Assessing Transformational Status and Factors Affecting Transformation of Micro and Small Enterprises in Oromia Regional State: The Case of Adama, Dukam and Shashemene Towns, Ethiopia

Abstract

Micro and Small enterprises are generally recognized as the engine of economic development and they have vital contribution to the economic development and creation of wider employment opportunity in developing countries. Thus, it is believed that focusing on the growth and transformation of such enterprises will bring paramount change in growth and development of the developing nations. The research was aimed at assessing transformational status and identifying factors affecting transformation of micro and small enterprises in Oromia regional state with particular focus on three selected towns namely, Adama, Dukam and Shashemene towns. The study was employed both primary and secondary data. The primary data was collected from 220 MSE operators through well-developed questionnaires. In addition, a key informant interview was made with food security and job opportunity creation office heads and experts of the towns. Parallel to this, the secondary data was taken from both the selected towns' food security and job opportunity creation offices and the region's food security and job opportunity creation bureau. To realize the objectives of the study both descriptive statics and binary log it model was employed. The study revealed that transformational status of MSEs into medium enterprises for the last five years was very low which is less than 5%. The log it analysis has also shown that out of six categories of factors, four of them were significantly affecting the growth and transformation of MSEs into medium enterprises namely, financial factors, market managerial factors, political/regulatory factors and infrastructural factors. While the remaining two factors (market related factors and other factors) were found to be insignificant. Thus, it was recommended that the regional government bodies and MSE operators need to work on these factors to increase the transformational status of MSEs into medium enterprises especially, financial factors, market managerial factors, political/regulatory factors and infrastructural factors.