FACTORS AFFECTING GROWTH OF SMALL AND MEDIUM ENTERPRISES IN ADDIS ABABA: THE CASE OF YEKA SUB-CITY

Abstract

This study investigates the critical factors influencing the growth of Small and Medium Enterprises (SMEs) in Yeka Sub-City, Addis Ababa. The purpose was to identify and analyze key barriers and enablers of SME growth in this region, highlighting the significant role of SMEs in economic development and the challenges they face in Ethiopia. A mixed-methods approach was employed, using both qualitative and quantitative data collection techniques. Primary data were gathered through structured questionnaires and in-depth interviews with SME owners, managers, and employees, while secondary data came from relevant reports and research papers. A random sampling method selected 181 SMEs from a population of 330 registered SMEs in Yeka Sub-City. Descriptive statistics, regression analysis, and Pearson Correlation Tests were used to analyze the data. Key barriers to SME growth identified included financial constraints, inadequate working spaces, internal management issues, bureaucratic government policies, and insufficient marketing strategies. Regression analysis indicated that financial resources, working space, government policy, internal management, and market factors are significant positive predictors of SME growth. Hypothesis testing and Pearson Correlation Test results further supported these findings, emphasizing the importance of these factors in fostering a supportive environment for SMEs. The study concluded that enhancing access to financial resources, providing adequate working spaces, improving internal management practices, streamlining government policies, and developing effective marketing strategies are essential for the sustainable growth of SMEs in Yeka Sub-City. It recommends targeted interventions by policymakers and stakeholders to address these barriers and support SME development, including creating financial support programs, ensuring the availability of suitable workspaces, offering management training programs, simplifying regulatory frameworks, and assisting SMEs in developing robust marketing strategies..