Performance of Micro and Small Enterprises and their Role in Enhancing Local Economic Development: A Case Study in Gullele Sub City of Addis Ababa

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Addis Ababa University


Local economies often get developed with the participation of government, non-government organizations, and the community at large. Among the community, micro and small enterprises operators have the capability to strengthen the local economy through mobilizing local resources. This research explores the performance of Micro and Small enterprises and their role in enhancing local economic development in Gullele Sub-City, Addis Ababa. The analysis was based on primary and secondary data collected through administrative type of questionnaires and key informant interviews from the operators, government officials, and enterprise representatives. Contribution of MSEs is viewed in terms of the enterprises’ performance by using their capital, profit, and employment creation. To see their impact, the study also review contribution of MSEs in light of economic improvement of the operators through household income and saving habit, household’s expenditure to food, education, health, durable and non-durable assets. Finally, discussion was held with operators regarding the challenge and opportunities the enterprises and operators are facing now. The results indicate that, MSEs show improvement in their capital and profit. The enterprises’ performance in terms of employment, capital and profit varies based on the sector in the study area. Construction and wood and metal works need high initial capital, they are labor intensive and have higher profit margin than the textile and the food and beverage sub sectors. Hence, this shows their contribution to local economic development is encouraging. Most of the operators are performing without appropriate training even if training is provided by the government. Nonetheless, the operator’s living standard, income, food consumption, education, health, durable, and non-durable household assets are increasing. Most of the operators have a plan to expand the business either in the same line or to have a branch and diversify the business which has a greater impact to the local economic development. However, there is still much untapped potential for improvements in this respect beyond what has been achieved so far. Major constraining factors for realizing such potential include lack of technical and entrepreneurial skills, lack of sufficient capital, affordable access to raw material and input and lack of market to their product.



Small Enterprises and their Role