Factors Influencing Growth of Micro and Small Enterprises: case of Ambo, Bako, Gedo and Ginchi Towns Oromia, Ethiopia; Logistic Regression Analysis

Abstract

As part of the industrial sector, micro and small enterprises (MSEs) are increasingly becoming popular and important in the Ethiopian economy as they would play a decisive role in contributing to employment generation, poverty reduction and the opening of wider distribution of wealth and opportunities. The main objective of the study was to identify factors that influence growth of micro and small enterprise in Ambo, Bako, Gedo and Ginchi towns. These towns were selected from West Shoa Zone towns depending on greatly inhabited enterprises. Thus, a sample of 294 micro and small enterprises was determined and proportionally allocated to each area or town. A systematic sampling technique was used to select a list of micro and small enterprises from each category that formed representative sample. Data were collected using questionnaire then SPSS software employed to analyze. The study employed Chi-square technique to test associations between dependent and explanatory variables. We have implemented logistic regression to evaluating the probability of growth of MSEs. The descriptive analysis revealed from a total of 309 enterprises 105 (34%) were found to be growing while the remaining 204 (66%) did not. Logistic regression model result indicated that among the variables sex, marital status, age, educational attainment of the manager/owner, prior experience of the manager/owner, access to credit and training, major activity (sectors), accesses to market linkage, infrastructures were selected as predictive variables. MSEs whose manager /owner attained high education and training, more experienced prior, those engaged in manufacturing and construction sectors, who had get more accesses to credit, market linkage and adequate infrastructures were performed better growth. Hence, concerned government officials, and other economic development players have to work in hand in the area of training, availability of finance, and formation and business sectors of MSEs in the country.