Challenges and prospects of small enterprises in Ethiopia : a study of entrepreneurs in Tigray Region

Abstract

The small enterprise has become a major sphere of interest for policy makers and donors. Despite the institutional and policy support, these enterprises have fallen short of expectations. This study is intended to fill the gap by exploring the challenges and prospects of the entrepreneurs in the small enterprise in general and specifically rate the challenges across each sector in Mekelle and Adigrat, Tigray Regional State of Ethiopia. Generally, 154 samples of the small enterprise were selected using a stratified proportional random sampling technique, from which the required data were generated and analysed employing the descriptive and exploratory research design. In the first part, the characteristics and prospects of the entrepreneurs and the small enterprise are presented. The finding reveals that the gender of the entrepreneurs is dominated by and is in favour of male entrepreneurs when compared to that of their female counterparts. The majority of respondents lack the relevant experiences and operate as sole proprietors. Furthermore, business plan is found out to be used only to meet the requirements of the financial institutions. The result also revealed that small enterprises are operated mainly by the owners of the business themselves and hence their contributions to employment and income generation for others is very limited. Financial constraint is found out as a general challenge to entrepreneurs of the small enterprises. In addition, different constraints such as training, access to finance, market opportunities, policy and legal measures are examined and rated across different business types where each factors are found to affect small enterprises at a different rates. What is severe problem for one sector is found out to be not a problem when compared to other sectors. These imply that policies and support programs need to take in to account the heterogeneous nature of enterprises and entrepreneurs. Overall, the result discloses a high failure rate of the small enterprises in the study sites and one can conclude that there is a lack of innovation from the side of entrepreneurs and a weak support from the government and other supporting institutions. In view of these, the researcher recommends an innovative support schemes to ameliorate and accelerate the growth of the small enterprises.