FACTORS THAT AFFECT THE GROWTH OF MICRO SMALL AND MEDIUM ENTERPRISES IN ADDIS ABABA CITY

Abstract

This study titled, factors that affect the growth of Micro, Small, and Medium Enterprises (MSMEs) in Addis Ababa (A.A) city provide vital insights into the obstacles that MSMEs encounter. Descriptive and exploratory research designs were used in conducting the study and a mixed approach was adopted for data collection. Quantitative data was gathered through questionnaires, while qualitative data was obtained through interviews. The research utilized both probability and non-probability sampling techniques. Probability sampling involved Cluster sampling for MSMEs based on sub-cities within the manufacturing sector, while non-probability sampling employed purposive sampling to select 3 institutions engaged in supporting MSMEs. A sample size of 383 MSMEs was derived from a total population of 8876 MSMEs in the manufacturing sector using the Yemane formula. The response rate achieved was 82.5%, with 316 respondents. Additionally, semi-structured interviews were conducted with 3 international and local institutions engaged in supporting MSMEs. Data analysis was performed with frequency, mean and standard deviation using the Statistical Package for the Social Sciences (SPSS). Regression and correlation analyses were employed to identifying relationships between variables and exploring factors affecting MSME growth. The findings highlighted factors that affect the growth of MSMEs, which are access to finance, current political environment, product quality, and business support programs. The study concluded that MSMEs are facing challenges in stagnant growth particularly in terms of profitability due to limited access to financing and concerns about product quality. Moreover, the current political environment has had a detrimental impact on their growth and long-term viability. While there are efforts from both governmental and non-governmental entities, further action is required to adequately address the specific needs of the enterprises. Recommendations include collaborative efforts by policymakers and stakeholders to address these challenges by enhancing access to finance, improving political stability, providing support to enhance product quality through financial aid and training, and offering additional support tailored to meet the diverse needs of MSMEs. Addressing these challenges and leveraging opportunities will contribute to sustainable growth and development of MSMEs.