THE ROLE OF MICRO AND SMALL ENTERPRISE IN REDUCING

UNEMPLOYMENT (IN CASE OF BULE HORA TOWN)

BULE HORA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE

A SENIOR ESSAY SUBMITTED TO DEPARTMENT OF ACCOUNTING

AND FINANCE IN PARTIAL FULFILLMENT OF BACHELOR OF ART
(BA) DEGREE IN ACCOUNTING AND FINANCE

JULY, 201
BULE HORA, ETHIOPIA
DECLARATION
The researcher declares this paper in the title the role of micro and small enterprise in reducing
unemployment in Bule Hora town that submitted to partial fulfillment of the requirement for
Bachelor of Art degree at Bule Hora University in Accounting and finance that compliance with
the regulation of university and meet accepted standard with respect to originality and quality.

Advisor name______________________ Signature ._________Date._____________

Examiner name.____________________ signature .__________Date_____________

Name: 1.WAKO ABBOLE

2: ALI JEILU

ii | P a g e
ACKNOWLEDGMENT
In the name of ALLAH the most merciful and most gracious first and for most great thanks
given to Almighty ALLAH. He has helped us in every aspect of my life. This research has
drowned on the talents, advice and encouragement of more people that researcher can possibly
acknowledge. We wish to express our gratitude and appreciation to our advisor (Mr.) Wegene
Bekele whose dedication and support have made possible the completion of the activities of this
study. It is a great chance to express our deepest appreciation and thanks to our families and
friends unreserved guidance and constructive ideas have brought about the successful completion
of our paper. In addition, we wish to say thanks to employees and bosses of micro and small
enterprise of Bule Hora town for providing relevant data for us. Finally we wish to say thanks to
Bule Hora University specially College of Business and Economics Department of Accounting
and Finance for its safe encouragement.

iii | P a g e
ABSTRACT
This study would conduct in Bule Hora Town on the role of micro and small enterprise in
reducing unemployment. The main objective of this study was to access the budget from
government to increase the role of micro and small enterprise and to create employment
opportunities. For the sake of achieving the objective, the study was faced the problem including
lack of good awareness of the society and lack of budget. The study would use descriptive forms
of research approach and primary and secondary sources of data were used. The primary source
of data were obtained from questionnaires and interview, while secondary data were gathered
from annual reports, published and unpublished material. The total populations were 720 and
the researcher would be take 88 sample size and stratified sampling techniques were used. As a
result the, study would be concluded that the sector has played a great role by creating job
opportunity for the workers and they improved their living standards. Finally, the researcher
recommended that the government, non government organizations and individual should
encourage the micro and small enterprise to increase its role and reduce unemployment and
avoid poverty in the area.

iv | P a g e
v|Page
ACRONYMS

MSEs ……………………………….. Micro and Small Enterprises

SBA ………………………………….Small Business Administration
EEA ………………………………….Ethiopia Economic Association
FSS ………………………………….. Forum for Social Studies
HICES……………………………….House Hold Income Consumption and Expenditure Survey
FMSES……………………………….Federal Micro and Small Enterprise Strategy

vi | P a g e
Contents
DECLARATION.............................................................................................................................ii
ACKNOWLEDGMENT................................................................................................................iii
ABSTRACT...................................................................................................................................iv
ACRONYMS...................................................................................................................................v
CHAPTER ONE..............................................................................................................................1
INTRODUCTION...........................................................................................................................1
1.1 Background of the Study.......................................................................................................1
1.2. Statement of the Problem......................................................................................................2
1.3. Research questions................................................................................................................3
1.4. Objective of the study...........................................................................................................3
1.4.1. General Objective..........................................................................................................3
1.4.2. Specific Objective..........................................................................................................3
1.5. Significance of the study......................................................................................................3
1.6. Scope of the study.................................................................................................................4
1.7. Limitation of the study..........................................................................................................4
1.8. Organization of the study......................................................................................................4
CHAPTER TWO.............................................................................................................................5
2. REVIEW OF RELATED LITERATURE...................................................................................5
2.1 THE THEORETICAL STUDY OF MICRO AND SMALL ENTERPRISE.......................5
2.2. THE ROLE OF MICR AND SMALL ENTERPRISE.........................................................7
2.2.1 Supporting Large and Gain enterprise............................................................................7
2.2.2 Source of Innovation.......................................................................................................7
2.2.3 Stimulating Economic competition................................................................................7
2.2.4 Creating Employment Opportunity................................................................................8
2.3 Problems of Micro and Small enterprise...............................................................................8
2.3.1 Lack of Managerial skill.................................................................................................8
2.3.2 Financing........................................................................................................................8
2.3.3 Tax..................................................................................................................................8
2.3.4 Problems of Selecting Qualified Personnel....................................................................8
2.3.5 Marketing........................................................................................................................9
2.4 Micro and small Enterprise as Vehicles for Poverty Reduction, Employment Creation and
Business Development.................................................................................................................9
2.5 Micro and Small Enterprise Policy and strategy in Ethiopian.............................................12
2.6. Empirical Study..................................................................................................................14
vii | P a g e
 2.7. Conclusion and Knowledge Gap........................................................................................15
CHAPTER THREE.......................................................................................................................16
RESEARCH METHODOLOGY..................................................................................................16
3.1. Research Approach.............................................................................................................16
3.2. Nature and Data sources.....................................................................................................16
3.3. Sample size and sampling technique..................................................................................16
3.4. Tools and methods of data collection.................................................................................17
3.5. Methods of data analysis....................................................................................................18
CHAPTER FOUR.........................................................................................................................19
4. DATA ANALYSIS AND INTERPRETATION......................................................................19
4.1 The Demographic and socio-economic background of Micro and small enterprise
operators....................................................................................................................................19
4.1.1 Age and sex distribution...............................................................................................19
4.1.2 Educational status.........................................................................................................20
4.1.3 Marital status and family size.......................................................................................21
4.2 The Nature of Enterprises....................................................................................................21
4.5 Financial and income status of micro and small enterprise workers...................................22
4.5.1 Initial capital.................................................................................................................22
4.5.2 Source of capital...........................................................................................................23
4.7 Types of Business operated by Micro and Small Enterprise...............................................23
4.9 The improvements of Micro and small enterprise workers.................................................24
4.10 Strengths of Micro and small enterprise in the town.........................................................25
4.11 Major constraints of Micro and small enterprise in the town............................................25
4.12 The Objective of Micro and small enterprise Establishment.............................................26
CHAPTER FIVE...........................................................................................................................27
5. Conclusions and recommendations...........................................................................................27
5.1. Conclusions.........................................................................................................................27
5.2. Recommendations...............................................................................................................27
REFERENCE................................................................................................................................29
APPENDIX....................................................................................................................................30

viii | P a g e
ix | P a g e
x|Page
CHAPTER ONE

INTRODUCTION
1.1 Background of the Study
Across the world as well as in Ethiopia there was small and large business organization operating
for profit. The definition of micro and small enterprises varies from country to country. All over
the world, number of employees or employment and capital investment or both has been used as
the basis for defining micro and small enterprises.
On the environment criterion, the general acceptable divisions were; micro or very small
enterprises were business-enterprises with the investment of paid up capital not exceeding US
$2300 and employ up to 19 workers. Small enterprises used the investment paid up of capital US
$(2300-5747) with 20-100 workers. Medium enterprises used the investment paid up capital
exceeds 50,000 but not greater than 500,000 birr with 101-500 workers (Hailay, 2007).
Specifying any size standard to define small business was necessarily arbitrary because people
adopt different standards for different purpose. Legislators may exclude small firms from certain
regulations and specify ten (10) employees as the cut-off point. Moreover businesses may be
described as “small” when compared to larger business size and economic criterion. The
criterion used to measure the size of business was vary. Size refers to the scale of operations of
criteria applicable to all industrial areas, while others were relevant only to certain types of
business (Gebrehiwot and Wolday, 2001).
The small business Administration’s establishes size standards that determine eligibility for loans
and for special consideration in bidding on government contracts. In 1984, the SBA issued a
revised set of standards, some of which are stated in terms of number of employees and others of
which are stated in terms of small volumes (Wolday and Gebrehiwot).
Size standards for most non-manufacturing industries were now expressed in terms of receipts.
US $ 3.5 million was a common upper limit in the service and retail areas in which small
business was strong. In mining and manufacturing, however, SBA classifies firms fewer than
500 employees as small. To provide a clear image of small business the general criteria for
defining a small business were suggested.
 Financing of business was supplied by one individual or a small group.
 Only a rare case would the business has more than 15 or 20 owners.

1|Page
  Except its marketing function the firm operations were geographically
localized.
 Compared to the biggest firms in the industry, the business was small.
 The number of employees in business was usually fewer than 100.
Obviously, some small business enterprises failed to meet all the above
standards (Hailay, 2007).
Micro and small enterprise, the world over comprise a widely divergent spectrum of
establishment, ranging from micro and rural enterprise to modern industrial units using
sophisticated technology. Because of their contribution in each and every national economy, the
importance and emphasis on micro and small enterprise has been accentuated in the mind of
policy makers, planners and the industry. This was the consequence of the recognition that the
shift from agrarian to industrial and to postindustrial knowledge base societies was not through
the large scale industrial houses but through individual and small initiatives by visionaries from
the micro and small enterprises. The main motivation of the researcher was to conduct the
research on this topic for various reasons. Among the reason behind why the researcher needed
to conduct the research on this specific topic was to solve the problem related with
unemployment reduction, inadequate allocation of resource by government, lack of proper
management and lack of good awareness of the society.
In addition to this, the main reason which motivates the researcher was to overcome the problem
of misuse of power (abuse of power) which related with government officials used the
government resource that allocated for reducing unemployment for their own use.

1.2. Statement of the Problem

The importance of micro and small enterprises sector in Ethiopia, particularly for the low-
income, poor and women groups, was evident from their relatively large presence share in
employment and small capital requirement. These were the sufficient reasons for governments
and other stake holders in development to be interested in micro and small enterprises. However,
there were several problems that affect the sector such as lack of good technology, lack of good
awareness of society, considering the sector as less profit, unwillingness to participate in the job
and lack of supply of budget and machinery from the government to encourage the people. The
problem of the study were poor development of instrument, absence of well-organized data,
shortage of social facilities like road and electric power and lack of budget allocation from the

2|Page
government.. All these were major problems in the study area which could be alleviated or
minimized by making the people to participate in micro and small enterprise which has a great
role on those problems. Therefore, the study was partially filled these problem and information
that the researcher wanted to investigate the role of micro and small enterprise in the alleviating
of unemployment in Bule hora town.

1.3. Research questions

In order to achieve both general and specific objectives of the study, the respondents attempt to
answer the following basic questions.
1. What was the trend to increase the role of micro and small enterprise in the town?
2. How was the role of micro and small enterprise in the creation of employment in the town?
3. What were the sources of finance available for the development of micro and small enterprise
in Bule Hora town?
4. In what way the micro small enterprise improve the living standard of the poor in the Bule
Hora town?

1.4. Objective of the study

1.4.1. General Objective
The main scope of the study was to assess the allocation of budget from the government to
reduce unemployment in the Bule Hora town.

1.4.2. Specific Objective

The study has the following specific objectives:
1. To identify the trends used to increase the role of micro and small enterprise.
2. To describe the role of micro and small enterprises in the creation of employment
opportunities
3. To discover the sources of finances available for the development of micro and small
enterprise in the town.
4. To identify the way in which the micro small enterprise improve the living standard of the
poor in the town.

1.5. Significance of the study

The significances of this study were that, it would benefit the organization with some possible
situation. That means it would partially filled the information gap the study intended to achieve a
micro and small enterprise sector may get high emphasis after the study would be completed
because the study would give some insight to the town in the study area.
3|Page
1.6. Scope of the study
Even though the information gap or poverty and the role of micro and small enterprises were
nationwide. However, the study would be confine to only Bule Hora Town. Moreover, the study
would also investigated the trends of micro and small enterprise, employment opportunity of
micro and small enterprise, the major problems and possible solutions in the town
The micro and small enterprise bureau could also use the findings of the study as an input to their
figure development and others may share experience from the result of the study.

1.7. Limitation of the study

The researcher was faced different problem when the study was conducted. These limitations
were absence of well-organized data, unwillingness of respondent to give genuine response.
There were also poor development of instrument and sampling restriction. However, the
researcher was tried to convince the respondent to get reliable and valid information to finish
within the time span.

1.8. Organization of the study

This research contained five chapters. The first chapter would deal with the introduction part;
which contained statement of the problem, basic research questions, objective of the study,
significance of the study, limitation of the study, scope of the study. Chapter two would contain
related review of literature as a whole. Chapter three would deals with research methodology.
Chapter four would include presentation, analysis and interpretation of the data. Finally, the fifth
chapter consisted conclusion and recommendation of the study.

4|Page
 CHAPTER TWO

2. REVIEW OF RELATED LITERATURE

2.1 THE THEORETICAL STUDY OF MICRO AND SMALL ENTERPRISE
The term enterprise was used to mean all industrial, commercial, agricultural, services rending
and financial intermediaries. Enterprises were commonly classified in to four, namely; micro,
small, medium and large scale. There was no universally accepted definition of Micro and small
enterprises. Due to this, countries adopt their own working definition. The definition of micro
and small enterprise has usually been based such an either quantitative or qualitative; never the
less, many developing countries apply the first one qualitative definition were based on the
specific parameters such as number of employment, assets and sale turn over, type and
ownership (world Bank; 1998, cited in Addisu, 2010).
The micro and small enterprise sector was highly diversified sector and play predominant role in
the economy of most developing countries. It comprised relatively modern and traditional or
independent products and services to domestic markets. Micro enterprise usually exhibits its own
characteristics such as it was an informal sector activity located in rural area or an urban center.
The sector was ran by the owner or manger assisted by family members and it also used minimal
fixed tools and startup capital, usually the sector used indigenous, local raw materials. It requires
rudimentary skills and technologies. Mostly, it produced goods and services for low income
consumers and sold the product through personal contact with consumers. Some micro and small
enterprise produce capital goods more often such enterprises produce a wide range of
intermediate in puts and consumer good and also supply a large variety of services. They
produce poultry, involved in food processing, beverage, garments, construction, cattle rising,
wood and metal product, furniture, jewellery, and other miscellanies products. They work in
areas such as trade, transport, communication, laundry, restaurant and hotels (little: 1985, cited in
Adisu, 2010).
“Some of those enterprise may be linked with medium and large enterprise under sub contracting
arrangements for either supply input or using their by product and wastes. Women account for
relatively high preparation of owners or workers in the small scale enterprise sector, personal
saving. Micro and small enterprise was major sources of human resource development and save
as training ground which gives un skilled workers” (Andualem; 1996, cited in Adisu, 2010).
5|Page
Micro and small enterprise also played an important role in the process of a country industrial
development particularly in developing countries. A small labor incentives industry has been
favored basically to create employment opportunities in an economy with abundant unskilled
labor. They required low capital, indigenous resource and technology which help utilization of
national resources.
Small scale industry means any manufacturing formulation, alteration, prefabrication and
preparation activity organized with capital ceiling and carried using many motive power driven
machinery and equipment with a view to selling products in clouding engineering services.
In light of the above definition and taking in to consideration the Ethiopian situation may be
defined in the following ways:
Micro Enterprise were business activities that were independently and owned operated have a
small share of market, were managed by the owner and employing five (5) or less people.
Small enterprises were those businesses that employed up to 49 people. They share the small
characteristics with micro enterprise in other aspects.
Medium scale enterprise were those which have relatively high share in the market,
independently or jointly owned and managed by the owner or by the appointed executive and
employee 50 to 99 workers. Those enterprises that employee move than 100 people would be
considered as large enterprise.( Hailay2007)
Currently the government of Ethiopia in its Federal Micro and Small Enterprises strategy of 2006
(FMSES) defines micro and small enterprise based on the size of capital and level of
automations as follows. Micro enterprises are those businesses with paid up of capital not
exceeding birr 20,000 excluding high technology constancy firms and other high technology
establishment. Small enterprises are those business with paid up of capital above birr 20,000 and
not exceeding birr 500,000 excluding high technology consultancy and other high technology
establishment. Lack of standard definition is basic challenges facing all those who are want to
understand what those enterprises mean when does the micro become small and the small
become medium.

6|Page
2.2. THE ROLE OF MICR AND SMALL ENTERPRISE
2.2.1 Supporting Large and Gain enterprise
The interdependence of micro, small, medium and large enterprises in Ethiopia and across the
world was one of the basic realities in the economy. The facts that, some functions were more
expertly performed by small business enable the small enterprise to contribute to the success of
the large ones. If small businesses suddenly go out of operation, the fate of the big enterprises
would be in danger. The major contributions of micro and small enterprise in supporting large
and giant enterprises could be classified in to distribution and supply function.

2.2.1.1 Distribution Function

To distribute and sell their products large enterprises should have whole sale and retail out lets.
The vital role of small business in distributing the product of both large and small manufactures
was evidenced by its dominance of retailing scene.

2.2.1.2 Supply Function

Small businesses also act as suppliers and subcontractors for large firms. Specially, in developed
world, the final products of small enterprises serve as raw materials of the big enterprises. The
relationship between cotton producer’s small enterprises and garment factories of Ethiopian, for
instance, cotton which was the final output of small enterprise was the raw material of Akaki
Garment factory, Bahir Dar Textile factory or Kombolocha Textile factory. On the other hand,
micro and small enterprise industries also purchases raw materials, equipment, and supplies from
large firms.

2.2.2 Source of Innovation

Some studies of patent records shows that, the majority of the 20 th century innovations were the
result of individuals or small scale enterprises. The current sophisticated Air Engine was
innovated by the unreserved efforts of the two brothers, white and Albright. Big enterprises
research centers of the time were not successful in devising equipment that flies on the sky from
continent to continent. The presence of millions of small business tends to stimulate progress by
providing many centers of initiative and source of innovation.

2.2.3 Stimulating Economic competition

In economy where there was no competition, the quality of products and services provided to the
customer highly depends on the self-interest of the business person. This was because the
customers do not have different alternatives to compare and select the best organization that
gives prompt services and quality product at a reasonable price. Thus, the establishment and

7|Page
existence of small and micro enterprises, has a great contribution in stimulating economic growth
of the country by making individuals to be driven by self-interest to act in socially desirable
manner.

2.2.4 Creating Employment Opportunity

The establishment and existence of micro and small scale enterprises all over the world has given
rise to the opening of new jobs. In Ethiopia, after the proclamation of free market economy,
many, private small business organization have been established. These small enterprises have
widened the chance employment for many persons (AUC, 2006).

2.3 Problems of Micro and Small enterprise

It is clear that, the small business enterprises found all over the world were not operating
smoothly.

2.3.1 Lack of Managerial skill

It was evident the most without any problem. They were experiencing peculiar problems like:
Micro and small enterprises management teams do not possess managerial skills that the work
deserves. This was because; the owner of the business was at the same time the manager. He/she
was responsible to pass major decisions alone and to accomplish daily routine activities that
require a diversity of talents. It was true that the micro and small enterprise managers also failed
to exercise the highest quality of management as they were bound by tradition.

2.3.2 Financing
The major problems of many micro and small enterprises were lack of capital and credit. Long
term capital was a particular need of many small firms. Borrowing money from banks was
sources of long term capital. However, fulfilling the requirements of banks to get loan and the
corresponding high interest rates were heard breaking to the sector.

2.3.3 Tax
Like any business organization, micro and small enterprise were also supposed to pay different
taxes by law. Reduction of tax from their annual profit was critical for them as they naturally
have capital source problem.

2.3.4 Problems of Selecting Qualified Personnel

Small business enterprises managers have a problem of selecting the right applicant for the right
position. This was because the managers themselves lack the skill or have little knowledge to
select competent employees (AUC, 2006).

8|Page
2.3.5 Marketing
Micro and small enterprises do not have clearly defined policy when to advertise, which media to
use channel of distribution, product differentiation, marketing strategy and other issues like wise
constitute significant problem for micro and small scale enterprises (AUC 2006).

2.4 Micro and small Enterprise as Vehicles for Poverty Reduction,

Employment Creation and Business Development
In many countries, there was now a wide recognition of the contribution of micro and small
enterprises to economic growth: In across-section of both developed and developing economics,
the contribution of the sector to total employment, entrepreneurship and innovation cannot be
underestimated for example, this sector generates about 6.2% in Japan and about 70% European
union (EU) countries (Creater and Jones, 2004; cited in Forum for social studies (FSS); 2011).
The potential advantages of a dynamic the sector have generated high expectations in many
developing countries about the contribution of this sector to job creation and poverty reduction.
Add to this the optimism that the full development of the sector can foster competitiveness in the
economy and achieve a more equitable distribution of benefits of economic growth in both
developed and developing economies. Such considerations have motivated many governments to
put in place national policies to stimulate the growth of this sector in services, distribution and
manufacturing-related economic activities.
Throughout the 1950s and 1960s, the currently vibrant Asian economies greatly benefited from
the growth of micro and small enterprise sector. Government of these nations pursued a strategic
focus on export-oriented medium-sized enterprise that fuelled the overall industrialization
process and helped penetrate the international market place. The success of the sector lay in the
fact that these firms were adopt at applying technology and training to address the needs of
growing markets. Additional success factors include, mutually cooperation that led to exchange
of information and know-how and thus rendered individual firms less prone to risks, not to
mention government support in technological extension services, including research support and
information on sources of technology and encouraging linkages and networking among
enterprises (UNCTAD 2005; Kual, et al. Cited in FSS, 2011).
Given the enormous differences between the socio-economic background of Asian countries and
other developing nations, a direct replica of Asia experiences may not be a realistic option. With
this provision, however, it is extremely important that developing countries take useful cues from
the Asian experience in their attempt to develop the micro and small enterprise sector and make
9|Page
it a robust engine of economic growth and employment creation. In this regard, recommended
steps include appropriate macroeconomic policies, an out ward orientation with focus on export
promotion, measures to attract foreign direct investment; and effective selective interventions are
suggested as essential options (Hawkins, 1998; cited in Fss, 2011).
From the perspective of developing countries, MSEs have a number of advantages that make
them attractive in accelerating economic growth.
First, because micro and small enterprise fairly labor intensive employment opportunities are
generated with relatively low capital cost. Secondly, they utilize raw materials and labor-
intensive technology that are domestically available. Thirdly, policies and programs can be put in
place to encourage the development of these industries indifferent parts of the country there by
reducing concentration of enterprise in certain areas and promoting balanced economic growth.
Four they, manageable production capacity and their flexibility make them suitable to respond to
current national demand and the limited size of the market in many developing nations (Fasika
and Daniel 1997; Andualem 2004, cited in FSS 2011).
Micro and small enterprise can contribute tremendously to the growth of national economies.
However, many developing countries have not been lucky to benefit from the growth of this
sector mainly due to institutional and policy constraints, ill-conceived development strategies; a
complex legal and regulatory environment that hinders the development of the sector; shortages
of adequate business development services, including lack of access to finance, markets and
business skills and appropriate technology are to be blamed for lack of success.
Within Ethiopian context, despite the potential contribution of the micro and small enterprise to
poverty reduction and employment creation, the government had not until very recently extended
adequate support to the development of sector. Shortly, there have not been meaningful
government support in-terms of recognition and access to finance and skilled required for
operating small business and enterprise profitably and efficiently (Eshetu and Zeleke 2008, cited
in FSS 2011). This has meant that this sector is at its infancy and there for needs a major
institutional and resource boost to contribute to the country’s program of sustainable
development and poverty reduction.
On the other hand according to the house hold income consumption and expenditure survey
(HICES, 2004/05 cited in Fss 2011); urban poverty incidence has increased from about 33% in

10 | P a g e
1995/96 to about 35% in 2004/05. At present the urban unemployment rate stands at a staggering
25% of the employable population.
These two hard realities have forced the government of Ethiopia to turn to the micro and small
enterprise sector as a strategy that can have a lasting effect on reducing urban poverty, creating
employment and bringing about overall growth in the business sector. As government plan is to
reduce urban unemployment through support for small and micro enterprises and acceleration of
the creation of urban-based employment, including vocational and technical training program, a
community based and labor intensive urban works program; expanding micro finance institution
and providing market support and services, premises for micro and small enterprise.
This is also reflected in the national urban development policy which as two main packages:
i. The urban development packages; and
ii. The urban good governance packages
The objective of urban development package are to reduce unemployment and poverty, to
improve the capacity of construction industry, to alleviate the existing housing problems, to
promote urban areas as engine of economic growth and to improve urban, social and economic
infrastructure particularly for youth .
Among the pillar packages micro and small enterprises development program is the major one.
The micro and small enterprise development program under urban development packages (2006)
has the following objectives:
 To reduce urban poverty and unemployment by supporting micro and small
enterprise;
 To achieve fast growth through the creation of linkages between micro and
small enterprise with medium and large enterprises;
 To promote the economic linkages between urban and rural areas.
The development of micro and small enterprise therefore, has been footed as a vehicle to reduce
poverty and create jobs for the creasing number of graduates out of the nation’s technical and
vocational education training institutes. Accordingly the government has ear marked significant
resources for the expansion the sector in the different regions.
This program has set ambitious goals to attack urban poverty and reduce unemployment in the
urban areas of the country. Among other things, it planned to create employment opportunities
for 1.5 million residents in 825 towns over the period 2005/07 to 2009/10. According to the

11 | P a g e
program 50% of these beneficiaries will be women; and the government plans to invest birr 6.2
billion and provide 4900 hectares of land for micro and small enterprise development (FSS,
2011).

2.5 Micro and Small Enterprise Policy and strategy in Ethiopian

Designing and implementing appropriate economic policy, strategy, and legal and regulatory
framework are prerequisites for creating and enabling environment to promote the sector. In
Ethiopia it could be argued that deliberate effort to promote micro and small enterprise was
relatively recent. In line with its ideology, policies and regulations of the Dergue` regime aimed
at eliminating the private sector. Restrictive policies such as fixing a ceiling on industrial capital,
introducing one man-one license rule, favoring state organizations in availing foreign exchange
and bank loans, limits on single borrower loans, restrictions on license and investments, absolute
priority given to the public sector in access to trained qualified manpower, etc were in place. In
general, the legal requirements to obtain licenses during the Dergue were bureaucratic which
discouraged the participation of micro and small enterprise operators. The tight for high
exchange control and heavy import restrictions had created scarcity of imported commodities
and corrupt and rent seeking business community (GebreHiwot and Wolday 2001).
Following the regime change in 1997, drastic measures, intended to transform the command
economy to market led-one, many of which were bound to affect micro and small enterprise,
were taken. The main macro-economic reforms and restructuring that, directly or indirectly,
affect the development of micro and small enterprise, include; adoption of market economic
policy; deregulation of domestic prices; devaluation of the local currency; privatization of public
enterprises; decentralization and devaluation of power and the formation of regional states;
formation of a new labor law; financial sector reforms including, the opening of private banks,
insurance companies and microfinance institutions. The reform also included the monetary
management and liberalization of interest rate and foreign exchange market; fiscal policy reform
including tax reform, budgetary restructuring and reduction of government deficits; introduction
of investment laws to encourage private investment; liberalization and promotion of foreign
trade; and promotion of favorable economic environment and bilateral, regional and multilateral
international relations. There were also focused measures including the issuance of the National
Micro and small enterprise strategy (1997) and establishment of the federal Micro and small
Enterprise Development agency (Gebrehiwote and Wolday, 2001).

12 | P a g e
The strategy stresses “various policies, structural and institutional related problems and bottle
necks” have constrained the role of the micro and small enterprise sector in and contribution to
the national economy. It has primarily aims at creating enabling legal, institutional and other
supportive environments for the development of micro and small enterprise. The specific
objectives of the strategy include: facilitating economic growth and bring about equitable
development; creating long-term jobs, strengthening cooperation between micro and small
enterprise providing the basis for medium and large sale enterprises, promoting exports and
balancing preferential treatment between micro and small enterprise and bigger enterprises. The
intended micro and small enterprise support includes erecting legal framework; improving access
to appropriate technology, information, advice and markets, and developing infrastructure. The
strategy also states its intention to the strengthen private sector associations and chambers of
institutions are expected to be involved in providing support to the sector.
Take at face value; it would appear that these measures would go a long way in promoting micro
and small enterprise, in the country. However, a study by the ECA (2001) concluded that
countries such as Cameron Ethiopia, Gabon, Nigeria, Senegal and Uganda have shown that the
policy environment in which micro and small enterprise operated proves to be a major handicap
for their expansion and growth. The same study repeals that the complexity of the customs
system and the many forms and declarations required have had a negative impact on the general
business climate, diverting entrepreneurs’ efforts from more productive tasks. The tax levied on
imported raw materials was often higher than that on imported finished products that uses the
same raw materials. The result was a substantial increase in the production cost of micro and
small enterprise operators that require high taxed imported inputs, thereby limiting their
competitiveness. In Ethiopia, the infrastructure was also evaluated as particularly disabling.
As argued in Asmelash, (2007), among the measures needed to support Micro and Small
enterprise development were:
1. Undertake a though review of the policy and regulatory environment with the aim
of determining their weakness and learning from best practices and produces in
manner that will stimulate the growth of micro and small.
2. Regular review policies to determine their effectiveness; and
3. Continued effort to harmonize laws, regulations and procedures at national and
regional level.

13 | P a g e
2.6. Empirical Study
As far as micro and small enterprise impacts were concerned, some researchers have been
recording some positive results. For instance, (Mohammed,2016), the role of micro and small
enterprise industries were important in a developing country like Ethiopia for reducing
unemployment, eradicating poverty through growth process of economy, create employment
generation, mobilization of resources and entrepreneurial skill and better utilization of local
resources, equitable distribution of income, rural development and creating regional balance in
promotion, growth of various development activities and supports the growth of large industries
by providing components and semi-finished.
( Erma’s ,2017) viewed that micro and small enterprise was very important for reducing
unemployment and poverty among vulnerable groups , has a potential to support the Ethiopian
economy in achieving its development goals, creation for high valued-added industries, to
increase income and domestic saving ,promotion of large-scale manufacturing industries, to
create employment opportunities, creation of female-oriented business and creation for
investment.
Despite the growing importance of micro and small enterprise provision to the productive poor
people, there were only a few studies conducted in the area, particularly on impact assessment in
Ethiopia.
According to mead and Liedholm (1998-69) and Ha(2003-2005), the main role of Micro and
Small enterprise in developing countries was not their small size but their isolation, which
hinders access to the market, as well as to information, finance and institutional support.
The argument that small business in Ethiopia was crucially in the role they play in employment
creation and general contribution to economic growth was not new. Although this may be true,
the vast majority of new enterprise tends to be one person establishment.
In his research, Dereje (2008) studied the nature, economic performance, opportunities and
challenge of micro and small enterprise in the construction sector. The result of this study is
revealed that the main constraints of the micro and small enterprise were shortage of capital, lack
of raw material, absence of government support, lack of market, lack of credit facility and high
interest rate. The study were also conducted specifically with a purpose of identifying the
problems that micro and small enterprise encounter.

14 | P a g e
2.7. Conclusion and Knowledge Gap
There were so many researchers were done regarding to this title, most of them were study on the
impact perspectives and their performances, this study would be focused on the role of micro
small enterprise to reduce unemployment, improving the standard of the people, the way in
which achieving its goal and the general effect on the poor.
Different scholars were discussed in the theoretical as well as empirical literature regarding to
this topic. They concluded that the various importance of the role of micro and small enterprise
in reducing unemployment in Ethiopia at national and regional level. I.e. Mohammed (2016) on
similar topic tried to recommended that the role if micro and small enterprise industries were
important in developing country like Ethiopia by reducing un employment, eradicating poverty,
mobilization of resources and better utilization of local resources. Erma’s (2017) viewed that the
role of micro and small enterprise was very important for creation of investments to increase
income and domestic saving and promotion of large scale manufacturing.
Dereje (2008) studied that the challenges of micro and small enterprise in the construction sector.
The constraints of this study were shortage of capital, lack of raw material, absence of
government support, lack of market, lack of credit facility and high interest rate.
Here the research gap is that the former researchers those who are discussed in the empirical
review were focused only on the importance of the micro and small enterprise in reducing
unemployment. Among them Dereje was focused on the challenges of the role of micro and
small enterprise in the construction sector. But they do not investigate that lack of good
awareness of the society, lack of good management, corruption by government officials to the
allocated by government and in adequate allocation of resources from the government. So in our
study we are filled this gap by dealing with this problem.

15 | P a g e
CHAPTER THREE

RESEARCH METHODOLOGY
3.1. Research Approach
To carry out this study, we would use descriptive form of research design this was because
of the main objective of this research would to assess the major challenges of micro and
small enterprise in Bule Hora town. The study would be used qualitative and quantitative
research design because research to select qualitative research approach was to know
feeling, thinking and activity of employees.

3.2. Nature and Data sources

To get more reliable and accurate data for effective achievement of both general and specific
objectives, the study would use both primary and secondary data sources.
Primary data was obtained from close ended questionnaires and open ended interview, while
secondary data would be gathered from secondary sources, annual reports, published and
unpublished materials.

3.3. Sample size and sampling technique

The target population was decided to be the active labor forces who are engaged in micro and
small enterprise sector and those bosses from micro and small enterprise bureau. There are 720
workers in the town who were performing their individual activities in different fields such as
town agriculture, industry, construction and, services. The sample size was designed to 88, by
using stratified random sampling technique and by taking 10% as precision or error.
In this study , the researcher would use probability sampling technique. From probable sampling
techniques, the researcher would use stratified random sampling because, the nature of the
population was heterogeneous. In the study area the target population consists of several sub-
groups that have different characteristics. To apply stratified sampling the researcher has
followed some steps. First, forming strata on the basis of common characteristics. The
stratification factor was based on occupation of the target population in which they were
engaged. Second, the size of sample respondents in each stratum was decided by adopting
proportional allocation in accordance with the size of target population in each stratum. In order
to avoid biasness and to give equal chance for each population being selected in relation to their
population in the total population, the researcher adopted simple mathematical formula suggested
by Tayro Yamane (1967) for determining sample size.
16 | P a g e
 n=N/1+N (e) 2
Where; n=sample size,
N= total population
e =precision
Therefore n=720/1+720(0.1)2 =88
Sample size for agriculture=75/720*88=9
Sample size for industry =288/720*88=35
Sample size for construction=68/720*88=8
Sample size for service =225/720*88= 27
Sample size for trading =64/720*88=8
Field No of MSE workers Sample size
Town agriculture 75 10
Industry 288 35
Construction 68 8
Service 225 27
Agro processing 64 8
Total 720 88
Source; Researchers own computation

3.4. Tools and methods of data collection

For the purpose of data collection the researcher applied both questionnaire and interview.
Primary data was collected by using open ended and close ended questionnaires from micro and
small enterprise workers, while structured interview was used to obtain information from micro
and small enterprise bureau workers or bosses. On the other hand secondary data would be
collected by referring the available published and unpublished books, documents and annual
report materials.

3.5. Methods of data analysis

The data collected from primary and secondary sources would be arranged organize and present
systematically. To analyze the organized data, the researcher would be used both quantitative

17 | P a g e
and qualitative methods. The data that was gathered from respondents in the form of close ended
questionnaires would be analyzed through quantitative technique by using tables, percentage and
graphs, whereas the data which would be collected from respondents in the form of open ended
questionnaire and interviews, would be analyzed through qualitative or simple descriptive
method.

18 | P a g e
CHAPTER FOUR

4. DATA ANALYSIS AND INTERPRETATION

This part of study deals with analysis and presentation of data gathered from sampled population
(micro and small enterprise workers, and office boss) and documents of the town, micro and
small enterprise bureau, through questionnaire and interview. From 720 total populations the
sample size was 88. Data was also obtained from the interviews conducted with micro and small
enterprise officials. Therefore, the analysis was made based on the information obtained from the
respondents supplemented by the data obtained from office documents. The gathered data were
analyzed by using tables, graphs followed by discussions.

4.1 The Demographic and socio-economic background of Micro and small

enterprise operators
4.1.1 Age and sex distribution
Sex structure was one of the demographic factors which affect the socio-economic activity of the
micro and small enterprise workers. As a result, this study identified the sex structure of the
micro and small enterprise workers as follow.
Table 4.2 the age structure of micro and small enterprise workers
Sex No of respondent Percentage
Male 47 53
Female 41 47
Total 88 100
Source: Questionnaires of 2019
The above table shows that the enterprises are owned by both sexes. Out of the total sample of
enterprises, 53% were owned by males, whereas the remaining 47% were owned by females.
This implies that the enterprises were dominated by males.
Workers have their own implication in alleviating poverty. It was because the involvement of
economically active population in a given economic activity has increased the productivity of the
micro and small enterprise sectors.
The age structure of the respondents has its own implications in alleviating poverty. It was
because the involvement of economically active population in a given economic activity
increased the productivity of the sectors.

19 | P a g e
Table4.2 the age structure of the workers
Age Number of respondents Percentage
18-28 30 34
29-39 28 32
40-50 15 17
51-61 10 11
Above 61 5 6
Total 88 100
Source: Questionnaire of 2019
Table 4.2 shows that, about 34% of respondents were between 18-28 ages which include
economically active age population which in turn implies that the sector was dominated by
young age groups. And the other 32% of age groups were categorized under the age of 29-39
which involves economically active population. Furthermore about 10% of the workers were
grouped under the age of 51-61. Generally the sector has been dominated by bread winner
(economically active population) which indicates that these economically active populations
have potential to reduce poverty and improve the wellbeing of their family in the study area.
More over there is no participation of economically dependent population in the sector with any
impact on the economic development of the town.

4.1.2 Educational status

Educational status of the respondents can facilitate and create new creativity, knowledge, new
job which has great implication in creation of employment, reduction of unemployment, income
generation, improve the life quality and wellbeing of the society and finally alleviating poverty
from the community. As the result this study identified the educational status of respondents in
the following table as follows.
Table 4.3 Educational status
Education level Numbers of respondents Percentage(%)
Certificate 43 49
Diploma 35 40
Degree 10 11
MSc 0 0
Total 88 100

20 | P a g e
Source; Questionnaire of 2019
According to the survey result, about 49% of the respondents have certificate and 40% of the
workers were joined diploma. More over 11% of the respondents have completed their degree
program with different knowledge and experience which enable them to manage their business
properly. This proper managerial skill in turn enables the micro and small enterprise worker to be
profitable and improve their livelihood by minimizing poverty.

4.1.3 Marital status and family size

Marital status Numbers of respondents Percentage
Single 35 40
Divorced 6 7
Married 45 51
Widowed 2 2
Total 88 100
According to the survey, about half of 51% the respondents were married. This indicates that a
person who was engaged in the sector can feed or fulfill all the requirements which is needed by
the family members.

4.2 The Nature of Enterprises

Micro and small enterprise operators were engaged in different enterprises in the town with
different activities. Town agriculture comprises activities related to fruit and vegetation, poultry
production, dairy farming and bee production. Construction includes building, road and bridge
work and water pipe work. Manufacturing enterprise include activities like, wood work, metal
work, weaving and pottery. Hotels, barker, and commodity trade are the major activities included
in service sector. The other enterprises which include ‘injera’, bakery, and loading and unloading
activities are grouped under agro-processing enterprises.(Bule Hora town in 2019

21 | P a g e
Fig 4.1 number of MSE establishment

Num
ber of
MSE
44
establ
ishme 40 38
nts
30

19
9
Year
2014 2015 2016 2017 2018 2019
Source: Adopted from Bule Hora Town MSE office Survey, 2019.
As indicated in figure 4.1 the number of establishment were 9 in 2014 and it has increased to 19
in 2015. Furthermore the establishment of enterprises has increased to 44 in 2017. However, it
shows slightly decline in 2018 and 2019.Generally, the data indicates that there was no
consistency in the growth of enterprise in the town. Their inconsistency is manifested by the
increment in one year and decline in another year particularly in 2018and 2019which exhibit
decline in terms of enterprise establishment. This is due to imbalance between supply and
demand in the market, lack of access to finance, lack of work premises, government support
which hinders their development and growth in the town. .

4.5 Financial and income status of micro and small enterprise workers
Finance was the major factor for enhancement of poverty reduction in the study area.

4.5.1 Initial capital

Initial capital is the most decisive factor for micro and small enterprise workers to start up their
business. As the result the study identified the initial capital of workers in the following table.
Initial capital( in birr) Numbers of respondents Percentage (%)
Less than 1000 31 35
1000-1500 44 50
1500-2500 6 7
2500-3000 7 8
Total 88 100
22 | P a g e
According to the above table about 35% of the have started their business with the capital of less
than 1000 birr; whereas about 50% of the respondents have started the business with 1500-2500
capital. And 6%started with 1500-2500 birr. However, only 7 of the workers have started their
business with more than 2600 birr. This indicted that micro and small-scale enterprises were
flexible to start a business with minimum initial capital.

4.5.2 Source of capital

Source of income is major factor that hinder and encourage the workers to start up or not to start
up their business. Therefore, this study discussed the major source of income as follows.
Source of finance Numbers of respondents Percentage (%)
Personal saving 17 19
Credit from relatives 5 6
Credit from micro finance 46 52
Credit from Bank 20 23
Total 88 100
Sources; Questionnaire of 2019
According to the survey, there are many source of capital for the micro and small enterprise
workers. As indicated in the above table about 52% respondents have got finance from micro
finance. However, only about 23% of the workers can access money from bank. It is possible to
conclude that the probability of the workers getting loan from formal finance institution
particularly from bank are very low because of their complex formalities like, asking grant and
from groups.

4.7 Types of Business operated by Micro and Small Enterprise.

The micro and small enterprise workers have engaged in different business enterprises (field of
work so as to make busy themselves at work to reduce shortage of income and to minimize
poverty. This study identified the major business enterprises in which the micro and small
enterprise workers worked.

23 | P a g e
Table 4.15 shows these business enterprises as follows.
Business enterprise( field of Numbers of respondents Percentage (%)
work)
Manufacturing 14 16
Service 21 24
Town-agriculture 22 25
Construction 19 22
Agro processing 12 13
Total 88 100
Source: Questionnaire of 2019
As indicted in the above table 14(16%) of respondents are engaged in manufacturing business
enterprise: whereas 22(25%) of respondents are engaged in agriculture sector. This indicate that
both manufacturing and service sectors are more labor intensive that absorb large labor force and
have high potential to create job opportunities for other many workers in the study area.
Generally, it is possible to conclude that these two business sectors are the major means of
source of income for large number of micro and small enterprise workers in the town and are
means of tools to improve the wellbeing of the worker by reducing poverty.

4.9 The improvements of Micro and small enterprise workers

It is obvious that the wide speared of the sector in different area with different activities have its
own great role in the improvement of house hold, workers and workers in terms of income
generation, personal saving, and grant for their family member and personal well-being.
According to the survey gathered from the respondents, there is a significant improvement in
their life. The major improvement of the employees because of their engagement in the sector
was; they are able to be self-sustained. They were dependent on their family before joining the
the sector, but now they were independent. Accordingly other than being self-sustained, they also
able to support their family. The other improvement of the employees they developed the habit
of saving money from their income which enabled them to educate their children, to have their
own house, even able to create job opportunities for others by invest their capital on other similar
field of work. Generally, micro and small enterprises were the major tools for micro and small
enterprise employees to improve their wellbeing which has great role in alleviating
unemployment and poverty directly or indirectly in the study area
24 | P a g e
4.10 Strengths of Micro and small enterprise in the town
According to the survey, the sector has a recognizable strength in the town. They have crucial
role for income generation and has important role for employment creation. This means the
sector were labor intensive and create more opportunity for both skilled and unskilled man
power. As the result, these sectors were source of productive and skilled labor force form
medium and large enterprises. They also train workers in much less cost than formal training
institution. The other role of these sectors were in terms saving foreign exchange by providing
import substitution goods such as by using locally available raw material as means of production.
Generally, micro and small enterprises of the town essentially improve the living standard of the
house hold in terms of income generation, employment creation and use of locally available
resources.

4.11 Major constraints of Micro and small enterprise in the town

Even though, micro and small enterprise has a great contribution for the improvement of living
standard of the house hold, it has a lot of problems that hindered their growth and development
in the town. According to the survey, gathered from the respondents, among the major problems
and constraints of micro and small enterprise development in the town are: lack of finance and
accessibility to credit services, lack of work premises, problem in marketing and demand for
their product, lack of institutional support, taxation and infrastructure problems.
In the town the sectors have a problem of finance. When establishing small business enterprises,
most individual sources of finance come from personal saving and loan acquired from relatives,
friends and money lenders with high amount of interests.
According to the survey the problem of finance is getting worsened because government as well
as private banks don’t show an interest to grant loan. This was due to the fact that the sectors
don’t meet banks collateral requirement and project study proposals.
Lack of work premises and market place was the other determinant factor affecting productivity
and economic activity of employees in the town. Small enterprises do not have the capacity to
buy land and build their office and sales out lets adjacent to market, streets and other
infrastructures. According to micro and small enterprise workers another problem of the sector in
the town was marketing problem. These problems can be associated with lack of demand for
their products due to the production place was far from the center of the market. This implies that

25 | P a g e
most of the enterprises are found far from the center of the market place of the town and have no
comfortable place for their customers.
Lack of institutional support was other major problem for the development of the sectors in the
town. According to the survey about 19% of respondents did not get any institutional support.
But according to some other respondents and the micro and small enterprises through
instruments like consultancy, training, information delivery and provide different infrastructure
which facilitate the business activity of the sectors.
The growth and expansion of micro and small enterprise was directly related to the
infrastructural development. But due to under developed infrastructural facilities like supply of
electric power, water and road are adversely affecting their activities.
High taxation also the major problem and constraint for most of the employees.. Like any
business organizations, micro and small enterprise were also supposed to pay different taxes.
Reduction of tax from their annual profit was critical for them as they naturally have capital
source problem.
Generally, it is possible to conclude that because of the above problems and constraints the
sectors were not contributing to the development of the economy to the level they are expected.
Thus, government and NGOs, should give them special attention so that they can help to reduce
the accelerating rate of unemployment and contribute a lot in alleviating poverty in the town.

4.12 The Objective of Micro and small enterprise Establishment

According to the survey gathered from interviewee the main objective of establishment of micro
and small enterprise were to reduce unemployment and poverty in the study area as well as in the
town through the expansion of micro and small enterprise sector throughout the town and to
make people the owner of skills, invention and new technology by the provision of training and
education by expertise coming from region and zone. However, according to the survey collected
from respondents and office staff members, the intended objective has not been achieved because
of some bottle neck factors. These bottle neck factors are: lack of finance and accessible credit,
lack of work premises and market places, problems in marketing and demand for their product,
lack of institutional support, taxation and infrastructure problems. Accordingly, the officials have
plans to fill the gap and to expand the sectors in wide area coverage to achieve the objectives
what they are intended.

26 | P a g e
CHAPTER FIVE

5. Conclusions and recommendations

5.1. Conclusions
The trend of micro and small enterprise development based on their establishment and number of
employed man power for about five consecutive years between 2014-2019 has shown interrupted
increment and decrement. Up to 2019 both have shown increasing trend but in 2018 and 2019
have shown decline. Therefore, it can be concluded that the trend of micro and small enterprise
development in the town is inconsistency. This was because of lack of access to finance and
credit services, lack of work premises, problem in marketing and demand for their product, lack
of institutional support, high taxation and infrastructural problems.
The micro and small enterprise sector has created job opportunity for about 720 workers in the
town who are engaged mostly in manufacturing and services sector. Therefore, it can be
concluded that manufacturing and service sector are major labor intensive in the town. The
majority of these sectors obtained their finance source from their relatives and personal saving.
The sector also dominated by male owner than female by sharing about 53% and 47% of
ownership respectively.
Because of the created job opportunity the micro and small enterprise workers and their family
can improve their life standards in many ways. They can stand with their two legs and can
support others by invest their capital. They have their own house, developed the habit of saving.

The sector has faced a lot of problems like, lack of access to finance, in adequate allocation of
resources from government, lack of good awareness of the society, lack of good management
and corruption by government officials to take the budget allocated from the government.

5.2. Recommendations
The development of micro and small enterprise has played a crucial role in the economic
development of the country in general and for Bule Hora town in particular. Therefore, giving
attention to the sector was important, because this was essential to reduce unemployment and
poverty in the town. As a result, the researcher recommended that the government bodies, non-
governmental organizations and individuals should encourage and provide access to minimize
hindrance factors of micro and small enterprise development in the following manner.

27 | P a g e
Accessing to finance:-The micro and small enterprises has financial problem to start and expand
their business. Therefore, financial institutions like banks and microfinance should simplify their
ridged formalities and the offices of the sector should have positive relationship with financial
institution and employees so as to facilitate and develop the sector in the town.
Provision of work premises and market place:-Work premises and market places were very
important for micro and small enterprise employees. Because they need place to produce goods
and to sale their products. Therefore, the city administration and municipality should supply
work premises and market places for them.
Providing institutional support:-To develop the micro and small enterprise sector in the town
there should be integrated institutional support. Therefore, the government should provide
institutional support for and sale their final product. Therefore, the city administration should
create suitable condition for the sector.
Develop infrastructures:-Infrastructures like, water supply, electric power and road were very
essential for micro and small enterprise development. Therefore the government should construct
this infrastructure in the town to facilitate the development of this sector, because without
infrastructural development it was impossible to bring development in the town.
Reduce high taxation:-One of the basic problems and constraints of micro and small enterprise
Sector was asking of high tax than their annual profit. Since they were in the infant stage, they
need some incentive than to be taxed because they have naturally capital source problem.
Therefore, the town trade and industry bureau should adjust the tax system again at least to make
balance or proportional with their annual income.

Generally, the government, nongovernmental organization, and individuals have applied in to

practice on the ground that the micro and small enterprises sector would grow and developed
rapidly. They also have high potential to absorb both skilled and unskilled labor force and also
have high potential to reduce poverty not only the micro and small enterprise workers but also
the surrounding people by creating job opportunities for them by invest their capital in different
field of work in the town.

28 | P a g e
REFERENCE
Adisu mekonnen, (2010). Contribution of micro and small enterprise for improving the living
standard of house hold unpublished.
Asmelash,(2007).support of Micro and small enterprise development.
AUC (2006) small business management, Addis Ababa, Ethiopia unpublished
Dereje (2008) the nature and economic performance of micro and small enterprise.
FSS, (2011) micro and small enterprise as vehicle for poverty reduction, employment creation
and business development.
Gebrehiwot.Aand Woldey.A(2011)Ethiopian journal of economics .AddisAbaba, Ethiopia.
Hailay, (2007) entrepreneurship and small business management(second edition) Mekele
University faculty of Business and Economics.
Mead and Lied holm (2003-2005) the role of micro and small enterprise in developing country.
Mohamed (2016) The role of micro and small enterprise industries.

29 | P a g e
 APPENDIX
BULE HORAUNIVERSITY
COLLEGE OF BUSINESSAND ECONOMICS
DEPARTMENT OF ACCOUNTINGANDFINANCE
Dear respondents:
We Ali and Wako are the undergraduate students in department of Accounting and finance from
Bule Hora University. Currently we are under taking a research entitled the role of micro and
small enterprise in reducing unemployment in case of Bule Hora town. To achieve this purpose,
to deeply investigate the case your response to the questions given below has a crucial value.
Therefore, you are kindly requested to read the questions carefully and give accurate and real
data which exists on the ground. The response that you reply will not be used for any other
purpose other than this research work, so be free and give your honest and genuine response.
Direction:
 Please answer the question by putting. “  ” Sign on boxes
 No need to write your name in the questionnaire
 Your response could be kept confidentially
 You can use extra paper for your additional information
Part one: personal Information
1, Gender; A) Male B) Female
2, Age of respondents; A) 18-28 B) 29-39 C) 40-45 D) above45

3, Educational background; A) Certificate B) Diploma C) Degree D) MSc

4. Type of the business/sector;
A) Industry. B) Town agriculture. C). Construction
D) Services. E) Agro processing
5. Marital Status; A) single B) married C) divorced D) widowed

Part Two: Specific Information

1. Number of members: a) at start up b) at this time

2. What are factors motivated you to involve in this business? (More than one answer is possible)

30 | P a g e
 Statement Respondents

1st 2nd 3rd 4th

Profitability of business

Lack of employment
alternative
Good government support
Previous experience

3. Amount of your capital in Birr

A) At start up B) Now
4. What were the sources of your start-up capital? (More than one answer is possible)
Respondents
Statement
1st 2nd 3rd 4th

Personal saving
Micro finance
Borrowed from friends and relative
Equb
Assistance from NGOs

5.If you answer for question 4 is “Yes” how did you acquire these capability?
Respondents
Statement
1st 2nd 3rd 4th

Training

Experience

Education

Naturally

6. Is there your making profit?

A) Yes B) No

31 | P a g e
7. For what purpose do you use the profit of your business?
A) For household consumption B) For saving C) For business expansion
8.) Type of employee
A) Full time workers. C) part time workers
B) Paid family members. D) unpaid family members
9. Are your employees qualified or trained in the area?
A Yes B). No
10. The legal form of ownership
A Sole proprietorship. B) Partnership
C) Joint venture. D) Corporation
11. Which promotion campaign your business use?
A) Posters B) Trade fair
C). No advertisement D) Business card. E) TV, Radio and others
12. What is your future plan?
A) Stop operation. B) Maintain production at the same level
C) Expand Capacity. D). reduce capacity
13. If your answer is Stop, why?
________________________________________________________________________
________________________________________________________________________
14. What were the problems you face?
A. At the time of establishment of the business
________________________________________________________________________
________________________________________________________________________
B. Running the business
________________________________________________________________________
________________________________________________________________________
What were your solutions?
C. For problems at the time of establishment of the business
________________________________________________________________________
________________________________________________________________________
D. For problems at the time of running the business
________________________________________________________________________
_______________________________________________________________________

32 | P a g e
 Part three; Interview Questions for micro and small enterprise bureau workers
1. What type of policies or strategies uses for the growth of micro and small enterprise sec-
tor workers in Ethiopia in general and Bule Hora town in particular?
2. How do you see the link between gender and involvement in the micro and small enter-
prise activities?
3. How do you evaluate the role of micro and small enterprise in reducing unemployment?
4. What are major role of micro and small enterprise in the creation of employment in Bule
Hora town?
5. What are the success and failure histories while starting the business up to now?
6. How do you see the working environment and housing units you are living?
7. What kind of assistance do you require from Government and other Non-Governmental
Organizations to maximize your profit and minimize cost?

33 | P a g e
.

34 | P a g e