1.

Introduction

1.1. Background of the study

The vast majority of firms around the world fall into the category of micro, small or medium-
sized enterprises. In terms of enterprises, more than 95% fall into this category; but even in terms
of employment in low and lower-middle-income countries, more than 50% of employees work in
companies with fewer than 100 employees (Ayyagari, Demirguc-Kunt, and Maksimovic, 2011).

In today‘s globalization of world trade, a substantial role is being assigned to the private sectors
in many developing nations. In line with this, there has been the emergence of the micro and
small enterprise (MSE) sector as a significant element of economic development and
employment. MSE Sector has been seen as the engine of employment, alleviating poverty and
upgrading the standard of living of citizens which is understood by both developed and
developing nations (Belay kinati et al.., 2015).

In developed countries, the share of the enterprises is even larger accounting, on average about
50% of GDP and 60% of employment. Thus, naturally, as economies grow, the share and
contribution of these enterprises in the economies of developing countries will improve. In these
economies, the expansion of these enterprises is doubly important as they are closely associated
with the relatively poor and especially so with disadvantaged groups of women and youth (Robu
M., 2013).

In developing countries, entrepreneurial activities and the associated Micro and Small
Enterprises (MSEs) are particularly salient among the urban poor. These enterprises provide
employment opportunities and a source of income, by which these poor people withstand the
causes and seeds of extreme poverty. Consequently, encouraging and supporting the
establishment and expansion of Micro and Small Scale Enterprises (MSEs) is one of the
development paths opted by the governments of developing countries to reduce unemployment
and the resultant poverty (Daniels and Mead: 1998). Governments of various least developed
nations are allocating ample resources for promoting the MSE sector because they see MSEs as
engines of employment; tools for alleviating poverty and improving equality (Gomez, 2008).
Apart from the government focus and efforts, various national and international
nongovernmental organizations (NGOs) have also spent considerable attention and resources,
directly or indirectly, on boosting up MSEs due to their ability to grow tremendously at the peak
of the economic crisis of the 1980s even exhibited unique strength in the face of recession
(Mulugeta, 2011).

In recognition of the importance of MSEs to the economy in terms of employment creation,

income generation, and equity, the government of the Federal Democratic Republic of Ethiopia
(FDRE), has adopted National Micro and Small Enterprise Development Strategy in 1997.
Following this, the Federal Micro and Small Enterprises Development Agency (FeMSEDA) was
established by the council of Ministers in 1998 (proclamation No.33/1998) to encourage,
coordinate and assist institutions that provide support for the development and expansions of
MSEs in the country at large. The primary objective of the strategic framework was to create a
favorable environment for MSEs so that MSEs could facilitate economic growth, create long-
term jobs, strengthen cooperation between MSEs, provide the basis for medium and large-scale
enterprises and promote export. In this strategy framework, the government prioritized those
enterprises with features like manufacturing and processing various commodities, self-
employment, particularly by disabled and unemployed youth, start-ups and expanding firms
owned by women, etc. Federal Micro and Small Enterprises Development the agency has been
established as an autonomous government institution under the supervision of the Ministry of
Urban Development and Construction. The primary goal of the agency is to meticulously
implement the strategies mentioned above (MUDC, 2013). To implement the MSE policies and
strategies, Regional Micro and Small Enterprise Development Agencies have been established.
In Ethiopia, the idea of Micro and Small Enterprise Development emerged as a promising agenda
in the 1980s. Different reasons have been mentioned for such events such as:

 The sector of micro and small enterprise is a preferred pathway for poverty reduction

 The micro and small enterprise sector is a platform for sustainable development and
productivity

 Micro and small enterprises are crucial actors within the trade sectors and a platform for
economically empowering both men and women.
1.2. Statement of the Problem
Developing countries have common characteristics of low economic growth, fast population
growth, high levels of unemployment, and poverty. Like many other major cities and rural areas
of developing countries, Ethiopia is presently suffering from a large number of social and
economic problems including widening income disparity, deepening poverty, rising
unemployment, poorly developed physical and social infrastructure, and the explosion of slums
and squatter settlements (Babbie Earl, 1990). For this reason, MSE is recognized by the EPRDF
government as one of the potential sectors to alleviate poverty in the country in general and in
the study area in particular (Berhane Tadesse, 2014). Micro and Small Enterprises provide
employment opportunities and an income-generating system to those who do not have access to
formal sector employment. It is also regarded as a tool for supporting the economic and social
conditions of the poor, especially the youth and women, by allowing access to education, and
health facilities, and improving their living standards sustainability (Amaha, W. Ageba, G.). On
the other hand, the reviewed empirical studies reveal that there is a gap in the assessment of
enterprises’ roles in terms of employment opportunities, generating income and profit, and
reducing poverty. In addition, some reviewed empirical studies about the sector focused on
major challenges and constraints (Assan, Alfred, 2008, Bennell, P, 2007) many studies focused
on problems and factors that slow down the growth of MSE and the outcome of the program in
comprehensive forms. Regarding the role of MSE in the process of poverty reduction, empirical
studies fail to investigate the role of MSE and how the program interferes on an individual level,
though according to Eva Michalowski (Eva Michalowski, 2008), the program is designed to
change the life of those individuals who involved in the program. For instance, the study
(Aynalem Adugna, 2014) to analyze the Causes of MSEs Failures, Problems of Micro and Small
Enterprises, and factors that hinder the performance of MSEs, respectively, found that lack of
capital, lack of markets, bureaucratic regulatory requirements, the problem of business
development services, poor supply of infrastructure, lack of raw material and inappropriate
locations are still major problems of the sector. Therefore this research will try to assess or
examine the roles of micro and small scale enterprises in holistically improving income and
employment creation by targeting and deeply investigating those micro and small scale
enterprises owners/operators in Robe town.
1.3. Objectives of the study

1.3.1. General Objective

The general objective of the study will be to investigate the major roles of micro and small-scale
enterprises in income improving and employment creation.

1.3.2. Specific Objective

The specific objectives of the study were:

 To investigate the role of micro and small-scale enterprises in generating income.

 To assess the role of micro and small-scale enterprises in employment creation.
 To assess the challenges of micro and small-scale enterprises in the study area.

1.3.3. Research Questions

1. What are the roles of micro and small-scale enterprises in income generation?
2. What are the roles of micro and small-scale enterprises in employment Creation?
3. What are the challenges of micro and small-scale enterprises in the study area?

1.4. Significance of the study

Currently, the role of the micro and small enterprise sector in terms of employment creation,
poverty alleviation, and income generation has been well recognized in many developing
countries including Ethiopia. Because most of a large number of the youth in urban areas of the
country including Robe are unemployed and dependent on their families. Hence, to give due
attention to MSEs sectors for reducing unemployment and poverty is indisputable. The problem
of unemployment, income inequality, low per capita income, and low living conditions are
evident in the study area. Thus, the development of MSEs can assist in reducing unemployment
and increase the income of individuals who participated in the sector and improve the problem of
income inequalities.
Consequently, the study will be used to show the role of MSEs in employment Creation and their
problems in the study area and will help the government and other actors to focus on MSEs as
one of the interventions in the fight against poverty and unemployment. The study will also assist
the planners and practitioners to give emphasis on MSEs in their development programs and
projects and to arrive at appropriate solutions to the problems on MSEs.

1.5. Scope and Limitation of the Study

1.5.1. Scope of the study

Though there are several areas to be covered by the study, the study will be limited to Robe town
only due to certain constraints. Even, the study will not deal with all small enterprises in the
Robe town. Instead, it will be focused only on some group of micro and small scale enterprises
in the town. By taking the problem of budget/finance and other related materials into
consideration the study will give more emphasis on the roles of micro and small scale enterprises
in improving income and employment creation in the study area.

1.5.2. Limitations of the study

The research will face many difficulties concerning the collection of data from secondary
sources. There is a lack of recorded documents in the office and even the data obtained with this
respect will be not sufficient for the pertinence of the paper and problems of transportation and
limited access to technological products. The other factor will be the unwillingness of
respondents to give relevant information related to the income they generate. In the same case,
there will be the subjectivity of the respondents on the questions during the collection of primary
data.
2. Literature Review

In this chapter, both theoretical and empirical literature related to the topic of the study will
present as follows.

2.1. Theoretical Literature

2.1.1. Definition of Micro and Small Enterprise

The definition and types of micro and small enterprises differ from country to country and there
is no universally stated definition for micro and small enterprises. Depending on their realities
and objectives, each country has to establish its definition for them. For instance, in our country,
Ethiopia, micro and small enterprises are given different meanings at different times. The recent
applicable definition is given by Central Statics Agency (CSA), 2010, on the bases of criteria -
level of paid-up capital/total asset, number of employed workers, and excluding building and the
definition divides enterprise between industry and service. The definition takes into
consideration of next five years' inflation and the value of the birr. Accordingly, the definition of
MSEs is presented as follows.

Micro-Enterprise

 Industry sector (manufacturing, construction, and mineral): An enterprise is said to be

micro when the number of human resources employed is five including owners and the
owner’s family, and their capital is less than or equal to ETB 100,000.
 Service (Retailer, transport, hotel tourism, ICT service): In-service sector, human
resource employed is five including owners and owners' families and their capital is less
than or equal to ETB 50,000 (FeMSEDA, 2015).
Small Enterprise

 Industry sector (manufacturing, construction, and mineral): In a small enterprise, the

number of human resources employed is between 6 and 30, and the total asset in cash is
less than or equal to ETB 1.5 million.

 Service (Retailer, transport, hotel tourism, ICT service): Human resource employed is
between6-30 and total asset in cash is less than equal to ETB 500,000 (FeMSEDA,
2015).

Table 1.1. The New MSE Definition

No Type of the enterprise Sector Human power Total Asset

1 Micro- enterprise Industry <5 <100000 birr

Service <5 <50000 birr

2 Small enterprise Industry 6-30 100000-1500000birr

Service 6-30 50000-500000

Source: Federal micro-small enterprises development agency

MSEs are defined in most countries based on the number of employees. Accordingly, most
commonly, micro-enterprise is enterprises with ten or fewer employees, while small enterprise is
enterprises with 10 to 50 employees (Farbman and Lessik, 1989). So, according to their purpose
and intention, different countries defined micro and small enterprises differently.

However, the parameters generally applied by most countries, single or in combination are a
capital investment in plant and machinery, the number of workers employed, or volume of
production or turnover of business (Hewaliyang, 2002, as cited in Endalsasa Belay, 2012).

Generally, there are qualitative, comparative, and quantitative criteria to define micro and small
enterprises. The qualitative sides include their financial practices, training styles, internal
management structure, and decision-making process. The comparative factors have to do with
the way micro and small enterprises are studied vis-à-vis large enterprises in the corporate sector.
They are small-sized in comparison with the large entities in which they share a given economic
space. Whereas the quantitative criteria include: the number of workers, sales turnover, and
investment capital. So, micro and small enterprises come in varying sizes and one country may
be larger than the big companies in another. Besides definition discrepancies (differences) in
different countries, the nomenclature (name) of the sector varies from one country to the other.
Countries named the sector as Small-Scale Industries (SSI), Micro and Small Enterprise (MSE),
and Small and Medium Enterprise (SME) (Ibid).

2.1.2. Common Characteristics of MSE

There are many common assumptions about the characteristics MSEs possess, such as they
employ few workers, are run out of the home, do not generate high income nor experience much
growth, and do not produce for markets outside their local environment.

Where in Ethiopia, are engaged in different activities. The document prepared the entitled
Inception Report on Micro and Small Enterprise Development in Addis Ababa (2014) reveals
that, due to their high employment creation capability, the existence of the market, short period
of return on investment, local raw material utilization, seven sectors are selected for intervention.
These are Garment and Textile, Metal and Wood Work, Dry Food Preparation, Construction,
cobblestone, Municipal Services, and Urban Agriculture. Zewde and Associates (2002)
identified that the MSE sector is characterized by several highly diversified activities, which can
create job opportunities for a large segment of the population. The characteristics of the informal
sector (small and micro enterprises) have also been described as it is easy to enter, is financed
mainly from personal and family resources require low starting capital, uses labor-intensive
techniques, and relies on the non-formal school system such as apprenticeship and on-the-job
training (cited in demis,2011).
2.1.3. Contribution of Micro and Small enterprises

2.1.3.1. Employment Creation

The major problems that the current world faces are unemployment, inequality, and poverty.
Developing countries in general and African countries, in particular, have been experiencing
high unemployment rates paralleled by increasing urban poverty. To reduce unemployment
micro and small enterprises make undoubtedly a huge contribution, especially in the developing
world. Most studies conclude that small enterprises are more labor-intensive than larger ones,
and some even find that the smaller firms also produce more output (or value-added) per unit of
capital and thus generate more output as well as employment for a given investment than do
larger firms (Haggblade and et al 1990).

In the case of Ethiopia, of the arguments in favor of the promotion of MSEs, the creation of
employment for urban youth is the major one. According to FMSEDA, jobs created by MSEs
have been growing since 2010/11. According to the study by Ethiopian Economic Association,
disaggregation of MSEs by sub-sectors enables us to see the relative importance of each
subsector. It also enables us to judge whether the performance is going as planned in meeting the
other objectives, other than job creation, such as facilitating technology transfer, creating and
strengthening linkages with medium and large scale industries, etc. Furthermore, the study
revealed that the biggest employment has been generated by the Construction sub-sector
accounting on the average for about 36.2 percent over the four GTP implementation years,
followed by Services with 20.8 percent, trade with 15.2 percent, Manufacturing with 14.7
percent, and urban agriculture taking 13.1 percent over the four GTP implementation years
(EEA, 2015).
2.1.3.2. Income Generation

While there are many exceptions to the basic pattern, the evidence suggests that larger employers
offer better jobs in terms of wages, fringe benefits, working conditions, and opportunities for
skills enhancements as well as job security. In low-income countries, small enterprises have
much lower productivity levels than larger firms which leads to lower wages and non-wage
benefits.

There is some evidence that this divergence in labor productivity and wage rates between small
and large firms narrows as countries become more developed in terms of industrialization
(Aregash A, 2005).

2.1.3.3. The Economic Contribution of MSEs

Due to its nature such as using labor-intensive technologies and endogenous resources, the micro
and small enterprise sector play a pivotal role in the local economic development. Different
scholars have stated the contribution of micro and small enterprises in various ways. For
instance, according to Lied Holm and Mead (1999), micro and small enterprises have the
potential to contribute in several ways to the reduction of poverty and the development process.
The followings are some of the benefits of MSEs.

1. Contribution to household income and welfare;

 Providing income maintenance for those with few options;

 Providing the basis for growth in income and welfare through asset accumulation, skill
development, and access to more rewarding economic opportunities; and

 Providing employment opportunities;

2. Contribution to self-confidence empowerment of the individuals

 Recognition of the dignity of individuals;

 Spreading the vision, that change is possible.

3. Contribution to social change, political stability, and democracy

 Through increasing confidence in local representative community-based institutions

 Through the development of individuals' feelings of responsibility and participation in

governance;

 Creating an institutional structure reflects people’s needs and objectives.

4. Contribution of distributional or developmental objectives

 Providing new opportunities for the Poor;

 Providing new opportunities for the woman

5. Contribution to demographic change

 Through the reduction of the birth rate

 Through a reduction in rural-urban migration

2.2. Empirical review

2.2.1. Empirical Studies on MSEs in the International

The ILO has made a report (2015), on the relevance of small and medium-sized enterprises
(SMEs) for employment and key constraints faced by SMEs and their workers. The report has
identified that it is estimated that there are 420 to 510 million SMEs worldwide and 80-95
percent are in low- and middle-income countries. SMEs account for over 95 percent of all
enterprises in OECD countries. The report adds that, for the majority of countries, more than 50
percent of total net employment creation can be attributed (CSA, 2015). While the employment
share of SMEs, as well as their share in net job creation, differs only moderately between low-
and high-income countries, there is a strong variation in entry density. This ranges from 0.4 in
low-income countries to 6.4 in high-income countries.
There are important differences in job growth across regions. In South Asia, there is a low share
of job creation by larger enterprises. In Africa, the majority of job creation is by the smallest
enterprises (less than 19 employees), whereas in Eastern Europe/Central Asia and Latin America,
more than 40 percent of job creation comes from enterprises with more than 100 employees. In
East Asia and the Pacific, job growth is concentrated mainly in enterprises with 20-99
employees. The ILO report has also identified the constraints facing enterprises. According to
the report, the level of constraints is differing country to country according to the level of
economic development.

For instance, access to electricity is the top constraint for enterprises of all size classes in low-
income countries (26 percent), followed by access to finance (21 percent). But in high-income
countries, the greatest constraint is inadequate skills of the labor force (18 percent), followed by
tax rates (14 percent). The most significant constraints also differ by region. In sub-Saharan
Africa, 22 percent of enterprises of all size classes stated that access to electricity was their
biggest obstacle. In East Asia and the Pacific, 17 percent of enterprises ranked access to finance
as their top constraint. In Europe and Central Asia, tax rates were the primary concern (17
percent). In Latin America and the Caribbean, informality was the principal obstacle (16
percent); and in South Asia, political instability was the biggest concern (25 percent). Viewed by
sector, access to finance is the most important constraint. It is named the top concern of 18
percent of all enterprises in the manufacturing and retail sector and 15 percent of enterprises in
services. For the second-ranking obstacle, the picture is more diverse.

For manufacturing, it is access to electricity (16 percent); for retail, it is informality (13 percent);
and for services, it is the tax rate (12 percent). Lahiri (2016) undertakes a study on the problems
and prospects of micro, small and medium enterprises (MSMEs) in India in the era of
globalization. According to this study, in the case of employment, the post-liberalization annual
average growth rate is mildly high than that of Pre Globalization annual average growth rate.
Though the growth rate in the case of employment is mildly high in the post reforms period, the
growth rate is not satisfactory in India. This may be due to the adoption of capital-intensive
technology by the small firms to some extent during the post-globalization period.
This study has identified major opportunities for MSMEs like; exposure to foreign markets, the
flow of foreign investment and technology, emerging areas of business, less government
intervention, employment generation, better performance by the MSMEs, better Customer
Satisfaction, short and long term capital, export contribution, removal of regional disparity and
better industrial relations.

2.2.2. Empirical studies on Ethiopian MSEs

In Ethiopia, the MSE sector has a high capacity for absorbing a high labor force; this is because
the sector is characterized by diversified activities. Due to its contribution to alleviating the
poverty of the low-income people and course with several constraints micro and small
enterprises get the attention of many researchers.

Accordingly, Daniel (2007) with having an objective to assess the impact of group-based MSEs
on poverty alleviation and employment Creation conducted research in Nekemte city of the
Oromia Regional State of Ethiopia.

Getahun (2009) carried out a research impact of MSE intervention on urban poverty reduction by
examining the level of employment creation, change in income, and living standard of the
beneficiaries in terms of education, health, household assets, and clothing. The study found out
that the studied MSEs have created permanent and temporary employment opportunities. The
income and expenditure of the beneficiaries of the MSE program have shown an increment,
according to the study. The respondents believed that their engagement in the MSEs has resulted
in improved health and clothing, and increased ownership of basic household assets. Studies
were also conducted specifically to identify the problems that MSEs encounter.

Mulugeta (2011) in his study entitled the livelihoods reality of micro and small enterprise
operators identified and categorized the critical problems of the MSEs into market-related
problems, which are caused by poor market linkage and poor promotional efforts; institution
related problems including bureaucratic bottlenecks, weak institutional capacity, lack of
awareness, failure to abide policies, regulations, rules, directives, absence of training to
executives, and poor monitoring and follow-up; operator-related shortcomings like developing a
dependency tradition, extravagant and wasting behavior, and lack of vision and commitment
from the side of the operators; MSE-related challenges including lack of selling places, weak
accounting and record-keeping, lack of experience sharing, and lack of cooperation within and
among the MSEs; and finally society-related problems such as its distorted attitude about the
operators themselves and their products.
By Primarily relying on 200 MSEs chosen from four major cities of Ethiopia namely Adama,
Hawassa, Bahirdar, and Mekelle, and taking a sample survey of 557 operators, Tegegne and
Meheret (2010) were conducted research to assess the contribution of the MSE strategy to
poverty reduction, job creation, and business development. The researchers indicated that the
national urban development policy is the root of the MSE program and strategy, and MSEs are of
the five pillars of the urban development package of the urban development policy.

According to them, the government of Ethiopia planned, via its MSE program, to create
employment opportunities for about 1.5 million urban residents by availing services such as the
provision of credit and premises, business development services, market linkages, and equipping
MSEs with appropriate modern machinery and equipment.

On the other side, the same writers concluded that MSEs provided job opportunities, hence
increasing income for a remarkable number of unemployed urban dwellers, especially the youth.

In general, the reviews from different studies informed that MSEs face many problems but they
have economic, social, and political significances that they need special attention to make them
efficient and so that they may contribute a lot to the development endeavors of developing
countries in general and in Ethiopia in particular. So, MSEs have great potential to achieve the
desired development and alleviate poverty and unemployment.

2.2.3. Challenges faced the micro and small enterprises

Theoretically, different constraints which hinder the operation of enterprises may exist. Even
though the MSE Sector has a vital contribution to the Ethiopian economy, it is not operating
without problems. Different challenges impede or hinder the operation of micro and small
enterprises. As cited in Endalsasa Belay (2012), the major challenges that hinder the operation of
the sector are mostly associated with:

Problem-related to market: the market is necessary to purchase raw material inputs and to sell
products or outputs. Mostly Ethiopian micro and small enterprises faced the problem of market
access.

Constraint related to finance: it is clear that finance is very necessary to start and expand
business activities. Like lack of market, Ethiopian micro and small enterprises faced with lack of
capital during and after establishment.
Problem-related to Technology: It is clear that using appropriate technology is necessary to
increase the quality as well as the number of products in business activity. Concerning this,
researchers explained the existence of problems in micro and small enterprises about technology.

Problems related to infrastructure: Understandably, good infrastructure facilities (such as

roads, and electricity) increase the performance of business activities. On the contrary, poor
infrastructure facilities weaken the performance of business activities.

Problem-related to access to information: Information about identifying the type of activity

with the necessary inputs, market information, regulation and legislation, accounting, managerial
advice, interlinkage information, etc., is very important for micro and small enterprises to be
successful.

Therefore, to increase the capacity of the MSE sector and thereby their contribution to
employment creation and income generation these real and other related challenges or constraints
should be solved or at least minimized.
3. Methodology

3.1. Description of the Study Area

Robe is one of the largest developing towns in the Bale Zone of the Oromia region in Ethiopia. It
is located 430 km to the southeast of Addis Ababa, the capital city of Ethiopia. The town is
found between 7°7′N latitude and 40°0′E longitude. The topographic elevation of the town
ranges from 2270 m up to 2690 m above sea level with a mean annual temperature of 15 °C. It
experiences cool temperatures and has a mean annual rainfall of 1100 mm. It covers a total area
of land of 80,240 km2. The town is found in the climatic subtropical zone (“weynadega”).
According to the data of the Robe meteorology station, the major rainy seasons are in autumn
from February to May, and summer from June to September.

The main economic activity in the area is agriculture, especially in the production of cereals
(such as wheat and Barley), fruits, and vegetables. In addition to farming, they are engaged in
small-scale commercialization to receive additional income, manufacturing, service sector, etc.

The town has four kebeles with a population of approximately 58,239 (FDRE CSA, 2007). It is
used as a residence for different social, economic, governmental, and non-governmental
institutions. It is one of the fast-growing towns in the Oromia region. According to the Industry
and Urban Development Bureau of Oromia, the standard assigning office is grouped under the
towns ranked B.

3.2. Research Design

The Study will be designed to investigate the contribution of Micro and Small Enterprises to
income generation and employment creation in the study area. The study will be conducted by
using a descriptive research design in which both qualitative and quantitative approaches will be
used to capture the in-depth and wider data and information for a thorough analysis and
understanding of the role of MSEs in income generation and employment creation. The source of
data for the study will be both primary and secondary from the study area and various places.
3.3. Data Types and Sources

3.3.1. Types of Data

Both quantitative and qualitative data will be collected from different sources through various
methods. Primary as well as secondary types of data will be gathered for the analysis of the
study. The importance of collecting and considering primary and secondary as well as qualitative
and quantitative data is to triangulate and supplement the diverse data generated from different
sources which in return is used to make the data and the result of the research reliable.

3.3.2. Data sources

To gather reliable information, both primary and secondary sources will be employed. The
primary data source will be collected from first-hand sources through interviews and
questionnaires to achieve the objectives of the study. Secondary data will be gathered through
reviewing and examination of documents, reports, and records published and unpublished.

3.4. Method of data collection

The study will use both primary and secondary data to find relevant information concerning the
topic. The primary data will be conducted through qualitative and quantitative data gathering
techniques to get the available source of data. The primary qualitative data will be collected
through personal observation and interviewing while the primary quantitative data will be
collected through interviews and questionnaires.

The secondary source of data will be the published or unpublished material, website, and other
related documents.

3.5. Sampling techniques and sample size

3.5.1. Sampling Techniques

The sampling technique of households will be selected by using the multistage sampling
technique. In the first stage, Robe town will be selected purposively, because it is my birthplace
so there should be possibilities to collaborate with others and there is not enough research
conducted in the town and also due to proximity, time and budget Robe town is suitable for my
research. In the second stage, 3 Kebeles (01, 02, and 04) will be selected among the four Kebele
Administrations randomly where MSEs operate. In this study, at the final stage, households will
be selected by using a random sampling technique proportional to the number of households
from the sample kebele. Also, construction, wood and metalwork, food catering or processing,
and tailoring types of MSEs will be selected
 3.5.2. Sample Size

To determine the sample size from the targeted population I will be used sloven's formula to
obtain sample size from 01, 02, and 04 kebeles and their household number are 242, 348, and
276 respectively. The total number from all kebeles is 866.

So, by using sloven's formula sample size will be obtained as follows

N
n
1  N (e 2 )

Where:

n=total number of sample size

N=total number of household in two kebeles

e=margin error (0.1)

N=866
e= 10%
n= 866/1+866(0.1)2=90

However, in case of scarcity of budget and availability of data, the sample size was reduced to 60
sample households from 90 calculated households, therefore interviewees make with these 60
households.

Thus, the sample size of respondents from each kebeles can be calculated as follows

Sample size from 01 kebele=242*60/866=17

Sample size from 02 kebele=348*60/866=24

Sample size from 04 kebele=276*60/866=19

 Table 3.1 Numbers of respondents with respective kebeles
No Kebeles No of members No of respondent Type of enterprises

1 01 242 17 Construction and Food catering

2 02 348 24 Wood and metalwork, and

Construction

3 04 276 19 Tailoring and Food catering

Total 866 60

3.6. Methods of Data Analysis

The type of data that is used for the study will be based on quantitative and qualitative. To
analyze the data the data will be collected through questionnaires and interviews with the
respondents. Descriptive statistical tools such as tables, percentages, and graphs will be used to
analyze the data. The percentage of the data will be calculated from the total of respondents. This
method of analysis will be used to determine the sustainability and role of micro and small
enterprises in income generation and employment creation.
4. Work Plan
5. Budget BreakDown