FACTORS AFFECTING GROWTH OF SMALL AND MEDIUM INDUSTRIES IN ADDIS ABABA: EVIDENCE FROM ARADA SUB CITY ADMINISTRATION (CITY GOVERNMENT OF ADDIS ABABA)

Abstract

The purpose of this study is to identifying factors affecting the growth of small and medium manufacturing enterprise in Arada Sub-city. Specifically, the intention of the study was to determine financial, marketing, working place and entrepreneurial factors, infrastructure, technological government policy and internal management factors affecting the growth of MSEs in Arada sub city of Addis Ababa city administration and to examine to what extent the factors determine the growth of small and medium enterprises. The respondents are owners and production employees of SMEs. Target population is 60 SMEs and the sampling technique is census. Data were collected from 57 SMEs who were engaged on textile, agro-processing, soap and detergent and leather byproduct. This study used descriptive and explanatory type of research. Data were collected using structured questionnaires and desk review. The descriptive statistics further shows that the small and medium enterprises are challenged by different factors most importantly by financial factors, absence of working place, insufficient market coverage & market chain for the product and service they produce, lack of technical training, high government bureaucracy and etc. The findings of the study further revealed that the growth of small and medium enterprises is determined by financial, marketing, working place and entrepreneurial factors, which are found the topmost four factors affecting the growth of MSEs in Arada sub city of Addis Ababa city administration. the more of these factors become good the more will be the growth of the small and medium enterprises. In this study, growth (change in capital) was used as a dependent variable and the independent variables were government policy, working premises, technological, infrastructural, marketing, financial, internal management and entrepreneurial variables. The findings further indicated that there exists significant relationship between independent variables and dependent variable. Moreover, the linear regression result confirmed that financial, marketing, working place and entrepreneurial factors have significant impacts on the growth of SMEs at 5% level of significance. SPSS version 24 and Microsoft excel 2010 were used to analyze the data. Based on findings of the study recommendations to government bodies, to operators of SMEs and suggestions for further researchers are forwarded.