An assessment of factors affecting the development and promotion of micro and small enterprises

Table of Contents

Acknowledgement

List of Tables

List of Figures

Acronyms

Abstract

CHAPTER ONE: INTRODUCTION
1.1. Background of the Study
1.2. Statement of the Problem
1.3. Research Questions
1.4. Significance of the Study
1.5. Scope of the Study
1.6. Limitation of the Study
1.7. Definitions of Terms
1.8. Organization of the Research Project

CHAPTER TWO: RESEARCH DESIGN AND METHODOLOGY
2.1. Description of the Study Area
2.1.1. Socio-Economic and Infrastructure of Nekemte Town
2.1.2. Administrative Structure of Nekemte Town
2.2. Research Design
2.3. Target Population and Sample Size
2.4. Method of Data Collection
2.5. Data Analysis

CHAPTER THREE: RESULT, DISCUSSION AND INTERPRETATION
3.1. How the MSEs in the Study Area Emerged and Progressed
3.2. MSE Policy Framework and Involvement of Supportive Agencies
3.3. Demographic Characteristics of Respondents
3.4. Characterization of MSE Operators
3.5. Relational Data (Cross Tabulation and Correlation)
3.5.1. Demographic Relational Data
3.5.2 .Basic Business Characterization of Relational Data
3.5.3. Working Environment of Relational Data
3.5.4. Finance Related Characterization of Relational Data
3.5.5. MSE’s Support Area Relational Data
3.6 Critical Factors that Affect Promotion and Development of MSE
3.6.1. External Environmental Factors
3.6.2. Internal Managerial Factor
3.6.3. Finance and Monitoring Factor
3.6.4. Market Related Factor
3.6.5. Interrelationships among Factors that Affects Development of MSEs

CHAPTER FOUR: CONCLUSION AND RECOMMENDATION
4.1. Summary
4.2. Recommendation

Reference

Appendix 1

Appendix 2

Acknowledgement

First of all I would thank the Almighty God for his an invaluable helps.

First, I would like to express my sincere gratitude to my advisors Dr Henery Onsare, Dr Admasu Tesso and Adamu Terfa (MBA) for their genuine, constructive and patience comments in this paper.

I am grateful to all Nekemte town MSE development agency staff and particularly to Ato Dassalegn Dame, Ato Miliyon Siyum, Ato Daraje Amanu, Ato Diriba Nikus, Ato Endalkachew Terefa, and Sanbate Darajje and others for their valuable inputs and supports they provide to the researcher during the study in providing useful information and their help during field work.

Last but not list, I am grateful to my wife S/r Dame Chameda , to my sister Mule Goshu, my children Firomsa Fikadu, Bilse Fikadu and Adanech Etefa for their support and taking care of our families during my studies.

List of Tables

Table 1: Definition of MSEs in Ethiopian context

Table 2: Organized and operational MSEs in Nekemte town administration

Table 3: List of active MSE sector used in sample size determination

Table 4: Organized and operational MSEs as of 2011

Table 5: Age wise classification of respondents

Table 6: Number of “members” in MSE of the respondents

Table 7: Amount of MSE’s Current capital in Birr

Table 8: Work premises of the sample respondents of MSE

Table 9: Source of finance to start operation

Table 10: Educational background and position of the respondents cross tab

Table 11: Number of “Members” and current capital in Birr of MSE cross tab

Table 12: Business sectors and number of “members” in MSE cross tab

Table 13: Business sector and current capital in birr of the MSEs

Table 14: Sufficiency and suitability of government constructed shades

Table 15: Work place and working premise sufficiency of the respondents

Table 16: Work place and work premise suitability for the nature of MSE operation

Table 17: Days needed to get licensed across work place of respondents

Table 18: Work place and source of finance to start the business of the respondents

Table 19: Ways profit determination and reason for which the profit spent

Table 20: MSE work place and reason for which profit is spent

Table 21: Work place and the main source of the operator's income

Table 22: Work place and existence of good market for MSE outputs

Table 23: Descriptive statistics of market linkage for MSE product/service

Table 24: Work place and MSEs supporting Institutions

Table 25: Descriptive statistics of technical training across work place

Table 26: Descriptive statistics of work place as impact on an environment

Table 27: Descriptive statistics of work place impact on managerial

Table 28: Descriptive statistics of work place influence on finance& monitoring

Table 29: Descriptive statistics of work place impact on market related factors

Table 30: Descriptive statistics of interrelated factors that affect MSE development

Table 31: Pearson correlation of interrelated factors for (for Number of respondents =96)

Table 32: Pearson correlation for interrelated factors that affect MSE development (Number=96)

List of Figures

Figure 1 : Map of the study area

Figure 2: Pie chart for business type in which the respondents operate

Figure 3: Pie chart for sample distribution of respondents by work site (sub-cites)

Figure 4: Schematic representations of work place and days needed to get licensed

Figure 5: Schematic representations of market linkage for products

Figure 6: Schematic representations of work place and technical trainings

Figure 7: Schematic representation o f workplace and environmental impact

Figure 8: Schematic representations of work place and managerial skill

Figure 9: Schematic representations of work place, finance & monitoring

Figure 10: Schematic representations of work place and market related factor

Acronyms

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Abstract

Despite the tremendous mushrooming in the number of micro and small enterprises, little research exists that examines the factors that affect the development and promotion of micro and small enterprises in Ethiopia particularly in Nekemte town. Micro and small enterprises are long recognized as important vehicles of economic diversification, employment creation, income generation and distribution, and poverty alleviation. As a result, micro and small enterprises occupy a prominent position in the development agenda of Ethiopia. The main objective of this study was to examine factors affecting the development and promotion of micro and small enterprises in Nekemte town. The total population of the study was 504 micro and small enterprises operating in the town. Five sectors (construction, manufacturing, urban agriculture, trade and service) were used as a stratum. Proportional stratified sampling technique was used for the selection of 96 micro and small enterprises from the strata. Following this, the researcher has selected key informants from each selected micro and small enterprises utilizing purposive sampling technique. Both quantitative and qualitative data were collected and analyzed. The researcher has utilized both primary (data collected) and secondary sources of information. The quantitative data was analyzed by using statistical package for social science (SPSS-version 16.0.) The result shows lack of access to credit from formal financial institution, lack of suitability and sufficiency of work premise, lack of technical and managerial capacity to guide operation, low level of educational achievement, lack of effective market linkage, lack of good market for their product, difficulty in forecasting market demand, failure to use business plan to guide operation, and low level of profit re-investment in business expansion were the major problems that hider the promotion and development of micro and small enterprises in the town. Moreover, the result also indicated that micro and small enterprises operators have concentrated in some sectors such as service and trade thereby creating unhealthy competition while agriculture and construction sectors which have potential economic activities seem to be ignored. The result also revealed that there is a positive and strong relationship among major factors that affect the promotion and development of micro and small enterprises (internal managerial factors, external environmental factors, market related factors and finance and monitoring factors) and there is statistical significance among these factors. These findings corroborate the need for integrated approach towards the development and promotion of the MSE sector. Based on the findings relevant recommendations were proposed: locality based approach of solving problems of micro and small enterprises through prioritizing the problems following their severity; enhancing capacity of the micro and small enterprises development agency, support institution and micro and small enterprises operators through provision of skill and business training; improving local business environment through provision of sufficient work premises at appropriate location; facilitating access to credit from financial institutions; exercising of an integrated or multi-sectoral approach to the development of micro and small enterprises. In addition, there seems an urgent need to amend the regulation of micro and small enterprises council so as to include other key institutions and development practitioners as the member of the council while removing other less relevant institutions whose duties and responsibilities were not clearly identified in the regulation. This is because increasing the number of member council of micro and small enterprises will create difficulty in creating and sustaining common goal and action plans and hence highly likely to lead to malfunctioning system.

CHAPTER ONE: INTRODUCTION

1.1. Background of the Study

In Ethiopia, like in other developing countries, Micro and Small Enterprise (MSE) has become an increasingly widespread used strategy for fostering socio-economic development of the country. This could be due to the unique characteristics of the MSE sector: labor intensiveness; suitability to produce more jobs with less capital per job created; utilizes local resources; uses simple and affordable technologies; fosters linkage formation within and among various sectors and its resilience to internal and external economic shocks (FeMSEDA, 2011).

However, the sector has been bound with various complicated and interlocked constraints and problems, which hinder its potential contribution to the socio-economic development of the country (FeMSEDA, 2011; CSA, 2011).In recognition of the sector’s potential contributions and its constraints, the government has been attempting to create enabling environment for its development and promotions. Among others, issuance of MSE development strategy in 2011, issuance of proclamation No 33/1998 to establish the federal micro and small enterprise agency (FeMSEDA) and amendment of the proclamation by No 104/2011 are the major government efforts made to alleviate the constraints of the sector.

In response to the government’s efforts, MSE support institutions are proliferating both at federal and regional levels. Despite the mushrooming of the support institutions, the MSE sector is still facing some constraints and is not contributing its maximum potential to the socio-economic development (FeMSEDA, 2011).

Although some of the formerly recognized constraints might have been resolved in some places, studies show that most of the constraints are still persisting in most places and have been holding back the MSE sector from contributing its maximum potential to the socio-economic development of the country. In addition, there are also newly emerging constraints to the development of the MSE sector that includes involvement of officials with rent-seeking behaviors in an organizations and financing of the sector and arbitrary and subjective tax systems. Thus, this research aims at investigating the specificity and severity of these constraints to the development of MSE in the case of Nekemte town administration.

To the end, this research aims at assessing the major constraints to the development and promotion of MSEs in Nekemte town that are identified at the country level and are still persisting in most places and holding back the MSE sector from development and promotion. These include lack of clear national policy to enhance the development of MSEs; lack of access to capital and credit; lack of work premise and land; lack of entrepreneurial and managerial; lack of skilled workforce; lack of formal business linkages amongst enterprises and involvement of some individuals with rent-seeking behaviors in dealing with organizing and arranging credit for operators.

1.2. Statement of the Problem

Most MSEs face critical constraints both at the operation and start up level. Some of these constraints include lack of access to finance, lack of access to premise, lack of infrastructure, lack of training in entrepreneurial and management skills, lack of information on business opportunities, social and cultural facts, in particular deficient entrepreneurial culture and excessive corruption.

Although the government has been taking series of polices and strategies, most interventionist policies are blanket recommendations regarding MSEs and hence are inappropriate and impractical for some situations. For instance, most Ethiopian government policies have a tendency to over regulate and limit the development and promotion of private sector enterprises and they are over bureaucratized and unfriendly to support small businesses.

According to Ethiopian Federal MSE strategy (2011) access to finance is a major bottleneck for the rapid growth and development of MSEs. Micro and small enterprises are more likely to face liquidity problems as they are considered expensive to be served thus less attractive to formal banks. Lack of finance is the most referred complaint among entrepreneurs in Africa (Bigsten, et al., 2003; Abdullah & Baker, 2000; Russel, 1997; Biggs & Srivastrava, 1996). Such lack of access to financial resources hinders firms from growing to their optimal size (Cabral & Mata, 2003; Elston, 2002; Holtz-Eakin, Joulfaian, & Rosen, 1994). A study result conducted on six towns in Ethiopia by using stratified sampling frame shows credit constraint affects negatively firm growth (Gebreeyesus, 2009).

As most researchers argue, for MSEs, lack of premise is unquestionably a serious problem. The issue of acquisition and transaction cost has become very prohibitive to the emergence of new enterprises and to the growth and development of existing ones. The issue of land provision has greatly constrained the chances of micro and small enterprises who aspire to start up businesses (MTI, 2012).

Furthermore, lack of skilled labor, which in turn leads to problems in production due to the unfamiliarity of workers with rapid changing technology, lack of coordination of production process, and inability to troubleshoot failures on machinery and/or equipments is a critical problem that MSEs are facing since they cannot afford to employ specialists in the fields of planning, finance and administration, quality control, and those with technical knowledge (Richard, 2000; Drucker, 1984).

The other factor that hinders development and promotion of MSEs is the ineffectiveness with which they interact with large or similar firms. In other words, formal and informal linkages or business cooperation through networking are not common. Large public enterprises and the few foreign affiliates do not outsource some of their operations to local MSEs. The legal and institutional mechanisms to enforce contractual obligations and government policy to design appropriate incentive mechanism to encourage the expansion of business linkages/sub contracting managements is at its infant stage.

In general, there are no sufficient institutional facilities that nurture the promotion, growth and development of MSEs. Marketing their products effectively as well as accessing and acquiring information on business opportunities are the major bottlenecks that small and micro entrepreneurs face all over the country including Nekemte. As a result, the design and quality of products of MSEs are below standard. In addition, lack of marketing skills, weak infrastructural facilities renders small businesses to be uncompetitive (Gartner, William, & Bhat, 2000; Romano & Ratnatunga, 1995; Weinrauch, Mann, P.Robinson, & Pharr, 1991).

To the end, some of the major constraints that are still persisting in most places and have been holding back the MSE sector from development and promotion are (a) Lack of clear and pragmatic national policy to enhance the development of MSEs; (b) Lack of access to capital and credit; (c) Lack of premise and land; (d) Lack of entrepreneurial, managerial and other skills; (e) Lack of sufficient marketing and promotional support; (f) Lack of skilled workforce; (g) Socio cultural constraints; (h) Lack of formal or informal linkages or business cooperation amongst enterprises and

(i) involvement of some individuals with rent-seeking behaviors as workers of institutions dealing with organizing and in arranging the source of finance for the sector (FeMSEDA, 2011). 3

Although these factors are identified at national level, this research aims at assessing the severity and specificity of the constraints to the development and promotion of MSEs in Nekemte town administration. It also provided appropriate recommendation that helps in removing the constraints hindering MSE development and promotion at Nekemte town administration level.

1.3. Research Questions

The above specific issues can be met by answering the following research questions. What factors restrain the development and promotion of MSEs? Which policy framework favors MSE development and promotion? How MSEs in the study area emerged (progressed)?

1.4. Objectives of the Study

The overall objective of the study is to examine factors that affect the development and promotion of micro and small enterprises in Nekemte town.

The specific objectives of the study are:

To examine how the MSEs in the study area emerged (progress) and grown.

To examine existing MSE policy framework and involvement of supportive agencies. To identify factors affecting the development and promotion of MSEs in the study area. To highlight the contribution of MSEs in employment creation of the study area.

1.5. Significance of the Study

The findings of the study can serve as additional information for addressing the constraints associated in the development and promotion of the MSE sector. There are very limited research output and literature regarding strategic orientation of MSEs particularly in Nekemte town administration. Therefore, academicians, consultants, and government agencies may use the study to be obtained as a stepping- stone for further study in the area at an advanced level. Both graduate and undergraduate students may find the study relevant for their academic work. The findings may also be considered as an important addition to the existing knowledge and literature in this area for the public at large.

1.6. Scope of the Study

The scope of the study is planned to a manageable size for the sake of time and resource constraints. For this reason, the population of the study was limited to active micro and small enterprises registered under small scale enterprises level in Nekemte town administration. The major variable that was addressed by this research was major factor that constrain the promotion and development of MSEs in the town. In addition to this, it also explains the progress of the MSE sector in the town and its role in employment creation.

1.6. Limitation of the Study

Registered and actual numbers of MSEs are not equal in the town. Most of MSEs were closed (dissolved) due to different problems immediately after registration. Nekemte town MSE development agency doesn’t have updated information about the exact number of MSEs and hence it reduced the intended sample size of the study by four. In addition to this, the unwillingness of few respondents to give the required information for data collectors and absence of members from their own worksite were the major bottlenecks encountered data collectors and researcher during data collection period.

1.7. Definitions of Terms

Micro and Small Enterprises have been defined in a variety of ways using various factors. Although many countries around the world seem to be using common factors in their definitions, the degree of emphasis and measures used differ quite considerably. These factors include number of employees, volume of sales, and the capital value of the business. The European Commission defines MSEs using a combination of employee numbers, annual turnover or balance sheet total and ownership (Hillary, 2000).

According to the Ethiopian Federal MSE strategy of (2011), micro enterprises are owners of the enterprise, family members, employees, enterprises hiring up to five individuals with a total capital of 50,000 birr (excluding the amount of building) or of industrial sector (construction, manufacturing and mining) having not less than a capital of 100,000 birr (excluding the amount of building). Small enterprises are owners of the enterprises, family members, employees, enterprises hiring from 6-30 individuals with a total capital from 50,001 to 500,000 birr (excluding the amount of building) or an industry sector (construction, manufacturing and mining) from 100,001 birr to not less than 1,500,000 birr (FeMSEDA, 2011). This definition of MSEs given by FeMSEDA (2011) is used as a base for the promotion and development of MSE from the micro enterprises to the small enterprises and finally from small enterprises to large enterprises. In short the definition of MSEs in Ethiopian context was summarized in the table below.

Table 1: Definition of MSEs in Ethiopian context

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Source: Federal MSE strategy 2011

1.8. Organization of the Research Project

This research paper is organized under four chapters. The first chapter provides background information about the topic of the study, which includes background of the study, problem statement, research objectives, significance of the study, scopes of the study, limitation of the study, definition of certain terms and organization of the research project. The second chapter deals with research design and background of the study area which includes its socio-economic and infrastructure, and administrative issues of Nekemte town, research methodology, sample size determination, methods of data collection, and data analysis. The third chapter deals with data presentation, data analysis and interpretation of the findings of the study. The last chapter, chapter four presents the conclusion drawn from the findings, the recommendations made to address factors that affect the development and promotion of MSEs, and the implications of the findings for future research, practitioners, government and other support agencies.

CHAPTER TWO: RESEARCH DESIGN AND METHODOLOGY

2.1. Description of the Study Area

Nekemte town was founded in 1865E.C as a small village under the auspices of King Moroda

Bakare. The word Nekemte was derived from the owner of the land whose name was “Nekemte Gada Otaa’’ who had lived for a long time at this specific place. Initially it was serving as a center of trade root; by the name “sarara” trade exchanged their product like slave, ivory, gold, silver, and different types of grain from Maji and Kafa to Mituwa, Gondor and Gojam.

The town has an altitudinal range of 1,960 to 2,170 meter above sea level and its temperature range is 14⁰ C-26⁰ C and its annual rain fall is between 1500 -2200mm. It is medium size town and one of the first grades of 20 cities of Oromia. Nekemte is surrounded by Guto Gida in the north, Wayu Tuka in the east, Guto Gida in the west & south.

Figure 1 : Map of the study area

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Source: Nekemte LED strategy, 2010

2.1.1. Socio-Economic and Infrastructure of Nekemte Town

The population of Nekemte town is 76,817 out of which male constitutes 39,167 while the remaining 37,650 are female. Currently there were more than 126,000 inhabitants in the town. Ethically the majority of the population of Nekemte town is Oromo, Amhara, Gurage, Ttigire etc. are residing in the town (CSA, 2011). Nekemte town is also facing challenges like high population growth due to the migration of people from rural to urban and urban to urban. As an important administrative, commerce, transport and tourist attraction center, it is not sufficiently and efficiently providing the expected infrastructure and socio-economic services to the community.

2.1.2. Administrative Structure of Nekemte Town

The unique opportunity of Nekemte town is that it’s located at the junction point and strategic site for business for western Oromia and western part of Ethiopia. According to the master plan (2009) of the town, the total area of the town is 5,580 hectares. Most of the people in the town depend on trade activities. It is also the capital city of East Wollega zone and is a gate way to the western part of country that can serve as a key to economic development of the society.

The administrative structure of the town was established as a form of municipality in the year 1949. Currently, the administrative structure of the town is divided into six sub-city administrations and each sub-city administration further has 80 clusters and 308 developmental groups. Like any other towns /cities in the region, Nekemte town administration has all government administrative structure which includes municipal office, revenue office, finance and economic development, MSE development agency, that actively involved in the management of MSEs starting from its organization of the MSEs into different sectors (table 2), training, licensing, providing work premises, arranging fund for their major activities, monitoring and reporting of the MSE activities, and solving the problems that MSEs faces from time to time. In this case, performance of Nekemte MSE development agency was described as follow.

Table 2: Organized and operational MSEs in Nekemte town administration

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Source: Nekemte town MSE development agency report of various years

2.2. Research Design

The researcher collected and reviewed relevant documents and information both from secondary and primary data sources. The independent variables are credit with which the MSEs are operating, the work premises, market linkages, business and technical skill that MSE operators posses, and the internal and external factors that affect the development and promotion (dependent variable) of MSE. Relevant data was extracted from statistical bulletin prepared by the CSA, Federal MSEs agency, and Nekemte town MSE agency. The primary data source was obtained by observation of the work premises, its location, presence of infrastructure facilities like water, electricity, road access to market of respondents and interview from the top management level of MSE owners in relation to the newly emerging constraints. In addition to this, a survey method was used by using questionnaire for data collection from the selected sample members of the selected MSE sectors operating business in Nekemte town administration of the six sub-cities.

2.3. Target Population and Sample Size

The targets populations of the study was 504 MSEs (with 2,722 members) which are operating in manufacturing, services, trade, construction, & agriculture sector in the town. The sample size was determined by using Watson, Jeff (2001) methods of sample size determination formula that was applied to reach at the required sample size for data collection from the respondents operating in MSEs (Watson, 2001). This was computed llows:

Abbildung in dieser Leseprobe nicht enthalten

Where: n= Sample size required;

N= Number of members of the MSEs which is 2,722;

P= Estimated variance in a population as a decimal of 0.1 for 90-10; A= Precision desired, expressed as decimal of 0.05 for 5%; Z= Confidence level of 1.96 for 95%; and

R = Estimated response rate, as decimal of 0.94 for 94% response to be returned.

Proportional stratified random sampling method would be used for the study. For the study, 100 respondents from 100 MSE were taken from the total 504 active MSEs as a sample size and proportionally distributed among five sectors of the MSE. The strata’s used was MSE sectors (i.e. construction, manufacturing, urban agriculture, trade activities, and services) in which the MSEs are organized. List of MSEs were first collected from the five sectors. Following this, systematic sampling technique is used in selecting the sample MSE within the strata. The first number

selected was the 3rd one and successive number was selected by adding five on each. Within the selected MSE, purposive sampling method was used for the selection of one respondent that reports on behave of the selected MSE based on the position and the duration that respondent stayed in that enterprises. One respondent is taken from one MSE at a time for increase the involvement of the number of MSEs in the study. MSEs involved in the sample had minimum of one year experience in the sectors in which they are operating.

Table 3: List of active MSE sector used in sample size determination

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Source: Nekemte town MSE agency office various years report

2.4. Method of Data Collection

Both primary and secondary data was collected through reviewing existing literature, reports, field observation, conducting interview for top level officials of MSE agency to investigate how MSE in the study areas are emerged and for examining the existing policy framework for MSE development and promotion and administering questionnaire to the employees or members of the MSEs in the town for collecting data about factors affecting MSE development and promotion.

2.5. Data Analysis

After data was collected, raw data was edited, coded, and entered in to data view of SPSS and finally analyzed by computerized system of statistical packages for social science (SPSS) version 16.0. Descriptive statics, correlation and relational data analysis was used.

CHAPTER THREE: RESULT, DISCUSSION AND INTERPRETATION

In this chapter, data collected from 96 MSE operators operating in the six sub-cites of Nekemte town administration was presented, analyzed, and interpreted. First, it discusses how the MSEs in the study area emerged; followed by examination of MSE policy framework and involvement of supportive agencies; the demographic characteristics of the sample respondents; characterization of MSEs; source of finance; business sectors; customer relation; support to the MSEs, and other critical factors that affects promotion and development of MSEs was presented.

3.1. How the MSEs in the Study Area Emerged and Progressed

In many developing countries, including Ethiopia, the micro and small enterprise development programs are viewed as a key policy strategy to embrace the MSE sector (Belay, 2012). Three indicators of success are important to views MSE success of African entrepreneurs rather from a contribution that these businesses make towards the economy. The first one is profit. But since computation of profit for small businesses is difficult, income of the operator was viewed. Employment creation by a business is also another second indicator of success. Thus size of an enterprise viewed from the number of employees is an important indicator of success. Finally the business turnover as another indicator of success especially when one is interested in understanding the macroeconomic contribution of the MSE sectors (Van Dijk, 2005).

The major objectives of the establishment of MSE development agency is to encourage, coordinate and assist institution that provide support to the development and promotion of MSEs in the country at large. In order to achieve this objective, it focuses on providing supportive services such as provision of training for trainer’s, prototype development and dissemination, information and consultancy services, facilitation of marketing and technological database to stakeholders which in turn provide similar activities to the targeted MSEs (FeMSEDA, 2011).

Accordingly, Nekemte MSE development agency has got a legal jurisdiction of organizing MSE, providing license for MSEs, facilitation of startup capital for MSEs, consolidating data of unemployment in the town, monitoring and evaluation of ongoing activities of organized MSEs, awareness creation and provision of training for MSE. In line with this, Nekemte MSE development agency has been organized 1,511 MSEs with total number of 10,822 members. Out of these 1,511 MSEs, only 1,018 (67.4 percent) MSEs were started operation with total numbers of 7,073 members during the period. This implies that not all of the MSEs which are organized and get licensed are engaged in to operational activities. The summary of seven year performance report in organizing and licensing MSEs in Nekemte town administration was clearly explained by the table below.

Table 4: Organized and operational MSEs as of 2011

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Source: Annual report of MSE agency, 2005 to 2011

When we see how the MSEs in the study area emerged from the above table, it is found that the number of MSE that were organized and involved in operational activities is increasing from time to time. It also shows that the numbers of MSEs that are becoming operational (active) is also increasing from 17.6 percent of 2006 to 93.9 percent of 2011. This could probably due to massive social mobilization (awareness creation) conducted on the unique contribution and importance of MSEs in the development of the economy in the country and Nekemte town administration in particular. This reveals that the MSE sector plays pivotal roles in bringing about economic transition through creating opportunities to use existing human and natural resources. Particularly, the sector has played crucial role in a quick remedy for the increasing unemployment problems in the country in general and Nekemte town in particular. Surveys conducted by CSA (2011) reveals also this reality.

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