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Addis Ababa University School of Graduate Studies ADDIS ABABA UNIVERSITY SCHOOL OF GRADUATE STUDIES Micro and Small Enterprise as Sources ofIncome Generation in Badesa Town, West Rararghe Zone, Oromia Regional State A Thesis Submitted to the School of Graduate Studies of Addis Ababa University in Partial fulfillment of the requirements for the Degree of Master of A."t in Envil"onment and Development By: Najib Vme." Russen July 2013 ADDIS ABABA ,· , Addis Ababa University School of Graduate studies This is to certify that the thesis prepared by Najib Umer Hussen, entitled: Micro and Small enterprises as a source of Income Generation and submitted in partial fulfillment of the requirements for Degree of Master of Arts (Environment and Development) complies with the regulations of the university and meets the accepted standards with respect to originality and quality. Signed by the Examining Conunittee: Advisor External Examiner __________ signature _______Dat e _______ Internal Examiner £/15J4 t.O~'\::. As $ 4 Signature __---::"' c'L...l:S';:".--__Date ______ _ ~ ( , ~ J.-I ~ --S;.. e,vl /.o ·m Chair of Department __---'-- F__-~ 1 ____ slgnature _______Dat e _______ Acknowledgment The generous cooperation of many people has contri buted for th e success and completion of this project work. My special gratitude goes to my advisor Dr. Abdulhamid 8adri, next to Glori ous A ll ah who gave me a full healthy, fo r hi s commitment on this research stud y at cach sta gc and fo r making valuable comm ents and suggestions. Hi s cooperati on and fri endliness is highl y appreciated. My heartfelt thanks also go to my mother, Wlro Zahriya Kasim and my brother Mohammedamin Umcr fo r th eir devoted motivation and financial support for the complction of my stud y. T would also like to thank Mr. Murad A. and Mr. Wazir, the staff members of Micro and Small Development Bureau of th e town for their response and giving me long time during interview and avai ling me the necessary information indispensable fo r the study. Lastly, but not the least, 1 would lik e to thank all my friend those sta nd on bchave of me in any cases to compl ete th is study. l Table of Contents Lists of Tables .... .. IV Lists of Fi gures. ... v Abbreviations ... ..... Vl CHAPTER ONE: INTRODUCTION ... .. I 1. 1 Background of the Study ................. ................ ............................... .. I , 1.2 Statement of the Problem ..................... ..... .. .) l.3 Objectives of the Study ........... .. .... ........ .. ....... ............. 5 1.3.1 General Objective .............................. .. 5 1.3.2 Specific Objectives .. .............. .. .. 5 1.4 Research Questions ................................. ................................. .................... ........... 5 I.5 Significance of the Study ..................................... .. ... .... ............ ... .. ... ... ... ....... 6 1. 6 Scope of the Study ..................................................... ............... .......... .......... .... 6 1.7 Limitation of the Study ......................................................... .......... .. .. .... .... ........ 6 1. 8 Organization of the Research ....................... ............. ....... ..... 7 CHAPTER TWO: LITRA TURE REVl EW ... ... 8 2.1 Defi nitions of Term s .. .. 8 2.2 Roles of Micro and Small Enterprise (MSEs) .............................................. ............ .9 2.2.1 The Importance of MSEs in Development .................... 9 2.2.2 Contribution ofMSEs to Employment Creat ion ................... ... ................ .. I I 2.3 U rban Unempl oyment Rate in Ethi opia ... ............................ .. ..... 13 2.3. 1 Unemployment in Urban Centers ...... ... 13 2.3 .2 Trends of Unempl oyment Rate in Urban Areas ..... .. .... ... .... .. ... ....... 13 l 2.4 Debates on the Growth of M icro and Small Enterpri se (MSE) ................ 14 2.5 MSE development Strategy in Ethiopia ............................ ...... 15 2.5.1 Overview of the MSE Sector in Ethiopia .......................... .. ... ....... ... 15 2.5.2 National Strategies for the Development ofMSEs .......... ....... ................. ... .... 16 2.6 Supports fo r MSE Deve lopment ................ .. 17 2.7 Constraints that Hinder th e Growth ofMSEs ............................................................. 18 ii 2.8 Empirical Evidence ..... .. ..... .. ................................ .... .... .... ........................... .................. 23 2.9 Conceptual Framework .................... .. .. ................................ .. ...................................... 24 CHAPTER THREE: METHODOLOGY .. .... ........................ .. ................ ..... ..... ..... ... .... .. ...... 25 3. 1 The Study Area ... .... ..... ................................................... .... ........ ... 25 3.2 Research Des ign .............................................................. ............ .. 27 3.3 Types and Sources of Data ........................................................ .................. ...... 27 3.4 Sampling Procedure ......... ... ....................................... .................. ......................... 27 3.5 Data Collection Techniques .. ....... .. ....................... .. .................................... ...... 27 3.6 Method of Data Analysis ....................................... .. ................................................... 28 CHAPTER FOUR: RESULT AND DISCUSSION ... .... .... ..... .... .... .. .. .... .................... 29 4. 1 Demographic Characteristics of the Respondents .... ..... ......... ..... ................... ......... .. .... 29 4.2 Busin ess Informatio n .................... .. ... ..... ..... ..... .... .... ....... .. .. ............ ...... .... ...... .. ............. 32 4 .3 Role ofMSEs in Creation of Job Opportunities ........................................................... 37 4.4 Rol e of the MSEs in the Living Standard of the Beneficiaries: Income, House, Medi cal services and Schooling ................... .... ..... .... ............................. ... .. ........ ....... 4 1 4.5 Major Problems and Constraints of Micro and Small Enterp ri ses ..... 51 4.5. 1 The problems or constraints of each sectors ........................................ .................. 58 4.6 Incentives of Government in Supporting MSEs .. ... .............. ...... ...... .. ... ........ 60 CHAPTER FIVE: CONCLUSION AND RECOMMENDATION ........................................... 63 5.1 Conclusion ..... .................................. ................................................. .. ....... 63 5.2 Recommendation .. ..... .. ............ .............................. ... ..... .... ....... .. .... ...... .. ..................... 65 REFERENCES APPENDICES ( iii Lists of Tables Table I : Employment status and enrol lment rate in education of Badesa town population ... ...... 26 Table 2: Sources of Busi ness Skill ................................................................................................ 32 Table 3: Reason for Starting the Enterprises ................................................................................ 33 Table 4: Total employees in each sector. .. ... ..... .. ... ..... ........ ... ................ ...... ... ....................... ....... 35 Table 5: Fi nancial sources of start-up capitals ofMSEs ........................................ .. ... ... ............... 36 Tab le 6: Previous work stams of the respondents ............................................. .. ...... .................... 38 Table 7 : Job Created by each Sector after Establi shmcnt.. .......... .. .. .. ..... .............. .. .. ........ .... .... .. 38 Table 8: Trends of employments in the enterprises ..................................................... ................ 40 Table 9: Income sources of the respondents before starting the enterprises ...... ...... ....... ...... ...... 42 Table 10: CUlTent Sources of In come Other than thi s Enterprise .. ...... .... ..................... .............. 42 Table I I : Current Income Level of the of the Respondents ....................................... ................ 43 Table 12: Future Plan of the Business Owner ...... ................ ........................................................ 44 Table 13: Change in total capitals of the enterprises .. .. ........ .. ............. .. .. ......... ............................ 45 Table 14: Changes in Levels of the Enterprises ............................................................................ 46 Table 15: Saving ..... .. ...... ................ .. .... ... .... ............ ... .......... ...... ....... ........ ... ........ .. ... .. .... .... ....... 46 Table 16: Purpose of saving ................................................................................. .. ..................... 47 Table 17: Amount of money monthly saved by th e respondents .................... ............................. 47 Table 18: Tm provements in tbe house ........ .... .... .. ...... .... .. ............ ...... .. .......... .. ........... ................. 49 Table 19: Capacity to get medical services at the time needed ...................... .............................. 50 Table 20: Capacity to pay school fee .. ...... .................... .. .... .... .... .......... ................. ....................... 51 Table 21: the problems and constraints ofMSEs in the area ........................................................ 52 Table 22: Problems and constraints ofMSEs and the sector in whi ch it widely exist ................ 58 c Table 23: Training
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