & widespread both in rural & urban areas. To tackle this; successful small
businesses are the primary engines of economic development, income growth and poverty reduction in
much of the developing world. As literature confirmed, MSEs took one of the major part of the
economy. As a result, the role of MSEs in the process of economic & social development of the
country is enormously vast.
In Wukro town the MSE sector contribution in employment creation and income generation. Due to
and other roles of MSEs in the city initiates the local government to encourage and expand the
programmed/projects as well, its expansion and rapid growth and development as away of overcoming
poverty and unemployment. Generally in the city the MSE sector severely affected by the challenges
like mentioned above. But, the research paper intended to assess the existing status of major
challenges of MSE and particular emphasis is given to constraints of financial provision i.e. the city
MSEs sectors have great lack of capital for the activities, not only this but also requires high
collateral/group formation loan size, short loan repayment period, high loan interest rate, inefficient
service delivery, of MFIS, Financial Policy and regulation constraints and low capacity MFI as well as
low availability of MFIS. In provision of business development support services are:-lack of training,
lack of extension and consultancy services and lack of marketing and information services. Not only
these but also the policy and regulatory framework brings high tax rate, tax estimation system, long
and time raking bureaucratic procedure of licensing. (Wukro MSEs office)

1.3 Objectives of the Study

1.3.1 General Objective:The general objective of this research is to assess the progresses, effects and challenges of micro and
small scale enterprise at Wukro town.
1.3.2 Specific Objectives:
The specific objectives of the study are:*.Examine the overall progresses of MSEs at Wukro town,
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*.Assess the effects of MSEs on improving socio economic problems of the town,
*.Identify major (critical) challenges of MSEs in the town and suggests solutions to them.

1.4. Significance of the Study

The findings of this research study would benefit politicians, policy makers, researchers & private
sectors to understand the progresses, Effects, and challenges of MSEs in economic development and to
create awareness on the business community to identify the enterprise problems and work together
with policy makers and other agents & stakeholders so as to create conducive environment to the
sector to alleviate poverty.
The study also has advantageous to understand the prospects and problems of MSEs development
which enables policy makers to take corrective measures to the effective progresses, Effects, and
challenges of MSEs in economic development of the country and it helps policy makers to evaluate
their plans or achievements against the drawbacks of such activities and uses to recommend corrective
economic development measures based on the assessed literature reviews that experienced & applied
to many developing countries in the world more over the study can initiate other researchers to
conduct deeper and wider research on the area

1.5. Delimitation/ Scope /of the Study

Since the study focuses on the progresses, Effects, and challenges of MSEs in the case of Wukro town.
It focuses mainly on the current private sectors (MSEs) involved in organized form of the town in
different activities. Because of financial constrains this research is confined in one woreda. In other
words, the study would be limited to those MSEs operators found in the 3 kebeles in the town that are
legally licensed and registered from 2002- 2007 E.C half year by the town MSEs administration and
operates for the purpose of employment creation and income generation for their households.
It also confined to evaluate the effectiveness of existing MSEs programs, projects, and policies that
facilitate the growth of the sector, and finally it will come up with alternative solutions that what to be
done for the future so as to achieve its target goal & reduce poverty of the poor.

1.6. Limitation of the study

Generally, this paper assesses the progresses, effects, and challenges of the MSEs in Wukro town
improving the economic condition & living standards of the households in the town. However during
the study the following limitations/ constraints were occurring.
Lack of experience of research writing
Unwillingness of respondents to give reliable information/data
Lack of sufficient previous study materials and some technical inabilities was encounter during
the course of the study

1.7. Organization of the study

This paper is organized in four chapters.
The first chapter gives introduction a general background of the research, statement of the problem,
research questions, objective; significant, scope, limitation, and organization of the study,
The second chapter deals with related literature reviews that provide an overview of critical concepts
of MSE in general and in the Ethiopian context.
The third chapter deals with Research methodology specifically in description of the study area, Socio
Economic characteristics of the study area and research design and methods.

The fourth chapter deals the Data Presentation, Interpretation and Analysis
Finally, the five chapters (chapter five) give conclusion and recommendations to improve and enhance
the role of MSEs sector in the town

CHAPTER TWO
2. REVIEW OF RELATED LITERATURE
2.1 Definition of MSEs
There is no universally accepted definition for MSEs. It has continued to be a controversial issue with
no consensus on the part of the various societies. It also characterized by the interchangeable name
with the organization, countries, and nature of activities. The definition of the term MSEs are generally
based on the value of sales, values of assets and number of persons employed by the enterprises.
The UNDP (2003) defines MSEs on the basis of the number of persons employed. The enterprises
that employ between 5-150 persons and are operating in the formal sectors (formally registered
business bodies) are SMEs. On the other hand SMEDA define MSEs in terms of employment
generated as well as investment in productive assets. According to this definition small enterprise is
the one hiring between 10-35 people or whose value of productive assets employed in the enterprises
is between 0.42-4.21 million Birr.
SMEs are also heterogeneous group ranging from small workshops making furniture, metal parts and
clothing to medium sized manufactures of machinery and services provides; as restaurants consulting
and computer software firms. Some are traditional, livelihood enterprises that are satisfied to remain
small; others are growth orientated and innovative. Firm size is interesting in part because of the many
size related regularities often anomalous, that have been uncovered (Tyler Biggs, 2006) In Ethiopia the
definition of the term MSEs is interchangeable both in terms of paid up capital and number of
workers.

2.2 Significance of MSEs Sector

According to ILO (2002) estimations, in all regions of the developing world informal employment
(outside of agriculture) represents nearly half or more of the total non-agricultural employment. It
ranges from 48% in North Africa, to 51% in Latin America, 65% in Asia and 72% in sub-Saharan
Africa. The informal sector is also a larger source of employment for women than men in developing
countries, for example in sub-Saharan Africa 84% of women non-agricultural workers are informally
employed compared to 63% of male non-agricultural workers (ILO, 2002).
In the face of increasing pressure from globalization, the informal sector activity and employment tend
to expend in both developed and developing countries in the last two decades (ILO, 2002). The
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emphasis of the policy makers and donors on MSEs is partly justified for their potential for enhancing
pro-poor growth. Recently, a number of sub-Saharan African (SSA) countries adopted poverty
reduction strategies that mainly emphasize promotion of MSEs as a major way to reduce poverty
particularly among the urban dwellers.

2.2.1 Employment opportunities

The role of MSEs, in income and employment generation is increasingly recognized; unlike to the
previous pessimist notion that these are not linked to the modern and formal sector and would
disappear once industrial development is achieved. In developing countries, the informal sector, in
which most of the MSEs lay, a large source employment and livelihood of particularly the urban
population. According to ILO estimations, in all regions of the developing world informal employment
(outside of agriculture) represents nearly half or more of the total non-agricultural employment. It
ranges from 48% in North Africa, to 51% in Latin America, 65% in Asia and 72% in sub-Saharan
Africa. ILO 2002
The informal sector is also a larger source of employment for women than men in developing
countries, for example in sub-Saharan Africa 84% of women non-agricultural workers are informally
employed compared to 63% of male non-agricultural workers (ILO, 2002). In the face of increasing
pressure from globalization, the informal sector activity and employment tend to expand in both
developed and developing countries in the last two Decades (ILO, 2002).MSEs are more advantageous
for developing countries not only because they demand more labor, but also because they usually
utilize unskilled workers who are excessively available in developing countries. By increasing
employment opportunities for the unskilled labor, MSEs would increase income and reduce the level
of poverty. Moreover, since MSEs produce goods that are more appropriate for the poor, they are more
appropriate means of reducing poverty.
MSEs provide livelihood to a large proportion of people in both developed and developing countries.
In the Netherlands, for instance, 57 percent of the labor forced work in enterprise that employs
between one to 99 workers (Sonko, 1994:3). Similarly, it was reported that 70% of the new jobs that
have been created in the USA in the last two years are n the small manufacturing and service sector
(Kapur, 1994). Again, in Chain, village and township enterprises number 19 million in 1992
employing 90 million people (Sonko, 1994). As a result of the favorable policies that India has been

practicing, there are now about 2.2 million MSE units in the country providing employment and
livelihood to 13.5 million people.

2.3. Constraints Facing MSEs

The lack of working premised was also found to present difficulties for the informal sector operators
who faced with insufficient capital, were often impeded from the start. The problems of raw material
shortages, lack of working capital and effective marketing practices faced by small manufacturing
industries result in the failure of these business to expand (Lois Stevenson and Annette st.onge, 2006).

2.4. MSEs in Ethiopia

All these reforms have immensely improved the domestic policy environment for MSEs. In fact, the
government has gone a step further in its support for Small Enterprises by formulating National Micro
and Small Enterprises (NMSEs) Development and promotion strategy. This is an important beginning
by the government and should be followed by refinements of micro polices and incentive schemes
aimed at promoting learning and technical change at the enterprises level (UN-2004).
According to the CSAs survey (2003), there was almost 590,000 MSEs in Ethiopia. 99.4% of which
were micro enterprises that hold fewer than 10 employees each and accounting for 88.2% of private
sector employment of the country. The micro intersperses are very small, an average, they employ one
and a half workers (this includes the owner and perhaps an occasional helper) and earn an annual
operating surplus Birr 1300. Sole proprietors operated 82% of urban enterprises of the total
employment. All urban micro enterprises accounted for 60% beyond family members apprentices
constituted a large proportion of remaining MSE work force. In 2000 for example MSEs contributed
to 68% of gross value of production and over 80% of employment in the manufacturing sector.
Generally, MSEs are among the most dynamic and innovative enterprises

CHPTER THREE
.

Research methodology

3.1 Description of the study area

3.1.1 Physical characteristics of the study area
3.1.1.1 Location
The survey area where the majority of the fields work was carried out in Woreda kiltie Awlealo ,
Eastern Zone of Tigray region. Tigray is the northern most region of Ethiopia and lies between
latitudes 140 16' and longitudes .390 09. Wukro is surrounded by Kilte Awulaelo woreda and 45 km
north of Mekelle,capital of Tigray in Ethiopia.
3.1.1.2 Topography
Information about the topography indicates that the relief feature of the study area comprises plane,
slope shallow area and river. Generally the physical characteristic of the town is determined by slope
and rivers.
Table 3.1 relief feature of the study area
Feature

Area coverage in %

Flat

15

Plane

72

River

13

Source 2007 E.C Wukro municipality office

3.1.1. 3 Climate (Temperature and rainfall)
The majority rain and cropping season of the study area extend from June to August. Annual average
rain fall of their town /2002 -2007 E.C was about 450-610 M.M with significance variation from year
to year. The man air temperature of the area is from 8.30 -310 2012)
3.1.1.4 Vegetation
Wukro is very reach by different fruits and vegetables, because it has irrigation around the town. In
Wukro there is river known which is called may Denglo. This river is flow water throughout the year,
so around the town they grow different fruits like oranges bananas, carrots, Zeytihuns, apples and
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mangos, etc. And they grow different vegetables like, sugar cane, onion, potatoes, cabbages, and other
vegetables, but some part of the town is coved by rock.

3.2 Socio Economic characteristics of the study area

3.2.1 Population
The most recent population figure for the Wukro town were taken by central statistical agency in 2005
E.C the male population being 16,154 and female population is 14,056 becomes a total of 30,210. The
average family size per house holders is about 3-5 and the religions pattern of Wukro town is 80%
Orthodox and 20% Muslim followers.
3. 2.2 Economic activates of the study areas
In Wukro town most of peoples live by trade. Same peoples lives by agriculture and by governmental
and nongovernmental salaries so in Wukro town the many economic activities is the trade of MSEs.

3.3. Research Type

The study applies descriptive type of research. This is because descriptive study it investigates the
progresses, effects, and challenges of MSEs in Wukro town at the present situation and it describes
how the expansion of MSEs can reduces poverty of MSEs operators. In other words, the study is a
purposive process of gathering analyzing classifying and tabulating data about the revealing
conditions, practices, trends and cause effect relationships of expansion of MSEs with poverty
reduction.

3.4 Data sources

In order to see the progress, effects and challenges of micro and small scale enterprise at Wukro
town the researcher is collected from secondary and primary source of data.
3.4.1 Primary source of data
The primary source of data collected from the micro and small scale enterprise at Wukro town
3.4.1 Secondary source of data
The secondary data is obtained from the reports of micro in small scale enterprise of Wukro town.

3.5 Sampling Technique

In order to see the role and constraints of MSEs in poverty reduction in Wukro town a well justifiable
and representative number of samples have to obtain based on probability and non probability
sampling technique.

Table 3.2 Major activities in the town and their sample size
No

Major MSE Activities

Targeted

Sample size

Population No (T.P)

(9% of T.P.No)

Construction

50

Traditional black smith and small cottage

30

Tailor

90

Food processing and bakery

75`

Metal and wood work

40

Petty trade

85

Small service provision ( salon )

60

Total

430

40

Source: Wukro town MSE office 2006 Annual report

To select the sample population; first the total MSEs in the town divided in to seven major stratas
based on their almost similar activities, and then the Number of sample is computed by taking 9% of
each strata (using proportionate stratified random sampling technique ).
In addition to the above proportionate stratified random sampling, non probability sampling which is
purposive sampling technique would be employed for concerned personnel, MSE officers, Experts of
central Zone Trade, Industry and Urban Development Coordinating Departments. The reason why
purposive sampling used is that to select officials and experts who are supposed to be well experienced
informed and knowledgeable who can illustrate the reality based on their experiences.

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3.6. Population and Sample Size

Even though many informal, unregistered and unlicensed MSEs operators are found in the town, the
known, licensed and registered MSEs operators by the town administration until 2006 E.C annual year
were 430 in number. Based on this fact the study is conducted by taking these 430 MSEs legal
operators as a target population with 9% (40) of sample size. In addition to this, two officers and three
experts from the total population of 16 workers found in the town MSE office. The other many
unregistered and unlicensed MSEs that are facilitating by household levels cannot be studied as they
are, if so the study would be complicated.
3.7. Data Gathering Tools
The data was collected from both primary and secondary sources. The primary data was collected by
using; questionnaire, interview and observation method of data collection tools. While secondary data
could be obtained from books, broachers, reports of the town MSEs office, Journals.
Questionnaire: Self-administered, both closed and open-ended questionnaire was prepared and
translated into Tigrigna Language and delivered to the selected 40 sample MSEs Operators.
Interview: by using judgmental sampling structured interview were made with the concerned
personnels or MSE officers found in the town administration.
Observation: observation or visit was made at each sample of MSE operators in the town by the
researcher.

3.8. Method of Data Analysis

The method of data analysis is conducted according to the nature of the gathered data and information
if whether it is quantitative or qualitative in nature. The quantitative data analyzed and interpreted
based on the responses given by the majority of respondents for each items in the questionnaire using
the average methods of descriptive data analysis by using for example tables and percentages.
Whereas qualitative data that are gathered from interviews, observation and open-ended questionnaires
are analyzed and interpreted based on the evaluation of the researcher.

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CHAPTER FOUR
4. Presentation, Interpretation and Analysis of the Data
In this section, the results of the survey are discussed to analyze the roles that faced of MSEs on
poverty reduction with a particular reference of Wukro town. The primary data was collected from a
sample of 40 MSE operators which are found in the town 3 Kebele by open and closed ended
structured questionnaires, observation and interviews of MSE office experts. So, the general findings
of the research question are discussed as shown below.

4.1 Overview of the Respondents

4.1.1 Age and Sex Composition
As many literatures argue that women in developing countries have a strong tendency to enter the
MSE sectors, in part because of ease to entry and their limited access to alternative activities. And they
are essentially marginalized in the labor force and unable to find employment alternatives in effect
they are driven to entrepreneurial activities out of the necessity.
Table 2. Age and sex composition of respondents
Male
Age group/year

No.

Female

No.

Total

No.

18-26

22.5

10

25

19

47.5

27-36

15

17.5

13

32.5

37-46

7.5

7.5

15

47-56

2.5

2.5

57-66

40

100

Total

19

47.5

52.5
21 0

Source: Own survey (2007 E.C.)

According to the sample survey in this study, interims of gender female operators 21(52.5%) dominate
than male 19(47.67%) operators. This result matches with the situation in other countries for example
12

a survey data made by UN (2004) from 12 countries it was reported that the majority of MSEs in
most countries are owned and operated by women.
Interims of age, the sample data revealed that most of the MSEs, in the town are operated by relatively
adult operators whose mean age is 35 years. This indicates that participation of youth in the MSEs
sector is low.
Even though, the government designed various policies and strategies to promote especially young
operators who will be job creators rather than job-seekers the information from the sample indicated
that the achievements are unsatisfactory.

4.1.2 Educational Background

As literature indicates firms (MSEs) which invest on research and development and human and
physical capital will be more efficient and grow faster than others.
The implication for MSE in developing countries is that entrepreneurs human capital such as
education and experience are important determinants of firm growth. Because education provided
entrepreneurs with a greater capacity to learn about new production process and product designs, offer
specific technical knowledge conducive to firm expansion and increase owners flexibility.
Table3. Distribution of MSE Operators by level of Education

Level of education

Male
Number

Percent

Female
Total
Numbe Percent Numbe Percent
r

Illiterate
Primary school (1-4)
(5-8)
High school (9-12)
Certificate
College and university
Total

2.5

7.5

6
9
2
19

15
22.5
5
47.5

5
11
4
21

12.5
27.5
10
52.5

11
20
6
40

27.5
50
15
100

Source: Own survey (2007 E.C.)

However, when we consider the educational background the survey indicated that 20(50%) of the
respondent MSE operators are high school (9-12) level. From this 11(27.5%) female respondents, and
11(27.5%) are junior school (5-8) grade level, from this 5(12.5%) are female respondents, and 3(7.5%)
of the respondents are primary school (1-4) from this 1(2.5%) are female respondents, and the rest
13

10(15%) of the respondents are certificate levels from this 4(15%) are female respondents as shown in
the table 4.
From the above table one can understand that majority 34(85%) of the MSEs in the city are operated
by lower educational level operators which are below certificate levels and only the basic skill of
reading and writing. This indicates that MSE operators in Wukro town have rather low business skills
and seem not to appreciate the importance of business education, on the other hand, the quality of
training and development provided by existing business training institutions and costs involved has
tended to be unattractive and un affordable to the potential beneficiaries. Due to this most of the
operators did not have technical and vocation training they are simply running their jobs because of
there are skilled through accumulated experience.
In addition, one of the question formulated to the respondents was, how they acquire (inter into) their
specific business? From this the data indicated that most of the owners 31(77.5%) have started their
business from scratch (without previous preparation or planning). Only 9(22.5%) have started their
business with previous preparation which are in the form of co-operatives to have chance of having
job opportunity, monthly income, and working place. Because of this before starting their business
most of the MSE operators do not prepare a business plan that includes the marketing, financial and
human resource, the service provided, the output required, the fund needed, the location of the
business, objective goal, constraints, suggested solutions, estimated profit or loss etc. And the data
information showed that the average startup capital from scratch was about birr 4000. This indicated
that most of the operators are starting their respective business with small amount of capital.

4.2 Source of Finance to Start the Business

Theoretically, MSEs may use internal and external source of financial. The former comprises own
savings and retained earnings while the latter includes security finance, explicitly borrowing from
formal and informal sources. For firms that can not resort to primary and secondary money and capital
markets (either because the market do not exist or the firms are not in a position to access such
market), small business for example, trade and bank credits are critical sources of funding for working
capital (WB: 2004). Bank credit typically finances ongoing operations, seasonal or cyclical cash flow
shortages start up cost for new operation etc. Trade credit on the other hand is given for the purchase
of raw materials and others inputs.

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In Ethiopia, the potential sources of finance include conventional banks, micro finance institutions,
cooperatives, government project, semi formal and informal lenders as well as trade credit (Wolday
Amha: 2001), while formal banks do not find MSEs attractive clients due to high transaction costs and
(real or perceived) risks. Due to this MSEs appear to be disproportionately affected by the under
developed nature of financial institutions in developing countries. For various reasons ranging, from a
lack of collateral to bias against small enterprises, MSEs tend to face a greater financial constrains that
do larger firms. From the prospective of MSE, owners insufficient credit is frequently the most
obvious and pressing challenge hindering firm growth.
Able4. Source of Capital for Starting the Business
What was your source of capital to start the business

Number

Percent

Personal saving

11

27.7

Borrowing from relatives and friends

15

36.9

Inheritance

4.6

Support from government (or NGOs)

3.1

Cash from Iqub

6.2

Loan from financial institutions

15.4

Others

6.2

40

100

Total
Source: Own survey (2007 E.C.)

In this study the sample data from the above table 5 revealed that, the main source of finance for the
owners that start from scratch is borrowing from relatives and/or friends, which constituting almost
15(36.9%), the next higher internal source is personal saving 11(27.7%), loan (borrowing) from
financial institutions account for 6(15.4%), inheritance, support from government (or NGOs), cash
from Iqub and others 4.6%, 3.1%, 6.1% and 6.2% respectively. From this, we can see that relative to
other sources of capital the role of financial institutions such as microfinance and banks to finance
MSEs operator is under expectation (unsatisfactory).
This may be due to high interest rate, short repayment period, and long procedural formalities and as a
result friend and relatives are the main source of finance not only for startup capital but also for
15

running the business. So from this sample data conclude that to participate MSEs borrowing from
relatives friends and personal saving are operating starting of source of capital respectively.

4.3. Reasons for entering the business

There are two approaches to the emergence and expansion of MSEs and the increase in the number of
people engaged in such activities. One approach perceives this as an outcome of improved
opportunities of people (including the poor and disadvantaged) to participate in ways that empower
and nourish them. On the other hand according to the second approach, it is an indication of failure of
an economy to provide productive jobs, forcing people to take refuge in activities that provide only
minimal subsistence support (Wolday Amha: 2001).
While it may not be easy to sort this out (and there is probably some truth in both), due to this fact in
this study attempts were made to get some information that may throw some light on the issue in the
study area.
Table 5. Reasons why the Respondents Entering to their Business
Why you enter in to this specific business

Number

Percent

Because it is profitable

10.7

Skilled in this activity

20.00

Parents/relatives in the business

12.3

23

56.92

40

100

having no other alternative

Others
Total
Source: Own survey (2007 E.C.)

Accordingly, questions were asked for respondent (MSEs) operators why they get in to their respective
specific business activities (as summarized in table 5).
As indicated in the above table 5 the four most frequent responses obtained are because it is profitable
4(10.7%), I am skilled in this activity 8(20.0%), this is the only thing I was able to do/I had no other
better alternatives 23(56.92%) and parents/relatives are/were in this business/inheritance 5(12.3%).
From this one could understand that perception and awareness of majority of operators towards their
business values have tend to create a culture that is anti-entrepreneurial. This may be past policies
16

limited individual entrepreneurship initiatives and in addition the education system has tended to
create employment seekers rather than job creators.
Due to this one can conclude that MSEs operators lack entrepreneurial quality for the success of a
business, that is initiative (doing things before being asked or forced by events). Because of this, as
we have seen the previous discussion, the number of male operators is much less than female
operators. Since majority of MSEs Operators consider the sector as the last chance to which they resort
to having exhausted all other possibilities. This implies that most of the MSE operators are
misunderstood the significance role of MSEs in terms of job creation, source of income and powerful
instrument in economic growth.
Since many operators regard MSEs as activities of last resort seems to suggest among other things the
need for measures to cultivate positive attitude especially among the educated urban youth such that
they regard MSEs as respectable business activities worth being engaged in.
Even though majority 26(56.92%) of the respondents in the above table 5 answered, just their havent
any other better alternatives, the data from the improvement condition after starting their business
indicated all 40(100%) of the respondents answered that their life has improved significantly as
compared before (when they did not start the business).and all respondents started that after starting
their business they have got employment opportunity, as a result their income level and saving ability
is increasing as a whole, operators household life generally improving from time to time. From this
we can understand that with the reality is that since MSEs tend to be labor intensive they create
employment opportunity at relatively low level of investment per job created.

4.4. Number of Workers and Working Premises

The data showed that 21(52.3%) of the respondents had 5 or less workers and the rest 10 (25) business
enterprise have (6-10) workers engaged in their activity and the other 9(22.5%) are construction and
metal work operators that work together in the form of cooperatives which holds (10-20) workers. The
above information argued that the definition of MSEs. according to MOTI (1997) in terms or number
of workers; which is started that micro enterprises are enterprises one which holds (employ) less than
10 persons and small enterprises are enterprises which holds 11-50 workers. From this one can
understand that majority of micro and small enterers / MSEs / in the city are operated by owners and
his/her family members for survival of the household.

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Accordingly, to the central spastics agency/ CSA /(1994-1995) report, the major obstacles experienced
by MSEs were irregular and erratic supply of raw materials and a shortage of suitable working
premises. The lack of working premises was found to present difficulties for the informal sector
operators who faced with insufficient capital were often impeded from the starts. As already
mentioned in the scope of this study the sample survey is conducted on MSEs operators who start their
business in 1995 E.C and afterwards with different provision of support and services by government.
However, from these registered and licensed operators who are found in the city only 1(2.5%) is
owned and 11(27.5%) are engaged in the business by renting, while 8(20%) are bought from other and
the rest 20(50%) are engaged in the business by: - illegally owned land, on street line, taking
land/house from friends/relatives until they will be establish on themselves and on permitted land but,
they didnt get the ownership rights as shown in figure 1 below.

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Figuer.1. Types of Business Premise

Rented

26.20%

Owned
Bought from ohers

50.70%

3%
20%

Other types of
Business premises

Source:-Own survey (2007 E.C.)

4.5 General Conclusion and Findings of the Interview

This paper is designed to explore the progresses, effects and challenges of MSEs with a particular
reference of Wukro town MSEs Operators. To do this the data was collected from both primary and
secondary sources. The primary data was collected by using observation and document analyses
method of data collection tools. Since, for the purpose of clarity the findings and analysis of the
interview with the concerned officials have discussed as indicated below with related interview
questions.

1. The Establishment of MSE in Wukro Town

As observed from the interview Wukro micro and small enterprise office was established and starts its
work September 1995 E.C. This is the result of the issuance of National Micro and small enterprises
strategy in 1997 and the establishment of the Federal MSE development agency. Since the Ethiopian
government recognized the significance of this sector and shows its dedication to promote the MSEs
development as one of the important instruments to create productive and dynamic private sector at the
lower pyramid, Wukro MSE office is established in 1995 to facilitate MSEs development activity in
the town.
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2. The Main Purpose /Objective / of this Institutions

The interviewee explained that, the primary objective of the establishment of MSEs in Wukro city is to
create enabling legal, institutional and other supportive environment for the development of MSEs in
the city, in order to minimize those constraints to achieve the intended national as well as regional
objectives by creating self-employment opportunity of the citys poor people. From this one can
understand that the establishment of MSE office near the community creates many advantages to the
society to provide and facilitate access to finance, provision of training in entrepreneurship, improving
access to appropriate technology, giving advice to the MSE operators at the lower level of the
community.

3. The Basic Criteria for Local Residence to Involve the MSE?

The interviewee argue that, if MSE operators become to be formal and who wants to activate their
business by registered, and licensed, of course yes. However many MSEs operators are informal
operators and inter in to their business activity as they like.
If MSEs operators want to become licensed/registered in this institution there are some formality
criterias that hinder them to inter into the business e.g. age(below 18 years),employed people, rich
people, could not engaged in to MSEs activities. From this, one can understand that the role of MSEs
in employment and income generation especially the poor people to alleviate poverty is increasingly
recognized, supported and implemented for the government bodies in the city.

4. The Total No of MSEs Operator in the Town?

As the interviewee had been explained and seen the 2006 E.C. annual Wukro town MSE office report,
the total number to MSEs who are engaged in their activities with formally registered and licensed by
the institution are 430.This indicates that awareness of the community in the town is increasing from
time to time as compared to the past. Because many informal MSEs operators become formal as a
result of government facilitates/supports the privatization policy.

5. The poor Benefit from their MSEs?

Since to inter in to a business requires less money with less skill, small and micro enterprises has been
become the only solution for self employment in Wukro city especially for vulnerable groups in the
society; e.g. women, younger people, former public sector workers and displaced military groups.
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These groups creating their own MSEs thus becomes self-employed, as a result increased their income
brings with it access to social as well as economic development of the owner.

6. The Challenges that hinder the Growth of MSEs Activity in the Town
As the time of the interview, the experts explain that, most of the challenges that hinder MSEs
development in the city are lack of infrastructure, limited access to finance, awareness of the society
towards MSEs activities. This implies that, for various reasons ranging from a lack of collateral to bias
against small firm, MSEs in Wukro city tend to face greater financial constraints that should be given
attention for the future.
7. The Potentials that Encourage the Future Visions for the MSE Sustainability
The interviewee argues that, the potentials that encourage the future vision for MSE development in
the city are - Government policies and strategies that facilitate the growth of MSEs development
throughout the country and which also applying in Wukro city are:

Encouragement and support of the government to MSEs in the traditional sector

Formation of MSEs sector and associations and strengthening them where they exist since they
could achieve their goals.

Facilitate the participation of MSEs in government procurement by simplifying tendering

procedures

Continued effort of the government to harmonize laws, regulations, and procedures at national
and regional levels

A human capital development program that calls for universal basic education and advances
vocational training in the city for those with the skills and drive to be successful in these areas. In
general, from the interview, it was informed by the experts that, MSEs in the city encouraging by
other things, as set of government policies that establish a favorable climate for not only the startup of new businesses but also favorable for the growth of businesses.

Policies that minimize the costs of licensing and registering a business, policies that call for the
government to provide easily access to information about laws and regulations, and policies such
as commercial codes that establish rules to minimize the costs of doing business by defining the
rights and responsibilities of all parties to a transaction and policies that establish and enforce
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clear rights to property and clear rules relate to the performance contracted are major potentials
that encourage the future vision of MSEs in the city.

8. The Main Strategies that Enable to Expand the MSEs Sector in the Town
From the discussion of the interview, the strategies that Wukro city MSEs Office uses to expand the sector is
similar to the National Micro and Small Enterprises Strategy of Ethiopia by considering the citys community
Socio- Economic back ground. Such as

Creating cooperatives of the poor and giving land/working place freely or with minimum cost

Addressing market failures that create cost disadvantages for MSEs

Investment in public goods, which open market access (especially for the poor) and develop markets for
support services: information, infrastructure (transport, market facilities, communications), training,
product development for financial and non financial services and institutional capacity building.

9. The Positive effect of MSEs to Reduces Poverty of the Poor

All the interviewee argues that, the expansion of MSEs in the town reduces poverty of the poor.
Because most of the community in the town uneducated, jobless poor that engage their activity only
for survival. Therefore, if these jobless (unemployed) poor people engaged/inter into a specific MSEs
activity with a minimum start-up capital, he/she could directly have got employment opportunity. And
operators income will be increase, as a result their saving also grow, this contributes not only for
themselves as a means of earning income, but also the countries as a whole to achieve the millennium
development goals and to reduce poverty.

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