DETERMINANTS OF MICRO ENTREPRISE PERFORMANCE IN ADDIS ABABA, ETHIOPIA

Abstract

This paper examined the performance of Micro enterprise in Addis Ababa, based on a cross sectional data type of 197 MEs selected from 3 sub cities of Addis Ababa namely Arada, Gulele and Yeka. The general objective of this study was to assess the performance of micro enterprises and its determinants in Addis Ababa. The methodology of the study involved multi-stage sampling technique. A regression model was used to identify the determinant factors that affected the performance of micro enterprises. The results of the regression analysis showed that 86.03% annual profit (performance) of micro enterprises fluctuation was explained by the included independent variables jointly and the rest which was 13.97% affected by other independent variable which was not included in the model and all the variables were statistically significant at 1, 5 and 10% significance level and had positive relationship with the performance of micro enterprises. Initial capital, number of employees, team work, finance, infrastructures, market and working place were significant at 1% significance level this was due to their strong interrelated effect on performance of micro enterprise. Age of the manager and age of the enterprise were significant at 5% significance level and this was due to reputation from time, products and services of the enterprise. Also the highest educational level attained by the manager, experienced managers and training were significant at 10% significance level and had positive relationship with performance of micro enterprises. The study also attempted to forward some possible recommendations. The good performance of micro enterprises in their filled of business was the result of generation of profit from their business. These among others developing culture and habit of team work, giving of training for enterprises on basic accounting and business management, kaizen, market creation for products and services and technology, strengthening market creation ability of micro enterprise, preparation of different market exhibitions and adjustment of bid system of the city to increase market access to the enterprises.