STUDY ON THE INFLUENCING MECHANISM OF THE DEVELOPMENT OF SMALL AND MICRO ENTERPRISES IN ETHIOPIA

The rationale for this study is rooted in the recognition that Micro, Small, and MediumEnterprises (MSEs) are vital to Ethiopia's economic growth and job creation. The government hasestablished numerous institutions to facilitate the smooth functioning of MSEs, and non-governmental organizations (NGOs) are also playing a significant role in promoting theirdevelopment. However, despite these efforts, the performance of the sector has not met theexpectations of many stakeholders due to persistent problems.One of the main reasons for thisstudy is to delve deeper into the mechanisms that influence the development of Micro and SmallEnterprises (MSEs) in Ethiopia. The primary objective is to investigate and identify therelationships between the performance of these enterprises and various selected influencingfactors. Additionally, the study aims to determine the impact of these factors on the performanceof small and micro businesses.Ethiopia has long acknowledged the critical role that MSEs play infostering economic growth and generating employment. This acknowledgment is evident in thegovernment's efforts to create a supportive ecosystem for these enterprises. Various institutionshave been established with the specific mandate to support MSEs, addressing their needs andchallenges to ensure their sustainable development. These institutions provide essential servicessuch as access to finance, training, market linkage, and policy advocacy.In parallel, NGOs are also actively engaged in promoting the development of MSEs. They offercomplementary support by providing training, facilitating access to markets, and advocating forpolicies that favor the growth of these enterprises. The combined efforts of governmentinstitutions and NGOs have created a robust support system aimed at fostering the growth anddevelopment of MSEs.Despite these efforts, the performance of the MSE sector has not fully metthe expectations of various stakeholders. Several persistent problems continue to hinder thesector's potential. These problems may include limited access to finance, inadequateinfrastructure, lack of market access, insufficient managerial skills, and regulatory challenges.These issues contribute to the suboptimal performance of MSEs, preventing them from achievingtheir full potential and significantly impacting their contribution to the economy.Given this context, the study's main objective is to investigate the mechanisms that influence thedevelopment of MSEs in Ethiopia. By identifying the relationships between the performance ofthese enterprises and various influencing factors, the study aims to provide a comprehensiveunderstanding of what drives or hinders their success. This understanding is crucial for developingtargeted interventions and policies that can effectively address the sector's challenges.The studyfocuses on several key influencing factors that are believed to impact the performance of MSEs.These factors include access to finance, infrastructure, market access, managerial skills, andregulatory environment. By examining these factors, the study aims to determine their specificimpact on the performance of small and micro businesses. This analysis will provide valuableinsights into which areas require the most attention and intervention to improve the overallperformance of the MSE sector.