FACTOR AFFECTING MICRO AND SMALL ENTERPRISES CONTRIBUTION TO EMPLOYMENT GENERATION: - THE CASE OF ADDIS ABEBA CITY

Abstract

Unemployment and low income are one of the present situations in Addis Abeba city. The government has formulated a policy to mitigate the overwhelmed problem by fostering micro and small enterprises. Micro and small Enterprises are well known as the building blocks of economy. The basic aim of this research is to identify and analyze factors that affect affecting of employment growth among MSEs in Addis Abeba, Ethiopia. Firm specific factor including: size, age, human capital and managerial competence and business environment factor which include access to finance, access to market, and infrastructure were realized as major factors for SMEs working in Addis Ababa. In this study both quantitative and qualitative approach was used. Data collected using interview schedule through questioner and data analysis carried out by using descriptive and econometric models. The econometrics result indicated that previous work training, size enterprises, access to finance, human capital, infrastructure, experience of the promoters and employees, start premises and support (market access) and enterprise size in included for analysis. Enterprises which are engaged in access to finance, education level, promoters training, sale and profit growth, physical infrastructure and firm size were positively and significantly determined employment growth whereas supporting market, and financial access affects the employment growth negatively and significantly. Promoting inter-firm and Buyers/Sellers cooperation, enhancing share capital contribution, enhancing information dissemination, educating and training of MSEs promoters in business development services (BDS) were recommended to enhance employment growth of MSEs.