COLLEGE OF BUSINESS AND ECONOMICS

A RESARCH SUMITTED TO ECONOMICS DEPARTMENT

FACTORS AFECTING THE SUSTAINABILITY OF SMALL AND MEDIUM

SCALE ENTERPRISE, IN THE CASE OF DEBRE BERHAN, ETHIOPIA

RESERCH PAPER SUBMITTED TO DEBRE BERHAN UNIVERSITY,

COLLEGE OF BUSINESS AND ECONOMICS IN PARTIAL
FULFILMENTS OF THE REQUIRMENTS FOR THE DEGREE OF
ECONOMICS.

By:-TIGIST ASSEFA

ADVISOR NAME:-INSTRUCTOR ESHETU

DECEMBER, 2020
DECLARATION

I, the undersigned, declare that this research titled “Factors Affecting Sustainability of
Small and Medium - Scale Enterprises” is my original work, prepared under the
guidance of Instructor Eshetu. All sources of materials used for the research have
been duly acknowledged. I further confirm that the research has not been submitted
either in part or full to any other higher learning institution for the purpose of earning
any degree.

ACKNOWLEDGMENTS
This study is made possible by a great deal of support from a number of people who
have been kind enough to stand beside me every step of the way through my stay in
the program. Yet, it would not be in its current shape if it hadn’t been for God’s
enormous will and support.Therefore, the highest gratitude goes to God.

First, I would like to express my heart felt appreciation to my advisor Instructor

Eshetu his valuable comments and counsel guided the entire study to reach its current
state. Thank you for being understanding and supportive. Special thanks all
respondents who have sacrificed their time to provide me with the vital information
needed to complete the study. I thank them all for their patience and understanding.

ACRONYM’S
ETB -------------------------------------------------Ethiopian birr
FeSMMIDA ---------Federal Small and Medium Manufacturing Industry
Development Agency
GDP --------------------------------------------------Gross domestic product
GTP -----------------------------------------------------Growth and Transformation Plan
MDGs --------------------------------------------------Millennium Development Goals
MOT ---------------------------------------------------Ministry of Trade
MSE -------------------------------------------------- Micro and Small enterprises
MSME ------------------------------------------------ Micro, Small and Medium
enterprises
MUDC -------------------------------------------- Ministry of Urban Development and
Construction
SME ------------------------------------------------- Small and Medium enterprises
SSA ------------------------------------------------- Sub-Saharan Africa
SPSS ---------------------------------------------------Software Package for Social Sciences
UNIDO -------------------------------------United Nations Industrial Development
Organization
NBE--------------------------------------------------- National Bank of Ethiopia

ABSTRACT
Small and Medium enterprises (SMEs) play an essential role in the sustainable
development of a country. They help in employment generation, job creation, self-
independence, industrial production increase, and export. The study examines factors
that determine sustainability of small and medium enterprises in Debre Berhan,
Ethiopia. The general purpose of the study was to identify the major internal &
external factors that influencing sustainability of small and medium scale enterprises.
And Primary and secondary data were used for this study. The targetpopulation was
small and medium Government organized enterprises in Debre Berhan,Ethiopia.

The choice of the study areas in ten sub cities was based on size and concentration of
SMEs.Data were collected using questionnaires from 80 SMEs. The selection of
respondents was done using census for closed SMEs respectively. The data collected
were analyzed by using appropriate descriptive statistics and logistic regression
techniques. The data have been analyzed with the help of Statistical package for
social science (SPSS). According to the participants’ perception, the study revealed
that the most important internal and external factors that determine SMEs
sustainability are work-related factor,, financial, political-legal factors, management
factor and Business Development are major factors that affecting SMEs
sustainability.

The major implication of the study is that improving financial and work-related
problems is critical in guaranteeing the survival of the SMEs. The study realized that
97.9 percent of the variation in sustainability can be explained by the independent
variables. The standardized beta value shows that, the contribution of an individual
variable to the model or the dependent variable. As it can be compare them, the
largest influence on the sustainability of SMEs is from the Management factor (-
0.191), Technological factor (0.099), Work related factor (0.306), Financial factor
(0.303). Therefore, as we compared with the Predicted sustainability value of the
variables, all the independent variables are the largest influence on the sustainability
of SMEs. Based on the finding there is no strong pair-wise correlation between
Independent Variables.
Key words: Government organized, Small and Medium enterprises (SMEs), factors
and sustainability,

Table of Contents
CHAPTER ONE.......................................................................................................................1

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

1.2 Statement of the Problem............................................................................................3

1.3 Objectives of the Study...............................................................................................4

1.3.1 General Objective.............................................................................................4

1.3.2 Specific Objective.............................................................................................4

1.4 Significance of the Study.............................................................................................5

1.5 Scope / Delimitation of the Study................................................................................5

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

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

LITERATURE REVIEW..................................................................................................7

2.1 Introduction.................................................................................................................7

2.2 Definitions of Small and Medium Enterprises.............................................................7

2.2.1 Definition of SMEs in Ethiopia.........................................................................8

2.3 Theoretical Literature..................................................................................................8

2.3.1 Factors of SMEs..............................................................................................14

2.4 Conceptual Framework.............................................................................................18

CHAPTER THREE................................................................................................................20

RESEARCH METHODOLOGY............................................................................................20

3.1 DESCREBTION OF THE STUDY AREA...............................................................20

3.1.1 The Study Area...............................................................................................20

3.1.2 Research Design.............................................................................................20

3.2. Type and sources of data..........................................................................................22

3.2.1 The target population......................................................................................22

3.2.2 Sampling Strategy and Procedures..................................................................23

3.2.3 Sampling Technique.......................................................................................23

3.3 VARIABLES AND MEASUREMENTS..................................................................24

3.4 DATA PROCESSING AND ANALYSIS.................................................................24

 3.4.1 Data Processing...............................................................................................24

3.4.2 Data Analysis Technique................................................................................24

3.5 INSTRUMENT DEVELOPMENT...........................................................................26

3.5.1 Design of the Instruments...............................................................................27

3.5.2 Instrument Validity.........................................................................................27

3.5.3 Instrument Reliability.....................................................................................27

3.6. Organization of the paper.........................................................................................28

CHAPTER FOUR..................................................................................................................29

DATA ANALYSIS AND INTERPRETATION.....................................................................29

4.1 Demographic Composition of Respondents..............................................................29

4.2 Educational quality....................................................................................................29

4.3 Activity of the enterprise...........................................................................................30

4.4 Binary Logistic Regression.......................................................................................32

4.7 Regressions Analysis.................................................................................................32

REFERENCE:-.......................................................................................................................41

APPENDIX................................................................................................................................46
 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Universally, the definition of small and medium enterprise (SMEs) still has not
coming into agreement. Some of the wonted criteria which are used to define it are the
number of employees, value of sales, value of assets, and size of capital, the capital
invested and the total balance sheet (asset, liability and capital). (Lepi, 2005, Story, et,
al 2011).

The definition of small and medium enterprises is important and useful: in the
preparation of statistics and the monitoring of the health of the sector over time; in
benchmarking against other economies and between regions within an economy; in
providing arbitrary thresholds for imposition of tax or other regulations; in
determining eligibility for particular forms of public support (UNIDO OECD: 2004).
Small and medium enterprises are named by adjectives indicating size, thus
economists tend to divide them into classes according to some quantitative
measurable indicators. The most common criterion to distinguish between large and
small businesses is the number of employees (Hatten: 2011). One of the first attempts
to provide a definition of SMEs is that of the Bolton Report 1971 (Carter and Jones-
Evans: 2006). European Commission promotes “the criterion of the number of staff
as the main criterion, however, introducing a financial criterion is nonetheless a
necessary adjunct in order to grasp the real scale and performance of an enterprise and
its position compared to its competitors” (European Commission: 2003, item 4).

European Commission through a guide determines the criteria for defining

enterprises: by the number of employees, and annual balance sheet (European
Commission: 2005). It is determined that small scale holds 10-50employees with total
asset >100,000 ≤ 3,000,000 and medium enterprise holds 50-300 employees with total
asset >$3,000,000 ≤15000,000 (Independent evaluation group 2005).

The Ethiopian Ministry of Trade and Industry (MoTI) define SMEs as follow, Small

1
enterprises are businesses with a total investment between Birr, 20,000 up to Birr,
500,000 and do not include these enterprises with advanced technology and high
technical consultancy while Medium enterprises are these business enterprises with a
total investment between Birr, 500,000 up to Birr 1 million and including those
enterprises that have high technical consultancy and excluding other high-tech
establishment.

Due to a contemporary highly competitive environment, most governments have seen

increasing awareness and Even there is no any universal agreement on the definition
currently most authors and researchers used “The small and medium enterprises
(SMEs) is recognized as an integral component of economic development and a
crucial element in the effort to lift countries out of poverty as a force to generate
employment and more equitable income distribution, activate competition, exploit
niche markets, enhance productivity, and by bring technical change (Wolfsan,
2007:28-39). recognition of the role played by Small and Medium Enterprises
(SMEs) and their contribution to the economy (Hlatshwako, 2012).

Small and medium enterprises (SMEs) play significant role in the growth and
development of world economy. The need for SMEs considered as a means of
ensuring self-independent, jobs creation, import substitution, effective and efficient
utilization of local raw materials and participation to the economic development (Ong,
2012). SMEs can innovate, adopt new technology and know-how, create jobs,
broaden the tax base, and diversify activities (risk) (Brixioval, 2009 ). It is estimated
that SMEs employ 22% of the adult population in developing countries (Admasu
abera, 2006:43).

United Nations Industrial Development Organization ( UNIDO ) estimates that

Currently Ethiopia implementing a five-year Growth and Transformation Plan (GTP)
in line with its long-term vision of achieving rapid, sustainable and equitable socio-
economic growth and development, reducing poverty, and meeting the Millennium
Development Goals (MDGs) within the framework of macroeconomic stability. In
order to that, Small and Medium scale Enterprises (SMEs) are regarded as the engine
of economic growth and equitable development in our country economies but, there is
still a huge amount of failure in this sectors because of this and many reasons long
term vision of our country may not be achieve easily. However, the five year Growth

2
and Transformation Plan (GTP) and long term visions will only be a reality if the
necessary requirements that meets the need of the present generation without
compromising the ability of future generation to meet their need (Rahel.F 2018).

most developing countries considered the massive potentials of the SMEs sector, and
the significance, contribution and potential of the SMEs to job creation, poverty
reduction and economic growth have been recognized in Ethiopia. And, despite the
acknowledgement of its huge contribution to sustainable economic development, its
performance still falls below expectation in many developing countries Arinaitwe,
(2006). This is because the sector in these developing countries has been affected by
several factors influencing against its achievement, and leading to an increase in the
rate of SMEs failure. Despite of that many researchers were try to assess about the
influential factors on small and medium enterprises performance, success and growth
etc. and they confirm that the existence of influential factors, those categorized under
financial and non-financial, but which is not clear for third Party to use the finding or
result for solution making due to unclearly, and before talking about the success,
growth and performance should exist in the market. Therefore, this study intended to
assess some of factors increasing the failure rate of SMEs in case of Debre Berhan.

Generally, the aim of this study is to investigate and identify the major factors that
influence the sustainability of SMEs in Debre Berhan, Ethiopia.

1.2 Statement of the Problem

Enterprises, particularly small and medium enterprises (SMEs), are decisive or
significant as a major source of income and employment and are at the heart of the
economic activity and development in many developing countries (Mead &
Liedholm, 2012)

Ethiopia is one of the developing countries which have taken measures to enhance the
operation of SMEs by considering their contributions According to the Ministry of
Urban Development and Construction (MUDC, 2013).

The contributions of small and medium businesses to development are generally

acknowledged but, the failure rate of the businesses is high globally. SME
entrepreneurs face many obstacles that limit their long term survival and
development. Research on small business development has shown that the rate of

3
failure in developing countries is higher than in the developed world Arinaitwe,
(2002). SMEs in developing countries for 95% of businesses, 50% of GDP and 60%
of employment, their rate of failure range from 50% to 90 %.( Fachoki, 2014) SMEs
are the emphasis of economic development all over the world. A positive relationship
has been documented between small business development and economic growth in
developed countries (Harris and Gibson, 2006; Monk, 2000; & Sauser, 2005).
However, not much research has been conducted on this relationship in developing
countries.

Many studies have been done on performance, success and growth issues of small and
medium enterprises, for instance the resected in Debre Berhan town recently (Dr.
Nongmaithem R.S and Mr.Tamesgan. Z, 2018) with the general objective of assessing
source of finance, exploring challenges and identifying supports for SMEs. However,
the study was highly concentrated on one factor (Financial source and its challenges)
by using descriptive statistics. But in reality there are other factors which affect the
performance or sustainability of SMEs. So, our study has been incorporated some of
the factors which affect the SMEs.

The new thing that was incorporated in our study is, we add variable and in addition
to this there is area gap. As a result we were try to assess the main factors which
affect small and medium scale enterprise by using data collected from the area. Thus
in order to know the main factors of the sustainability of the business the following
questions would be answered:-

1) Does those factors are influencing factors for the sustainability of small and
medium enterprise? and
2) From where the SMEs are gain their financial sources?

1.3 Objectives of the Study

1.3.1 General Objective

The overall objective of this study is to analyze and identify the key factors that
influencing sustainability of small and medium scale enterprises.

1.3.2 Specific Objective

4
  To analyze the factors that influencing the sustainability of small and medium
enterprises.
 To examine the source of finance available for the startup and expansion of
SMEs.

1.4 Significance of the Study

The study conducted in this research was concerned on the following significant
expectations. That is the suggestion including the discussion; result and
recommendation that forwarding the study should be used to control or limit the effect
of the factors that affect the sustainability of small and medium enterprises in Debre
Berhan Town. It indicates how the sustainability of small and medium enterprise can
be improved by minimizing the effects of the factors. The significance of this study is
to differentiate problems related with sustainability of small and medium enterprises
in Debre berhan and by expecting the following contribution:

For small enterprises: - The findings of this study also help the enterprise, in Debre
Berhan town within an awareness into the benefits of using different factors studied in
this research to predict the factors that affect the sustainability of small and medium
enterprises.

For academics/Researchers: - The finding of this study may contribute a basis for
further study on factors affecting sustainability of small and medium enterprises.

In general the significance of this study is to provide a clear overview of the factors
affecting sustainability of small and medium enterprises. And, provide a way of
controlling the negative effect of these factors on the enterprises.

1.5 Scope / Delimitation of the Study

Conceptually the study was limited to the factors (Management, work-related,

marketing, financial factors, political-legal and Technology) which may affect the
sustainability of small and medium – scale enterprises particularly in Debre Berhan
town. The research area is in Debre Berhan town but for work simplicity it was done
on two kebele that are kebele 9 and kebele 4 The case area Debre Berhan is selected
because it is the town which is near to us to conduct our study with least cost and also
it is the town which holds large number of small and medium enterprise. The study

5
was focus only on three (manufacturing, trade and service) sectors of small and
medium enterprises in Debre Berhan town, Ethiopia.

1.6. Limitation of the study,

In doing this research or research paper we may face many problems. Among those
problem the major one are as follows:-

1) Shortage of clear information from different respondents.

2) Lack of experience on conducting research on the sides of researchers.
3) Do to the covid19 was very difficult collect enough information through
intervation.

6
 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

The purpose of the literature review is to provide insight into information from
previous researches related to this study and the research questions which will
facilitate the research process (Rowley, 2012). This chapter reviews works on SMEs
in Ethiopia and other countries in general. Concepts on sustainability and
determinants of sustainability where be reviewed. This help to understand the state of
SMEs and its determinants of sustainability. This chapter comprises of four sections.
These are definitions of SMEs, the concept of business sustainability, empirical
studies, and the conceptual framework.

2.2 Definitions of Small and Medium Enterprises

There is no universally agreed definition for small and medium enterprises. The term
SME covers a wide range of definitions and measures, varying from country to
country and varying between the sources reporting SME definitions. Also, based on
the economic activity sectors, the definitions are different (Salimzadeh, Courvisanos
& Nayak, 2013). Some of the commonly used yardsticks are the number of
employees, total net assets, sales and investment level, number of annual working
hours, annual turnover, annual balance sheet or production volume, and independence
of the company (Harjula, 2008). Among the various criteria, the number of employee
and the annual turnover or revenue seem to be the most important criteria used to
define SMEs (Peacock, 2004). Therefore, there is no a single SME definition
uniformly accepted around the world. (Gibson &Vaart, 2008) state that no single
definition of SMEs appears to be universally recognized, but it is found that SMEs are
in general:-

 Formally registered with government - or other registration bodies;

 Obligated to pay taxes and social security charges;
 Able to allow their employees to take sick- and annual leave while receiving

7
 compensation;
 Able to provide skills training for their employees:
 Able to invest in capital with a payback of longer than twelve months;
 Able and inclined to contribute to the local community

2.2.1 Definition of SMEs in Ethiopia

The Ethiopian Ministry of Trade and Industry (MoTI) define SMEs as follow, Small
enterprises are businesses with a total investment between Birr, 20,000 up to Birr,
500,000 and do not include these enterprises with advanced technology and high
technical consultancy while Medium enterprises are these business enterprises with a
total investment between Birr, 500,000 up to Birr 1 million and including those
enterprises that have high technical consultancy and excluding other high-tech
establishment.

According to Ministry of Trade and Industry Development Bureau (MOTI) the new
Small & Medium Enterprises Development Strategy of Ethiopia (published 2011) the
working definition of SMEs is based on capital and Labor. The same as micro and
small enterprises the definition of medium enterprises also defined based on capital
and labor. Currently the manufacturing sector is separated from the MSMEs by
containing small and medium manufacturing sector only. It has been established
before only one year and the other sectors was called federal urban job creation and
food security agency. Based on federal small and medium manufacturing industry
development agency (FeSMMIDA), ―Small manufacturing industry‖ means an
industry having a total capital, excluding building, from birr 100,001 to birr 1,500,000
(One Hundred Thousand One Birr to One Million Five Hundred Thousand Birr) in the
manufacturing sector and engages from 6 to 30 workers including the owner, his
family members and other employees. Medium manufacturing industry" means an
industry having a total capital, excluding building. from Birr 1,500,001 to Birr
20,000,000 (One Million Five Hundred Thousand One Birr to Twenty Million Birr) in
the manufacturing sector and engages from 31 to 100 workers including the owner,
his family members and other employees;(Federal Negarit Gazette Regulation No.
373/2016;4).

2.3 Theoretical Literature

8
There are varying global definitions of SMEs depending on the level of economy.
Although there is so far no common definition in almost all East African Community
countries (Kenya, Tanzania, Uganda, Burundi and Rwanda) they all use the same
basics of capital investment; turnover; and number of employees. SMEs are defined
in multiple benchmarks: the size of capital employed in machinery, manpower
directly engaged and sales turnover (URT, 2009).

In Tanzanian context, enterprises are defined or categorized based on number of

employees and capital directly employed in machinery (URT, 2002).

Table 2.1: Definition of Micro, small, medium and large enterprises in Tanzania
context

Types of enterprise Number of employers Working capital

Micro enterprise 1-4 0-5 million
Small enterprise 5-49 >5-200 million
Medium enterprise 50-99 >200-800 million
Large enterprise 100 and above Above 800 million
Source: URT, 2002

The contributions of the SMEs in the economic, social and political reforms embarked
by Tanzania for the past years as stipulated in the Five Year Development Plan
2011/12 to 2015/16 (FYDP); “to improve the business environment so as to increase
economic growth and finally reduce the prevalent poverty level” (URT, 2009).
SMEs are the bedrock of the country’s economy. “They predominate in productive
activities and it is thus important to enable them to prosper and expand even more,
thus creating the growth and jobs that the economy desperately needs” (URT, 2009).
The Tanzanian business community should continue organizing forums to sensitize
and utilize the open opportunities available as one of the firms put it, “these Mid-sized
companies are instrumental in realization of Tanzania’s Vision 2025 (The Citizen,
Thursday, 15 November 2012).

One of the strategies and priority areas for regional cooperation in the East African
Community in investment and industrial development in the area as provided by
article 80(1) (c) of the East African Community establishment, was the facilitation of
development of small and medium scale industries including sub-contracting and
other relations between large and small firms to improve the production of goods and
therefore, to expand market all over the world (URT, 2009).

9
The important economic contribution of SMEs has aroused significant interest from
both international organizations and academic researchers whose goals include using
public policies to trigger growth in SMEs, ultimately enhancing overall economic
performance. Accordingly, since the 1970’s, many researchers have worked to
establish an explanatory framework for the growth of SMEs, for, example Farouk and
Saleh, (2010), established an explanatory framework for the growth of SMEs in
Egypt. They argued that, despite the considerable attention paid to SME growth, to
date very few theories have been able to adequately explain why some SMEs grow
and others fail. They concluded that, the growth of SMEs is a complex phenomenon.
Although it has gained vast academic interest, not a single model has been developed
to date that can adequately explain why some SMEs grow and others do not (Farouk
and Saleh, 2010).

Theory on Mergers and Acquisitions by SMEs by Aaberge (2012) has been developed
almost exclusively from the study of large deals by large firms. In this theory he
argued that the behavior and success of mergers and acquisitions by (SMEs) may be
significantly different. He developed a theoretical framework, and several testable
hypotheses, regarding the distinctive features of SMEs mergers and acquisitions. The
empirical results supported his expectations and showed that, compared to large firms,
acquiring SMEs: rely more intensively on external growth via mergers and
acquisitions; are more likely to be withdrawn, suggesting that SMEs are more
flexible, and more able to avoid deals that turn sour; and, finally, SMEs mergers and
acquisitions were more likely to be financed with equity rather than debt, indicated
that the influential financial pecking order theory was of less relevance to SMEs
(Aaberge, 2012).

SMEs Theory of Chinese on factors that affected the growth of township and village’s
enterprises run by township and villages defined as collective at provincial by Biggeri
et al., (1999). The paper examined SMEs theory and the role of human capital in the
SMEs development. Following this, it analyzed the development of Chinese township
and village’s enterprises and their role in the socio-economic development of rural
areas and of the national economy. A panel analysis was then performed, using
provincial panel data of Collective Township and village’s enterprises over the period
1986 to 93, in order to capture the major determinants of provincial growth. The
results of the panel estimations highlighted some important features of township and

10
village’s enterprises run by town and village sector, and provide empirical evidence in
support to the positive role of clustering and human capital in the provincial growth of
this sector (Biggeri et al., 1999).

According to Mclntyre (2001) on the role of SMEs in transitional: growth and

entrepreneurship theory he argued that, the direct economic effects of making new
services and products available and creating employment, the SME has several
equally important effects on the functioning of transitional societies that move
through more indirect channels. The development of this sector is essential to create
the political and social ‘environmental conditions’ necessary to allow desirable
changes to occur elsewhere in the system. The SMEs sector must simultaneously
absorb resources and workers from the large enterprise sector and at the same time
help to create a labour market situation in which the process of reorientation and
fundamental reorganization of the large enterprise sector can be carried through
without threatening social peace (Mclntyre, 2001). In addition to slowing down the
restructuring process, the failure to develop the SME may increase the volume of
required transfer payments for unemployment, early retirement and other
programmers and (under certain fiscal policy assumptions) crowd-out investment and
other employment creating expenditures (Mclntyre, 2001).

The grounded theory approach on measuring performance of SMEs developed by

Chong (2008); the theory helped set the process of extensive in-depth semi-structured
interviews and observations while maintaining the natural settings of the business
processes. It identified the financial and non-financial measures based on short-term
and long-term matrices. The theory concluded that, in line with the goal approach, the
owners-managers focused their evaluation process on abilities to attain the internally
generated goals and targets.

Halim et al., (2011) they looked at the internationalization process of Malaysian

SMEs and how it fits the internationalization theories particularly, Uppsala model,
network approach and international new venture or born global theory. Findings
indicated that all three theories were still applicable as not all SMEs that
internationalized are born global in nature. Exporting was the most used mode of
entry and increasing profit was the main reason for internationalization.

Small business management theory developed by Chittithaworn et al., (2011) stated

11
that, SMEs characteristic, management and know-how, products and services,
customer and market, the way of doing business and cooperation, resources and
finance, strategy, and external environment are the factors affecting business success
of SMEs in Thailand.

Alberto et al., (2013) developed a SMEs theory of planned behavior on what

marketing for SMEs entrepreneurs, the need to market the marketing approach. The
theory stated that, the adoption of the marketing approach is conditioned by
entrepreneurs’ own conception of marketing, which may be substantially different
from that proposed, in a paradigmatic way, by academics under different names that,
is, the transactional, relationship existing between and among these SMEs, or
intuitional marketing. This implied that, the potential benefits for SMEs, coming from
its adoption, rely upon what entrepreneurs really do when they think they are
implementing a marketing programme (Alberto et al., 2013). Therefore the aim of this
theory was: to shed light on SME entrepreneurs’ conception of marketing, in order to
verify whether their interpretation differs from that proposed by marketing
researchers, and to assess quantitatively the psychological determinants of the
entrepreneurs’ intention (marketing technique) to adopt a marketing approach by
applying a well-known model for predicting both human and organizational behaviors
(Alberto et al., 2013).

Jones and Bartlett (2010) argued that, for any business with growth market strategies,
the organization was attempting to gain more sales from existing market and
alternatively native growth perspective might lead the firm to develop a new product
or service that can generate sales from existing customers. Nguyen et al., (2010)
argued that, Vietnamese government has mainly focused on increase the number of
SMEs rather than improving the performance of SMEs and strengthening the business
competitiveness. This must be facilitated by the critical entrepreneurial role of the
state and the evolving relationship between the state’s entrepreneurial role and market
factors are parts of the success picture.

Type of enterprise, enterprise scale, the current ratio, fixed assets ratio, the net assets
of interest rate, through the quality authentication, credit rating significantly affect the
availability of credit of small and medium agro-enterprises (Lijun and Hongan, 2011).
Therefore, the small and medium agro-enterprises should pay attention to improve

12
their own quality. In the condition of scale, type and fixed assets are short-term hard
to change, strengthen the financial management, sound financial system, improve the
operating conditions (Lijun and Hongan, 2011). Adjust measures to local conditions,
timely adjustment of product structure, give full play to the local resources, market,
technology, and other aspects of the comparative advantage, form a competitive
advantage and regional characteristics leading products, enhances the enterprise the
profitability; improve product quality and safety, pay attention to the understanding of
the product quality, and reduce the management risk. The process of employing
technological instruments to massify promotion and the access of the small and
medium- sized companies to the institutional products and services will bring about
the positive results in SMEs performance (Santiago and Julio, 2007).

Schimitt et al., (2002) found that, it was plausible that, the moment when the small
business owner has to switch management practices from a highly informal and
flexible “direct supervision” to a professional management of “supervised
supervision” depends on a series of internal and external factors, such as: the
experiences and management capacities of the owner-manager, the general and
technical educational level of employees and employer, the branch in which the SME
operates and the complexity of its operations, thus; direct supervision is easier and
possible to a larger scale in a firm that produces standardized and scale-intensive
goods than in an entity with several product lines or more complex production and
marketing processes; the traditional relationship between employers and employees,
the organizational culture and the predominant values with regard to work and duty.
When the risk of non-fulfillment of duties or even negative behavior by the
employees was high the limits to a direct supervision management were narrow; the
legal and regulatory framework. When the rules of the game are clear and transparent,
the management of the SMEs by direct supervision will be much easier than under
poorly defined and changing framework conditions (Schimitt et al., 2002).

The contribution of (SMEs) to employment, growth and sustainable development is

now widely acknowledged. Their development can deepen the manufacturing sector
and foster competitiveness. It can also help to achieve a more equitable distribution of
the benefits of economic growth and thereby help alleviate some of the problems
associated with uneven income distribution (UNACTAD, 2000).

13
SMEs play a pivotal role in the development of the country. It has made significant
contribution to industrial production, export and employment generation. In
developing countries as well as developed countries they are important from the point
of view of employment generations, which is very important in countries like India
with huge backlog of unemployment in the urban sections of the economy. It has been
observed that their composition depends upon the way the production is being
organized in the economy (Zaidi, 2013).

Higher personal household wealth, a higher proportion of home ownership, a high

percentage of skilled labour, a higher rate of unemployment, and the size structure of
existing enterprises can be factors influencing the rate of new business formation.
Many researchers suggested that areas having many small firms are likely to have
high rates of new firm formation for example Garofoli (1994) mentioned that. public
services had positive and statistically significant effects on business location and
growth.

2.3.1 Factors of SMEs

Internal Factors

The internal environment includes factors in the business environment that are largely
controllable by the business (Fatoki & Garwe, 2010).

1. Management Factor;-Among many Management factors (management skill,

experience and strategic business planning) have been mentioned in many studies in
link with SMEs growth and survival. A study conducted by (dun and Bradstreet,
2016) mentioned that, Irrespective of the size of any business large, medium or small,
several researches and statistics appear to have ranked poor management or
management inability the main cause of business failure in general (Argenti 1976;
Dun and Bradstreet 1969 amongst other). In the contemporary global dynamic
business environment strategically thinking and systematically decision-making are
also important for small enterprises growth and survival (Dobbs & Hamilton, 2007).
Business strategies refer to an internal management action changing the firm plan
premeditated to cope with external environment changes in order to achieve the firm‘s
business objectives (Blackbur, 2013).

2. Work - Related Factors; - One of the desires of most participants in this sector is

14
to save on costs and this includes saving on rental; for them higher disposable income
now is more important than a better-quality premise. They therefore prefer to operate
either from homes or from other rent free locations even if it means violation of
existing regulations (Sethuraman, 1997). Since incomes of the operators depend
significantly on where they do their business within the city, they choose to operate
closer to inner city or other locations despite the risks involved in violating the
regulations where purchasing power, and hence demand for their output, is
concentrated.

External Factors

Factors such as economic variables and markets; crime and corruption, labor,
infrastructure and regulations make up the external environment (Fatoki & Garwe,
2010).

3. Financial Factor; - The finance gap theory, as postulated by Bolton (1971), states
that the components-knowledge gap and supply gap are the two sets of challenges
faced by SMEs. points out that SMEs lack knowledge about available sources of
external finance and that once these are determined, SMEs have distress satisfying the
loan requirements from the external financier. Furthermore, external financiers do not
understand the entrepreneur and their small business venturing. This means that the
only possible way that SMEs can raise capital is through personal savings, friends,
and family members. Additionally, since both their venture capital and sales value are
small as compared tooperating costs, they face challenges in maintaining the business
resulting in eventual collapse of the SMMEs. (Bolton, 1971)Financial factors can be
both internal and external factor. Small firms are influenced by financial constraints
than large and medium enterprises. According to Abdel, Rowena & Robyn, 2010),
small business owner-managers have very basic understanding of financial and
accounting information and have serious problems with financial planning literacy.
Ademola & Michael also identified key challenges of SMEs among them poor
accounting method and practices have been mentioned (Ademola & Michael, 2012).
In developing economies including Sub-Saharan Africa, SMEs are typically more
credit on straind/stressed than large firms, severely affecting their possibilities to grow
(Beck, 2005; Beck and Demirguc-Kunt, 2006; Beck, 2006; Ayyagari, 2008; Beck,
2008; Ayyagari et al, 2012). Hubbard, 1990 noted that when the company is smaller,

15
therestrictions on credit are greater. Furthermore, according to (Beck, 2006) cited in
(ElSaid, 2013), small firms consistently report more financing obstacles than medium
and large enterprises.

4. Marketing Factors; - Every business that exists is facing a solid competition

around the world, hence it becomes very tough to rope (fasten) in customers.
However, a business cannot be operated to reach its maximum point without it being
marketed. Besides, it is essential to advertise the best products in the market so as to
rope in customers to buy it. ( Manoj Kumar Sharma, 2015).

5. Business Development (Business plan and market analyses);- A business plan is

a mechanism used to enterprises in to the future, to for see difficulties and to identify
possible solutions for the different situations that may arises, and makes arises, and
makes it possible to reduce the projects risks by making decisions with more and
better quality information as well as enabling the enterprises to connect with the
environment in business strategy form (arendt & brettel, 2010 and liu & hsu, 2011) A
business strategy incorporates functional strategies namely; marketing, financial
management, human capital and information system are included (Kotler &
Armstrong, 2012). So, the firm‘s probability of survival and growth is highly
depending on the ability of a business to plan and excited realistic strategy based on
its resources (Fadahunsi, 2012).

6. Political and legal factors: - many SMEs fail in spite of support from government
private initiative that support and develop small business. SMEs problems not only
during economic downturns but also during economic progress (kongolo, 2010).

2.3.2 Empirical Study

The issue of MSEs has been one of the top agendas of various policy makers and
academics since time memorial. The reason for such favorite attention given by
government is due to MSEs' indispensable role in creating wide job opportunities,
improving household income and well- being, and boosting national economy
ALEMU,2017).

According to the Federal Micro and Small Scale Enterprise Development Agency
(FeMESDA) and annual report (2013/14) of National Bank of Ethiopia, a total

16
200,319 new MSEs were established during the fiscal year 2013/14 against 77,415
during previous year i.e. 2012/13. The total no. of employment generated during
2013/14 was 2.4 million as compared to 1.2 million during 2012/13. Out of total
newly established of MSEs in Ethiopia, Oromia region took the leading share (70,259
MSEs i.e. 35.1%) followed by Amhara (64,135 MSEs - 32%), Tigray (32,726 MSEs -
16.3%) SNNPR (22,632 MSEs - 11.3%) and Addis Ababa (7,392 MSEs - 3.7%).

These impressive facts indicate the rapid growth of MSEs and their role in
employment generation. Studies have suggested that there is huge potential for
employment and income generation by establishing MSEs and consequently, this will
lead to poverty reduction in Ethiopia (Tadesse, 2014). Rogerson, 2000 and
Gagoitseope, P. K., & Pansiri, J. (2012). The existing phenomena indicate those large
portions of MSMEs in Ethiopia are established with government support. This
includes loan disbursement by various financial institutions like public and private
banks and micro finance institutions etc. According to annual report 2013/14 of NBE
Annual Resource Mobilization of ETB 111.4 billion & Disbursing Activities of
Commercial Banks and Development Bank of Ethiopia (Specialized Bank) ETB
59,965.4 million was recorded as at June 30, 2014.

The point here is to be noted that outstanding credit amount (Includes government
borrowing in the form of bonds and treasury bills from commercial banks, DBE and
other sectors other than NBE) is very high i.e. ETB 181,327.4 million. To recover the
loans, these financial institution are usually depended on MSEs upon certain extent, in
that case these MSEs are supposed to record growth in coming years. But, the
previous studies indicate that enterprises managed by women have lower expected
growth rates (Coad & Tamvada, 2012). In a study for women owned SMEs, it is
observed that Women in Ethiopia represent up to 30 percent of all SMEs owners and
have a 78 percent failure rate. (Bekele & Worku, 2008; Kipnis, 2013).

Other failure stories of SMEs reveal that their characteristics which include reactive,
firefighting mentality, resource limitations, informal strategies, flexible structures, and
lack of strategic planning processes may have contributed to their failures (Gnizy,
Baker, & Grinstein, 2014). A view expressed by Fredland and Morris (2009) argued
that the causes of failure cannot be isolated and that “any attempt to do so is, at
bottom, a futile or unsuccessful exercise”. However, they suggested that:- The issue

17
of causation is clarified somewhat by classifying causes as endogenous (internal to the
firm and presumably within its control) and exogenous (external to the firm and
beyond its control).

Such a classification has the merit of providing a somewhat better policy handle since
if causes are endogenous, appropriate policy “helps firms help themselves”, if
exogenous, appropriate policy may seek to change the economic environment. The
factors that affect the long term survival of MSMEs 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 (55%), poor managerial skills (54%), shortage of technical skills (49%),
and inability to convert part of their profit to investment (46%). Bekele and Worku
(2016 g.c)

2.4 Conceptual Framework

Conceptual framework is used to make conceptual distinctions and organize ideas. In

fact, it can be defined as a way ideas are organized to achieve a research project‘s
purpose. Based on the review of literature this study identified five essential driving
factors. These selected factors have been used frequently by previous literatures and
supposed to be the critical success factors of SMEs. Sustainability of enterprises in
Debre Berhan , Ethiopia depends on certain factors as set out into two categories as
dependent and independent variables. Independent variables include: management
factor, marketing factor, business development factor (technology), financial factor,
work related factor and. The dependent variable is sustainability of SMEs.

S
U
18 S
S
T
 WORK RELATED

MANAGEMENT
INTERNAL
FACTORS
EXTERNAL

FAINANCIAL FACTOR

MARKETING FACTORS

TECHNOLOGY

POLITICAL FACTORS

Source:own survey finding, 2020

CHAPTER THREE

19
 RESEARCH METHODOLOGY

3.1 DESCREBTION OF THE STUDY AREA

3.1.1 The Study Area

In this research the researcher focus the study area in the town of Debre Berhan.
Historically, Debre Berhan is a city in Amhara region, Ethiopia. Debre Berhan was
founded in 1456 (march 7) byAtse Zara Yaqob. It is located in North Shewa Zone of
Amhara Region, about 120 km north east of Adiss Ababa. The town has an elevation
of 2,840 meters with chilly climate. It was an early capital of Ethiopia and afterwards,
with Ankober and angolalla, was one of the capitals of kingdom of Shewa. Today, it
is the administrative center of the North Shewa Zone of the Amhara region Debre
berhan is one of the coolest cities found in the subtropical zone of Ethiopia. The city
has a typical subtropical highland climate.

The soil is lem(fertility)and semi fertility.

3.1.2 Research Design

Research design is the proposal for fulfilling research objectives and answering

20
research questions (John A.H. et al., 2007:20-84). In other words, it is a master plan
specifying the methods and procedures for collecting and analyzing the needed
information. The types of research employed under this study were descriptive and
explanatory research. First, the major purpose of descriptive research is description of
the state of affairs as it exists at present. Then this study describes and critically
assesses critical factors affecting the effectiveness of MSEs in the sub-cities.

Second, the study employs explanatory in that the relationship between variables is
correlated with an aim of estimating the integrated influence of the factors on
effectiveness. Moreover, the study utilized cross-sectional in the sense that all
relevant data was collected at a single point in time. The reason for preferring a cross-
sectional study is due to the vast nature of the study and the limitation of time. And
obtaining information from a cross-section of a population at a single point in time is
a reasonable strategy for pursuing many descriptive researches (Janet M. Ruane,
2006:94).

According to Mark et al. (2009:101) mixing qualitative and quantitative approaches

gives the potential to cover each method’s weaknesses with strengths from the other
method. In this study, a combination of qualitative and quantitative approaches of
doing research was employed, which has been practiced, as recommended by
Creswell (2009:203-216).

3.1.3 Questionnaire Design

The design of the questionnaire was keep very simple to encourage meaningful
participation by the respondents. The questions will kept as brief as possible with care
taken to the actual wording and phrasing of the questions. The reason for the
appearance and layout of the questionnaire are of great importance in any survey
where the questionnaire is to be completed by the respondent (John A. et al.,
2007:128-42). The literature in the study was used as a guideline for the development
of the questions in the questionnaire. Besides, some questions in the questionnaire
might be able to adopt from other sources. The questions that could use in the
questionnaire are multiple-choice questions and likert scale type questions. The type
of scales use to measure the items on the instrument will be continuous scales

21
(strongly agree to strongly disagree).

3.2. Type and sources of data

i. Primary Sources
In order to realize the target, the study was 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 MSEs operators and the relevant
owner managers who heads the enterprises in the select sectors were takes place. The
interview method of data collection is preferred due to its high response rate from
different point of view. That gives the two people concerned an opportunity to interact
and get details on the questions and answers. Through interviews, clarification of
issues is easily achievable leading to accuracy of data from the respondents , further
(it has flexible opportunity to collect anything out of frame).
Sources of Data
The study was used both primary and secondary sources of data collection.

ii Secondary Sources
Secondary data from files, pamphlets, office manuals, circulars and policy papers was
use to provide additional information where appropriate. Besides, variety of books,
published and unpublished government documents, websites, reports and newsletters
will reviewed to make the study productive.

Types of data

Based up on, who classifying the data, data is classified into two. Those are primary
(data collected by the researcher by itself) and secondary (data which are previously
collected by others) data. In this study both types of data was be used. From primary
data survey type (asking people a set of questions) and from secondary data internal
(obtained from the organization which is under observation) type of data was be used.

3.2.1 The target population

The target Population of the Study is the group or the individuals to whom the survey
applies. The target population should be represented as a finite list of all its members,
Kitchenham and Pfleeger (2002).

22
3.2.2 Sampling Strategy and Procedures
The kebele 9 and 4 were purposely chosen among kebeles of the town, as a study area
for this research. This is because of their nearness and convenience to collect data in
short time and they are holding large amounts of SMEs compared with other.

3.2.3 Sampling Technique

Stratified random simple sampling was used to get information from different sizes of
the MSEs. This technique is preferred because it assists in minimizing bias when
dealing with the population. With this technique, the sample frame has been prepared
into relatively homogeneous groups (strata) before selecting elements for the sample.
According to Janet (2006:94), this step increases the probability that the final sample
has been representative in terms of the stratified groups. The strata’s are sectors
including: services, trade, constructions and manufacturing.

According to Catherine Dawson (2009:54), the correct sample size in a study is

dependent on the nature of the population and the purpose of the study. Although
there are no general rules, the sample size usually depends on the population to be
sampled. In this study to select sample size, the sample size those has been selects in
this study is consider as representative of services, trade, constructions, and
manufacturing and also large enough to allow for accuracy, confidence and general
liability of the research findings. The formula which is designed by TARO
YAMANE’S was used for the calculation of the sample size.
Due to:-

 I have been worked with a finite population and the population size is known,

n=N /¿)

Where, n = is corrected sample size required,

N = is the Population Size and =100
e = Margin of error = 5%=0.05

100
n= =80
1+100(0.052)

3.3 VARIABLES AND MEASUREMENTS

23
In this study, change in profit is use as a dependent variable to measure the
sustainability of SMEs. Here the change in profit ratio data was use as the measure of
the dependent variable performance of the enterprises involved in the survey. This is
mainly because of as recommended by Rami and Ahmed (2007:6) change in profit
has been widely adopted by most researchers and practitioners in business
performance models. Also growth in employment level of the enterprises would not
be another appropriate alternative measure of performance because this SMEs are
primarily established as a source of self-employment. The independent variables are
working policy, financial factors, marketing factors, technological and management
factors.

3.4 DATA PROCESSING AND ANALYSIS

3.4.1 Data Processing

The methods of data processing in this study was manual and computerized system. In
the data processing procedure editing, coding, classification and tabulation of the
collected data was used. Data processing has two phases namely: data clean-up and
data reduction. During data clean-up the collected raw data was edited to detect
irregularities, errors and omissions in responses and check the questions are answer
accurately and uniformly. The process of assigning numerical or other symbols would
come next which was used to reduce responses into a limited number of categories or
classes. After this, the processes of classification or arranging large volume of raw
data into classes or groups on the basis of common characteristics was applied. Data
having the common characteristics place together and in this way the entire data was
divided into a number of groups. Finally, tabulation and charts was used to summarize
the raw data and display in the form of tabulation for further analysis.

3.4.2 Data Analysis Technique

The Statistical Package for Social Science (SPSS) version 20 or Stata software
version 7 (STATA) will use to analyze the data obtained from primary sources.

3.4.2.1 Descriptive Analysis

Descriptive analysis was used to reduce the data in to a summary format by tabulation
(the data that was arranged in a table format) and measure of central tendency (mean

24
and standard deviation) and measure of central tendency (mean and standard
deviation). Moreover, charts was used to describe the general characteristics of
enterprises. The reason for using descriptive statistics is to compare the different
factors.

3.4.2.2 Inferential Analysis

According to Sekaran (2000:401), inferential statistics allows to infer (gather) from

the data through analysis the relationship between two or more variables and how
several independent variables might explain the variance in a dependent variable. The
following inferential statistical methods was used in this study.

 the relationship between work - related factors and effectiveness of MSEs;

 the relationship between technology factors and effectiveness of MSEs;
 the relationship between financial factors and effectiveness of MSEs;
 the relationship between marketing factors and effectiveness of MSEs;
 the relationship between poletical factors and effectiveness of MSEs;
 the relationship between management factors and effectiveness of MSEs;

3.4.2.2.2 Linear Regression Analysis

Linear regression is a method of estimating or predicting a value on some dependent

variable given the values of one or more independent variables. Like correlations,
statistical regression examines the association or relationship between variables.
Unlike correlations, however, the primary purpose of regression is prediction
(Geoffrey M. et al., 2005:224-225). In this study multiple regressions has been used.
Multiple regression analysis takes into account the inter-correlations among all
variables involved. This method will also take into account the correlations among the
predictor scores (John Adams, et al., 2007:198). They added multiple regression
analysis, which means more than one predictor is jointly regressed against the
criterion variable.

Regression Functions

The equation of regressions on this study is generally built around two sets of

25
variables, namely dependent variable (Effectivness) and independent variables (listed
above). The basic objective of using regression equation on this study is to make the
study more effective at describing, understanding and predicting the stated variables.

Regress Performance on Selected Variables

Yi = α0+ β1X1 + β2X2 + β3 X3 + β4X4 + β5X5 + β6X6 + Ԑj

Where:-

Y is the response or dependent variable- Effectiveness

X1= work related factors, X2=financial factors, X3= technological factors, X4=
marketing factors, X5= political factors, X6= management factors, and Ԑj:- other
factors that may have impact on dependent variable positive or negatively, are the
explanatory variables.

α0 is the intercept term- constant which would be equal to the mean if all slope
coefficients are 0.

β1, β2, β3, β4, β5, and β6 are the coefficients associated with each independent
variable which measures the change in the mean value of Y, per unit change in their
respective independent variables.

Accordingly, this statistical technique was used to explain the following relationships.

Regress Effectiveness (as dependent variable) on the selected linear combination of

the independent variables using multiple regressions.

3.5 INSTRUMENT DEVELOPMENT

Basically, the instruments was 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 taken
as an instrument to strength the investigation.

26
3.5.1 Design of the Instruments

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

3.5.2 Instrument Validity

Validity is the degree to which a test measures what it significances to measure

(Creswell, 2009:190-92). Validity defined as the accuracy and meaningfulness of the
inferences which are based on the research results. It is the degree to which results
became from the analysis of the data actually represents the phenomena under study.
Researcher was deal with about the validity of the questionnaire data depends on a
crucial way the ability and willingness of the respondents to provide the information
demanded.

As much as possible the relevant data was collected on the factors of the MSEs that
can better indicate the relationship between factors and the Effectivness of MSEs. The
interviews also validate the measurement. Moreover, to have valid conclusion,
inferential statistical model was used to test the relationship between the variables.

3.5.3 Instrument Reliability

The reliability of instruments was measured the consistency of instruments. Creswell

(2009:190-92) considers the reliability of the instruments as the degree of consistency
that the instruments or procedure demonstrates. The reliability of a standardized test is
usually express as a correlation coefficient, which measures the strength of
association between variables. Such coefficients vary between -1.00 and +1.00.

In this study each statement was rate on a 5 point likert response scale which includes
strongly agree, agree, neutral, disagree and strongly disagree. Based on this an
internal consistency reliability test was conducted in the town. Instruments was
developed based on research questions and objectives; it is possible to collect
necessary data from respondents.

27
3.6. Organization of the paper

The paper has been hold five chapters, It incorporates:- chapter one Introduction part,
chapter two Literature review, chapter three Research design and methodology,
chapter four Presentation and discussion of the findings and chapter five incorporates
summary, conclusion, and recommendation.

CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

This chapter deals with presentations, discussions and interpretations of the data

28
collected through questionnaire analysis and findings of the study as set out in the
research methodology. The study targeted 100 small and medium business enterprises
employees within Debre Berhan. Out of these, 80 were completed and retrieved
successfully.

Descriptive statistics such as mean and standard deviation were used to analyze the
data. Regression analysis was used to test the relationship between the variables under
study in relation to the objectives of the study. The data was analyzed using statistical
package for social sciences (SPSS) version 20 and the analysis is given below. \

4.1 Demographic Composition of Respondents

Gender of the participants In this research the researcher obtained the gender details
of respondents who participated in the research. Like other country, in Ethiopia both
females and males are operating in SMEs at different positions as owners, managers
or employees. However the percentage of their involvement in such enterprises is not
equal. Depending on Figure 4.1, 75% of total sample are males and the rest 25% are
females. These shows majority of the people own SMEs are males.

Figure 4.1 Genders of respondents

Frequency Percent Valid Cumulative
Percent Percent
Male 60 75.0 75.0 75.0
Valid Female 20 25.0 25.0 100.0
Total 80 100.0 100.0
(Source; survey, 2020)

4.2 Educational quality

According to Table 4.2 Below, the educational level of the sample respondents
indicates that 6.3% of the respondent are non educated, 12.5% of the respondents are
primary graduate,30% of the respondents are high school graduates and 27.5% of the
respondents are diploma graduates while the other 17.5%, 3.8%, and 2.5% are degree,
MA, PHD respectively. These shows that the small and medium enterprises
employees have lack of skilled man power.

Figure 4.2 educational quality of respondent

29
 Frequenc Percent Valid Cumulative
y Percent Percent
no formal
5 6.3 6.3 6.3
induction
Primary 10 12.5 12.5 18.8
Vali high school 24 30.0 30.0 48.8
Diploma 22 27.5 27.5 76.3
d
Degree 14 17.5 17.5 93.8
Ma 3 3.8 3.8 97.5
Phd 2 2.5 2.5 100.0
Total 80 100.0 100.0

4.3 Activity of the enterprise

The study sought to know the business activities of the respondents’ in city of Debre
Berhan, Ethiopia. The study established that most (58.8%) of the respondents‘ were
engaged in trade sector, which indicates that the vast number of people lived in the
city are engaged in trade, followed by 22.5%% of the respondents who engaged in
agricultural operation and then (8.8%) of the respondents‘ were engaged in service
sector. Only3.8% and, 2.5%, of the respondent engaged in the construction and
manufactories sector

activity of the enterprise

Frequency Percent Valid Cumulative
Percent Percent
Valid Manufacturin
2 2.5 2.5 2.5
g
Construction 3 3.8 3.8 6.3
Trade 47 58.8 58.8 65.0
Agriculture 18 22.5 22.5 87.5
Service 7 8.8 8.8 96.3

30
 Others 3 3.8 3.8 100.0
Total 80 100.0 100.0

4.3 Results of Measures of Mean and standard deviation

There are a number of challenges that affect sustainability of SMEs associated with
different factors. This part explains the descriptive statistics calculated on the basis of
the factors that affect the sustainability of SMEs. The results for measures of mean
and standard deviation were obtained from the sample of respondents of
manufacturing, construction, trade and service enterprises shown in the following
tables.
Descriptive Statistics
N Mean Std.
Deviation
management
80 1.55 .571
factor
technology factor 80 1.50 .503
work related
80 1.53 .527
factor
financial factor 80 1.56 .744
Valid N (listwise) 80
The above Tables 4.4 clearly shows that it can be say all factors have a mean value of
almost equal. This implies that majority of SMEs believed that management factor,
technological factor, work-related factors and financial factor are their main obstacles
to become sustainable.

4.4 Binary Logistic Regression

Binary logistic regression is a type of regression analysis where the dependent
variable is a dummy variable (Saroje & Sohel, 2013). They mention that It is a
variation of ordinary linear regression which is used when the response variable is a
dichotomous variable and the independent variables are continuous, categorical, or
both. Unlike ordinary linear regression, logistic regression does not assume that the
relationship between the independent variables and the dependent variable is linear
(Saroje & Sohel, 2013)

Logistic regression does not make many of the key assumptions of linear regression

31
and general linear model that are based on ordinary least square algorithms.

4.7 Regressions Analysis

Logistic regression is used to predict the presence or absence of a characteristic or
outcome based on values of a set of predictor variables. It is similar to a linear
regression model, but suited to models where the dependent variable is dichotomous
(Bian, 2013). For the purposes of determining the extent to which the explanatory
variables explain the variance in the explained variable, Logistic regression analysis
was employed. The results of such analysis are narrated under.

Omnibus Tests of Model Coefficients

Chi-square Df Sig.

53.435 7 .000
model

Model Summary
Step -2 Log Cox & Snell Nagelkerke R
likelihood R Square Square
1 57.419a .487 .650
Source: own survey,SPSS 2020

As it shows in the above table this X2 produce significance value of 0.000 (i.e.,
P=.000), which is below 0.05 making our sustainability model significant. Model
summary part shows how much of the variation in sustainability is explained by the
model. Cox & Snell and Nagelkerke R Square indicated that between 48.7% and 65%
of the variation in sustainability is explained by Management factor, Technological
factor, work related factor, and financial factor.

A regression model was developed to test the developed hypotheses so as to

determine the significance of the impact of various factors affecting the sustainability
of SMEs. This model incorporated the Factors (independent variables) to predict the
sustainability of SMEs. The dependent variable was the sustainability of the

32
enterprises and the independent variables includes management, Technological factor,
finance and Working Place and related factors. A regression is used to predict the
value of certain variable based on the other variable. Y= a + bx Where, x is
independent variable Y is dependent variable “a’’ is constant “b” is coefficients of
independent variable .
Coefficient results obtained from regression analysis
Model Unstandardized Coefficients Standardized t Sig.
Coefficients
B Std. Error Beta
(Constant) .695 .203 3.433 .001
management factor -.191 .081 -.217 -2.345 .022
1 technology factor .099 .097 .099 1.016 .313
work related factor .306 .100 .321 3.049 .003
financial factor .303 .062 .448 4.890 .000

33
Source: survey finding, SPSS,2020

When we see direction and significance relationship of independent variables to dependent variable
sustainability, three out of four variables have statistically significant relationship with the
dependent variable; management factor (B=-.191, p=.022), work related factor (β = .306, p= .003),
financial factor (β = .303, p= .000),. And the remaining one variable have insignificant relation with
the dependent variable; technological factor (β = .099, p= .313).
Logit(sustainability) = .695+(-.191management factor) + (.099technological factor) +(.306 work
related factor)+(.303financial factor)

Which indicates that management factor contributes -0.191 units, technological factor contribute
0.099 units, work related factor contributes 306 units, and financial factors contributes 0.303 units of
efficiency, The findings also indicate that if all the independent variables are held constant at zero,
the sustainability firm recorded would be 0.695 (its sustainability would increased or affected by
1.226 unit) of small and medium enterprise sustainability of manufacturing, construction, service,
and trade firms each when the other independent variables kept constant or unchanged. The model
also indicate that there is significant association between the variables and the sustainability of the
enterprise in Debre Berhan town..

Hypothesis Summary
Ha1. There is negative relationship between management factor and sustainability of SMEs
accepted
Ha2. There is positive relationship between Technological factor and sustainability of SMEs
Rejected
Ha3. There is positive relationship between work-related factor and Accept
sustainability of SMEs
Ha4. There is positive relationship between financial factor and sustainability of SMEs Accepted

MULTICOLLINIARITY

According to (Pallant, 2007), there is no formal way in the logistic regression

procedure of SPSS to test multicolinearity. But, she suggested that we can use the
procedure of linear regression and focus only colinearity statistics which contain
tolerance value and variance inflation factor (VIF). Tolerance value that are very low
(less than .1) indicates that the variable has high correlation with other variables in the
model (pallant, 2007).

34
The VIF measures how much the variance of an estimated regression coefficient
increases if your predictors are correlated (Ringle et al., 2015). More variation is bad;
we're looking for precise estimates. If the variance of the coefficients increases, our
model isn't going to be as reliable. Some papers argue that a VIF less than 10 is
acceptable (Hair et al., 1995), but others say that the limit value is 5 (Ringle et al.,
2015).

Coefficients a
Model Collinearity
Statistics
Tolerance VIF
management
.889 1.125
factor
technology factor .805 1.242
1
work related
.687 1.455
factor
financial factor .908 1.101
Source: survey finding

As it can be seen in the table above; the result didn‘t violate any of the above
assumptions. Tolerance value of all variables is very far from .1 and VIF is closer to
1, then the model is seems much stronger and the factors are not impacted by
correlation with other factors.

CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary

The objective of study is to examine Factors that affecting sustainability of SMEs;

35
four sectors from small and medium businesses were included in the study. These are
manufacturing, construction, trade and service. In addition, the study uses a survey
based strategy to approach the objective and stratified random sampling technique
was used. The analysis was done using statistical software SPSS using tools such as
descriptive statistics and binary logistic regression. From the descriptive statistics
findings revealed that majority of the variables such as; management factor,
technological factor, work related factor and financial factor.

Which indicates that majority of SMEs believed that the management factor,
technological factor, work related factor and financial factor are their main obstacles
to become sustainable. The major objective that initiated this study is to assess the
factors that are mostly affecting the sustainability of SMEs in Debre Berhan city. This
study aimed at investigating the key problems which affect the sustainability of SMEs
based on the questionnaires consist of 80 randomly selected SMEs and unstructured
interviews were conducted to the SMEs operators. The major objective that initiated
this study is to assess the factors that are mostly affecting the sustainability of SMEs
at Debre Berhan in ten sub cities.

In the descriptive part of the analysis, this research examined the trend of number of
members and it founds that the current number of members is decreased from the
starting time in all types of the enterprises. This research shows that Majority of the
enterprises 2(2.5%) involved in manufacturing such as wood and metal work, cobble
stone , production of leather product and tailor (modify based on the environment) ,
47(58.8%) were involved in trade such as Merchandise & retail business, baltena ,
supply of bread & enjera and butices, 3(3.8% ) were involved in construction such as
stock breaks, blocks and paving bricks (concrete, flooring---) , And the remaining 7
(8.8%) were involved in service business sector such as cafe and restaurant, tea-
coffee, internet rent service, barber shops, mobile maintenance and photo copy
service.

The finding of this research shows that, most of the SMEs operators have no efficient
management knowhow or skill and experience to perform their activities effectively
and efficiently. These lead to them unsuccessful because they run their business
activities without having adequate knowledge about the business environment. Lack

36
of managerial know-how and skills and absence of harmonious relationship among
employees places significant constraints on SMEs development and expansion. Even
though SMEs have a tendency to attract motivated managers, they can hardly
compete) with larger firms due to they face a challenge to pay more.

The scarcity of management talent and skill is predominant in most countries in the
region has a magnified impact on SMEs. The shortage of support services or their
relatively higher unit cost hamper SMEs efforts to improve their management because
consulting firms often are not equipped with appropriate cost effective management
solutions or alternative way for SMEs. Furthermore, absence of information and/or
time to take advantage of existing services results in weak demand for them. The most
basic factors which affect the sustainability of SMEs are financial factor which
includes insufficient source of finance, existence of high interest rate, shortage of
working capital, unavailability of book keeping and insufficient availability of raw
material influence on the product and productivity of the enterprises.

Regarding Business Development, most of SMEs operators had no prepared sufficient

Business Development tasks, before they inter to the operational activity in the given
study area, specially insufficient and interrupted preparation of Business plan. These
lead them, unable to create long-term value for an organization from customers,
markets, and relationships. Inadequate Business Development preparation problem is
not only the problem of the study area problem it is a country wide problem, therefore
this problem is not solved by the SMEs operators rather than by the government of the
country and other concerned group. Binary logistic regression analysis was used to
test four hypothesizes as shown in table. Based on that Management factor (β =.-191,
p= .022), work related factor(β = .306, p= .003) and financial factor(β = .303, p= .
000) have statically significant relationship with in dependent variable sustainability.
The remaining one variable; technological factor (β = .099, p= .313). Have
insignificant relationship with dependent variable sustainability.

5.2 Conclusion
This research was conducted in Debre Berhan , Ethiopia with the prime intent of
critically assessing the factors affecting sustainability of SMEs operators engaged in

37
manufacturing, construction, trade and service sectors. Based on the objectives and
findings of the study, the following conclusions are worth drawn. SMEs are faced
with a variety of internal and external variables which are not only affecting its day to
day business but its long term success and survival.

The aim of this study was to determine the key variables specifically affecting Debre
Berhan SMEs. The results reflected in this study indicated that work related factor
which include Absence of harmonious relationship among employees/team work,
Lack of motivation, Absence of initiative to asses ones strength and Lack of tolerance
to work hard are the key internal variables that affect sustainability of Debre Berhan
SMEs. On the other hand, marketing variables (Poor customer handling system, Lack
of available market information, Lack promotion, Lack of connection with successful
and other business, Lack of adaptability), financial variables (Lack of access to
finance, poor Book keeping and accounting system, High interest rate, Shortage of
working capital and Insufficient availability of raw material) and political-legal
variables (Lack of government support, tax and Lack of accessible information on
government, regulations).

The study examines the impact of four factors on sustainability of SMEs. The key
finding of this study rejected the second hypotheses. Among the findings of the study
indicated no significant support of the Government to most small and medium
business owners in Debre Berhan. This finding agrees with the conclusions in the
work of (Oyelola, 2013) who stated government supported initiatives had not
contributed meaningfully to reducing the rate of failure of small businesses in Nigeria.
Finally the research clearly illustrates that, even if the degree of those critical factors
in each of manufacturing, construction, trade and service sectors, most of the factors
are considerably common for four sectors. It has been noted that financial and work
related factors had very high effects on the sustainability of MSEs compared to other
factors in the research area.

5.3 Recommendation
On the basis of the findings and conclusions mentioned, the following
recommendations were forwarded. Many SMEs hope that government would help

38
seriously reduce and prevent their problems. The Ethiopia government needs to focus
urgent attention to addressing the harsh financial conditions impeding the survival of
the SMEs sector such as reducing interest rates, resolving multiple tax issues and
through easy loan application from formal financial institutions.

Research by (Harper, 2004) observes that governments that are not concerned with
the promotion of small enterprises should examine the impact of its policies and
programmers on the small businesses. Financial factors are frequently indicated as the
explanatory factor for most problems faced by the studied SMEs therefore, it is
necessary to solve this problem. And, The Access to information about regulations
should be made available to SMEs at minimum cost.

On the other hand, SMEs in Debre Brhan should not totally rely on government
agencies; they should attempt to find their own path of progress by relying on
strategies which allow them to access new markets, increase their revenue and expand
their customer base. By establishing long-term relationships with customers they are
able to build customer loyalty and in turn reduce the cost of operation. Prior research
(for example Reicheld 1993; Ndubisi 2003) has shown that it is far cheaper to serve
an existing (loyal) customer than to attract and serve a new one.

It is also imperative for business owners to properly scan the Ethiopian business
environment so as to identify the opportunities and threats there in, and develop the
various techniques that will help them to adapt to the changing environments as they
emerge. The price of raw materials is increasing from time to time; therefore, the
distribution of raw materials must be in the hand of government even if it is difficult.
Solving the working premise by providing suitable site and appropriate tax levied in
accordance with their incomes. In this regard, the tax system needs proper attention as
many SMEs have complaints over the existing subjective method of tax assessment
and levied which is based on subjective estimation and beyond the ability to bear as
most of them do not have audited financial statements (conventional financial record
keeping).

The major marketing constraint for the MSEs sector include lack of available market
information and lack of creating awareness about the product therefore The culture of
participating in exhibition and bazaar must also give take off since it benefits the

39
economy as a whole and SMEs operators in particular. And also there is a great lack
of information on the changing environment market information if, small and medium
enterprises have to be sustainable there has to be available information as fast as
possible. Lastly beyond the government support and marketing strategies SMEs
should develop harmonious relationship and clear division of duties and
responsibilities between themselves through developing formal rules and regulations
they should improve work-related.

REFERENCE:-

 Abdel, K, Rowena, B. & Robyn, D. (2010).Understanding financial

information used to assess small firm performance, Qualitative Research in
Accounting & Management, 7 (2): 163-179.
 Admasu Abera, A. (2012). Factors affecting performance of micro and small
enterprise (master‘s dissertation).college of business and economics, Addis

40
 Ababa University, Ethiopia.
 Ademola, I. S. & Michael, A. A. (2012).Small-scale businesses as a remedy
to unemployment problem in Nigeria. International Journal of Scientific
&Engineering Research, 3(11): 1-6.
 Arinaitwe, J.K.(2006). Factors Constraining the Growth and Survival of
Small Scale Businesses. A Developing Countries Analysis, Journal of
American Academy of Business, 8 (2): 167-178.
 Argenti J (1976). Corporate Collapse: The Causes and Symptoms. UK:
McGraw-Hill Book Company Limited.
 Azzone, G., &Bertele, U. (1994).Exploiting green strategies for competitive
advantage. Long Range Planning, 27(6): 69-81.
 Bekele, E & Worku, Z. (2008). Factors that Affect the Long-term Survival of
Micro, Small, and Medium Enterprises in Ethiopia. South African Journal of
Economics.
 Blackbur, R. A., Hart, M. and Wainwright, T. (2013). Small business
performance: business, strategy and owner-manager characteristics. Journal of
Small Business and Enterprise Development 20 (1): 8-27.  cs, 10(2):76-81.
 Dobbs, M. and Hamilton, R. (2007). Small business growth: recent evidence
and new directions. International Journal of Entrepreneurial behavior and
research, 13(2): 296-322.
 El-Said, H., Al-Said, M., Zaki, C., 2013.What determines the access to
finance of SMEs? Evidence from the Egyptian case.Working Paper Series,
Economic Research Forum.
 Fredland, E. J. and C. E. Morris.(2009). 'A Cross Section Analysis of Small
Business Failure’. American Journal of Small Business, 1 (7), 7-18.
 Fadahunsi, A. (2012). The growth of small business: Towards a research
agenda. American journal of economics and business administration 4(1):105-
115.  Gall, M. D. & Borg, W.R (1996).Educational Research: An
Introduction, White Plains, NY: Longman Publishers USA.
 Gnizy, I., Baker, W.E., & Grinstein, A. (2014). A dynamic capability and key
success factor for SMEs entering foreign markets. International Marketing
Review, 31(5): 477–505.
 Harris , Gibson, T. & Van Der Vaart, H.J. 2008.Defining SMEs: A less

41
 imperfect way of defining small and medium enterprises in developing
countries.Brookings Global economy and development.
 Harjula, H. (2008). Scoping study on the inclusion of releases and transfers
from small and medium sized enterprises (SMEs) in PRTRs’, environment
directorate. Organization for Economic Cooperation and Development: Paris,
France.
 Hlatshwako, P.L. 2012.Challenges facing small and medium enterprises in
Manzini, Swaziland.Master of Business Administration, University of
Kwazulu Natal, South Africa.
 Kotler, P. and Armstrong, G. (1999). Principles of Marketing. New Delhi:
Prentice-Hall of India Private Limited.
 Lepi, 2005, Storey, 1995; cited in Demis and Mulugeta, 2011). Factorees that
affect the performance of small and medium enterprises
 MUDC, (2013).Survey on M S S E in Selected Major cities of Addis Ababa;
Ethiopia
 Mead, D. &Liedholm, C. (1999).Small enterprises and economic
development: small firm Dynamism in; East Asia.
 Ong, J.W., Ismail, H., Yeap, P.F., Emmanuel, O.O. and Daniya, A.A.
(2010/2012), ―Malaysian small and medium enterprises: Journal of Asia
Entrepreneurship and Sustainability, 2(1): 95-102
 Salimzadeh, p. Courvisanos, J.andNayak, R. (2013). Sustainability in Small
and Medium Sized Enterprises in Regional Australia: A Framework of
Analysis; Australia.
 Wolfenson, 2007 the role of small and medium enterprises on the country
economy:28-39.
 Alberto, M., Gianluigi G, Alesandro P. (2013). Small and medium enterprise,
Theory of planned behavior; What is marketing for small and medium
entrepreneurs. Journal for market the marketing approach. 4, 30-45.
 Aaberge R. (2012). Theory and evidence on mergers and acquisitions by small
and medium enterprises, Journal for small and medium enterprises growth. 5,
76-78.
 Biggeri, M., Gambelli, D. and Phillips C. (1999), Small and medium
enterprise theory: evidence for Chinese retrived on 15/6/2013 3, 121-131.

42
 Chong H. and Prairre A.M (2008). Measuring performance of small and
medium-sized Enterprises in Shangai China. Journal of the grounded theory
approach 1, 102- 109.
 Chittithawan C., Islam A., Keaw C., Halsiza D., and Yusuf M. (2011). Factors
affecting small and medium enterprises business in Thailand. Asian social
science, Vol7, No.5, 2011 5, 15-21.
 Farouk M. and Saleh M. (2010). An explanatory framework for the growth of
small and medium enterprises journal: A system dynamic approach,
department of operations Research and decision support, faculty of computers
and information, Cairo University, Egypt.
 Halim N., Abdullah N. and Zain S. (2011). The internationalization theory and
Malaysian small and medium enterprises, international Journal of trade,
economics and finance vol.2, No. 4, 17-31.
 Lijun P. and Hongan X. (2011). The research paper on impact on the factors of
small and medium agro-enterprises availability of credit, Vol 5, No 8,
(611130).
 Mclntyre R. (2001). The role of small and medium enterprises in transition:
Growth and entrepreneurship, UNU World Institute for economic research
(UNU/WIDER), a research and training centre of the United Nation, New
York USA.
 Schimitt M., Stmm. A and Zehdnicker M. (2002). The growth gap: A small
enterprise phenomenon, Germany Agency for Technical Cooperation (GTZ),
San salvado, El Salvador.
 UNACTAD (2000). Growing micro and small enterprises in LDCs, a case of
Burkina Faso, Nepal and Zambia
 URT. (2002) Tanzania National Census, Kiuta, Dar es salaam Tanzania
 URT. (2002). Small and Medium Enterprises Development Policy. Ministry of
Industries and Trade, Dar –es lalaam, Tanzania
 URT. (2009). The Economic survey, The ministry of Finance, KIUTA, Dar es-
sallaam, Tanzania.
 Dobbs, M. and Hamilton, R. (2007). Small business growth: recent evidence
and new directions. International Journal of Entrepreneurial behaviour and
research, 13 , 296-322.

43
 Coad, A. and Tamvada, J. P. (2012). The Growth and Decline of Small firms
In Developing Countries. Papers on Economics and Evolution No. 0808.
 FeMSEDA. (2013/14). Micro and Small Enterprises Sector Development
Yearly Statistical Bulletin. Addis Ababa, Ethiopia.
 Azzone, G., &Bertele, U. (1994).Exploiting green strategies for competitive
advantage.Long Range Planning, 27(6): 69-81.
 Bekele, E & Worku, Z. (2008). Factors that Affect the Long-term Survival of
Micro, Small, and Medium Enterprises in Ethiopia. South African Journal of
Economics, 10(2):76-81.
 Brixiova, Z. (2009). On determinants of small and medium enterprises,
Ethiopia.
 Fatoki, O. &Garwe, D. (2010). Obstacles to the growth of new SMEs in South
Africa: a principal component analysis approach, African Journal of Business
Management, 4 (5): 729-38.
 Peacock, R. (2004). Understanding small business: practice, theory and
research. Australia, Scarman Publishing, Adelaide:
 Admasu, A. (2012). “Factors Affecting the Performance of Micro and Small
Enterprises in Arada and Lideta Sub-Cities, Addis Ababa”. A Master’s thesis.
Addis Ababa University, Ethiopia.
 UNIDO. (2004). Effective Policies for Small Business: A Guide for the
Policy Review Process and Strategic Plans for Micro, Small and Medium
Enterprise Development, OECD,TICA, Centre for Private Sector
Development, Istanbul. Pp 17-18.
 Carter, S, Jones-Evans, D.(2006).Enterprise and Small Business: Principles,
Practice and Policy (2nd ed.).Harlow: Prentice Hall.
 European Commission.(2003).Commission Recommendation of 6 May 2003
concerning the definition of micro, small and medium-sized
Enterprises.Official Journal of the European Union.
 Hatten, TS (2011).Small Business Management: Entrepreneurship and Beyond
(5th ed.).Mason: South-Western Cengage Learning.
 Mark Saunders, Philip Lewis and Adrian Thornhill. (2009). Research Methods
for Business Students. Fifth edition, FT Prentice Hall.
 Harris , Gibson, T. & Van Der Vaart, H.J. 2000.Defining SMEs: A less

44
 imperfect way of defining small and medium enterprises in developing
countries.Brookings Global economy and development.
 Lepi, 2005, Storey, 1995; cited in Demis and Mulugeta, 2011). Factorees that
affect the performance of small and medium enterprises
 Mead, D. &Liedholm, C. (2012).Small enterprises and economic
development: small firm Dynamism in; East Asia.
 Fatoki, O. &Garwe, D. (2010). Obstacles to the growth of new SMEs in South
Africa: a principal component analysis approach, African Journal of Business
Management, 4 (5): 729-38.

APPENDIX

QUESTIONNAIRE
DEBRE BERHAN UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS DEPARTMENT OF
ECOMOMICS DEGREE PROGRAM
SECTION 1: INTRODUCTION

45
Dear respondent,

I am a graduate student in the department of Economics Debre Behan University.

Currently, I Am Undertaking A Research Entitled ‘‘Factors Affecting Sustainability
of Small and Medium-Scale Enterprises.”. You Are One Of The Respondents
Selected To Participate On This Study. Please Assist Me in Giving Correct and
Complete Information to Present A Representative Finding On The Current Status Of
The Factors Affecting Sustainability of Small and Medium-Scale Enterprises In Cities
Of Debre berhanYour Participation Is Entirely Voluntary And The Questionnaire Is
Completely Anonymous. 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. All Information Will Be
Used For Academic Purposes Only.

Thank You In Advance For Your Kind Cooperation And Dedicating Your Time.
Sincerely, Tigist Assefa

Instruction
No need of writing your name.
For multiple choice questions indicate (√) sign in the appropriate block.
For liker scale type statements mark (√) sign only once for the given variables
depending on your level of agreement.

SECTION 2: GENERAL INFORMATION ON THE BUSINESS INTERPRISES

AND PARTICIPANTS

A. Age ------------

B. Gender 1.Female □ 2. Male □

C. Educational qualification 1. No formal education □ 2. Primary □ 3. High

46
School □4. Diploma □ 5. Degree □6. MA/MSc □7. PhD□
D. Level of your enterprise is: - 1. Small □ 2. Medium □

E. Main activity of the enterprise? 1. Manufacturing □ 2. Construction □

3. Trade 4. Agriculture □ 5. Service □ 6. Mining

and quarrying □7. Others □

F. Current Status of the enterprise? 1. `Existing □ 2. Closed □

SECTION 3:- FACTORS AFFECTING SUSTAINABILITY OF SMALL AND

MEDIUM ENTERPRISE

Questioners developed for independent variable (factors1.

Please indicate your opinion regarding following statements (1.Strongly disagree

(SD), 2.disAgree (D), 3.Neutral (N), 4. agree (A), 5. Strongly agree (SA))

S.N
Management and Experience factor 1 2 3 4 5
o
1.1 Shortage of Experienced Managers
Nonexistence of harmonious relationship among
1.2
employees/team work
Poor management skill on work and resources
1.3
administration

2. Please indicate your opinion regarding following statements (1.Strongly disagree

(SD), 2.disAgree (D), 3.Neutral (N), 4. agree (A), 5. Strongly agree (SA))

s.no Work Related Factor 1 2 3 4 5

Absence of own premises and inadequate working
2.1
premises
Absence of cooperation within the employees/the
2.2 existence
dis confortable work environment
Lack of employees motivation to do jobs by their Own
2.3
/lack of belongingness

3. Please indicate your opinion regarding following statements (1.Strongly disagree

(SD), 2.disAgree (D), 3.Neutral (N), 4. agree (A), 5. Strongly agree (SA))

47
s.no Financial factor 1 2 3 4 5
3.1 Insufficient of source of finance
3.2 Book keeping not available
High interest rate charged by banks and other
3.3 lending
institutions

4. Please indicate your opinion regarding following statements (1.Strongly disagree

(SD), 2.disAgree (D), 3.Neutral (N), 4. agree (A), 5. Strongly agree (SA))
5.
S.No Marketing factor 1 2 3 4 5
4.1 Lack of skill to set competitive price
4.2 Insufficient knowledge on customer handling system
Lack of available market information (price value of
4.3
product or service in the market )

5. Please indicate your opinion regarding following statements (1.Strongly disagree

(SD), 2.disAgree (D), 3.Neutral (N), 4. agree (A), 5. Strongly agree (SA))

S.No Business Development Factor 1 2 3 4 5

The business was not started based on research and
5.1 market
analyses
Unable to participate concerned Group and
5.2 members in the
planning practice/process
5.3 Absence of strategic business planning

6. Please indicate your opinion regarding following statements (1.Strongly disagree

(SD), 2.disAgree (D), 3.Neutral (N), 4. agree (A), 5. Strongly agree (SA))

s.n
Political –legal factor 1 2 3 4 5
o
6.1 Lack of government support (taxation, licensing )
6.2 The Tax levied on my business is not reasonable
Political intervention (poorly equipped to deal with
the
6.3 problems arising from regulations like setting of
price floor
and asking capital guarantee (collateral))
insufficient information on government regulations
that are
6.4 relevant to my business (absence awareness creation
regarding the rules and regulations that are newly
developed )

48
7. What is your financial source for your operations at starting and expansion
phase ?------------

Questioner for Dependent variable sustainability Please rate the following

according to the level of each effect on your enterprises sustainability.

8. Please indicate your opinion regarding following statements (1.Strongly disagree

(SD), 2.disAgree (D), 3.Neutral (N), 4. agree (A), 5. Strongly agree (SA))
 The Business Enterprises are sustainable in the operation (market) when

Business Enterprises are sustainable in the

S.N 4
operation 1 2 3 5
o
when :-
8.1 The revenue is increased (increment of profit)
The market share increased (an increase sale
8.2
Volume)

49