IDEAS home Printed from https://ideas.repec.org/a/bla/sajeco/v76y2008i3p548-568.html
   My bibliography  Save this article

Factors That Affect The Long‐Term Survival Of Micro, Small And Medium Enterprises In Ethiopia

Author

Listed:
  • Eshetu Bekele
  • Zeleke Worku

Abstract

There is an increasing recognition of the potential importance of micro, small and medium enterprises (MSMEs) for employment, income and poverty reduction in Ethiopia. Although the MSME sector contributes significantly to the national economy, the high failure rate among well established small businesses and enterprises is a matter of major concern. A random sample of 500 small businesses and enterprises selected from five major cities in Ethiopia were followed up for 6 years in order to assess the impact of influential factors that affect the long‐term survival and viability of small enterprises. Hazard ratios estimated from the Cox Proportional Hazards Model were used to quantify the impact of key predictors of survival. Businesses that ceased operation were characterised by inadequate finance (61%), low level of education (55%), poor managerial skills (54%), shortage of technical skills (49%), and inability to convert part of their profit to investment (46%). The study shows that participation in social capital and networking (iqqub schemes) was critically helpful for long‐term survival. Businesses that did not participate in iqqub schemes regularly were found to be 3.25 times more likely to fail in comparison with businesses that did. Results of the study have implications that could be used for developing policy initiatives that are aimed at fostering long‐term growth in small businesses and enterprises.

Suggested Citation

  • Eshetu Bekele & Zeleke Worku, 2008. "Factors That Affect The Long‐Term Survival Of Micro, Small And Medium Enterprises In Ethiopia," South African Journal of Economics, Economic Society of South Africa, vol. 76(3), pages 548-568, September.
    • Handle: RePEc:bla:sajeco:v:76:y:2008:i:3:p:548-568
    DOI: 10.1111/j.1813-6982.2008.00207.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1813-6982.2008.00207.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1813-6982.2008.00207.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Robert E. Carpenter & Bruce C. Petersen, 2002. "Is The Growth Of Small Firms Constrained By Internal Finance?," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 298-309, May.
    2. Jayachandran N. Variyam & David S. Kraybill, 1994. "Managerial Inputs and the Growth of Rural Small Firms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 568-575.
    3. Braverman, Avishay & Guasch, J. Luis, 1986. "Rural credit markets and institutions in developing countries: Lessons for policy analysis from practice and modern theory," World Development, Elsevier, vol. 14(10-11), pages 1253-1267.
    4. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI).
    5. Gina Buijs, 1998. "Savings and loan clubs: Risky ventures or good business practice? A study of the importance of rotating savings and credit associations for poor women," Development Southern Africa, Taylor & Francis Journals, vol. 15(1), pages 55-65.
    6. Webster, L., 1991. "World Bank lending for small and medium enterprises," World Bank - Discussion Papers 113, World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sènakpon Fidèle A. Dedehouanou & Didier Y. Alia, 2020. "Dynamics of off-farm self-employment in West African Sahel," WIDER Working Paper Series wp-2020-142, World Institute for Development Economic Research (UNU-WIDER).
    2. Abiola Babajide Ph.D, 2012. "Effects of Microfinance on Micro and Small Enterprises (MSEs) Growth in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(3), pages 463-477, July.
    3. Surender Mor & Sonu Madan & Geoffrey R. Archer & Arvind Ashta, 2020. "Survival of the Smallest: A Study of Microenterprises in Haryana, India," Millennial Asia, , vol. 11(1), pages 54-78, April.
    4. Zeleke Worku, 2019. "Regulatory Obstacles and Small, Micro and Medium-sized Enterprises," International Review of Management and Marketing, Econjournals, vol. 9(6), pages 44-50.
    5. Nagler, Paula & Naudé, Wim, 2017. "Non-farm entrepreneurship in rural sub-Saharan Africa: New empirical evidence," Food Policy, Elsevier, vol. 67(C), pages 175-191.
    6. Nagler,Paula & Naude, Wim & Nagler,Paula & Naude, Wim, 2014. "Non-farm enterprises in rural Africa : new empirical evidence," Policy Research Working Paper Series 7066, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Diagne, Aliou & Zeller, Manfred, 2001. "Access to credit and its impact on welfare in Malawi:," Research reports 116, International Food Policy Research Institute (IFPRI).
    2. Hameem Raees Chowdhury, 2016. "Joint-Liability in Microcredit: Evidence from Bangladesh," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(1), pages 105-129, March.
    3. Idrees Khawaja & Nasir Iqbal, 2019. "Determinants of Expansion of Micro and Small Firms and State of Entrepreneurship in Pakistan," PIDE-Working Papers 2019:160, Pakistan Institute of Development Economics.
    4. E. Chuke Nwude & Kenneth Chikezie Anyalechi, 2018. "The Impact of Microfinance on Rural Economic Growth: The Nigerian Experience," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 27-31.
    5. Jain, Pankaj S., 1996. "Managing credit for the rural poor: Lessons from the Grameen Bank," World Development, Elsevier, vol. 24(1), pages 79-89, January.
    6. Zeller, Manfred, 1994. "Determinants of credit rationing," FCND discussion papers 2, International Food Policy Research Institute (IFPRI).
    7. Cumming, Douglas & Deloof, Marc & Manigart, Sophie & Wright, Mike, 2019. "New directions in entrepreneurial finance," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 252-260.
    8. Jie Ning & Matthew J. Sobel, 2018. "Production and Capacity Management with Internal Financing," Manufacturing & Service Operations Management, INFORMS, vol. 20(1), pages 147-160, February.
    9. Magnus Schückes & Tobias Gutmann, 2021. "Why do startups pursue initial coin offerings (ICOs)? The role of economic drivers and social identity on funding choice," Small Business Economics, Springer, vol. 57(2), pages 1027-1052, August.
    10. Massimo Colombo & Annalisa Croce & Samuele Murtinu, 2014. "Ownership structure, horizontal agency costs and the performance of high-tech entrepreneurial firms," Small Business Economics, Springer, vol. 42(2), pages 265-282, February.
    11. Kim, Sang-Joon & Bae, John & Oh, Hannah, 2019. "Financing strategically: The moderation effect of marketing activities on the bifurcated relationship between debt level and firm valuation of small and medium enterprises," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 663-681.
    12. Aiello, Francesco & Albanese, Giuseppe & Piselli, Paolo, 2019. "Good value for public money? The case of R&D policy," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1057-1076.
    13. Fernández de Guevara, Juan & Maudos, Joaquín & Salvador, Carlos, 2021. "Effects of the degree of financial constraint and excessive indebtedness on firms’ investment decisions," Journal of International Money and Finance, Elsevier, vol. 110(C).
    14. Luis Catao & Carmen Pages & Maria Fernanda Rosales, 2009. "Financial Dependence, Formal Credit and Informal Jobs - New Evidence from Brazilian Household Data," Research Department Publications 4642, Inter-American Development Bank, Research Department.
    15. Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2012. "Microfinance and its role in household poverty reduction: findings from Pakistan," Global Development Institute Working Paper Series 17312, GDI, The University of Manchester.
    16. Wang, Wei & Yang, Haoxi & Wang, Xi, 2023. "Financial development and wage income: Evidence from the global football market," Journal of Banking & Finance, Elsevier, vol. 149(C).
    17. Munjal, Surender & Requejo, Ignacio & Kundu, Sumit K., 2019. "Offshore outsourcing and firm performance: Moderating effects of size, growth and slack resources," Journal of Business Research, Elsevier, vol. 103(C), pages 484-494.
    18. M. Jahangir Alam Chowdhury & Dipak Ghosh & Robert E. Wright, 2005. "The impact of micro-credit on poverty: evidence from Bangladesh," Progress in Development Studies, , vol. 5(4), pages 298-309, October.
    19. Quan-Hoang Vuong & Huyen Thanh T. Nguyen & Thanh-Hang Pham & Manh-Toan Ho & Minh-Hoang Nguyen, 2021. "Assessing the ideological homogeneity in entrepreneurial finance research by highly cited publications," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-11, December.
    20. Wioletta Czemiel-Grzybowska, 2014. "Selected Constraints To Development Of Entrepreneurship In Poland," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 10(2), pages 21-27, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:sajeco:v:76:y:2008:i:3:p:548-568. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.