Online published on 28 February, 2020.
The objective of this study is to assess the impact of micro and small enterprises in the socioeconomic development of Tigray, Ethiopia. Smaller manufacturing enterprises are import substitution and the hub of an entrepreneur, recently it paid attention to policy, programs, and packages formulated and amendments. However, the practical implementation of what is happening on the ground, knowledge about the development, the effectiveness of policy evaluation and the constraints make ineffective utilization ofanopportunity isunexplainedso far. Hence, thisstudy intends to fill thegap byexploring the impactof program intervention, theassociation between financing preferenceand socioeconomic development outcome indicators and constraints as the whole, treated and control group wise and across the subsectors. In this cross-sectional study, data collected through primary and secondary sources from 464small manufacturing enterprisesplaced in five urban townswith cluster multistage sampling and distributed self-administrated questionnaires. The study has used descriptive statistics, independent t-test, chi-square test, General Learner Model (MANOVA), binary logistic regression, and propensity score matching with the help of SPSS version 20, and Stata software version 12.
Based on the result of the descriptive statistics, the study found that small manufacturing enterprises have a contribution to improving sales volume, profit, household income, on the mobilization of savings, employment creation, boosting expenditure, social capital, household physical assets, health facilities, educational facilities, f inancial capital. However, the contribution to innovation and technology transfer is low or at the beginning.
Based on the propensity score matching the estimated result of program intervention helps to improve sales volume, generate employment, improve financial capital, improve social capital, and enhance household income, utilize innovation and technology transfer, mobilizing savings, and to boost expenditure on clothes and food items. Before matching, using a binary logistic regression, the study found that the intervention of the program has a positive effect only on the sales volume, employment creation, social capital, innovation process dimension.
Based on the General Learner Model (GLM) sales volume, household income, mobilization of savings, household expenditure, employment creation, and financial capital significant difference across has financing preference of the owners. On the contrary, as chi-square result found, innovation level, social capital sachems and household assets have no significant differences across has financed preference by owners. While applying PSM, almost in all methods, there is a positive and significant difference between mixes of debt-equity and equity financing in terms of sales volume, the income of household head, savings mobilization, employment creation, consumption, and capital balance.
Before(GLM) and after matching (PSM), using both models, almost did notbring differences(financial capital, human power, mobilize savings, sales volume, income, and expenditure) in the direction as well as the significance level. Therefore, the leveraged financing preference gives more benefit to the mentioned socioeconomic development outcome. Based on the descriptive result, small manufacturing enterprise owners have experienced moderated problems, except f inance (major) related to environmental, managerial, marketing, and government-related constraints.
There is no statistically significant difference between treated and control groups on environmental, managerial, marketing, finance, and government-related problems. Small manufacturing enterprise owners engaged in agro-processing, products or chemicals, input for construction, and in minerals and jewellery types of sub-sectors, experienceda majorproblem in finance-related constraints, whereas, textileand garmentsub-sector has faced majorproblems on managerial and finance related constraints.
Based on the findings, the researcher suggested some recommendations such as providing capacity building training on how owners set price policy and deciding on choosing the best alternatives, facilitating the link with medium and large enterprises to acquire raw materials and to sell their output including NGO's, entrepreneurship centre and research and development organization. As technology comes with the help of research and development, the concerned body should develop local agents’ innovation projects. Since almost manufacturing enterprise activities are a power-driven machine, some others require a water supply, and infrastructure, the government should fulfil adequately to alleviate the problems and increase productivity as import substitution sectors.
To increase the accessibility of credit easily, SMEs Bank should be commenced in addition to government subsidize and non-governmental organizations, introducing new services like; trade credit, investment banking, factoring, saving and mutual funds, leasing companies and others to avoid collateral and criteria of financial statements. The Ethiopian government should introduce as risksharing mechanisms (credit guarantee fund) which have implemented in Asian and most of the African countries. Setting the minimum ratio of bank loan to micro and small enterprises, and the government should help to introduce best scenarios for captivating the performance of enterprises like abstaining participating inthe programand leveraged finances and apply both leveraged financing and participating in the program.
