Rift Valley University Dire Dawa Campus Department of Project Management

Post graduate program

Course Title: Research Methods (MBA 652)  

RESEARCH PROPOSAL
Performance of Micro and Small Enterprises and their Role in Enhancing Local
Economic Development
(A Case study in Dire Dawa City Administration)
 
Name of the Group & Group Three
1. Antenah Ambew
2. Anwar Shafi
3. Ibsa Nahwi
4. Nesri Yaya
5. Shamshadin Mohammed 
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Submitted to: Abel Mesfin (Ph.D. Candidate)
Submission Date: February 15, 2023
 
DIRE DAWA, ETHIOPIA
Feb, 2023
 
List of Abbreviations and Acronyms
Abstract
CHAPTER ONE
1.1 Background of the Study
1.2. Statement of the Problems
1.3. Objective of the Study
1.31. General objective
1.3.2 Specific Objective
1.4. Research Questions
1.5. Significance of the Study
1.6. Scope of the Study
1.6. Limitations of the Study
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1. Defining Local Economic Development
2.2. Definition of Terms
2.2. The Micro and Small Enterprises Development Prospects
2.3. Micro and Small Enterprises Clusters In Ethiopia
2.4. Micro and Small Enterprise Development Policies and Strategy of the
Government of Ethiopia
2.5. Micro and Small Enterprise Support Packages
2.5.1. Duration for Micro & Small Enterprise Stay in The Clusters
2.6. Issues Regarding the Implementation of The Micro And Small Enterprise
Development Strategy
2.7. Micro & Small Enterprise (MSE’s) Main Targets
2.8. Priority Sectors For Financing MSE’s
2.9. Major MSE Loan Eligibility Criteria
2.10. Pre Loan Saving
CHAPTER THRE
3.1 Sampling Techniques
3.2 Sample size
3.4 Data Source and Collection Procedure
3.5 Secondary Data Collection Techniques
3.6 Method of Data Analysis
Work plan
Budget Requirement
References
Appendices/Annexes
List of Abbreviations and Acronyms
 BDS Business Development Service
BoFED Bureau of Finance and Economic Development
CSA Central Statistical Authority
CED Committee for Economic Development
DDA Dire Dawa Administration
DMF Dire Micro Finance
DDMSEDA Dire Dawa Micro and Small Enterprises Development Agency
EC European Commission
GDP Gross Domestic Product
HASIDA Handicraft and Small Scale Industries Development Agency
ILO International Labor Organization
LED Local Economic Development
MoUDC Ministry of Urban Development Construction
MoTI Ministry of Trade and Industry
MSME Micro, Small and Medium Enterprises
MFI Micro Finance Institute
NGO’s Non-Government Organizations
ReMSEDA Regional Micro and Small Enterprises Development Agency
SE Small Enterprises
TVET Technical and vocational educational training
TVETC Technical and Vocational Education and Training College
UN United Nations
UNIDO United Nations Industrial Development Organizations
 Abstract
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 proposal explores the performance of Micro and Small
enterprises and their role in enhancing local economic
development in Dire Dawa City. 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 MSE’s 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 MSE’s in light of economic improvement of the operators through house
hold 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.
 CHAPTER ONE
1 Introduction
1.1 Background of the Study
Micro and Small Enterprises (MSE’s) sector is defined as the
natural home of entrepreneurship. MSE’s have the potential to
provide the ideal environment for enabling entrepreneurs to
optimally exercise their abilities and to attain their personal
goals and professional goals. In all successful economies,
MSE’s are seen as essential spring board for growth,
personal satisfaction, job creation, and social progress.
Studies conducted by Endalkachew, (2016) also shows that
the small business sector is very important force to generate
employment and more equitable income distribution, activate
competition, exploit niche markets, enhance productivity, and
bring technical change through the combination of all of these
measures, to stimulate local economic development.
The results indicate that, MSE’s 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,
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
production.
Although the emergence of MSE’s is viewed differently, the sector is
playing a significant role in promoting local development through the
creation of job employment opportunities and utilization of local
resources. In recent years, when the economies of most industrialized
countries have shown various signs of stagnation and structural decline,
MSEs are being recognized as generators of new growth, primary
sources of technological changes and job creation, as one of the
major factors in maintaining socio-economic stability (Giaoutzi,
Nijkamp & Storey, 1998). Under the prevalence of extreme
poverty, unemployment and coupled with the growing urban population,
the modern and formal sector of the economy could not absorb the
multitudes of unemployed people who are more of unskilled
(Workneh,2015). Among many, one of the contributions of MSE’s is the
development of the local economy through providing job and
entrepreneurship for the local people. Local economic development may be
defined as increasing the local economy’s capacity to create wealth for local
residents. Local economic development (LED) is the process by which
public, business and non-governmental sector partners work collectively to
create better conditions for economic growth and job employment
generation. The aim is to improve quality of live for all (Helmsing, 2011).
To decreasing the existing level of urban unemployment and urban poverty through the
development of the local economy to a certain level, the recent Ethiopian government
has designed MSE’s Development program under its urban industrial development
package in 2013. In 2017 the program has a target to decrease 80% of urban
unemployment by creating permanent employment opportunity and to decrease20% of
urban unemployment by creating temporary job employment opportunity, and thereby
to reduce urban poverty. In Ethiopia, although MSEs exist for longer periods,
they have got the attention of policy makers, academicians and researchers
very recently. The work of Andualem (2012) indicated that MSE;s in
Ethiopia have been neglected for long period until shift was made to market
led economic system. However, since 1991 the EPRDF government has been giving
strong attention to the sector. As a result, in2011 the Addis Ababa city Administration
developed a business plan for the first time in home furniture, dry food, metal and
wood works sub sectors. Later on in 2013 an overall MSE’s Development program was
designed for the entire country (Dire Dawa City administration MSEs Development
agency business plan 2012 and MSEs Development program 2013). Dire Dawa City
administration is Industry Park and free Trade zone city located in surrounding Easter
Ethiopa part which is in the Industry cluster part of Ethiopan city. The town has a
total population of 280,000. Micro and small enterprise operated when the
town administration develop a business plan on MSEs throughout the city
in 2012 when the sub city administration develop a business strategy on MSE’s.
 1.2. STATEMENT OF THE PROBLEMS
From its genesis, micro and small enterprise is believed to have higher
potential for local economic development in an overarching manner. However,
MSEs are not a panacea, but they are more promising approach than other
instruments we have for employment opportunities for local economic
development (Barr, 2012). Not more operation but operation with care and
precaution make it effective mechanism of local economic development. In
this regard, there are three critical issues to consider such as MSEs
programs need to target the poorest section of the society having clear
institutional mission of serving the most disadvantaged (Greeley, 2014;
Hashemi and Rosenberg, 2014). While most governments hoverer
owned the potential of MSEs to create job employment and contribute to
poverty eradication for local economic development, in many cases this
potential is not being rewarded (Reinecke and White,2004). A study carried on
MSEs’ problems by Liedholm and Mead (1999) showed that three categories
of constraints are predominant in MSE sector. Access to capital, problems of
markets and other infrastructure, access to raw materials and intermediate
inputs are the main problems (Philipos, 2014).Studies show that most MSEs
Working in developing local economies countenance the same challenges and
contribute to the local economic development.
According to the ILO report (2013) some of the constrictions are:
unfavorable legal and regulatory environments and, in some cases,
discriminatory regulatory practices; lack of access to markets, finance, business
information; lack of business premises (at affordable rent); low ability to
acquire skills and managerial expertise; Low access to appropriate
technology; and Poor access to quality business infrastructure are some of it
(ILO, 2013). Ethiopian MSEs are also challenged by many of these problems.
According to the CSA Report (1994-1995), the major obstacles experienced by
small-scale manufacturing industries were the irregular and inconsistent supply
of raw materials and a shortage of suitable working premises.
The Ethiopian government adopted the national Micro and Small Enterprise
Development Strategy the first time in November 1997.
The policy identified a number of constraints hampering the development of
this sector. The policy serves as guideline to all stakeholders to
stimulate the establishment of new enterprises and enabling the existing
ones to grow and become more competitive.
This policy identified un-favorable legal and regulatory frameworks, under
developed infrastructure, poor business development services, limited access to
finance, ineffective and poorly coordinated institutional support as the key
constraints (MSEs strategy for Ethiopia, 1997).
Of course, any program has its own objectives that can be used as a parameter to
evaluate its impact on the beneficiaries at the end, likewise the currently being
executed MSEs development program of Ethiopia has a clear target of
unemployment education. By creating 80% permanent employment and 20%
temporary employment opportunities as well as poverty reduction target (which
enhances local economic development, which is not explicitly stated in the program
by the year 2016).
The reviewed empirical studies reveal that there is a gap with regard to impact
assessment of enterprises ‘performance in terms of employment opportunities,
income, profit and capital in light with local economic development. In addition,
the reviewed empirical studies with regard to the sector focused on socio-
economic development determining factors of MSEs success and its major
challenges and constraints Philipos, (2014); Workneh, (2015); Solomon, 2012).
Most studies, in academic and non-academic institution, focus on factors that hider
the growth of MSEs and the outcome of the program in aggregate forms.
Regarding the role of micro and small enterprises in the process of local
economic development, empirical studies fail to investigate level of
performance and how the program intervene in an individual level though the
program designed to change the life of those individuals who involved in the
program. For instance, the study conducted by Workneh (2015) with the
objective of analyzing factors that hinder the performance of MSEs found
that lack of capital, lack of markets and other necessary infrastructure,
bureaucratic regulatory requirement, problem of business
development services and in appropriate locations are still major
problems of the sector. But the researcher did not see how MSEs
contribute for local economic development in the process of
employment creation, income generation, and asset holdings. Philipos’s
(2014) study, focus more on the impact of business development services
(BDS) for MSEs development in enterprise level and found that BDS is in its
early stage in MSE’s. The researcher also tried to identify the challenges
faced by MSEs in BDS program in city some of the factors identified are low
level of MSE operators’ awareness for majority of BDS, unwillingness to pay
for BDS, lack of diversity of BDS providers and service and lastly limited
knowledge of BDS intervention
The researcher h old up to see MSEs contribution in the
development of the local economy using their performance,
employment, income and an asset. The research conducted by Solomon
(2012) also tried to analyze growth determinants of MSEs and found that
product diversification is a major determinant factor for the growth of small
enterprises.
The finding reveal that business experience is associated with new start-ups
calls for the promotion of the culture of apprenticeship and intern
experience sharing for the young as a possible area of
intervention in employment generation schemes to minimize the extent of
unemployment. However, the study failed to investigate how MSE’s can
empower the local economy. From the above mentioned studies, it is
possible to learn that the contribution of MSEs in enhancing local
economic development is not studied very well. Therefore, this study tries
to assess the impact of MSE’s both on enterprise and individual\household\
level in the context of local economic development taking Dire Dawa city
Administration as a case.
 1.3. OBJECTIVE OF THE STUDY
The general objective of the study is to analyze the role of
MSEs in enhancing local economic development (LED) in the case of
Dire Dawa city Administration.
Specifically this study seeks to:
 Analyze the performance of MSEs (in terms of capital, employment and
profit operating in Dire Dawa city administration
 Examine the role of MSEs in improving the wellbeing of the households
 Identify the challenges and opportunities of the selected enterprise for
Promoting local economic development in the town
Operational definitions of the study
Based on the above objectives, the following variables & questions are set for
investigation.
 What are the contributions of MSE’s in generating employment opportunities
to the Local people in the city?
 Are MSE actors contributing for local economic development?
 What are the changes scored by MSE operators in terms of income, saving
and asset Holding after they engage in the activities?
 What is the level of their education, health, and living standard observed in
the MSE’s Operators?
 1.4. Research Questions
With the help of sufficient and appropriate data on the Performance of Small
Scale Enterprises in Dire Dawa City Administration and Its Implication for
Promotion to Medium Scale Enterprises, this study was used the following
hypothesis:
HI: There is a positive association between enterprise growth and access to finance.
H2: There is a positive association between the MSEs growth and loan criteria of MFls.
H 3: There is a positive relationship between MSEs growth and proper
training.
H4: There is positive relationship between MSEs growth and profit.
H5: There is positive association between MSEs growth and access to market.
H6: There is positive association between MSEs growth and average sale
volume.
 1.5. SIGNIFICANCE OF THE STUDY
A micro and small Enterprises operator is particularly
feasible programs and projects derived from
development strategy of the urban development policy.
It is most likely to be the most viable and sustainable
institutions to provide accessible and of affordable
market and job opportunities to the youths and women
economically productive, but unable to meet the jobs in
practical operations. It is on the basis of the scope of the
study the papers we evaluation will be expected to contribute
as guidelines to arrange the real contribution of micro and
small enterprise development strategies for specially the
urban peoples of Ethiopia specially for urban Industry
dwellers like Dire Dawa city administration.
 1.5. SCOPE OF THE STUDY

The paper findings and evaluations scopes and area to

be addressed will be defining the study area scope. The
study is delimited for various reasons based on Dire
Dawa city micro and small enterprise
development strategies contribution to local
economic development based on various variables in
the city
 1.6. LIMITATIONS OF THE STUDY
The paper findings should be considered in the lighter of some
limitations pertaining to the scope and quality of secondary data
and primary data information that were gathered within the
limits of allocated budget and time constraints the research
workers expectations. Secondary data information about the
micro and small enterprise role in contributing to local
economic development, readily available particularly from the
micro and small enterprise development agency offices and at
city level will be some shortage of data and bureaucracy when
data gathering when analyzing and will be happen which may
take the research some limited.
 CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1. Defining Local Economic Development
Concerning the definition of local economic development (LED),
different authors use different words with the same meaning for local
economic development. A common definition of LED is the process in
which partnership between local government, the private sector and the
community established to manage local and access to external resourced
to stimulate the economy of a well-defined territory. Define LED as
“process by which local government and/ or community based groups
manage their existing resources and enter into new partnership
arrangements with private sectors, or with each other, to create new
jobs and stimulate economic activity in a well-defined economic city”.
 2.2. DEFINITION OF TERMS:
Micro Enterprises are: An enterprise that can employ up to 5(five)
individuals including the enterprises owner and the family with a capital birr
50,000 for service sectors and birr 100,000 for industry sectors. The capital
amount does not include the value of enterprises Building If any.
Small Enterprise :– “Small Enterprise are those business enterprises that can
employ 6-30 individuals including the enterprise owner and the family with a
capital of birr 50,001 – 500,000 for service sector and birr 100,001 –
1,500,000 for industry sector. The capital amount does not include
the value of an enterprises ‘building if any.
Individual micro and Small Enterprise – licensed business enterprises
owned by a single individual(sole proprietor ship)
Organized :– micro and Small Enterprises (MSE) – is licensed business
enterprise owned by organized group of people who are organized
according to the countries / Dire Dawa City Administration
Cooperatives directions proclamations. Generally the Micro and Small
enterprises development Agency target according to Unemployment reduction is
mainly the Technical and Vocational institutes and Colleges and University graduates
as well as other Unemployed Youths who are organized under Cooperatives, in the
form of sole proprietorship, share Company and Private limited Company through
establishing a business enterprise.
2.2. THE MICRO AND SMALL ENTERPRISES DEVELOPMENT PROSPECTS
Micro and small development programs have become
increasingly wide spread tools in fostering innovation and
growth of a competitive private sector in developing countries,
including Ethiopia. As part of the MSE Development Strategy of
the Government of Ethiopia, industrial extension program are
considered as the main Tool for spurring income and employment
growth among micro- and small-scale enterprises.
The purpose of this study is to analyze government’s interventions
in poverty reduction development in Ethiopia and Discuss some
of the concerning issues regarding these interventions.
The study summarizes experience of cluster development
policies in the past, analyzes the challenges and provides
possible areas of Government action to strengthen clusters.
The study is based on case studies, interviews and field visits of
various governments created MSE in City administration.
 2.3. MICRO AND SMALL ENTERPRISES CLUSTERS IN ETHIOPIA

Like other countries in the world, industrial clusters for micro- and small-scale enterprises
are also present in Ethiopia. The most common types of clusters in Ethiopia are natural
clusters. Although the Exact number of natural clusters in Ethiopia is not known, they are
commonly found among labor-intensive. Manufacturing sectors and are mostly located in
urban centers areas. Some examples of such clusters are the footwear cluster in Industry
park the handloom cluster in Dire Dawa. There are both dynamic and survival opportunities
clusters in Ethiopia. One example of dynamic clusters in Ethiopia is the footwear cluster in
industry zone, Dire Dawa. Identified this cluster as an exceptionally successful case in
Africa because of its remarkable recovery from the intense competition from imported
Chinese shoes in the late 1990s. The free trade zone and industry park cluster in Dire Dawa
is located in the largest open market known as industry door trade.
The cluster comprises of more than 1500 micro and small scale shoe making enterprises
and other related businesses and complimentary activities like input suppliers (soles,
leather, shoe accessories), and service providers (repair and maintenance, machinery rent
At that time, the number of producers in the cluster was
estimated to be only 500 (van der Loop, 2011).The number of
producing firms increased substantially after the recovery and
reached about 1000 in 2013 (Sonobe et al., 2014) and is
currently estimated to be more than 1500. The reason behind
the recovery of the cluster is the persistent upgrading efforts
made by enterprises in the cluster (Sonobe et al., 2014). A
further study by Gebreeyesus and Mokonen
(2019)substantiated the upgrading efforts in the cluster due to
continuous innovation and learning efforts and using improved
quality of raw materials and machinery. Such innovation and
learning efforts are facilitated through the existing networks
and knowledge linkages in the cluster. The cluster was able to
recover despite the absence of support from the government
2.4. Micro And Small Enterprise Development Policies And
Strategy Of the Government Of Ethiopia
In line with the current MSE Development Strategy of Ethiopia, the government has
formulated as a development strategy in January 2011. The main objective of the
MSE development strategy of Ethiopia is to alleviate poverty and to solve the
problems of unemployment and working and selling premises often faced by the
operators. This is aimed to be done through the training and organizing and
financing, construction of standard working and selling premises where a number of
enterprises that work on similar and closely related goods can enter and operate.
The provision of premises to similar and related enterprises is believed not only
to resolve their space limitations but also help create markets, facilitate technology
transfer and induce network and collaboration among enterprises. In addition, having
MSEs that work on similar and closely related goods in one location is held to
provide a ground where linkages with medium and large scale industries can be
initiated. Working premise problem is one of the most frequently mentioned problems
by entrepreneurs both for establishing and running their business. According to the
2018 Urban Employment Unemployment survey collected by the Central
Statistical Agency of Ethiopia, individuals in urban centers that are planning to open
up their own businesses and those that already have one were asked about the main
problems that they face for starting and running their business.
2.6. Issues regarding the implementation of the Micro and small
enterprise development strategy
Government established clusters permit greater focus of public
resources and allow the provision of support to enterprises more
accessible and feasible. However, there are some concerning issues
regarding the implementation of the cluster development strategy of
Ethiopia
1. Some of the criteria used for selecting qualifying enterprises that
would enter the government created clusters are restrictive. For
example, the requirement to have a book of record for income
and expenses may exclude a lot of MSEs in Ethiopia without such
records for their businesses. Studies also show that most MSEs in
Ethiopia start their businesses using own savings or borrowing from
friends and families. The selection criterion that requires a reputation of
loan settlement may, once again, exclude many enterprises without
history of loan from formal financial institutions.
2.5. Micro and Small Enterprise Support Packages
The following support packages will be given to enterprises that are operating in the
government Created clusters.
Training and information about saving and access to credit.
Business Development Service (BDS).
Industry extension services and technology transfer.
Trainings to upgrade the marketing skills of MSEs and provide information to
enable
Enterprises look for market opportunity independently.
Linking enterprises with big companies and assisting them to participate in
government purchases and bid invitations

2.5.1. Duration For Micro & Small Enterprise Stay In The Clusters
The maximum period that MSEs can operate in the government
created clusters is 5 years. Those enterprises that are able to grow into
medium-size enterprises will be provided with another working space at the
industrial zones of each city. On the other hand, enterprises that do not grow
into medium-size enterprises will have to leave the cluster but other supports
like provision of finance, training, information and market linkages will
continue for another 2 years.
2. It is not clear whether government created clusters would be able to generate the
same kinds of advantages envisaged in natural clusters such as market linkages with
input suppliers and output buyers and collaborative networks among enterprises in
order to maximize opportunities and address common challenges.
3. The limited period of stay in the government created clusters (a maximum of 5
years) raises a question of how enterprises would be able to maintain their market
linkages with input suppliers and output buyers when they move to another location after
the five year period. In order to address these issues, case studies were made on
government created clusters in Ethiopia that were established in the past.

2.7. Micro & Small Enterprise (MSE’s) Main Targets

 Technical and Vocational Schools, colleges and universities graduates as well as
other unemployed youths who are organized under cooperatives, in the form of Sole
proprietorship, Partnership, Share Company and Private Limited Company to
establish a business entity.
 Economically poor women, but unable to arrange their own business environment to
start up own business.
2.8. Priority Sectors For Financing MSE’s
The government gives financing priority to MSEs that can contribute to the economic
growth, industrial transformation and the sectors that can create more job
opportunities. In line with this, MSEs working on manufacturing and other related
business that are supporting the export sector as well as produces raw materials or
products that can substitute imports shall be the strategy priority sectors for financing.
Accordingly, the followings are some of major business types that shall be given financing
priority: Table

Manufacturing Construction Trading Service Sectors Urban Agriculture

 Textile and  General  Domestic  Transport  Modern fattening
garment contractor products service  Bee keeping
 Leather and  Sub-  Domestic  Store service  Poultry
leather products contractors products  Cafeteria and  Vegetables and
 Food processing  Production of retailing restaurant fruit
and beverage construction  Inputs delivery  Packing service
inputs  Consultancy
Metal engineering  Traditional service
 Wood work mining  Municipality
 Handicraft  Coble stone service
  Infra-structure  Project
subcontract
2.9. Major MSE Loan Eligibility Criteria
I. MSE Certificate and Business License
II. Appropriate working and sales outlets
III. Job related experience and skill
IV. iable business plan
V. Pre loan saving
VI. Audited financial report (for existing MSEs) and Matching collateral or Credit
Guarantee certificate

TARGETING MSES
Targeting MSEs in One Stop Service Center (OSSC)
i. Organizing, screening, licensing and training of MSEs are facilitated and performed in
One Stop Service Center (OSSC) that to be established in each
town by a group of staff from MSE agency , micro finances branch
and Town Commission for Technical and Vocational Education
offices.
ii. The city administration MSE agency assigns one CSO in each OSSC or one
CSO for a group of OSSC in a town or urban kebele city depending on the
volume of operation of MSES to be financed
 CHAPTER THREE
RESEARCH METHODOLOGY

The micro and small Enterprise development role in contribution to unemployment

reduction is considered as units of analysis. Descriptive analysis will be used for the
quantitative information content analysis of the qualitative information obtained
through observation and formal and informal discussions is used to Validate and
complement the results of the quantitative data analysis and going to build finding and
recommendations.
Dire Dawa is one of the cities in Ethiopia, which have governing role in social,
political and economical condition of the country. This city has two levels of government
administration such as city and Kebele administration. It has 61 Kebele administration of
which 24 Kebeles are found in urban (on the year 2004 organized to 9 Keble in
Urbun), the rest 38 Kebeles in rural area. Dire Dawa is located at 505 KM in the east of
Addis Ababa city, geographically lies between 09 28.1 to 09 49.1 latitude north and-41
38.1 to 42 19.1E longitude and 1000-3000 altitude.
This city administration is predominantly low land and has a mean monthly
temperature of 24.80 c According to DDASA 2013 and CSA (2011), the total
population of Dire Dawa 341 thousand, among this each urban and rural population
comprise of 67.93% and 32.07% respectively. Among these gender distribution of
males and females are 171,461 (50.15%) and 170,373 (49.85%) respectively. This
census reports stated that the annual grows of population at the rate of 2.5% in
the city. . The average elevation is about 1500-2000 meter above sea level and the
average annual rain fall is about 623 mm, area and density 1558.61 areas in squ.km.

This administration is still commercial and industrial center in the country. Since, it
found strategic location and relatively better transportation. Network, additionally; it
is being industrial and commercial town due to its nearest location to Djibouti and
relatively well-developed infrastructure
It has trade as the main economic sector that contributes to economic of the city.
This study employed both quantitative and qualitative methodology. In order
to come up with more rich and comprehensive information, both first hand and
secondary sources of data were consulted. The rationale for the integrated
approach is due to the fact that understanding the affairs of the sector. demands
multifaceted approaches.
Since MSEs sector operators are formally registered and their numbers are
somehow known, systematic sampling technique was employed to
get a better response from respondents taking their list from the Dire Dawa
Administration of MSEs team office. The research has a cross-sectional study
design. Such a design is preferred because of the limitations immaterial
resource and time available for the research. With regard to the
nature of investigation it employed a post-test research design, that baseline
data on the conditions of the respondents was not collected prior to the
intervention specifically for the purpose of this study.

The baseline data were collected after the intervention was already implemented. It was
collected from program participants through questionnaire, in-depth interviews, and key
informants interviews. The study tried to assess the performance of MSEs and their role in
enhancing the local economy in Dire Dawa city administration of Dire Dawa city
Administration
 3.1 Sampling Techniques
Sampling Frame
To select a sample for the study, sampling frame is required for selection of different
sampling units. Since one of the characteristics of MSEs Sectors are having registration
and the exact number of operators is some how known. The researcher follows
systematic sampling method and purposive sampling technique for primary data
collection. The researcher employed systematic sampling from construction, textile,
food and beverage and Wood works, fattening, dairy farm, poultry farm and other
available sectors.. The sample survey also shows that most operators working in micro
and small enterprises are engaged in these sub sectors and have different manifestations.
The list of city with the corresponding number of enterprises and the list of individuals
working in the selected town was the sampling frame. Initially 9 urban Kebeles
administrations were purposely selected from the city considering number of
enterprises, the number of individuals who are engaged in MSEs in the selected town
and town which are not adjacent in their location to get necessary information from
different corner of the town.
 3.2 Sample size
The study population was composed of MSEs operators in the enterprises working in
construction, Textile, Food and beverage and wood and metal works, fattening, dairy,
poultry farm operating in Dire Dawa administration. Probability sampling technique
of systematic sampling method was applied for selection of operators for data gathering
through questionnaire. The total number of the respondent for questionnaire selected
in the following ways: The total population for the sample size was determined
with consideration of representativeness. Inconsideration of representativeness at first,
the sample size was determined using the adopted from Cohen (as cited in Belayneh,
2013).
Information gathered through questionnaire may not answer all necessary evidence on
micro and small enterprises in the study area. The researcher develops interview and
case studies to get more facts about the study. Interview was designed for officials
from the town and case study was developed for operators who are working currently and
have better knowledge in the study area. During conducting interview, the researcher
purposively selects the interviewee because having experience and knowledge in the area
helps to understand the problem and development in the area. In case studies, the
researcher also applies purposive sampling from the operators who have a long time
experience and closely working in MSE’s.
 3.4 Data Source and Collection Procedure
Primary Data collection techniques
Questionnaire
The study employed quantitative methods as an important means of generating the
required primary information from the field. The quantitative method was functional
through administrating a household based survey using a standardized questionnaire. The
questionnaire contains questions or variables that discusses the level of education, some
demographic and social characteristics such as age, household size, types of occupation,
the employment status and source and amount of both initial and current capital of the
business, major problems and assistance that the operators needed from the government
in the area of MSEs operation and the like. In order to collect the necessary information
(responses), both closed and open ended questions was developed and incorporated
in the
The questionnaire was designed in English language and has been administered to
respondents in a face to face interview.
In-depth interview
An in-depth interview was held among purposively selected members or operators of the
MSE sector and government officials from different offices and authorities to identify
their views, characteristics and as certain the contribution of MSEs for local
economic development.  
Case Study
Case study method is among the viable qualitative strategies in understanding
scenarios at micro-level. In the context of this study, a simple narrative case of the
individuals who have solid experiences of engaging in MSEs was investigated to best
knowledge and reconcile possible discrepancies in the research.
Observation
The other data collection method that was considered during the study was field
observation. It was used because the researcher can get the chance to see the problem in
reality. Hence, observation was under taken while respondents were doing their activities
and to examine how they can manage their resource.
 3.5 Secondary Data Collection Techniques
As long as the type of data required for the study is both primary and secondary
in its nature, a growing body of literature, such as journal articles, working
papers and other relevant works on the stipulated research problem was consulted
primarily via internet sources. It is worth noting however that CSA data such as,
year 2017 employment and unemployment survey and 2014 labor market survey
and also the micro and small enterprise development strategy and other
related written reports have been used implemented throughout the
course of analysis and interpretation of the study.
3.6 Method of Data Analysis
The data analysis was undertaken right after the data collection from the field. A
tabulation plan was developed during the course of the study so as to enable the
researcher to investigate the role of MSEs in local economic development and
speed up the process of analysis. In the study, statistical tools such as mean,
mode, ratio, and percentage was employed to analyze the data that
has been collected from questionnaire and interviews
 Work plan (Schedule/Duration)
Objective Schedule
Phase 1a: prewriting 6-12 weeks
Review the requirement of the instructor that proposal will be submitted to 1 week
Research context, history, and background of research problem 2 weeks
Develop and write a 1 to 2 page document exploring questions and possible approaches 1 week
Contact experts in the field concerning possible approaches 1 week
Refine the research question 1 week
Phase 1b: administrative task
Identify and contact any relevant sources of information 1 week
Research budget needs 1 week
Request necessary transcripts 1 week
Phase 2: writing and administration 5-7 weeks
Create a document with problem statement, framework 1 week
Gather any additional data required 1 week
Add any remaining details needed to complete the draft 1 week
Request feedback from advisor 1 week
Revise the rough draft 1 week
Phase 3: complete and submit proposal 2-3 weeks
 Budget Requirement
Below is the budget breakdown required to accomplish the Research work?
 
Budget Items Number of quantity & Total Days Rate Total Charge
A. Stationary materials      

1. Printing & Ream paper 4 packet 100.00 400.00

2. Pen 10 10.00 100.00

3. Flash disk 1 250.00 300.00

4. CD/DVD 1 100.00 100.00

5 Stapler 1 100.00 100.00

Printing( proposal, thesis) and photocopy 6 200.00 2200.00
6
  Sub-total     2,200.00

B. Other costs     6000.00

Office supplies & Other equipment     2000.00
 
Internet service and Telephone     1000.00
 
C. Overhead support     3,500.00
Transportation and related things(Travel)     2,500.00
5.
Major advisor 300 hours 20/hr 6000.00
6
Co-Advisor 20 hours 200/hr 4,000.00
7
Sub-total 19,200.00
 
Contingency 10% of the Total amount 1920.00
 
 References
Andualem Tegegne (2016).Challenges in effective development and promotion of
MSEs in Ethiopia: Some suggested approaches. Addis Ababa, Birhana Selam Printing
Press. Assefa Admassie (1997). A Comparative Analysis of the Development of Small Scale
Industriesin Region 14 with other Regions, in Wolday Amha (Eds) (1997).Small Scale
Enterprise Development in Ethiopia, Proceedings of the Sixth Annual Conference on the
Ethiopian Economy. Addis Ababa, Ethiopia
Barr, Michael S. (2012). Microfinance and Financial Development, Michigan
Journal Of International Law, Vol. 26, no.271.
Belayneh Amare (2013) Land Degradation Assessment and Evaluation of Current Land
Uses and Soil Conservation Structures at Upper Chena Catchment, South Gondar, Ethiopia,
M.Sc.Thesis, Environmental Science Program. Addis Ababa University, Addis Ababa.
Benyam Aragaw (2016).Financial and Operating Performance of Women Operated Micro
and Small Enterprises Organized under Wise. Addis Ababa University, Addis Ababa.
Berner, E., G.M. Gomez and P. Knorringa (2016).Helping a large number of people
becomes A little less poor: The logic of survival entrepreneurs.' Paper presented at the
conference 'UNU-WIDER Workshop on Entrepreneurship an Economic Development',
Helsinki (21-23 August 2016).
Borm Checkoway. (2019), Community Development Social Diversity and New
Metropolis, Community Development Journal.
Dire Dawa Administration Micro and Small Enterprises Development Agency Office.
2016 profile directory.
European Commission. 2007, Opportunity and Responsibility – How to help small
business to integrate social and environmental issues into what they do, European
commission – Directorate-general for enterprises and industry.
Getnet AmbachewTamrat and Mulugeta Negash. 2012. Determinants of Micro & Small
Enterprises Transformation: From Micro and Small Scale to Medium level industry.
Gurmeet Singh and Rakesh Belwal (2008). Entrepreneurship and SMEs in Ethiopia,
Evaluating the Role, Prospects and Problems Faced by Women in this Emergent Sector,
Gender in Management: An International Journal Vol. 23 No. 2, pp. 120- 136.
ILO, Geneva .2002 Small Scale Production, Strategies for Industrial Restructuring.
Intermediate Industrial Restructuring Intermediate Technology Publications, London.
ILO Seed Program & African Development Bank (2004). Supporting Growth-Oriented
Women Entrepreneurs in Ethiopia, Kenya & Tanzania: An Overview Report of Small
Business in SmallTowns of Eastern Amhara Region: Nature and Economic Performance,
Journal of Economics, 14(1), July 2004.
ILO (2013). World Employment Report 2004-05, Employment, Productivity, and
Poverty Reduction, Geneva.
Mohan Dhamothoran. (2017), Handbook on Integrated Community Development,

Seven DA pproach to Community Capacity Development

Solomon, E. (2004). Socio economic determinants of growth of small manufacturing
enterprises in Addis Ababa. (Master Thesis). Addis Ababa University, Ethiopia.
Workneh Fiseha.2007. The Constraints of Micro and Small Scale Enterprises in Addressing
Employment Opportunity: The case of Kolfe Keraneo Sub-city, Addis Ababa. MA Thesis
in Regional and Local Development Studies. RLDS, Addis Ababa University
 Appendices/Annexes
Annex - A
Rift Valley University Dire Dawa Campus
Department of Project Management Post graduate program
QUESTIONNAIRE FOR MSE OPERATORS
SECTION 1: INTRODUCTION
This is to conduct a research entitled Performance of Micro and Small Enterprises in
Dire Dawa City Administration. So you are one of the respondents selected to
participate in this study. The information you are providing will be of great importance
in producing current, practical and reliable out put , that will inform readers of the
study . The information you will provide is confidential and only used for the academic
purpose.
Thank you in advance for your kind cooperation .
Instructions
 No need of writing your name
 For multiple choice questions indicate your answers with a check
SECTION 2: GENERAL INFORMATION ON BUSINESS ENTERPRISES

1. What is the main activity of the enterprise?

A)Textile and garment B)Food processing C)Wood and metal work
1. How did you raise funds to start-up your business?
A) Personal saving D) NGOs G) Micro finance institutions

B) Family E) Friends/Relatives H) Others (specify)--

C) Banks F) Iqub/Idir

2. Which one of the following aspect is the most important for the profitability of
your business?
A) Existence of working premises B) Availability of capital
 SECTION 3: FACTORS AFFECTING THE PERFORMANCE OF MICRO
AND SMALL ENTERPRISES
Please indicate the degree to which the following factors are affecting the profitability of
your business enterprise performance. After you read each of the factors, evaluate them
in relation to your business and then put a tick mark (√) under the choices below. Where,
5 = strongly agree, 4 = agree, 3 = undecided, 2 = disagree and 1= strongly disagree.
 
1. Please indicate the degree to which you agree or disagree with the
following statements concerning politico-legal factors.

S.No 4. Political legal factors: 5 4 3 2 1

4.1 Tax levied on my business is not          

reasonable
4.2 Costy company registration and licensing          

bureaucracy
4.3 Political influence in team formation,          

enterprise
selection,

4.4 Lack of access able information to          

government
regulations relevant to my business
 1. Please indicate the degree to which you agree or disagree with
the following statements concerning working place factors.

S.No 5. Working place factors: 5 4 3 2 1

         
5.1 Absence of own premises
         
5.2 Current working place is not convenient
         
5.3 House rent is too high for my business

1. Please indicate the degree to which you agree or disagree with the
following statements concerning technology factors.
S.No 6. Technology factors: 5 4 3 2 1
6.1 Lack of information in the availability of
         
appropriate tools and materials
6.2 Lack of skill and knowledge to handle new
         
technology
6.3 Lack of capital to acquire new technology
         

6.4 Unable to select proper technology

         
4. Please indicate the degree to which you agree or disagree with the
following statements concerning infrastructural factors.

S.No 7. Basic Infrastructural Factors: 54 3 21

7.1 Absence of Power and power          

interruptions

         
7.2 Insufficient and interrupted water supply

         
7.3 Lack of business development services

7.4 Lack of sufficient and quick          

transportation service
7.5 Lack of appropriate dry waste and          
sewerage system
5. Please indicate the degree to which you agree or disagree with the
following statements concerning infrastructural factors.

S.No 7. Basic Infrastructural Factors: 5 4 3 2 1

7.1 Absence of Power and power          

interruptions
         
7.2 Insufficient and interrupted water
supply
         
7.3 Lack of business development
services
7.4 Lack of sufficient and quick          
transportation service

7.5 Lack of appropriate dry waste and          

sewerage system
6. Please indicate the degree to which you agree or disagree with the
following statements concerning marketing factors.

S.No 8. Marketing Factors: 5 4 3 2 1

8.1 Inadequate market for my product          

8.2 Searching new market is too difficult          

8.3 My products are Poor quality for the

         
market

8.4 Lack of establishing a market network          

8.5 Lack of market information          

8.6 Lack of promotion to attract potential

         
users
8.7 Poor customer relationship and          
handling
7. Please indicate the degree to which you agree or disagree with the
following statements concerning financial factors.

S.No 9. Financial Factors: 5 4 3 2 1

9.1 Absence or inadequacy of credit institutions          

         
9.2 Lack of access to credit institutions

         
9.3 Shortage of working capital

9.4 High collateral requirement from lending          

institutions
         
9.5 High interest rate by lending institutions

         
9.6 Loan application procedures are
complicated
8. Please indicate the degree to which you agree or dis agree with the
following statements concerning management factors.
S.No 10.Management Factors: 5 4 3 2 1

         
10.1 Lack of clear division of duties among members

10.2 Poor organization and ineffective communication          

         
10.3 Poor selection of business partners

         
10.4 Lack of well trained and experienced employees

10.5 Lack of low cost and accessible training facilities          

10.6 Lack of financial ,human and material          

management
 9. Please indicate the degree to which you agree or disagree with the
following statements concerning entrepreneurial factors

S.No 11.Entrepreneurial factors: 5 4 3 2 1

         
11.1 Lack of motivation and self drive

         
11.2 Lack of tolerance to work hard

         
11.3 Lack of readiness to learn ,to improve and to change

11.4 Lack of creativity, flexibility and adaptability to new          

ideas.
         
11.5 Lack of entrepreneurship training

11.6 Lack of information to exploit business opportunities          

 10. How do you rate the performance of your business profitability?

Item 5 4 3 2 1

         
Performance Factors

         
The business is Profitable

         
There is a good Sales turnover

         
The business has good Market share

         
There is good customer loyalty

           
 Annex - B
INTERVIEW QUESTIONS FOR MSE OPERATORS
 
1. What problems did you face while running MSEs in relation to:
2. A. External factors
 Politico-legal factors [government policy, bureaucracies (in relation
to company registration and licensing), taxation and like]
 Premises factors
 Technology factors
 Infrastructure (power, transportation, water supply and like)
 Marketing factors (relationship with suppliers, customers and others)
 Financial factors (interest rates, collateral requirements, etc)
B. Internal factors
 
 Management and related factors
 Entrepreneurial factors
1. What are other problem(s) did you faced regarding the
overall Functioning of your activity?
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