Practices And Challenges Of Operating Micro And Small Enterprises: The Case Of Toke Kutaye Woreda West Shoa Zone Of Oromia Regional State, Ethiopia

Abstract

The Micro and Small Enterprises sector is identified as a tool in bringing about economic transition by efficient use of the skill and talent of the people without requesting high-level training, much capital and sophisticated technology. This research aims to identify the problems and prospects of operating MSEs; to identify effect of business environment challenges on the growth of MSEs and to find out the various challenges facing the operating of MSEs. The study was based on primary data collected from 284 sample selected. By using simple random sampling techniques. Cross-sectional and exploratory research designs were used. Toke kutaye District was selected purposively and sample respondents were selected from sample frame based on random sampling techniques from target population and sampling unit. Additional information was obtained from focus group discussion, and key informant interview. Data was analyzed by using descriptive statistics and inferential statistics. Qualitative data were used to substantiate the responses of questionnaire. Out of 284 distributed questionnaires to the respondents all are regained successfully which represent average response rate of 32.4% trade or merchandise and retail shop, 20.1% construction and 14.8 % manufacturing / wood and metal work, service sector 27.1% and urban agriculture 5.6% show the average of those sectors. Out of the total the mean of amount of total capital invested to start the business initially (in Birr) were about 44223.94. And also, that out of the total the mean of the current total capital of respondent's business (in Birr) were 173950.93. The finding revealed that the major challenges of MSEs operation were business regulations and laws and productivity, innovation and market linkage. From the responses of the sampled business sector they obtained that most of the respondents used their personal saving 50.7%, family contribution 29.6%, banks loan 2.8%, Non-Government Organization contribution 2.8%, and loan from micro finance institutions 14.1%. The result revealed that the major effect of business environment factors on the growth of micro and small enterprises were competent manager, business opportunities, training in business skill and good infrastructure respectively. The study showed that micro and small enterprises have their own strategy on the members’ management efficiency systems such as business is profitable, there is a good sales turnover, the business has good market share and there is good customer loyalty are the ways to increase growth of MSEs. Therefore, the study concludes that, Policies and strategies that focus on micro and small enterprise’ education, implementation of well-established businesses, market linkages of entrepreneurs and entire stakeholders are helpful so as to achieve wider hope of micro and small enterprise’ owners. MSEs should start using plan to their business activities and adopt a formal management efficiency system in their internal business practice. And also, stakeholders of the sector should work on preparing training programs on management issues and creating experience sharing opportunities especially to those enter into the sector without any management experience. The study recommends that the government needs to establish plan for MSEs owners learning on how to run their businesses successfully