Growth of youth-owned MSEs in Ethiopia: characteristics, determinants and challenges

Abstract

The study examines the factors that influence the growth of youth-owned MSEs in Ethiopia using a sample survey of 909 operators which were selected through a multi-stage random sampling techniques. The result of the cross-tabulated descriptive statistics showed that the personal attributes, firm characteristics, inter-firm cooperation and policy predictability affected the growth of the MSE operators. Growth rate was also influenced by the diverse and heterogeneous character of the youth-owned MSEs. Unlike many other studies, the findings of this study reveal that the average growth rates of microenterprises are much lower than the small enterprises. Female-owned firms registered relatively lower growth rate compared to their male counterpart. The results obtained from the regression indicate that among the personal attributes of youth MSE owners: education, sole ownership form of business organization, small enterprise category, experience in similar business, and gender (male MSE owners) are significant variables which positively influence the growth of the youth operators. Out of the firm-level attributes, access to training before starting business, social networking and access to loan are statistically significant variables which negatively affect growth rate. On the other hand, access to product markets, future plan of the enterprises, saving culture, size of start-up capital and current capital are found as significant variables influencing the growth of youth-owned MSEs. The predictability of policies and inter-firm cooperation are also found to be significant variables affecting growth and expansion of youth-owned MSEs. Since the growth rate of microenterprises and women-owned enterprises are lower, the study suggests revisiting the current support program by crafting tailored interventions. Moreover, although inter-firm cooperation and policy predictability affect the growth of youth-owned MSEs, due focus should be given to improve social networking and building the trust and confidence of the operators on government policies and strategies.

Keywords: Youth-owned micro and small enterprises (MSEs), Growth rate of firms