Contributions of Micro, Small and Medium Enterprises (MSMEs) to Income Generation, Employment and GDP: Case Study Ethiopia

Abstract

The pillar goals of this research are to review the conditions of MSMEs, their contribution to employment creation, income generation, poverty alleviation, contributions to the local, regional and national GDP, stimulating entrepreneurial climate and the challenges and opportunities in the design, implementations, marketing opportunities, linkages, financial sources, dynamics, survival and policy landscape. To achieve the presented purposes, we collected primary and secondary data through a survey, focus group discussions and documents reviews. We used qualitative and quantitative approaches to analyse the collected data using various statistical programs. We used descriptive and econometric statistical analysis to process the data, obtain the relevant estimation results and fully discuss the purposes under the study. We firmly maintain that the systems we presented, and the methods applied enabled us to tackle the aims of the study. MSMEs in Ethiopian are the chief sources of job, income, significantly contribute to the local, regional and national GDP and key policies to eliminate poverty. In the log-linear regression, we found that MSMEs initial capital, BDS, access to credit facility are the key determinants of MSMEs performance. Majority of the MSMEs produce for local and regional markets; few for national markets and none for international markets. Besides, we found that sex of MSMEs owner/manager, BDS, access to credit and capital size strongly determine the survival of MSMEs. Based on this study, the major obstacles of MSMEs in Ethiopia are the question of sustainability, lack of credit, weak market linkage, insufficient training, weak human resources development schemes, dependency on government and spoon-feeding mentality, oscillations in government policies, price variations, weak links and poor market and product development strategies.