INVESTIGATIONS OF CHALLENGES AND OPPORTUNITIES OF MICRO AND SMALL SCALE BUSINESS

ENTERPRISE DEVELOPMENT (IN CASE OF HARAMAYA TOWN)

PREPARED BY: ASEGID REGASSA

ID NO: 3631/04

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR

THE DEGREE OF BACHELOR OF BUSINESS MANAGEMENT IN

THE DEPARTMENT OF MANAGEMENT

ADVISOR: DESALEGN AMLAKU

SUBMISSION DATE: 23/06/2

TABLE OF CONTENTS
ACKNOWLEDGEMENT.........................................................................................................................I
ABSTRACT..............................................................................................................................................II
CHAPTER ONE........................................................................................................................................1
1.1 BACKGROUND OF THE STUDY....................................................................................................1
1.2 BACK GROUND OF THE ORGANIZATION................................................................................2
1.3 STATEMENTS OF THE PROBLEM...............................................................................................2
1.4 OBJECTIVE OF THE STUDY..........................................................................................................3
1.4.1 GENERAL OBJECTIVE...............................................................................................................3
1.4.2 SPECIFIC OBJECTIVES...............................................................................................................3
1.5 LIMITATIONS OF THE STUDY......................................................................................................3
1.5.1 SCOPE OF THE STUDY.................................................................................................................4
1.6 SIGNIFICANCE OF THE STUDY....................................................................................................5
CHAPTER TWO.......................................................................................................................................6
REVIEW OF RELATED LITERATURE...............................................................................................6
2.1. INTRODUCTION..............................................................................................................................6
2.2. DEFINITION AND CONCEPT OF MICRO SMALL SCALE BUSINESS ENTERPRISE........6
2.3. ROLE OF SMALL BUSINESS ENTERPRISE IN THE ECONOMY...........................................6
2.4. SMALL BUSINESS SUCCESS FACTORS.....................................................................................7
2.4.1. KNOWLEDGE CUSTOMERS AND MARKET..........................................................................8
2.4.2. INNOVATION.................................................................................................................................9
2.4.3. THE INDUSTRY.............................................................................................................................9
2.5. SOURCES AND ACCESS TO FINANCE BY MSE SECTORS..................................................10
2.6. CHALLENGES OF SMALL SCALE BUSINESS ENTERPRISE...............................................12
2.7. REASON WAY SMALL BUSINESS FAIL...................................................................................13
2.7.1. LACK OF ENTREPRENEURIAL AND MANAGERIAL SKILL...........................................13
2.7.2. POOR ACCOUNTING.................................................................................................................13
2.7.3. OPERATIONAL IN EFFICIENCIES.........................................................................................13
2.7.4. THE LACK OF A SUCCESSION PLAN....................................................................................13
2.7.5. LACK OF ACCESS TO CAPITAL.............................................................................................14
2.8. APPROACHES TO STUDY THE CHALLENGES OF SME......................................................14
2.9. OPPORTUNITIES OF SMALL SCALE ENTERPRISE..............................................................14
CHAPTER THREE.................................................................................................................................16
3. RESEARCH METHOD......................................................................................................................16
3.1 RESEARCH DESIGN.......................................................................................................................16
3.2 METHOD OF DATA COLLECTION.............................................................................................16
3.3 TARGET POPULATION.................................................................................................................16
3.4 SAMPLING TECHNIQUES AND SAMPLE SIZE........................................................................16
CHAPTER FOUR...................................................................................................................................17
ANALYSIS, PRESENTATION AND DATA INTERPRETATION...................................................17
CHAPTER FIVE.....................................................................................................................................29
SUMMARY, CONCLUSION AND RECOMMENDATIONS............................................................29
5.1 SUMMARY........................................................................................................................................29
5.2. CONCLUSION.................................................................................................................................30
5.3. RECOMMENDATION....................................................................................................................31
REFERENCE..........................................................................................................................................35
Acknowledgement
First, I would like to thanks the almighty God who be all thinks for me and give me this success.
Next my heartfelt appreciation and thanks goes to my Advisor Mr. Desalegn Amlaku (MBA)
who makes valuable comments and give suggestion to the proper completion of the paper.

Lastly, I would like to thanks my father Obboo Regassa Ya’I who supported me financially.
Abstract
The study was conducted on challenges and opportunities of micro and small scale business
enterprise in Haramaya town. The variable to be checked as a factors are skill capital lack of
information the assistance of third party and potential opportunities for excursion and into
innovate the other one to do this the student research was based only primary data in order to
avoid business this primary data was obtained through questionnaires to collect available
information from sample respondent simple random technique was used. The researcher was
used from target population of 918 tacked 898 peoples as a sample the collected data was
analyzed by descriptive statistics such as table.
CHAPTER ONE

1.1 Background of the study

Micro and small business enterprise is one that has relatively small share of its market and is
managed by its owners of the business .small business is the one that has fewer than 50
employees however in austral small business small business is defined as one with fewer than 15
employees .also in united states small business having less than 500 employees for
manufacturing and less than 7 million on in annual receipt for most one manufacturing (for
champs m.1997).

Micro and small enterprise allow the rural poor including some of the most marginalized and
vulnerable strata such as rural woman, youth and landless to diversify their income create new

Source new sources of economic growth and generate additional employment (including self-
employment) in rural areas. The some strata many also reached thou MSE support of small scale
local enterprise whose e business expansion can create new job for rural poor .core issues that
shape the justification for the design of investment in MSE development concerns.

The police and institutional environment country‘s legal frame work current business practices
government policies such as tax break or seed grant for MSE bureaucratic and administrative
procedures may all act either to encourage or improve development .

The availability and strength of local finance service, commercial bank, micro finance
institution, micro leasing company’s also non-financial services provider such as business
counseling must be adequate to support MSE growth.

The business opportunities and involving demand in project area .agriculture related (agro
processing input selling ,food trade ) and non-agricultural MSE opportunities (carpentry metal
working ,transport, shop, hand craft other amenities) should be present together with government
cameral indication that financial return s from typical MSE are attractive to this
cliental(Philippines, 1996).

MSE plays great role in the development of overall economy of country because of their the
following characteristics .they are more flexible in adapting change in diversification of demand
and also create employment with lower cost of investment and encourage channel and mobilize
individual saving they are also the corner stone of the entrepreneurship and ladder of high land
development.
There are many challenges that can face small scale business among this they have to complete
with much larger companies .bigger companies have big bigger budget and counsel provides
product and services at much lower cost that means because of economic s of scale they can
produce at lower cost per unit of give services for MSE this is impossible .among this financial is
the common one SME face lack of finance technology availability raw material ,finance market
government action ,existence of illegal business and a variability of restructure (brooking)

1.2 Back ground of the organization

Haramaya micro and small enterprise office established in 1997E.C. It is located to eastern
region of Ethiopia in Haramaya town and it is from Addis Ababa by 517 km to the west. In the
town micro and small enterprises include are includes manufacturing, merchandise, services and
agriculture

Among people of Haramaya town who participate in the movement of micro and small
enterprises most of them are get initial capital and the place or area of work to facilitate their
activity, to develop and encourage them from the government. The encouragement of micro and
small enterprises is started since 1998 E.C and then developed from time to time in alarming rate
because, the objective of micro and small enterprise is to provide job opportunities and income
generation for the society.

The bureau of micro and small enterprise in the town facilities and gives advice for the people in
the town about setting new business opportunities or micro and small enterprises.

The main objective of the office is to develop micro and small enterprises movements in
Haramaya and its surrounding.

1.3 statements of the problem

In successful developing countries small scale business by virtue of their size location capital
investment and their capacity to generate employment have demonstrated their powerful
contribution for rapid economic growth. Our government has planned up on poverty alleviation
strategies a few years back one center piece of this strategy is accelerating economic turn up of
the country through strategic support mechanisms to the micro and small scale enterprise sector.

In Haramaya town micro and small scale enterprise has problems such as lack of capital
availability, illegal business, lack of managerial responsibilities, high taxation, marketing
problems such as increases in the price of the product. Generally the researcher is to dig out the
left challenges and opportunity of this sector.
Research Question

• What is the effect of operational and managerial skill on success of MSE?

• What is the relationship between an initial working capital and growth of MSE?

• What is the effect of information on the growth of MSE?

• What is the effect of the body that plays r in the exposition and innovation of new
business?

1.4 Objective of the study

1.4.1 General objective

The general objective of the study was to analysis and explores the challenges and opportunities
of MSEs.

1.4.2 Specific objectives

The specific objective of the study was to identify the effect of operational and managerial skills
on the success of MSEs to assess the relationship between an initial and working capital and
growth of MSEs. To analysis and screen out the effect of information on the growth of MSEs.

• To assess the effect of the body that plays role in the exposition and innovation of new
business.

• To analyze and screen out the effect of information on the growth of MSEs.

• To assess the relationship between an initial and working capital and growth of MSEs.

• To identify the effect of operational and managerial skills on the success of MSEs.

1.5 Limitations of the study

Even though the research has some significance it also has some limitations:

• Lack of cooperation from some respondents those who are concerned in giving
information.

• Financial problems to pay necessary expenditure to conduct the research.

• Illiteracy of some respondents to fill the questionnaire.

• Limitation of time to collect data.

1.5.1 Scope of the study
The research study in Haramaya town however because of various limitations the scope of the
study was limited to the challenges and opportunities of micro and small business development
(service, manufacture and merchandise agriculture) in Haramaya town.

1.6 Significance of the study

The successful completions of this research will have e the following potential importance’s:

• By pinpointing the major factors affecting the performance of small business the research
proposal gives insight for Haramaya town administration and other government bodies on
how to alleviate the problem stated.

• It may also serve as an initial reading for researchers and individuals seeking g intensive
study in the problem area.

• So, the significance of the study was not limited to one party gather the whole micro and
small business will benefit from it.

• The study will help in developing an experience for the researcher such as research
techniques and reporting method. If will help the researcher to fulfill the partial
requirements for the degree of Bachelor of any (BA) in management.
CHAPTER TWO

Review of related literature

2.1. Introduction
The primary purpose of this chapter is to get the theoretical understanding of challenges
and opportunities of micro and small scale business enterprise. This review literature is
concerned is concerned more deeply related to the subject under the study and more specifically
it focused on six primarily area. These are definition and concept of micro and small scale
enterprise, small business success factor failures, challenges of small business enterprise, role of
small business enterprise in economy, approaches to study challenges of SMEs, sources and
access to finance by MSE sectors.

2.2. Definition and concept of micro small scale business enterprise

Micro enterprise are business found in all sectors of Ethiopian economy with a paid-up capital
(fixed assets) of not more than 20,000 birr but excluding high consultancy firms and other high
tech establishment, small-scale enterprise allow individuals to profit from their passions,
sometimes called small business, that employees small number of workers and does not have a
high volume of scales (Internet) small enterprise are business enterprise with paid up capital of
more than 200,000 but not more than 500,000 birr but excluding high tech consultancy firms and
other high tech establishments, (Ministry of trade and industry of Ethiopia).

2.3. Role of small business enterprise in the economy

Today small business enjoy more and more esteem and prestige’s economists and social
scientists, politicians and sociologist have been actively to emphasize their achievements, their
potential, their problems and promise, Today small business are usually defined in terms of one
or more of the following number of employees total capital assets, profit, annual turnover.
Manufacturing is scarcely distinguishable from other forms of production in the earliest stages of
its development. There can be instances when the properties income is mainly derived from
property ownership.
 • When incomes is primarily acquired through the exercise of labor (craft, worker

• Other cases when there is mixture of both resources (shop keeper’s small farmers).

They make exceptional contribution such as, create employment opportunity, Introduce
innovation, stimulate economic completion Aid by business, promotes economic residence an
and produce goods and services efficiently (Chant, E.M.1988)

2.4. Small business success factors

Business success can be achieved in almost any location in any economic climate, and with any
amount of competition those reason are

The ability to keep developing new products to retain and build a customer base consider gradual
product development based on improvements to the current product line and sold to the current
customer base

• The maturity to treat employees, suppliers and partners, fairly and respectfully. Trust and
respect result in productivity increase in ways that may be difficult to see and quantity

• A steady source of business during both good economic times and down turns over the
long term develop a product mix that will include winners during good economic times
and other winners when times are tough

• Deal making skills to work with resources suppliers to keep costs low keeping costs
lower than competitors and continuing to look for cost reduction even when the business
is profitable is key

• The experience and skills of the top managers over half of business failures are directly
related to managerial in competence

• A product that is at least a cut above the competition and service that doesn’t feet in the
way of people buying. There must be a compelling reason to buy the product is great the
people love to provide service and the buying experience is easy and fun.(Gemini.1995)
2.4.1. Knowledge customers and market
By their nature small business are nearer to the customer or managers of small businesses can
easily understand information about their structure tends to locate its management from
customer and the market. Thus, especial effort is required to keep decision makers of big
business enterprises well informed through research should be under taken and the result
should be presented to them however, it does not mean that research is not applicable for
small enterprise. The fact is that small business managers can acquire almost automatically
some information unlike by business enterprise manage who can get information only with a
great like market supply

The small business manager close acquaintance with customer and market is a good
potential strength In short both sensitive awareness of customer needs and careful
observation of market trends are necessary to make their potential strength in a reality (David
in gram)

2.4.2. Innovation
Innovation should be the ground bare for operational activities of small business
entrepreneurial and managerial skill of the owner of such farm are essential to promote the
business to growth and profitability. If the Owner (manager) has adequate knowledge of
material skill and entrepreneur skill of the owner (Manager) will lead the business to loss and
more severally to death. If its operations remain static while the external environments
changing and the completions becoming fiercer (pouiburns, and sm must dishonor 1996,
p.29)

2.4.3. The Industry

• High potential Intuitively

• High potential industry is emerging or has not spent much time in the market.

• Now a day’s Technology industry fits this profile

• HPA offers low capital investment and enable operation with small number of employees

• Low potential Intuitive

 • Its best day is almost over

• Such industry are capital and labor intensive

• Are highly specialized

2.5. Sources and Access to finance by MSE sectors

Enterprise needs finance to invest in new equipment and machinery reach out to new markets
and products cope with temporary cash flow shortages as well as to innovate and expand some
argue that capital being scarce in developing countries should essentially be deployed in a way
that maximizes the creations on new job sand productions of new products and services (Without
basically the dual nature of the economy) rather than being used to convert a very small number
of the business into modern capital-intensive one there is also debate on whether small
entrepreneurs needs as mien access to credit as is frequently claimed others like harper (1984)
point out that emphasis on credit should not allowed to obscure factors such as marketing or
technology assistance which may be just as critical to the success or failure of MSE.

According to the 1995/96 survey of urban informal sector in Ethiopian lack of working
capital was among the most pressing problems that small manufacturing industrial identified
theoretically enterprise may use internal and external source of finance the former comprises
own falling and retained earning while the later includes security finance explicit borrowing
from formal and informal sources implicit borrowing in form of account payable (i.e. trade credit
and advance from clients) hire purchase and lease to buy contracts, for firms that cannot resort to
primary and secondary money and capital market (either because of the market do not exist or
firms are not in passion to access such markets) small business for example trade and bank credit
are critical sources of funding for working capital

Bank credit typically finance on going operational, seasonal or cyclical cash flows shortages
startup costs for new operations Trade credit on the other hand is given for purchase of raw
material and their inputs (Dagnew gesses, 2003)

In Ethiopia the potential sources of finance include convectional banks, microfinance

institutions, and cooperatives, Government project semi-formal and informal lenders as well as
trade credit equity finance is limited. Although we have not direct evidence one could reasonably
expect much more equity finance to be forth coming in situation where equity holders (in
partnerships) could liquidate their holding, quickly and with relative ease when they want to hire
purchase and lease to buy contracts, if they exist are not visible NGO are no lager in involved at
least officially since the issuance law proclamation No 40,1996, Which requires those involved
in the provision of microfinance to be established as share companies (owned only by Ethiopian
national) prohibiting them from directly involving themselves in credit and savings activities.
Formal banks do not fund MSE, attractive client due to high transaction cost, and (real or
perceived risks. Banks do not take financing MSE operators as their mission either nor is their
capacity, specially their branch network, extensive and dense enough to effectively reach MSE,
through country (in ruler areas in particular) more over the delivery finance service to MSE
requires the development of innovative financial product that attract MSE Operator, Which
Ethiopian banks are despite high number of saving and credit cooperative as well as multi-
purpose cooperative in the country to our knowledge, there is no evidence showing whether and
to what extent MSE, use these cooperative as sources of finance.

Government credit programs to MSE in many countries Used to be based the poverty lending
approach which concentrate on reducing poverty through credit, often provided together with
complementary services, such as skill as training and teaching of literacy and numeracy, health,
nutrition, family planning and the like, Under this approach donor and government funded credit
is provided to poor borrowers, typically at below market interest rate the goal is to reach the
poor, especially the poorest of the poor. Except for mandatory saving the mobilization of local
saving is normally significant part of this approach to micro finance however subsidized credit
programs have done very little to improve access of MSE’s operators to financial services
instead they hindered the development of sustainable financial institutions Credit subsidized also
credited distortion in financial markets of it was in response to this challenges state the micro
finance revolution in 1985 come of age in the 1990 which is transition from the poverty to
lending approach to financial lending approach. (Robinson, 2001)
2.6. Challenges of small scale business enterprise
There are many challenges that can face small scale business. Among this there have to compete
with much longer companies. Bigger companies have big bigger budget and can usually provide
products and services at much lower cost. That means because of economies of scale they can
produce at lower cost per unit of give service. Fir small scale business this is imposable. By
using this strategy large companies can leave out the small scale business from the market. In
order to defense his small scale business must expense its business by alarming rate but to do this
there is another obstacle that hind their goal. Among this lack of finance because of the reasons:-
They have no resource to obtain capital to expand, banks and leaders are not willing to lend
small companies without tangible asset that can be used for collateral small scale business also
have no options of saving share of stock to public to raise funds. On the other hand large
companies have the chance to get what is seen here. And they can use this as strategic weapon to
shut the small scale business from the market (Brookins).

Another problems that is common for many small scale business is hard to attract employees. It
is difficult for small scale business to compete with the salaries and benefit that large
corporations provide. Many potential employees are also hesitating to work for small scale
business, because they feel that there is not opportunity for advancement.

Because of this most small scale business is running by the owner of the business. This has its
own adverse impact on the growth of the business. As have seen above since it is difficult for
small scale business to get skilled man power, they choose to manage the business by themselves
without any knowledge and experience about it. And also founder dependence is another without
its founder is a business with dead line. Many businesses suffer from the founder dependency
and this dependency is often caused by the founder being unable to let go for certain decisions
and responsibilities as the business growth. A business owner merely has to give over more
control to their employees or partners. In pacts, however this is a big stumbling block for
founders, because it is usually involve compromising on the quality of work being done, until the
person doing the work learns the rope.

The problem of balancing quality and growth is another problem that comes from the managing
of the business by the owner without managerial skill. Even when a business is not founder
dependent, there is a time when issue from growth seems to mate or even out away the benefit.
Whether a product or the service at some point a business must sacrifice in order to scale this
may mean not being able to personally manage every client relationship, not inspecting every
widget unfortunately. It is usually that levels of personal engagement and that attention to detail
that makes a business some successful therefore many small business owner often find
themselves tied to this habits to determinant of the company’s growth.

The is large middle ground between shoddy work and un health obsession with quality so it is up
to the business owner to navigate the companies process to war ds a compromise that allows
scale without hurting the brand.

2.7. Reason way small business fail

2.7.1. Lack of entrepreneurial and managerial skill

The study conducted on small business have released that there is general lack of knowledge in
entrepreneurial and managerial capacity in fact of it’s often easier for man and women to going
to business for themselves. No law stopped them from choosing to be their own boss and they
can choose almost any line of business they like. But business run by people without prior
managerial experience this means that business owner with marketing skills.

2.7.2. Poor Accounting

You cannot be in control of a business if you don’t know what is going on with bad numbers or
no numbers a company is flying blind and it happens all of the time.

2.7.3. Operational in efficiencies

Paying too much for rent, labor and materials not having the tenacity or stomach to negotiate
terms that are reflective of today is economy may leave Amuse UN competitive.

2.7.4. The lack of a succession plan

We are talking nepotism, power struggles, significant players being replaced by people who are
in over their heads all reasons many family business do not make it to the next generation.
2.7.5. Lack of access to capital
The issue is that people need to learn how to access capital when people wisely use funding and
capital the small business can absolutely grow.

2.8. Approaches to study the challenges of SME

Different studies have employed different approaches to study the challenges of SMEs. The
dynamic relation b/n the firm and its operating and entrepreneurial characteristics prepared
conceptual models of SMEs performance. This tippet that performances outcomes are functions
of many variables including individual owner characteristic owner behavior entrepreneurial
influences, the mode transcend the SMEs is merely miniature version of large business and
recognized small firms and unique entities. Organization structure is one stage of development
and micro enterprise are not the same as that in the preceding or following stages thus with
different reemphasis and operating context, each state of development will have different set of
problems the other assumption indifferent models. Therefore, may be carried from stage to stage
or be unique as particular stage. The greater knowledge of how SMEs involved in the critical
factor face in various life cycle stages is strongly needed to fully understand their development
process and types of assistance for their survival and growth. According to Harns & Kuratko
(1990) has developed a long list of major problems of SMEs. The list include of planning lack of
finance, lack of management experience general management problems of growth management,
lack of training and development inability to identify relevant training course lack of
information.

2.9. Opportunities of small scale enterprise

Opportunities identification is the process by which a small business comes up with the
opportunity for new venture. It is fist difficult task most good business opportunities do not
suddenly appear. Although most small business do not have formal mechanisms of identifying
business opportunities, some sources are often fruitful consumers and business associated,
members of the distribution system and technical people. Often consumers such as business
associates purchasing proves to fit a certain life style are the best source of ideas for new venture.
One small business evaluation of why so many business executrices were complaining about
lack of good technical writing and word processing services resulted in the creation of her own
business venture to fill this need.

The opportunity is identified by using input from consumes, business associates, channels
members of technical people, each opportunity must be carefully screened and evaluated. This
evaluation of the opportunity is perhaps the most critical enchantment of the small business
process, as it allows the entrepreneur to assess whether the specific product or service has the
return needed for the resource s requires.
CHAPTER THREE

3. Research Method

3.1 Research Design

To realize the objectives and to seek answer questions. The research design of this study was use
the descriptive design to obtain the intended information. generally, the researcher is use a
descriptive approach in order to dig out challenges, opportunities of micro and small scale
business enterprise development in case of Haramaya town.

3.2 Method of data collection

In this study data will be gathered in two ways:-

Primary source: It will be collected by using questionnaires (open-ended and close-ended)

Secondary source: will be used from documents, related books, internet and other organizations
records.

3.3 Target population

The target population: Sample respondents of the research are only people engages in activities.
The micro and small scale enterprises in Haramaya town has total population of 918 from this
total population 583 male and 335 females(Bureau of MSE)

3.4 Sampling Techniques and sample size

The population of the study is very large. So, it is difficult to collect data from each owners and
managers of micro and small scale enterprise. So, the study will adopt random sampling
technique which divides population in to homogeneous subgroups, such as manufacturing,
services, merchandise and agriculture by using personal judgment and probability from total
population of 918 the researcher 98 sample size which represents 11% of total population
(Haramaya town micro and small scale enterprise)
CHAPTER FOUR

ANALYSIS, PRESENTATION AND DATA INTERPRETATION

This chapter concerns with presentation analysis and interpretation of data that collected through
questionnaires. The researcher distributes 98 questionnaires for Haramaya town micro and small
business enterprise holders and employees, and 73 out of 98 questionnaires were collected but
the vest 25 has been not responded.

4.1. Personal information of the respondents

Table1. Demographic characteristics of respondents

No Item Response %
1 Age
18-30 28 38.36
31-50 26 35.62
51-65 9 12.33
>65 10 13.69
Total 73 100
2 Sex - -
Male 48 65.75
Female 25 34.25
Total 73 100
3 Educational status
0.4 12 16.94
5.8 16 21.92
9-10 14 19.18
11-12 19 26.03
College diploma and above 12 16.44
Total 73 100

As the above table shows item one shows group of respondents. From the sample taken whose
ages are grouped from 18-30 years are 38.36% from 31-50 years are 35.6% from 51-65 years are
12.33% and above 65 years are 13.96% this indicate that the large percentage of the people who
are engaging in small business are grouped with in the productivity age, because the age of 18 to
50 years is in the stage of adult who can give real information about possible problems of the
small business. And can play great role in business development.
Item 2 of the same table shows sex distribution. Accordingly 65.75% of the owners are male the
rest 34.25% of them are female. This result indicates that the male percentage in operating the
small business dominated over female. This implies that male are more employee and the female
is comparatively less because most of the females in this area are not more educated.

In the same table again item 3 shows educational status of the owners and employees of the
business. Accordingly from 0-4 grades are 16.44% from 5 to 8 21.92% from 9-10 19.18%, from
11-12, 26% and diploma and above are 16.44% this shows that even not more relatively the high
percentage of stake holders are educated from 5 grade up to 10th and some of them are below 5
grade and diploma and above.

In general this indicates that these sectors are occupied by the people that have middle level of
education that can’t understand the problems and opportunities exist within these sectors.
Because the people who attended the higher educational intuitions are only 16.44%.

4.2. Marriage status

Married 23 31.50
Un married 50 68.5
Divorce 0 0
Widowed 0 0
Total 73 100

As the table indicates that 68.5% of the respondents are single and 31.5% are married and there
is no divorce and widowed. We can conclude that most of the respondents are single and
followed married. That means that most small and micro enterprise are owned and managed by
young and productive.
4.3. Business sectors and management.
Table2. Types of small scale industries they runs and their manager

no item No of respondents Percentage%

1 Types of small scale
industry you run?
Service 20 27.5
Manufacturing 15 20.5
merchandise 15 20.5
agriculture 23 31.5
total 73 100
This table shows that 27.5% of the respondents are service provider 20.5% of them are
manufacture while 20.5% are merchandiser and the remaining 31.5% is agriculture. This indicate
that large percentage of the owner of the business is occupied by agriculture sector, and
followed by service , manufacture and merchandise sectors again this shows that such like
occupation adverse effect on the growth of small business. Because high percentage of the sector
is occupied by service and agriculture which needs the skinned man power that the area as
indicated in 1st table educational back ground the stack holders are not more educated and
trained, so it is difficult to develop the business with in such condition

2 The manager of industry?

The owner of industry 47 64.4%
Employed 10 13.69%
Relative of the owner 16 21.92%
Total 73 100%

Item two of the share table shows the manager of the business. Accordingly 64.4 of total
respondents are business owners while 13.69% and 21.92% are revolved and relative of the of
the owner of the business this indirectly shows that the business is running by the people who
has no enough managerial skills, because as the data indicated in the ones the educational levers
of the business owner is not further to lead the business sector and also it implies there is the
owner dependence problem which can result to fatigue.
 4.4. Problems of the business enterprise
Table 3 establishment problem

No Item Response
Number %
1 At the time you started the business
did you face establishment problems?
Yes 44 60.27
No 29 39.73
Total 73 100%

The above table shows whether the owners of the business face establishment problems.
Accordingly 60.27% of the respondents faced the establishment problems before starting their
business.

Whereas the rest, 39.73% of them did not face any establish problems. To identify the kinds of
the problem they faced so they answered that 60% of them responses as they have lack of
finance and capital to start the business 30% of them responded as they have not enough
information and skill to start and run the business 10% the respondents. Listed different
instructors as reasons, so to from this it’s possible to read as the finance and capital problem is
getting lion share among the problem that encounter the people of the area to start and run the
business.
Table 4 rate of problems related to managerial training and consultancy

No Item Response
Number %
1 How do you rate the presence and extent of problems
related to managerial and consultancy service.?
No problem at all 21 28.77
Some problem but manageable 32 43.84
Serious problems 20 27.4
Total 73 100%

As can be observed from the above 20% of the respondents said that we had no problem
regarding to managerial and consultancy services, 43.84% have some problem and the rest 27.4
of them are in the serious problems this imply that high percentage of the respondents have
medium and serious problems respectively.

4.5. The impact of information on business development

Table5. The presence and excellent of problems are related to information.

No Item Response
Number %
1 How do you late the presence and the
extent of the problem related to
information to run your business?
No problem at all 19 26.03
Some problems but not serious 34 46.58
Serious problems 20 27.4
Total 73 100%
As indicated in the above table 26 % of respondent answered that is no problem related to
information 46% of the respondent responded as there is some problem and 27.4% of them
answer as they have serious problems related to information so in average there is the problems
of information in the area to run the business,

Table 6 sources of information to deals with their customer and to get daily market
condition.

No Item Response
Number %
1 What is your source of information deals with your
customers and to get information about day to day
market?
Cell phone 11 15.07
Posta service 0 0
Television 18 24.66
E. mail 0 0
New paper 5 6.85
Radio 15 20.55
Mobile phone 24 32.88
Total 73 100%

The above table show the sources of information that respondents are used to deal with their
customers and to follow the daily condition of the market. Accordingly there is no any resident
who uses both postal and Email services, 6.85%, 15.07 and 20.55% are using newspaper, cell
phone and radio respectively the rest 24.66% and 32.88% using Television and mobile phone
respectively this implies that most of them uses only mobile phone and television.

In order to know the reasons they used only the above sources open ended question is for warded
to them and 65% of them. Said that we need to use other technology such as Email and internet
but, there is no accessory in the area. And the rest 35% responded that other technologies are
costly to use so in order to escape from its cost they chose the source of information that is listed
in the above table this shows that there is not enough information technology service in the area,
and there is not equal capacity to use this sources.

4.6. Feasibility Analysis

Table7 whether cost benefit analysis was conducted before establishment of the business.

No Item Response
Number %
1 Have you made any cost benefit analysis before starting
the business?
Yes 30 41.09
No 43 58.9
Total 73 100%
2 If your answer for the above question no
Lack of ability and skill 42 57.59
Lack of information about its importance 31 42.46
Total 73 100%

As can be observed from the above table Items one shows we there cost benefit analysis was
conducted or not accordingly 41-01% of them are conducted cost benefit analysis before starting
their business where 58.9% they did not conduct cost benefit analysis before starting the
business.

Item two of the same table show that the reason of respondent not conduct the cost benefit
analysis 57.53 told as they have not ability and skill to conduct analysis and the rest 42.47 have
lack of information about its importance to their business.

During cost benefit analysis before starting the business will insure that the proposed business
worth pursuing by identifying the likely opportunities and threat to be sacked flow ever the
respondents included in the study did not conduct the analysis because of lack of ability and skill
and have not information about its importance. This show that there is lack of ability’s properly
it needs to give support to improve this.
Table of Amount of capital the business owners have

No Item Response
Number %
1 How much capital do you have?
• 1000-5000 15 20.55
• 5001-10,000 16 21.92
• 10001-20,000 27 36.99
• < 20000 15 20.55
Total 73 100%

As can be seen from the table above item one shows how much capital the sampled businesses
have. Accordingly 20.55 replied that their capital is between 1001 birr up to 1000 birr, 36.98 and
20.55% of the respondent capitals from 1001 to 20000 and above 20000 birr respectively.

No Item Response
Number %
2 Is initial capital is enough to run your business?
Yes 27 36.97
No 46 63.01
Total 73 100%
If your response for the above question not what is
your sources of additional capital
Bank 35 47.95
Informal lenders 25 34.25
Credit from friends 6 8.22
Credit from family 7 9.59
Others 0 0
Total 73 100%

As the resident response 36.98% of them have enough capital to run their business, where as
63.2% of them high percentage of the respondents have not enough capital, but in order to
successfully operate business need sufficient capital to meet customers’ needs any want in term
of quality and quantity so, by considering this the researcher for warded the question to know the
source of their additional capital from respondent who use credit 47.95 of them use bank as their
sounds of additional capital the percentage of the people who uses the informal and family is
equally 19.57% while 15.45 use credit from friend.

The open ended question is for warded to respond to know for what reason they used the sauté
they are using and why not use other sources among the people who use family and friend as
their sources of additional capital 67% of them act interest the rest 23% answer as they don’t
worry about the time to turn back.

On the other hand the people to who borrow from informal enders responded that there is long
process to get money from informal senators and also it needs equity that can service as
collateral but they have not such like thing to get this capital from formal. Sectors these shows
the financial institution in the area is not smoothly related with micro and small business sector
and also the people of the area also have not enough awareness about importance of formal
sector:
Table9. Whether the owner profitable in the operation of their business.

No Item Response
Number %
1 Did you get some profit from your business?
Yes 63 86.30
No 10 13.69
Total 73 100%
2 If your response to the above question is yes for what
purpose do you use it?
Totally for consummation 15 20.55
For reinvestment 29 39.73
For deposit 29 39.73
Total 73 100%
3 You want to change your business?
Yes 10 100
No 0 0
Total 10 100%

As can observed from the above table one shows whether the respondent did get some profit
from their business or not. According 86.31 of the respondents replied as they got profit from
their business, which the rest 13.69% of the respondents replied as they did not get profit from
their business in the same table item two shows the purpose for which they applies their profit.
Accordingly 23.81% of them apply consumption, 39.73% for reinvestment and 39.73% for
deposit purpose.

This implies high percentage of the respondent use their profit for reinvestment and deposit his
shows even though their business. If not such modernized there is promising potential in the
area. Item three of the same table shows the respondent that can’t get profit from their business,
accordingly 100% of them have the feature dream to change and modify their business and this is
again an appreciable thing that must be supported.
Table 10 the body that support small business and the kind of support they provided to them.

No Item Response
Number %
1 Is there anybody that supports you to expand your
business or innovate a new business?
Yes 25 34.25
No 48 65.75
Total 75 100%
2 If your answer is yes who is that?
Micro and small counter poise agency 16 64
None government body 9 36
Other government body 0 0
Total 25 100%
3 If your answer is yes how they support you?
By giving training and consulting 13 52
By giving capital and finance 9 36
By giving timely and correct information. 3 12
Total 25 100
Yes 23 31.51
No 50 68.49
Total 73 100%

As above table shows there is any did body that support the growth of small business.
Accordingly 34.85% of the respondent have support from different organs while 65.75 have no
anybody that support them 64% supported by micro and small business enterprise agency while
36% is supported by none government did this shows that expect the micro and small enterprise
agency the contributions of other organ is very low in this area.

Again within the same table item there shows that the kinds of support contributed by micro and
small business enterprise agency and none government body. From their support 52% is in the
form of finance and timely correct information giving respectively. This implies that more than
half of their support is in the form of training and consultancies service and this can improve
their managerial and operating skill to expand their business, but the support of giving timely
correct information is very low this can adversely as teat the growth of micro and small business
because at this time information is the corner stone of any business organization.
Item fourth of the same table also shows the percentages of paternal opportunity that exist in the
area to expand innovate a new business in the area accordingly 31.51% of the respondent replied
as there is an opportunity of merging new business. This implies that there is not then promising
opportunity for exposing and inn valium of micro and small business enterprise in the area.
CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

The following major findings were identified based on the response of the respondents. As
finding shows, the performance of micro and small business in Haramaya town is affected by
lack of managerial and operational skills, lack of enough capital, low information technology and
low supportive body for innovation and expansion.

5.1 Summary
Based on the data’s that is analyzed in chapter 4, the researcher so comes up with the following
findings.
•Almost all of the peoples engaging are young. That means 38.36% peoples are found between
the age 18-30, 35.62%, 13.69% and 12-33between 31-50, >65 and 51-65 respectively. This
indicates that the large percentages of the people who are engaging in small business are
group within the productivity age.
•The large percentage of the owner of the business is occupied by agriculture sector and followed
by service and the lest manufacture and merchandise
•Relative of the owner of the business this indirectly shows that the business is running by the
people who have no enough managerial skills.
•To identify the kinds of the problem they faced so they answered that 60% of them responses as
they have lack of finance and capital to stark the business 30% of them responded as they
have not enough information and skill to start and 10% the respondent listed different
infrastructure as reasons
•The sources of information that respondents are used to deal with their customers and to follow
the daily conditions of the market most of them uses only mobile phone and television.
•During cost benefit analysis before starting the business will insure that the proposed business
worth pursuing by identifying the likely opportunities and threat to be sacked flow ever the
respondents included in the study did not conduct the analysis because of lack of ability and
skill and have not information about its importance.
•The respondents use their profit for the investment and deposit
•More than half of their support is in the form of training and consultancies service and this can
improve their managerial and operating skill to expand their business.

5.2. Conclusion
According to the result shows, the micro and small business enterprise of Haramaya town is
occupied by the people that have not enough managerial and operational skills. This is shown
that around 70% of the people are affected by lack of managerial and operational skills review of
related shows that, among the cause of failures of small business lack of managerial and
operational skill is the fundamental one.

The same is true for Haramaya town micro and small business enterprise. It is the main factor
that negatively affect the growth the following challenges.

Lack of finance and capital is another problem that affects the growth and development of micro
and small business. The case of Haramaya town is not different from this finance and capital is
the crucial factors that highly affect the growth of small business, as generalized from the
respondents’ responses 63% of the business sectors have lack of finance and capital to run their
business. Since the problems of finance is not the single problem it is also the cause for other
problems such as high cost per unit high fixed cost, low quality, low competing strategy.

Another thing that was found in this finding is the opportunity that exists for innovation and
expansion of micro and small business enterprise in the town of Haramaya and it, area. So as can
be. Seen from the responses respondents there is not an organ that motivate the innovations and
expansion of the business in the area among the sample take around 65% responded as there is
not an organ that motivate the innovations and expansion the area is full of potential for business
activities, for this the profitability of all business owner without enough capital and managerial
and operational skill is an evidence for this potentiality.
5.3. Recommendation
Based on the given conclusion the following possible recommendations have been for awarded
by the researcher.

As explained in the conclusion part most of micro and small business of Haramaya town is found
in different challenges that hind their growth and development. Among this lack of managerial
and operational skills, insufficient capital and finance lack of information technology facilities
and soon. Therefore in order to over comes this problem. It needs the contributions of different
organs such as micro and small business enterprise agency investors other NGO’s and the
business owners themselves. The agency of micro and small business should give necessary
training by preparing different panel discussion and meeting within few month intervals to create
awareness in the minds of the business owners on how to manage the business and how to use
the available resources efficiently and be productive. The owners of the business should also use
these chances and attend with attention to be the role model to other business owners and share
experience they get from this training. The administrative of the town should also play its role in
order to alleviate these problems by fulfilling necessary infrastructure.

As the researcher tried to explain in the conclusion part even though there is malty of problems
on the growth of small business, still there is potential opportunity as supported by evidence that
shows most of the owners of the business are getting profit from their business. So again it needs
the support of second party to exploit this opportunity, this second parts should be financial
institutions, investors and other charity organization should support these sectors as much as
possible by funding necessary capitals and materials so if these all thing, are fulfilled it is easy to
overcome all these challenges and contribute to the development of the country.
 APPENDEX
HARAMAYA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
This questionnaire is presented to you as a past of study under taken to identify emerging canings
and opportunities that small and micro enterprises are facing in their day to day operation.
Dear respondents please fill in the below listed questions with the help of data collectors as
genuinely as possible your cooperation in this regard is in valuable and complete response will
be highly appreciated.
Thanks you in advance
Direction indicates your response by putting tick (-) mark against the appropriate box and write
brief answers in the given space and don’t write your name.
Part I Demographic questions
•Age: 18- 30 31-50 51-601 < 65
•Sex: male Female
•Education status 0-4 5-8 8-10 10+1 – 10+2
College diploma and above
•Marital status: Married Unmarried
•Types of small scale industries that you run
Service Merchandise Manufacturing
Other specify ___________________________________________
•The managers of the industries:
The owner Employed Relative of the Owner
Other specify _________________________________________________________
•At the time you started the business did you face the establishment problem? Yes
No
•If your answer for questions No 7 is yes what are those problems?
_______________________________________________________________________

•Have you made any cost benefit analysis before starting the business?
 Yes No
•If your answer for question No 9 is No why not?
Lack of ability and skill Lack of information about its importance
If any other specify ____________________________________________________
•Did you get some profit from your business yes No
•If your answer to question No 11 is yes for what purpose did you use it?
Totally for consumption for reinvestment
For deposit
If any other please state _____________________________________________
•If your response for No 11 is No you want to change your business operations? Yes v No
•If your response No question 13 why not? _____________________________
_______________________________________________________________________
•How many capitals do you have?
1000-5000 5001-10,000 10,001-20,000 20001<
•Is initial capital is enough turn your business? Yes No
•If your answer for Q. No 16 is not what are your sources of additional capital? Bank
Informal lender Credit from friends
Credit from family
If any other please specify _____________________________________________
•What is your reason to use the above source? _________________________
_______________________________________________________________________
•How do you rate presence and extent of problem related managerial training and consultancy
services.
Non problem at all serious problem
Same problem but manageable
•Is there anybody that supports you to expand your business, of to involve a new business? Yes v
No

•If your answer for a No 20 is yes who is that?

 Micro and small business enterprise agency
None government body
Other government body
If any other please specify _____________________________________________
•If your answer fro question No 20 yes how the support you?
By giving training and consultancy service
By giving capital and financial support
By giving timely and correct information to compete in the global world
•What are your sources of information to deals with your customers and to get information about
day to day market condition?
Cell phone Postal service Television E-mail
Newspaper Radio Mobile phone
Other specify _______________________________________________________
Reference
•Ctlant, E.M. ad D.A walker. 1998. Small business demand for trade credit Applied economics
Vol. 20: 861-876
•Dagnew Gesses 2003. Some point on saving and credit cooperative in Ethiopia Addis Ababa.
•David ingram. Small business Chron.com > small business > Business technology and
customers support information Technology
•Far champs M. 1997. Trade credit in Zimbabwe can manufacturing world development Vol.
25:5: 795-815
•Gebrehiwot Ageba and Waldy Amha (1997) small scale enterprise development in Ethiopia
•Gemin: 1995 employment and income in micro and small enterprise in Kenya result fo 1995.
Gemine technical report No 92 Maryland
•Harger M. 1987 small business in the third world john wiley and sons.
Robison 2001. The micro finance revolution sustainable finance for the poor 7 BRD World Bank
Washington.