Determinants of Micro and Small Scale Enterprises Advancement into Medium scale Enterprises: The case of Nifas Silk Lafto Sub-city, Addis Ababa

Abstract

The purpose of this study is to examine the determinants of micro and small scale enterprises advancement into medium scale enterprises. The study used explanatory research design and the total population of the study was 1180 MSEs. Stratified random sampling procedure was used for the selection of 299 MSEs from Nifas Silk Lafto Sub-city. Data were collected by using structured questionnaire from the selected respondents and analyzed by using regression technique. The study shows that the major source of finance for MSE is personal saving. The study shows most of the MSEs are legally sole proprietorship and majority of them complained for insufficient loan to run their businesses. The findings of the study revealed that credit access; marketing and administrative factors affected positively the advancement of small scale microfinance to medium scale enterprises at 5% level of significance. Based on the findings the researcher recommends that locality based approach for solving problems of MSEs through prioritizing the challenges as per their severity; enhancing capacity of the MSE development agency through provision of skill and business training; improving local business environment through provision of sufficient work premises at appropriate location & facilitating access to credit from financial institutions are the major issues.