Performance of Micro and Small Enterprisers in Tigray, Northern Ethiopia

Micro and Small Enterprises (MSE) have become the focus of attention for the economic development, economic growth and job creations in the world. Majority of the firms worldwide are dominated by businesses of micro and small enterprises. In developing countries, the informal sector that mainly establishes MSE remains the major source of employment and income for the urban population. A study was conducted to examine the performance of MSE in three zones of Tigray State, namely, Southern zone, Mekelle zone and Eastern zone. The data was collected using structured questionnaire on 246 MSE business owners. The data are analyzed using multiple linear regressions (dummy), Cross tabulations and chi-square test for test of independence. The result revealed that Gender, initial capital, enterprise and job type are found to be important factors of performance of MSE. There is a gender difference on sector type, education level and work sheds of micro and small enterprises business owner. The result also showed that initial capital has positively affected the performance of business owners and men headed business owners have better performance than female headed business owners.


LITERATURE REVIEW
There is no universally accepted definition of MSEs because the classification of business into micro, small and medium scale is a subjective judgment Ekpeyong and Nyong (1992). Egbuogu (2003) showed that definitions of MSEs vary both between the countries and between the continents. The major criteria used in the definitions according to Carpenter (2003) could include combinations of number of employees, financial strength, sales value, relative size, initial capital outlay and types of industry. In countries such as the United States of America, Britain and Canada, micro, small and medium business is defined in terms of annual turnover and number of paid employees. In Ethiopian context the improved definition of MSE is presented in table 1 below. Table 1.Improved definition of MSE in Ethiopian context.

MSE Development and the Renaissance of Ethiopia
MSE is one of the institutions given recognition in the country's industry development plan and is the fact that it serves as vehicle for economic growth of the country. Ethiopia has its own political reasons for giving priority to MSE development. The government is devoted to fulfill the benefits of the farmers as they are basis for developmental state in rural, and they are the bases for mobilizing community and bring about development and good governance. Therefore, MSE plays a great role in urban as entrepreneurs use their resource and labor intensive similar with the farmer in the rural.
Long time in history development and expansion of MSE, was widely considered as sign of backwardness (for example, previously due to cultural backwardness it was prohibited for males/female to work/employee on bar or restaurants) and lack of another alternative in all segments of the society and in the party /EPRDF/ too. However, it resulted from misunderstanding that MSE are basis for a number of developments in the technology sector of these days. Hence it © CNCS, Mekelle University 106 ISSN: 2220-184X is better to be noted that renaissance of the country would not be realized unless such false perceptions are changed and replaced with correct one. Wanjohi and Mugure (2008) described that a business started by one person has a greater chance of failure than a firm started by more than one person. Thapa et al. (2008) also found on their studied that the education of owners has positive effect on entrepreneurial and small business performance. Similarly, Rose et al. (2006) in their study of the 'Dynamics of Entrepreneurs Success Factors', reported that, higher education level helps the business owners to have better knowledge and skills which contribute to the success of their venture. Another study by Charney and Libecap (2000) found that entrepreneurship education produces self-sufficient enterprising individuals. Furthermore, they found that entrepreneurship education increases the formation of new ventures, the likelihood of self-employment, the likelihood of developing new products, and the likelihood of self-employed graduates owning a high-technology business.
Entrepreneurs vary in age from young to old in many instances. An individual may begin a business as a hobby or secondary source of income and have it grow into a profit-driven enterprise. A number of studies have focused on the entrepreneurial characteristics of the owners/managers of small businesses as key factors to small business success. Age of the owners/managers was one of the most important characteristic that was repeatedly used to predict small business performance and success (Lussier and Pfeifer, 2001). Lussier (1995) reported on his studied that 'people without any college education who start a business have a greater chance of failing than people with one or more years of college education. His studies also showed that younger people who start a business have a greater chance to fail than older people starting a business. Similarly, Praag (2003), in his study of business survival and success of young small business owners, found that younger small business starters have a lower success and survival probabilities than older starters. The chance of both voluntarily and forced exit from the business is higher to young starters. From these studies, one can understand that the age of small business owners have its own contribution to the success and failure because individuals learn not only from formal education but also from their walks of life. Alasadi and Abdelrahim (2007) in their study of small business performance in Syria showed that as the age of the business owner increases it contributes to the success of the enterprises performance of the business owners. And they argued also that increased age brings © CNCS, Mekelle University 108 ISSN: 2220-184X with it a sufficient level of accumulated knowledge or experience of a certain trade to try going into self-employment alone.
Understanding the level of respondents" education helps in identifying and determining the development approaches to be followed. High level of human capital and research and development are positively associated with the performance of firms. They promote the growth of firms from low level of activities to large and better performance of enterprises (Aklilu, 2010).
According to Bereket (2010) most of the MSE owners (45.5%) use their profit to create new business while the study of Selamawit (2015) has showed that 26% of the entrepreneurs involved on trade sectors.

Gender Dynamic of MSE
Women entrepreneurs around the world are now making a difference in the sector of entrepreneurship. In most countries, the majority of MSEs are owned and operated by women. Furthermore, since working proprietors are the single largest category of the labor force, the great majority of the workers are also women. MSEs headed by women tend to be concentrated in a relatively narrow range of activities: beer brewing, knitting, dressmaking, crocheting, cane work, and retail trading. MSE's headed by women are more likely than their male counterparts to operate from the home. Since it is the home-based MSEs that tend to be overlooked, women owners of MSEs are particularly likely to be the "invisible entrepreneurs" (Mead and Liedholm, 1998).
Lack of access to credit/ finance is almost universally indicated as a key problem for MSE entrepreneurs. Accessing credit, particularly for starting an enterprise, is one of the major constraints faced by women entrepreneurs. Women often have fewer opportunities than men to gain access to credit for various reasons, including lack of collateral, an unwillingness to accept household assets as collateral and negative perceptions of female entrepreneurs by loan officers (Mahbub, 2001). According to Lussier (1995), businesses that start undercapitalized have a greater chance of failure than firms that start with adequate capital.
According to Bereket (2010) the majority's education levels of all the entrepreneurs are from grade 9-12 (36.1%). Next to grade 9-12, the respondents with diploma level of education and first degree holders" accounts for 18.5% and 8.3% of the sample respondents respectively.
However, it is only recently that women's entrepreneurship has gained the attention of economic planners and policy makers. According to Aregash (2005); and Amha and Admassie (2004), 98% of business firms in Ethiopia are micro and small enterprises, out of which small enterprises represent 65% of all businesses. More than half of all women entrepreneurs in Ethiopia often face gender related challenges related to establishing new businesses as well as operating or expanding existing businesses. Women are disadvantaged due to culture, religion and tradition. For instance many women face difficulty in raising credit finance from banks as well as borrowing via informal networking. Walker and Brown (2004) have reported that MSE's performance can be measured by financial and non-financial criteria although the former has been given most attention in the literature. Traditional measures of business success have been based on either employee numbers or financial performance, such as profit, turnover or return on investment. For businesses to be deemed successful or well performed these financial measurements require increases in profit. As cited from the studies of Walker and Brown (2004); and Hall and Fulshaw (1993), 'the most obvious measures of performance are profitability and growth'. In economic terms this is seen as profit maximization. Economic measures of performance have generally been popular due to the ease with which they can be administered and applied since they are very much hard measures. In this study, performance of MSEs is measured by yearly profit since it is better than the nonfinancial measures in terms of reducing the subjectivity of the measurement results. Non-financial factors have also their own contribution for higher profit and growth for the business owners, but, to reduce subjective measurement only financial profit considered in this study.

Poverty, Unemployment and Physical Aspects of the Region
According to the report by the Ministry of Finance and Economic Development of Ethiopia 2014\15, the poverty rate of the region (citizens whose daily income is less than one dollar a day) was 22.5 % (MoFED, 2015). However, in the year's 2016\17, the poverty rate is believed to be lower than it was in the 2014\15 due to the integrated efforts made in the household based package in the rural areas and due to the trainings and credits given to the MSEs in the urban areas.
According to CSA (2015), unemployment rate in the urban areas of the The landform is complex composed of highlands (in the range of 2300 to 3200 meters above sea level) and lowland plains (with an altitude in the range 500 to 1500 meters above sea level). It has diversified agro-ecological zones and niches each with distinct soil, geology, vegetation cover and other natural resources (Araya et al., 2010;Gebrehiwot and van der Veen, 2013). Thus, this area was also partly chosen for this study because of unemployment rate is high in this region than the other regions of Ethiopia. And the three zones was chosen purposively as those are potential in performance of MSEs

Research Design and Data Collection
In this study a cross sectional research design was employed to assess the factors that affect the performance of entrepreneurs of Tigray region. The reason for using this research design is that it enables the researcher to examine the relationship between different variables like gender dynamics, sector dynamics and different socioeconomic characteristics. This study is both qualitative and quantitative research that attempts to accumulate existing information and data regarding evaluating MSE performance of the business owners. The quantitative aspect of the studies are age, total number of households, yearly profit, and the qualitative aspect of the study are gender, sector types, job types, education level, work sheds and types of enterprises. It is appropriate to use this method in order to verify the observations regarding the intended research questions.
The qualitative aspects include personal interviews and observations of the business owners. The study employed both primary and secondary sources of data collection. In order to realize the target, the study has used well-designed structured questionnaire. The required data has been collected from the owner of the MSEs. The layout of the questionnaire has been kept very simple to encourage meaningful participation by the respondents. The relevant secondary data has been collected from files, pamphlets, office manuals, circulars and policy papers from the MSE's Regional Office.

Sampling Techniques and Procedures
Three zones are chosen among six for this study i.e. southern, Mekelle, and eastern zones because  Table 2). Simple random sampling has been used to get information from the MSEs of the three zones. Two stage sampling technique was adopted in this study. First, purposive sampling technique used to select three zones from six zones of Tigray region, followed by simple random sampling from each zone. Sample size was determined from the following formula as suggested by Cochran (1963). Where, n is the required sample size, z is value for the selected alpha level, 1.96 for (0.25 in each tail) 95% confidence level, p is the estimated proportion of an attribute that is present in the population, and d is the acceptable margin of error for proportion being estimated.
By using the above parameters as p=0.2 and d=0.05, the sample size in this study was estimated to be 246 samples of MSE and presented below ( Table 3) the proportion of the sample from each zone.

Methods of Data Analysis and Processing
This study used both descriptive and inferential statistical methods of data analysis. The descriptive statistical method describes the socioeconomic characteristic using tables and graphs and the inferential statistical method inferred for the target population using chi-square test of independence and multiple regression analysis. The reason why chis-square test was used is that to see the association between variables, like sector types and gender dynamics.

Chi Square Test of Independence
The chi square test of independence compares two categorical variables in a contingency table to see if they are related. The hypothesis test is: Ho : The two variables ( rows and columns) are independent H1 : The two variables are correlated.
Reject the null hypothesis if the p-value is less than 5%. The chi square statistic value is computed as follows: Where, df is the degree of freedom; Oi is the observed value; and Ei is Expected value.

Multiple Regressions
The multiple regression model is as follows: = 0 + 1 + 1 + 2 ℎℎ + 2 + 3 + 4 + 5 + 6 +   Results reveal that almost all of the entrepreneurs' (98.37 %) business is run by one person (private), while only 1.63% entrepreneurs have their businesses run jointly (with partner or cooperative work) (Fig 2). This is because when entrepreneurs start work with partners or with © CNCS, Mekelle University 115 ISSN: 2220-184X more than two people there is lack of trust among the partner. In a discussion among partner, everyone tries to impose their ideas upon the others which lead to conflict of ideas. Ultimately the group disintegrates in a belief that they will be successful if they stand by their own. Therefore, to avoid such inconvenience entrepreneurs prefer to work independently or privately for better performance of their business. However, Wanjohi and Mugure (2008), reported that a business started by one person has a greater chance of failure than a business started by more than one person and this assertion is contrary to the above result. This is because people working in MSE in Ethiopia particularly in Tigray region has less experience and education level, as the MSE business is at the infant stage. For better performance of individuals and growth economy of the country business run by partners are powerful.

Respondents Demographic Profile
According to table 5, to improve their profit the entrepreneurs expand their existing sector type or changes to another sector type in their future plan. The result revealed that 35.8% of entrepreneurs' long run plan sector type is on trade sector followed by 24.7% urban agriculture sector type. The Government of Ethiopia wants to transfer these business owners to manufacturing and construction sectors because these sector demands more labor and it is believed that they can help reduce unemployment rate of the region. However, majority of the entrepreneurs planned to work on trade and urban agriculture as these types of sectors demand low initial capital, not so sophisticated skills and technologies and minimum man power as compared to manufacturing and construction type of sectors. Selamawit (2015) showed that majority of entrepreneurs (45%) were involved on trade sector followed by 26% of those involved in services sector types. Most of the entrepreneurs are not willing to transfer to the manufacturing and construction sector types because manufacturing and construction demand more initial capital and labors. Table   6 shows that 60% of the entrepreneurs were not willing to transfer to manufacturing and © CNCS, Mekelle University 116 ISSN: 2220-184X construction due to shortage of capital. 23.5% and 12.2% of the entrepreneurs didn't want to transfer due to lack of knowledge on the technologies and its surplus been long time, respectively.  have their own association to sharing their experiences regularly.

Conclusions
The average age of the business owners was around 40 years old and the average total household size was 3.9. Majority of the business owners education levels were first cycle (grade 1-6) and high Scholl (grade 9-12) and 51% of the respondents were male headed. 98.37 % of the entrepreneurs their business run by a single person and majority of the entrepreneurs involve on trade (35.8%) and urban agriculture (24.7%) as these sectors demand low initial capital, not so sophisticated skills and technologies and minimum man power as compared to manufacturing and construction. work promotion and to expand their existing businesses. The result also revealed that there is gender difference on sector types, work sheds and education level of MSE business owners.
Initial capital is positively related to the performance of MSEs. Most females headed entrepreneurs are involved in less labor intensive economic activities like trade and services sectors. Manufacturing and construction sectors demand more labor/energy and are too mechanical, and females headed entrepreneurs consider these sector enterprises challenging to join. Male headed enterprises perform better than female owned enterprises they are also risk takers. Majority of the entrepreneurs were involved in micro enterprises, because micro enterprise demands low initial capital with almost no additional labor needed than small enterprise. But, entrepreneurs involved in small enterprises better performances, as these enterprises have enough initial capital than micro enterprise. Even if most entrepreneurs prefer to work solely in different sectors due to some challenges, this leads to poor performance of the enterprise. Therefore, business owners should work jointly for better performance of the enterprises.

Recommendations
Based on the major findings mentioned in the analysis, the following recommendations have been drawn with the view to improve the role of MSE in contribution to employment and income generation.
The construction of market sheds and common facility centers at suitable locations by assistance of the Government, donors and private sector could help to address this problem. Thus, government with support from donors could engage in constructing shades for MSEs to address the problem of work place, coupled with measures to encourage private investors to engage in construction of premises suitable for entrepreneurs.
The sector types are not connected with each other and with other trade markets. There are market linkage and technical skill gabs that they seek from government. So the government or the responsible body should create market linkage like bazars or exhibitions to promote their products easily. Peoples start MSE business plan, they should have enough initial capital and it is better to work jointly.

ACKNOWLEDGEMENTS
We would like to thank for Trans disciplinary Training for Resource Efficiency and Climate Change Adaptation in Africa (TRECCAfrica) scholarship for providing us the budget.

CONFLICT OF INTERESTS
There are no conflicts of interest.