Micro and Small Business Enterprises (MSEs) are regarded as the driving forces of economic growth, job creation, and poverty reduction in developing countries in general and Ethiopia in particular. They have been the means through which accelerated economic growth and rapid industrialization have been achieved (Endalkachew, 2008).
Liedholm and Mead as cited in Endalkachew (2008), stated that micro and small enterprises are more labor-intensive than large ones, and some even find that the smaller also “produce more output per unit of capital and thus generate more output as well as employment for a given investment than do larger firms”.
In cities of Ethiopia, MSEs sector in general are the predominant income generating activities; they have a significant contribution to local economic development and used as the basic means of survival (Andualem, 2001). Empirical studies on micro and small-business development have shown that the rate of failure in developing countries is higher than in the developed world (Andualem, 2001).
Until recently, SMEs have not been a major area of focus in Ethiopia but nowadays the existing government has issued a national MSEs development strategy for the promotion of MSEs in 1997 and established a well-concerned institution for the sector by the Council of Ministers of Ethiopian Regulation No 33/1998 on April 3, 1998.
In spite of the enormous importance of the Micro and Small business Enterprises (MSEs) sectors to the national economy with regards to job creation and the alleviation of abject poverty among impoverished women in Ethiopia, the degree of recognition and strategic support provided to the sector is grossly inadequate. Three successive governments that were in power since 1960 have failed to improve the difficulty of women entrepreneurs in Ethiopia (Ethiopian Welfare Monitoring Unit, 2002).
The youth population, defined as those between 15 and 29 years old, is the most abundant asset in sub-Saharan Africa (SSA). In the region, the youth accounts for about 60 per cent of the population. Although some consider that the youth could be a potential demographic dividend for the region, youth employment is a challenge that confronts all the countries in sub-Saharan Africa (Endalkachew ,2008).
Youth unemployment is a pressing issue in Ethiopia where almost two-thirds of the population is younger than 25 years. Over the past two decades, youth between the ages 15 and 29 increased by 7 per cent per year on average. In spite of the pressing youth employment challenge, youth issues were given only limited attention in the development policies of the country until recently. The current policy emphasis on the promotion of the private sector, expanding investment to improve the productivity of agriculture and introducing non-agricultural activities for the purpose of employment diversification in rural areas has resulted in some recovery and overall macroeconomic stability in the country (Berhanu et al, 2007). Like youths, women are the disadvantaged segment of the population that MSEs can link into business.
1.2. The Problem Statement
As part of the agricultural, industrial and service sectors, MSEs are increasingly becoming popular and important in the Ethiopian economy, as they would play a decisive role in contributing to employment generation, poverty reduction and the opening of wider distribution of wealth and opportunities. However, according to Stevenson & Annette (2006),as cited by Endalkachew (2008), MSEs have faced a number of constraints, among others, lack of access to markets, finance, business information; lack of business premises; low ability to acquire skills and managerial expertise; low access to appropriate technology and poor access to quality business infrastructure. The sector is also known as an instrument in bringing about economic transition by effectively using the skill and talent of the people without requesting high-level training, much capital and sophisticated technology.
Although women entrepreneurs contribute significantly to the national economy in terms of job creation, skills development and the alleviation of abject poverty among men and women alike, the literature clearly shows that small and micro businesses enterprises operated by women entrepreneurs are not being provided with adequate strategic support in terms of policy, access to finance, tax assessment, skills development and managerial training, technological transfer and infrastructural development (Berhanu et al. 2007).
According to the census result (2007), the urban unemployment stands at 25%. Recently, with around 50% of the urban men between age 15 and 30 were unemployed. The policy for SMBEs promulgated in 1998 serves as a guideline to all partners to stimulate the establishment of new enterprises enable the existing one to grow and become more competitive in capturing unemployed people.
But some reviewed empirical studies with regard to the sector focused on major challenges and constraints (Endalkachew, 2008; Weldegbriel, 2012; Workneh, 2007). There are many studies focused on problems and factors that hinder the growth of MSEs and the outcome of the program in aggregate forms. Ethiopian government has focused on creating micro and small business enterprises, based on their potential to create employment opportunities. As the knowledge of the researchers, yet empirical studies fail to investigate role of MSEs contribution in reducing youth and women unemployment in the study area.
Hence, this intended research is aiming at exploring the contributions of MSEs in creating new business opportunities for the youth and women in South Gondar Zone, Ethiopia. Moreover, it will be important in narrowing the research gap on such areas of the sector in the study area.
1.3 Research questions
This study will primarily focus on answering the following basic/research questions:
1. What is the perception of youth’s ; women’s towards their engagement in Micro and Small Enterprises?
2. To what extent youth’s and women’s are participating in the business & how much return they generate from it?
3. What are the determinant factors of the MSE in linking the youth and women in to the businesses?
1.4. Objective of the Study
1.4.1. General Objective
The general objective of the study is to investigate the role of Micro and Small Business Enterprises in linking women and youth towards productive businesses cited in South Gondar Zone, Ethiopia.
1.4.2. Specific Objectives
The specific objectives of the study are:
1. To examine the perception of the respondents towards their engagement in Micro and Small Enterprises.
2. To study the extent of youths’ and women’s participation in the business and the return they generate from it.
4. To identify the determinant factors of the MSE in linking the youth and women in to the businesses.
1.5. Significance of the Study
The study will mainly focus on the assessment of MSEs and their economic contributions towards the youth and women so as to provide comprehensive findings and recommended directions. Therefore here, the findings and suggestive solutions of this research may enable MSEs through proclaiming how they are trialing and possible means to adjust their undertakings accordingly. Because of this research, policy makers and partnering organizations may review their programs that have to do with potential areas to be invested as far the sectors contribute and fails to do so. It will also valuable for other researchers of similar and related study area being as a springboard for further reference.
1.6. Scope and Limitations of the Study
It would have been ideal to conduct the research throughout all regions of the country, which are experienced with MSEs. However, due to time and funding constraints, the study will be confined to South Gondar Zone, Ethiopia. The scope of the study will be delimited to analyze the role of MSEs in reducing youth and women unemployment in the study area. Moreover, the findings accrued out of the study cannot be generalized to MSEs of other Zones and Regions. Yet, the researchers will go thoroughly in exploring the contributions, retrospect, prospects and challenges of MSEs from different dimensions. Data, which are necessary but have no longer effect on the study may not available as most of the businesses are newly organized.
REVIEW OF RELATED LITERATURE
2.1. Concepts and Definitions
According to Ministry of finance and economic Development (1997) Micro and small business enterprises (MSEs) are a special focus of the government, given that they comprise the largest share of total enterprises and employment in the nonagricultural sectors. In recognition of the important role MSEs have to play in creating income and employment opportunities and reducing poverty.
The newly update micro and small business enterprises definition of FMSEDA (2010) that includes:
• Micro Enterprises in the formal and informal sector, with a paid up capital not exceeding Birr 100,000 and employed up to 5 employees for manufacturing sector and a capital of Birr 50,000 and employed 5 employees for service sector.
• Small Enterprises are those business enterprises with a paid up capital of above Birr 100,001 and not exceeding Birr 1,500,000 and employing 6-30 for manufacturing sector and capital of Birr 50,001-500,000 and employing 6-30 employees for service sector.
2.2. MSEs in Ethiopia
According to Solomon (2004), in Ethiopia MSEs are informal sectors that are the main source of employment and income for vast number of people. Also Mulu (2007) and Rahael (2010) argued that the largest private sector constitutes the MSE and the medium industries and created the largest number of employment in the country. The government of Ethiopia also gives greater emphasis for the development of MSE in its strategy and policy formulation. In developing countries, the informal sector is a large source of employment and income. In Ethiopia, about half of the urban workforce is engaged in the informal sector and Addis Ababa nearly accounts for about 40% of the total operators in micro enterprise activities (Rahael, 2010).
According to the central statistical agency (2003), small scale manufacturing survey, over 89% of the informal sector operators are concentrated in manufacturing, trade, hotel and restaurant activities. Of the small scale manufacturing industries 85% are engaged in the manufacture of food, fabricated metal furniture and old traditional cloths. The survey also revealed that the number of people earning their livelihood from the informal sector activities and small scale manufacturing industries is eight times larger than those engaged in the medium and large scale industrial establishments. According to the FMSEDA (2010), the MSBE sector is characterized by highly diversified activities which can create job opportunities for a substantial segment of the population. This indicates that the sector is a quick remedy for unemployment problem. To curb unemployment and facilitate the environment for new job seekers and self-employment a direct intervention and support of the government is crucial.
The MSEs sector in Ethiopia appears to be fraught with a number of constraints that stifle its rapid growth and development as a means of overcoming poverty and unemployment (Zewde, 2002). According to Zewde, the main constraints that face MSEs include inadequate empirical research on MSEs, limited responses by financial institutions to MSEs, lack of appropriate technology and related facilities, lack of strong organizations for entrepreneurs, lack of co-ordination among Business Development Service providers, lack of access to land and premises, and lack of market access and market information. The Ethiopian government also identifies major constraining factors of the sector (MOTI, 1997). These include: inadequate marketing and production space; facilities, backward production technology; lack of innovation; marketing problems; lack of information; poor input quality; absence of intra and inter enterprises networks; and lack of financial capital. Similarly Solomon (2004) identified the major constraints faced by small enterprises includes demand problems, paucity of capital, equipment and technology, human and material inputs, rules and regulations and institutional bottle necks.
A characteristic associated in micro-enterprises is that they tend to be independent minded, workaholic and have a strong family orientation (Boissevain, 1991). This explains their ability to take flexible decisions, affording them less bureaucracy and taking timely action to respond to day-to-day arising situations. Their main focus is family well-being and thus they tend to dislike government interference, and tend to be particularly averse to taxation on their hard-earned profits. The flexibility and lack of formality of micro-enterprises is at the same time their weakness in that these characteristics often lead firms not to seek professional guidance. Accessing finance is difficult for micro-enterprises and often seen as a major stumbling block for their success. This is due to the high-risk element that such enterprises carry with them. This difficulty in accessing finance often puts them at a disadvantage, constraining their options for the carrying out the necessary restructuring, which in this era of globalization, is much needed to withstand external competition (Solomon, 2004).