TECHNOLINK COLLEGE

FACULITY OF BUSINESS AND ECONOMICS DEPARTMENT OF

BUSINESS MANAGEMENT

Title; Assessment Of Financial Management Practice In Small Scale And Business Enterprise In
Case Of Burau Sub City Town

A Senior Essay Submitted To The School Of Business And Economics For The Requirement Of
Partial Fulfillment Of B.A Degree In Business Management

GROUP MEMBERS ID/NO

1. MILION HUMNESA……………………….525/14
2. ABABO CHALA ……………………………545 /14
3. BASHATU DABA …………………………..513 /14
4. BONTU KASA ………………………………. /14
5. BIKILTU AMSALU…………………………502 /14
6. EFTU TESFAYE……………………………. 342/14

ADVISOR……………………………HABETAMU (MSc)

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 APPROVED BY BOARD EXAMINER

APPROVED BY BOARD OF EXAMINERS

______________________________ _____________________
Dean, Graduate Studies Signature
______________________________ _____________________
Advisor Signature
______________________________ _____________________
External Examiner Signature
______________________________ _____________________
Internal Examiner Signature

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 DECLARATION

We the undersigned, declare that this thesis is our original work, prepared under the guidance
of HABETAMU (MSc) All sources of materials used for the thesis have been duly acknowledged.
We further confirm that the thesis has not been submitted either in part or in full to any other
higher learning institution for the purpose of earning any degree.

Name Signature
_______________________ _________________________
_________________________ _________________________
_________________________ _________________________
_________________________ _________________________
_________________________ _________________
ETHIOPIA, OROMIA REGION, SHAGAR CITY, BURAYU SUB CITY TOWN

May 2/2025

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 ACKNOWLEDGMENT
First We would like to express our deepest and heartfelt gratitude to OUR GOD. Secondly, our
Families for their blessing and encouragement we want to express our heart full Appreciation
and special thanks to our ADVISOR. MR. HABETAMU For his unforgettable effort in
facilitating the ground to start the research project and completed by idea support.

Lastly we have a special thanks goes to all our best friends. We are very grateful especially to
Burayu Sub city MSEs who have answered to our questionnaires with good commitment and
happiness to help us. we also like to extend our thanks to the employees of Trade and Industry
Bureau for availing the necessary indispensable information for the study.

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 Abbreviation
MSE………………………………………micro and small scale enterprises
ILO……………………………………….international labor organization
PRS………………………………………poverty reduction strategies
CSA………………………………………central statistics authority
MOTI………………………………….ministry of trade and industry
UNIDO…………………………………united nation international development of
organization

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List of Table
Table 1 technique of sampling .................................................................................................................... 24
Table 2: methods data collection ................................................................................................................ 25
Table 3: : personal information of the respondents ..................................................................................... 26
Table 4: Educational status ......................................................................................................................... 27
Table 5: personal information ..................................................................................................................... 28
Table 6: education status ............................................................................................................................. 28
Table 7: Information about adequate financial management ...................................................................... 29
Table 8: Problem related to lack of financial management information ..................................................... 29
Table 9 The availability of financial document: ......................................................................................... 29
Table 10: How to follow financial management ......................................................................................... 30
Table 11: Problem related to lack of monthly cloths financial activities .................................................... 31
Table 12:Resource uses in effective and efficient....................................................................................... 31
Table 13: Major factors that hindered the MSE resource to use in effective and efficient manner ............ 32
Table 14: Sufficient marketing opportunity ................................................................................................ 32
Table 15: Major factors that makes insufficient marketing opportunity ..................................................... 33
Table 16:The economic advantage of small and micro enterprise and promote habit ................................ 33
Table 17: Income level of respondents after join to MS enterprise ............................................................ 34
Table 18: Employment opportunity of MS enterprise ................................................................................ 34

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 Table of Contents
APPROVED BY BOARD EXAMINER ...................................................................................................... ii
DECLARATION ......................................................................................................................................... iii
ACKNOWLEDGMENT.............................................................................................................................. iv
Abstract ......................................................................................................................................................... 1
Abbreviation ................................................................................................................................................. v
List of Table ................................................................................................................................................. vi
Table of Contents .......................................................................................................................................... 1
CHAPTER ONE ........................................................................................................................................... 2
INTRODUCTION ........................................................................................................................................ 2
1.1.Back ground of the study .................................................................................................................... 2
1.2.Statement of the problem .................................................................................................................... 4
1.3. Objectives of the study....................................................................................................................... 6
1.3.1.General objectives ........................................................................................................................ 6
1.3.2.Specific objectives ....................................................................................................................... 6
1.4.Definition of Terms............................................................................................................................. 6
1.5.Research questionnaires ...................................................................................................................... 6
1.6.Significance of the study ..................................................................................................................... 7
1.7.Scope of the study ............................................................................................................................... 9
1.8.Limitation of the study ........................................................................................................................ 9
1.9.Organization of the Paper ................................................................................................................... 9
CHAPTER TWO ........................................................................................................................................ 11
RELATED LITERATURE REVIEW ........................................................................................................ 11
2.1.INTRODUCTION ............................................................................................................................ 11
2.2.Micro and small enterprises .............................................................................................................. 11
2.3.Definition of Micro and Small Enterprises ....................................................................................... 12
2.4.Historical Background of MSEs in Ethiopia..................................................................................... 13
2.5.The role of MSEs in economic growth in Ethiopia........................................................................... 15
2.6.Conceptual overview of financial management ................................................................................ 17
2.7.Financial management practices in SMEs ........................................................................................ 17
2.8.Challenges of financial management in SMEs ................................................................................. 20

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CHAPTER THREE .................................................................................................................................... 23
Research Methodology ............................................................................................................................... 23
3.1.Description of the study area ............................................................................................................ 23
3.2.Sampling methods ............................................................................................................................. 23
3.3.Sampling techniques ............................................................................ Error! Bookmark not defined.
3.4.Data source and data collecting tools ................................................................................................ 24
3.5.Methods of data collection ................................................................................................................ 25
3.6.Data analysis techniques ................................................................................................................... 26
CHAPTER FOUR....................................................................................................................................... 28
DATA ANALYSIS AND INTERPRETATIONs....................................................................................... 28
CHAPTER FIVE ........................................................................................................................................ 35
FINDING, CONCLUSION AND RECOMMENDATION ....................................................................... 35
5.1.Finding .............................................................................................................................................. 35
5.2.Conclusion ........................................................................................................................................ 35
5.3.Recommendation .............................................................................................................................. 36
5.REFERENCE ........................................................................................................................................... 37
6.QUESTIONNAIRE ................................................................................................................................. 39

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 Abstract
This study was conducted under the title of assessment of financial management practice on
micro and small enterprise in Burayu Sub city town. the research focused on identifying and
clarifying the main problems associated with the financial management in micro and small
enterprises. The objective of the study was to assess the financial management practice in micro
and small enterprise in Burayu Sub City town. The research utilized a case study methodology,
with purposive and stratified random sampling techniques to select 4 micro and small
enterprises from a population of 105. Data collection methods included primary sources like
interviews, questionnaires, and direct observation, as well as secondary data from enterprise
reports and records. The analysis employed both qualitative and quantitative approaches, with
descriptive techniques to summarize the gathered data. Key findings were analyzed in terms of
frequency and percentages, shedding light on the financial practices and demographic
characteristics of the respondents. This study examined the financial management practices of
small-scale enterprises in Burayu Sub City, based on a survey of 30 participants. It was found
that the majorities of entrepreneurs are middle-aged and have completed primary or secondary
education. Key challenges identified include inadequate financial information, lack of skilled
personnel, insufficient government support, and poor financial documentation. Additionally,
resource inefficiency and limited marketing opportunities hinder business growth. Despite these
obstacles, the majority of respondents report economic benefits, including improved income and
employment. The study highlights the need for enhanced financial management systems, training,
and stronger governmental support to improve the sustainability and efficiency of small-scale
businesses in the area.

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 CHAPTER ONE

INTRODUCTION

1.1.Back ground of the study

Business always assumes that the wader of the financial statement and other information in their
financial reports are fairly knowledgeable about business in general and under start basic account
terminology and measurement method in particular. Don’t expect to find thirdly hand holding
and helpful explanation in financial reports you need and realize that drafting a financial report
yourself tasks a lot of accounting know how financial report is governed by stator and common
law and it should be done according to ethical standard. Unfortunately, financial reporting
sometimes falls short of both and ethical standard . those standard and requirement for
accounting and financial reporting often charge(source) the price of dealing with those situation
has been another step increase in the range and rabidity change in accounting and financial
reporting standards and current rule and regulation (GREUNIG,2006).

Small scale industry are not be to contribute substantial economic development as they are
needed particular because financial prod. And marketing problems. this problems are still
measure handicaps’ to their development lack of adequate finance and credit has always been a
measure problem of Ethiopia small business , small scale unit don’t access to industries source of
finance , partly because of their size and party because of fact that their surpluses. Which can be
utilized to replay loan are negligible. Because of their size and because of the fact limited profit
they search fund for investment purpose. Consequently, the approach money lender who change
high rate of interest hence small scale enterprise find it difficult to get how material of good
quality and at cheaper rates in the field of production very often fail to produce goods in request
quantity and goods of quality of low cost.

Furthermore the technique for production which those enterprise have adopted are usually
outdated, because of their poor financial position they not able to buy new equipment course
quaintly, this productivity. Besides many entrepreneurs can hope to make their enterprise
successful (hailin G/tisen 2013).

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Micro and Small enterprises can be defined as one, which is independently owned and operated,
and not dominant in its field of operation. It can also be defined in terms of sales volume and by
the number of employees in the firm. Micro and Small Enterprises may be defined as businesses
with a small number of employees. The legal definition of “Micro and Small Enterprise" often
varies by country and industry. According to the new Small & Micro Enterprises Development
Strategy of Ethiopia (published 2011) the working definition of MSEs is based on capital and
Labor as follows

Micro, small, and medium enterprises (MSMEs) play a crucial role in Ethiopia's economy,
contributing to employment, income generation, and overall economic development. The
classification of enterprises in Ethiopia typically follows the definitions provided by the Ministry
of Trade and Industry (MoTI) and the Federal Micro and Small Enterprises Development
Agency (FeMSEDA).

Levels of Micro and Small Enterprises in Ethiopia

1. Definitions and Classifications of Micro and small Enterprises in Ethiopia

Industry Enterprise include: Manufacturing,Construction and Mining

Service Enterprise include: Retailing,Transport, ICT, Hotel, Tourism and Maintenance

• Micro Enterprises: These are defined as in Industry human power are greater than or equal to
five(5) employees and Total assets greater than 100,000birr and in service the human power
greater than or equal to five(5) employees and Total assets greater than or 50,000birr. They often
require minimal capital investment and are usually informal in nature.

• Small Enterprises: Small enterprises are defined as in the Industry human power is greater
than or equal to six up to thirty(6 up to 30) employees and Total assets are greater than
500,000birr and in service the human power is greater than six up to thirty employees and Total
asset are greater than 500,000birr. These businesses tend to be more formalized than micro
enterprises.

Table 1 working definition of MSEs based on capital and labor

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Sr Enterprise Level Sector Hired person Capital

1 MICRO Industry ≤5 $6000.00 or

£4500.00≤Birr
100,000.00

Service ≤5 $3000.00 or
£2200.00 or ≤Birr
50,000.00

2 SMALL Industry 6-30 $90,000.00 or

£70,000.00 ≤Birr
1,500,000.00

Service 6-30 ≤Birr 500,000.00

Source:- Addis Ababa City Administration Micro & Small Enterprises Development Bureau

In Oromia Regional State, Shagar City Burayu Sub city Town, MSEs are working enlarge. In
this town more than seven types of formal MSEs are accessible. Those are: urban agricultural
development, Industries, Service, trade, General construction, Cobblestone preparation for the
road, and stone work. In all these sectors there are 105 MSEs which maintain members 980
(male and female) involved as shown below in table . (Report of Trade and industry Office of
Burayu Sub city Administration, 2017 )

The objective of this research is to monitor the effect of the financial reporting system on
informational delivery and user need. Extensive research in to the involving state of the arts in
financial reporting by state and local government will provides the board with base of evaluating
the need to develop standard for financial reports intended.

1.2.Statement of the problem

Micro and Small Scale Enterprises (MSEs) are widely recognized as key contributors to
economic development, job creation, and poverty reduction in both developed and developing
countries, including Ethiopia. In particular, MSEs in Ethiopia have been central to promoting

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entrepreneurship, private ownership, and income generation. They are flexible, adaptable to
market changes, and serve as important platforms for employment, especially for youth and
women.

However, despite their critical role, MSEs in Ethiopia—and specifically in Burayu Sub City of
the Oromia Regional State—face numerous challenges that significantly hinder their
performance and growth. According to the ECSA Report (1994-1995), major performance-
determining factors include lack of access to finance, inadequate market opportunities, limited
managerial skills and training, weak infrastructure, and insufficient access to information and
technology.

Among these challenges, poor financial management practices stand out as a core issue. Many
MSEs in Burayu Sub City lack proper financial planning, fail to maintain accurate financial
records, and do not prepare timely financial reports. Additionally, their investment practices are
often informal and unstructured, making it difficult to allocate resources efficiently or evaluate
financial performance. This lack of financial discipline limits their access to credit, hampers
growth, and increases their risk of failure.

Further challenges include limited access to markets, lack of raw materials, delays in credit
access, regulatory bottlenecks, and a general absence of business development services. Most
entrepreneurs also lack the necessary training in financial literacy and business management,
further weakening their ability to navigate these constraints.

Despite existing research on MSEs in Ethiopia, there is a noticeable gap in localized studies
that assess financial management practices in the specific context of Burayu Sub City.
Without this understanding, it is difficult for policymakers and stakeholders to design targeted
solutions that address the real needs of enterprises in this area.

Therefore, this research seeks to evaluate the financial management practices of small-scale
enterprises in Burayu Sub City, identify key constraints, and examine how these factors affect
business performance and sustainability. The study aims to fill the knowledge gap and provide
practical recommendations for improving financial management and supporting the growth of
MSEs in the region.

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1.3. Objectives of the study

1.3.1. General objectives

The general objective of the study is to assessment of financial practice in small scale enterprise.
In Burayu Sub City town.

1.3.2. Specific objectives

The study has also the following specific objectives

1. To assess the financial management practices of small-scale enterprises in Burayu Sub

City, focusing on financial statement preparation, record-keeping, and timeliness.
2. To evaluate investment practices of small-scale enterprises in Burayu Sub City
3. To identify the market demand for the products of micro and small-scale enterprises in the
town and evaluate how effectively these enterprises are achieving their business objectives.
4. To examine the main challenges affecting financial management practices in small-scale
enterprises within Burayu Sub City.

1.4. Definition of Terms

 Determinant: - is a factor or element that limits or defines a decision or condition

 Enterprise: - is a business or company, entrepreneurial activity, especially when
accompanied by initiative and resourcefulness.
 Micro finance: - refers to the provision of financial services to low-income clients,
including consumers and the self-employed.
 Municipality: A town,city district with it’s own local government including the officials
who govern it.
 Performance: - is the accomplishment of a given task measured against preset known
standards of accuracy, completeness, cost, and speed. In a contract, performance is
deemed to be the fulfillment of an obligation, in a manner that releases the performer
from all liabilities under the contract. Performance is MSEs in strengthening their
enterprises.

1.5.Research questionnaires

Under this study the researcher tried to answer the following research questions.

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1. What are the current financial management practices of small-scale enterprises in
Burayu Sub City, particularly in terms of financial statement preparation, record-keeping, and
timeliness?
2. How do small-scale enterprises in Burayu Sub City manage their investment practices,
and to what extent are these practices structured and effective?
3. What is the level of demand for the products offered by micro and small-scale enterprises in
Burayu Sub City, and how effectively are these enterprises achieving their business objectives in
response to market needs?
4. What are the major challenges affecting financial management practices in small-scale
enterprises in Burayu Sub City?

1.6.Significance of the study

The study could serve as stepping-stone for other researches, which may focus on similar topics
and issues, related to Micro and Small Enterprises in general and their determinants of
performance in particular. It is important for policy makers like MSEs Development Agencies.
The study will also enable Micro and Small Enterprises owners to know that determinants of
performance of their business by suggesting some practical measures to be taken by these MSEs.
6. Policy Formulation and Support

Financial assessments provide valuable data for policymakers aiming to support the MSE sector.
Understanding the financial challenges faced by these enterprises can inform the development of
targeted support programs, such as training in financial literacy or easier access to credit
facilities. The Ethiopian government has recognized this need and initiated various programs
aimed at strengthening the financial capabilities of MSEs (Federal Micro and Small Enterprises
Development Agency, 2020).

Performance Measurement and Benchmarking

Financial assessments allow MSEs to measure their performance against industry standards and
benchmarks. This is essential for identifying strengths and weaknesses within the enterprise. The
World Bank's Doing Business report notes that performance measurement is critical for growth
and sustainability in the MSE sector (World Bank, 2020). By understanding their position
relative to competitors, MSEs can strategize effectively to enhance their market presence.

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Informed Decision-Making

Regular financial assessments empower MSE owners to make informed business decisions. By
analyzing financial statements, entrepreneurs can identify trends, manage cash flow, and allocate
resources effectively. The Ethiopian Development Research Institute (EDRI) highlights that
better financial management leads to improved operational efficiency and profitability among
MSEs (EDRI, 2020). Informed decision-making is particularly crucial in a dynamic market
where MSEs must adapt quickly to changes.

Capacity Building

Financial assessments often reveal gaps in knowledge and skills among MSE owners regarding
financial management. Identifying these gaps allows for targeted capacity-building programs that
can improve financial literacy and management skills among entrepreneurs, leading to better
business outcomes.

Access to Finance

One of the primary challenges facing MSEs in Ethiopia is access to finance. Many micro and
small enterprises struggle to secure loans due to a lack of collateral, credit history, and financial
literacy. A thorough financial assessment can provide insights into the financial health of these
enterprises, making it easier for financial institutions to evaluate loan applications. This can lead
to increased access to credit, which is crucial for growth and sustainability.

The study is expected to provide the Oromia state Shaggar city Burayu sub city Town Micro
and Small enterprises and the office with solutions for solving some problems that the MSSE’s
have in their performance. In addition to this the MSE’s will learn a haut the determinants of
performance that drive them out from their jobs.

The finding of the study might be significant in identifying the various problems of micro and
small scale enterprise that hinder their growth.

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 The researcher hopes that suggestion and recommendation of the study will help that
management practice of the sector.
 Provide valuable information for government practice of the micro and small scale
enterprise.
 The finding the study will be important to academics and researchers also who can use it as
spring board researcher/studies.
 Financial assessments help MSE owners and managers make informed decisions about
resource allocation. By understanding their financial position, MSEs can identify areas where
they need to cut costs or invest more resources. This leads to more efficient operations and
better overall performance.

1.7.Scope of the study

The study will covers the assessment of financial management practice of micro and small scale
business enterprise in Burayu Sub City town in the study area are 105 small scale business
enterprise. From this research will try to recognize only four those are wood & metal product
manufacturing, Gamme and his brothers metal product manufacturing, B2 furniture metal work ,
Recycle plastic manufacturing, we selected those MS enterprise because of near to our office
they have long through their experiences.

1.8.Limitation of the study

Due to some major challenges related with the collection of the data, the study was exposed for
some limitations. The first limitation of the study was associated with availability of sufficient
information regarding to the study area Shortage of enough reference on the town. Secondly, the
study suffers from lack of sufficient secondary data related with Finance constraints Difficulties
in managing respondent route.

1.9.Organization of the Paper

The research paper would have five chapter the first chapter, included back ground of the study
statement of the problem, objective of the study, limitation of the study, significance of the
study, scope of study, methodology of the study, organization of study and data source collecting
tool. Chapter two included the comprises of six section this are definition of MSE, the role MSE
in poverty reduction, the MSE sector in Ethiopia, the concept of business performance and

9
financial management practice, empirical studies and conceptual frame work. Chapter Three this
chapter provides an over view of the data analysis techniques and it’s comprises six section this
are description of the study area, sampling methods, Sampling techniques, Data source and data
collecting, methods of data collection, data analysis techniques. Chapter four In this chapter the
data collected on assessment of financial management practice in small scale enterprise in
Burayu Sub City town analyzed and interpreted based on 30 respondent that are selected
randomly. Chapter five included the comprises of three section this are finding conclusion
recommendation.

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 CHAPTER TWO

RELATED LITERATURE REVIEW

2.1.INTRODUCTION

This chapter review work on MSEs in Ethiopia and other countries in general and Burayu Sub
City town in particular works on financial management practice were also reviewed. This is of
help to under stared the state of MSEs and its determinants of financial management practices,
this chapter comprises of six section this are definition of MSEs, the role of MSEs in poverty
reduction, the MSEs sector in Ethiopia, the concept of business performance and financial
management practice, empirical studies and conceptual framework.

2.2.Micro and small enterprises

Micro and small enterprises are essential for economic development, job creation, and poverty
alleviation, particularly in developing countries like Ethiopia. However, they face significant
challenges that must be addressed through targeted policies and support systems. Enhancing
access to finance, improving skills and training programs, simplifying regulatory frameworks,
and facilitating market access are crucial steps in fostering a more conducive environment for
MSE growth.

Micro and small enterprises are considered are as one of the principal driving force in the
economics development of the given country. They stimulated private ownership skills. They
also flexible and can adopt quality to charging market demand and supply situation further; they
are the main ground for the generation of employment opportunity. Besides their growth
contribution, there are so many problems that affect their growth and expansion which included,
lack of access to market, lack of raw material ,delay of credit and etc are some of them . But, the
main problem is financial management practice in the area.

Micro and small business enterprises in Burayu Sub city town are also one of the enterprises
supposed to be faced with the above listed problems.

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2.3.Definition of Micro and Small Enterprises

The MSEs Sector everywhere is characterized by highly diversified activity which can create
employment opportunity for substantial segment of the population. This implies that the sector
quick remedy for UN employment and poverty problem. Realization of the modest standard of
living through curbing UN employment and facilitating the environment for new top sackers and
self- employment requires a direct involvement and support of the government and or other
consideration [Emma I.et al-2009] this differ in their level of capitalization sales and
employment hence definition that employee measure of size [number of employee, turn over
,profitability net worth etc. ].when applied to a one sector could lead to all firms being
classified as small ,while the same size definition when applied a different could lead to
different result.

The absence of such uniform definition of MSEs has created difficulty. In line with this, [Tegene
and Meheret 2010]. Argued that the absence of single of globally applicable definition has made
the task of accounting. The number of MSEs and assessing their impact extremely difficult
decors count l lies through the national four most government to make such definition
categorization is mainly for durational and promotional purpose to achieve the disliked levels of
development of sector. incondite nation industrial development organization UNIOU] gives
alternative definition for developing countries accordingly .it defines micro enterprise as
business of firms with less than five employed small experience as the business of firm with 5-9
employed UNIDO,2002].the united state of America the small business act issued in 1953 started
that small business in one which is independently owned and operated that number of employees
and sales volume as guideline indenting small business [MAJOO-L.S AND Radroan
N.S,2010.2.H].in the same countries ,a committee for economic development [GED]has
explained that small business is characterized by at least two of the key features.

Management is independent [equally the managers are owners], capital is supplied and on
individual or small group holds ownership and the area of operation is mainly local [works and
owners are in one home country.

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2.4.Historical Background of MSEs in Ethiopia

Historical back ground of SMEs in Ethiopia is not the same with substantial economic
development, as they need. Additionally, because of financial and market problems .these
problems are still major handicaps to their development. Lack of adequate finance and credit has
always been major problem of Ethiopia micro and small business. Micro and small business
units do not access to industrial source of finance partly because of their size and because of the
fact that their supplies ,which can be utilized to replay loan ,are negligible .the again because of
the fact limited profit search fund of investment purpose consequently ,the approach money
leaders charge high rate of interest hence small scale enterprise find it difficult to get raw
materials of quality and cheaper rates in field of production very often ,they do not get row
materials in time.

As a result these enterprise, very often fail to produce goods in request quantity and good of
quality of low cost. Furthermore, the technique of production, which these micro and small
enterprise have adapted, are usually outdated, because of their poor financial position they are
not able to buy how equipment consequently their productivity suffer.

Ethiopia does not have national unified registry of enterprise sufficient data on the micro and
small business sector of pans until late egos the government was not particularly interest in the
small business sector and there were no attempt quality its nature while the need for such data
base has been emphasized by a number of interracial agencies. There is currency to over all
classification system of micro and small business enterprise by the size of the final entry survival
and growth rate of the first comprehensive effort.

The development of micro and small enterprises (MSEs) in Ethiopia has a rich historical context
that reflects the country’s socio-economic evolution, policy shifts, and the role of informal and
formal sectors in the economy. Understanding this historical background provides insight into
the current state and challenges faced by MSEs.

. Pre-1974 Era: Traditional Economy

Before the 1974 revolution, Ethiopia had a largely agrarian economy characterized by
subsistence farming and traditional crafts. The informal sector was prevalent, with small-scale

13
artisans and traders operating without formal recognition or support from the government. These
enterprises were primarily family-run and focused on local markets.

The Derg Regime (1974-1991)

The overthrow of Emperor Haile Selassie in 1974 led to the establishment of the Derg regime,
which implemented socialist policies aimed at nationalizing industries and redistributing land.
During this period, the government viewed MSEs with suspicion, as they were often seen as
remnants of the feudal system. The focus was on large state-owned enterprises, and little
attention was given to supporting or formalizing MSEs.

However, informal MSEs continued to operate under oppressive conditions, often facing
challenges such as limited access to finance, lack of training, and regulatory barriers. Despite
these challenges, the informal sector became a crucial source of employment and income for
many Ethiopians during this time.

Transition Period (1991-2000)

The fall of the Derg regime in 1991 marked a significant turning point for MSEs in Ethiopia. The
new government adopted a more market-oriented approach, recognizing the importance of
private enterprises in economic development. Policies began to shift towards promoting
entrepreneurship and supporting small businesses.

In 1997, the government established the Small and Micro Enterprises Development Strategy,
which aimed to promote MSEs as a means to reduce poverty and create jobs. This strategy
included measures such as providing credit facilities, training programs, and creating an enabling
environment for small businesses.

Growth and Formalization (2000-2010)

During this period, Ethiopia witnessed significant growth in the MSE sector. The government
intensified its support for MSEs through various initiatives, including establishing microfinance
institutions and providing technical assistance. The introduction of a legal framework for MSEs
encouraged many informal businesses to register and formalize their operations.

14
The 2005 Micro and Small Enterprises Development Strategy further emphasized the role of
MSEs in job creation and poverty alleviation. Government programs aimed at enhancing access
to finance, promoting skills development, and improving market access for MSEs were initiated.

Current Framework: The 2011 E.C Strategy

The Small Micro Enterprises Development Strategy published in 2011 E.C (2018/2019) marks a
comprehensive approach to supporting MSEs in Ethiopia. The strategy defines MSEs based on
capital investment and labor size, categorizing them as follows:

This strategic framework aims to address various challenges faced by MSEs, including access to
finance, skills development, market linkages, and technology adoption. It recognizes the
significant role that MSEs play in economic development, job creation, and poverty reduction in
Ethiopia.

The historical evolution of MSEs in Ethiopia reflects broader socio-economic changes within the
country. From a largely informal sector under the Derg regime to a more structured approach in
recent years, MSEs have become integral to Ethiopia's economic landscape. The 2011 E.C
strategy represents a commitment by the government to foster an environment conducive to the
growth and sustainability of MSEs, recognizing their potential as engines of economic
development.

2.5.The role of MSEs in economic growth in Ethiopia

Economic growth in Ethiopia is widespread and remains a major challenge of substantial

development and stabision (Lutheran world federation of Ethiopia, 2006 listed in Eshetu and
Mamo, 2009). The role of micro and small enterprise is all about lack of basic needs, low or
inadequate level of income and consumption, poor command over resource and height level of
Social exclusion, in equality and vulnerability. The role played by MSEs, through the various
social-economic benefit emanating for the sector was found to be eminent in the overall
development effort and process of nation.

In the other words, by generating larger volume of employment as well as higher level of
income, the MSEs will not only have contributed towards economic growth reduction, but they

15
will also have enhanced the well fare and standard of living of the many in the society
(MUKRS, 2003).

Current international thinking is in tune with a view that acknowledges MSEs as at owl to fight
row economic grow in long none,

The economic grow reduction is simply not going to happen by government flat but only through
private sector dynamism. The evidence directly linking MSEs and economic growth reduction is
considered ably less robust than that linking them to economic vitality, even in the most
developed economics poverty production strategies (PRSs) currently being formulated in many
developing countries place a more pronounced emphasis on the contribution that the private
sector will have to make Large employees opportunity, Economical use of capital,Balanced
regional development, equitable distribution of wealth and decentralization of economic power,
dispersal over wide Area, Higher standard living,Mobilization of local resource, innovative and
productive technology,Less dependence of foreign capital, Promotion of self employment,
Shorter gestation period,Facilitate development of large scale enterprises, individual
tastes,Fashion and personalized service, More employment creation capacity compared to the
over reliance on the social a gender that characterized earlier PRSs (perumal K & prased , d;2-
29). Paroling an a study conducted in urban centers of four western ashen courtiers namely
BENIN, BURKINA FASO, NIGER and TOGO to identify they factor shaping the micro
enterprise sector, explore the needs, character. Motivation and success factors for micro
entrepreneurship in the region, together with some of the impediment to the growth and success
or micro enterprise vent users (ROY and wheeler, 2006;404)Roy and wheeler indicated the
MSEs provide a substantial source of employment, there by contributing to get rid of poverty to
the urban poor. According to them, the main reason for the urban poor to be absorbed in the
MSEs in due to the fact that the formal sector does not the capacity to absorb this growing
demand for jobs and for this reason may have to look for alternative means to generate a
livelihood.

16
2.6.Conceptual overview of financial management

Financial management is one of several functional areas of management but its central to the
success of any small business financial management is the management of finances of business
in order to achieve the financial objectives of the business.

(McMahon, etc./19993) define financial management based on mobilizing and using source of
funds: financial management is concerned with raising the funds between competing uses, and
with ensuring that the funds are used effectively and efficiently in achieving the enterprise goal.
The content of financial management practice includes. The following areas accounting
information system, financing decision investing decisions. However, these previous researcher
though looked into financial management. Financial management as used in this study in
composed of live(J) contracts and these include; working management which is also subdivided
into case management receivables management and inventory management other construct under
financial management include; investment, financing, management information system and
financial reporting and analysis Koss et al (1999) indicated three kinds of decision the financial
manager of a firm must make in business.

2.7.Financial management practices in SMEs

Financial management is one of several functional areas of management but it is central to the
success of any small business. Financial management it is the management of finances of a
business in order to achieve the financial of the business. MC MAHON et al (1993) define
financial management based on mobilizing and using sources of funds. Financial management is
concerned raising the funds needed to finance the enterprises assets and activities the allocation
of this score funds between competing uses, and with enduring that the funds are used effectively
and efficiently in achieving the enterprise goal.

The context of financial management practices includes the following areas accounting
information systems financing decision, investing decision. However, there previous researchers
through looked into financial management. They did not include other key areas like working
capital management which would include accounts receivable, inventory, cash management
account payable management. (Meredith, 1986).

17
Financial management as used in this study as composed of five (5) construct these includes
working management which is also subdivide into cash management, receivable management
and inventory management other constructs under financial management includes; investment,
financing, accounting information system and financial reporting and analysis. ROSSET AT
(1992) indicate three kinds of decision , the financial manager of a firm must make in business
there include the financing decision, and decision involving short term finance and concerned
with the net working capital, investment and financial reporting. Similarly Ang (1992) also
indicated three main financial decisions including the investment decisions and divided decision.

Small companies frequently suffer from a particular financial position problem of a lack a capital
base. Small business are usually managed by their owners and a viable capital is limited to
access to equity market and in the early stages of their existence owners find it difficult in
building up revenue reserves if the owner manger are to survive. Rosset al, (1992)

Financial management practices in Small and Micro Enterprises (SMEs) are crucial for their
sustainability, growth, and overall success. The Small Micro Enterprises Development Strategy
of Ethiopia, published in 2011, provides a framework that emphasizes the importance of sound
financial practices tailored to the unique characteristics of MSEs. Here are key aspects of
financial management practices in SMEs, supported by relevant literature:

Financial Planning and Budgeting

Effective financial management begins with comprehensive financial planning and budgeting.
SMEs should develop annual budgets that outline expected revenues, expenses, and cash flows.
According to Abor and Biekpe (2006), proper budgeting helps SMEs allocate resources
efficiently and anticipate financial challenges.

Cash Flow Management

Cash flow is critical for the survival of SMEs, as they often operate with limited capital. The
ability to monitor and manage cash inflows and outflows can prevent liquidity crises. A study by
Horne and Wachowicz (2008) emphasizes that maintaining adequate cash reserves and
forecasting cash needs are essential practices for SMEs to ensure they can meet their obligations.

Access to Finance

18
Access to finance is a significant challenge for many SMEs. The Ethiopian strategy highlights
the need for improved access to credit and financial services. According to a report by the
International Finance Corporation (IFC, 2010), SMEs often face difficulties in securing loans
due to lack of collateral and insufficient financial records. Therefore, developing relationships
with financial institutions and exploring alternative financing options, such as microfinance, can
enhance their financial viability.

Record Keeping

Accurate record-keeping is vital for effective financial management. Proper documentation of

transactions helps SMEs track performance, prepare financial statements, and comply with tax
regulations. According to the World Bank (2014), many SMEs fail due to poor record-keeping
practices, which hinder their ability to make informed decisions based on financial data.

Financial Literacy

The level of financial literacy among SME owners can significantly impact their financial
management practices. A study by Afolabi (2013) found that many entrepreneurs lack the
necessary skills to manage finances effectively, leading to poor decision-making. Training
programs aimed at enhancing financial literacy can empower SME owners to make better
financial decisions.

Cost Control

Cost control measures are essential for improving profitability in SMEs. Implementing strategies
such as monitoring expenses, negotiating better terms with suppliers, and identifying wasteful
expenditures can help SMEs maintain healthy profit margins. According to a study by Mazzarol
et al. (2014), effective cost control contributes to the competitiveness of SMEs in the
marketplace.

. Investment Decisions

SMEs must make informed investment decisions to foster growth and expansion. The Ethiopian
strategy emphasizes the need for SMEs to evaluate potential investments carefully, considering
factors such as return on investment (ROI) and risk assessment. Research by Brigham and

19
Ehrhardt (2013) suggests that systematic investment analysis can lead to better outcomes for
SMEs.

In summary, effective financial management practices are essential for the success of Small and
Micro Enterprises in Ethiopia and beyond. By focusing on financial planning, cash flow
management, access to finance, record-keeping, financial literacy, cost control, and informed
investment decisions, SMEs can enhance their operational efficiency and sustainability. The
2011 Small Micro Enterprises Development Strategy of Ethiopia provides a vital framework for
addressing these issues, ultimately contributing to the economic development of the country.

2.8.Challenges of financial management in SMEs

Financial challenges: as in most developing economics financial difficulties are very common for
most of the SMEs in due to in collateral personal and financial statement related problems in
utilizing bank loans and low level of equity, SME credits are still at a low level of around 25%
which is an important factor behind the low technological capacity and less modernized
production facilities of SMEs. Alternative source of finance such as angles investors, credit
guarantee funds and venture capital companies are sufficient and most of the time increasable,
for SMEs , in Ethiopia in additional to that background and knowledge level of SMEs owners
play an important role financial problems of SMEs as most SMEs owners/ manager comes from
a technical or engineering back ground, their knowledge about finance and accounting is most
costs is significantly limited. That most SMEs owner/managers refrain from hiring professional
finance managers for not delegating their “managerial power” which causes their financial
problems to growth and even threaten the survival of their enterprise.

Financial management in Small and Medium Enterprises (SMEs) is critical for their
sustainability and growth, particularly in developing countries like Ethiopia. Various studies
have highlighted several challenges faced by SMEs in managing their finances effectively.
Below, I will discuss these challenges, referencing relevant literature and research findings.

Limited Access to Finance

One of the most significant challenges faced by SMEs in Ethiopia is limited access to finance.
According to a study by Abate (2016), many SMEs struggle to secure loans from formal
financial institutions due to stringent collateral requirements and high-interest rates. The
20
Ethiopian banking sector is often risk-averse, leading to a preference for larger enterprises that
are perceived as less risky. This lack of access to finance restricts SMEs' ability to invest in
growth opportunities, leading to stagnation.

Lack of Financial Literacy

Financial literacy among SME owners and managers is another critical issue. Research
conducted by Kedir and Nega (2019) indicates that many entrepreneurs lack the necessary skills
to manage financial resources effectively. This deficiency often results in poor budgeting,
inadequate cash flow management, and ineffective investment decisions. Without a solid
understanding of financial principles, SME owners may struggle to interpret financial statements
or forecast future financial needs accurately.

Inadequate Financial Planning

Many SMEs in Ethiopia do not engage in proper financial planning. A study by Edris et al.
(2020) found that a significant number of SMEs operate without formal financial plans or
budgets, which leads to inefficient resource allocation and increased vulnerability to economic
fluctuations. The absence of structured financial planning makes it difficult for businesses to
anticipate cash flow problems or identify areas for cost reduction.

High Operational Costs

The operational environment for SMEs in Ethiopia often involves high costs, including utilities,
labor, and raw materials. According to the Ethiopian Chamber of Commerce and Sectoral
Associations (ECCSA), these high operational costs can severely impact profit margins. SMEs
may struggle to manage their finances effectively when faced with rising costs, leading to cash
flow issues and potential insolvency.

Regulatory Challenges

The regulatory environment in Ethiopia can also pose challenges for SMEs in financial
management. As noted by the World Bank (2021), complex tax regulations and compliance
requirements can be burdensome for small businesses. The time and resources required to

21
navigate these regulations can detract from financial management efforts, leaving SMEs
vulnerable to penalties and fines that further strain their finances.

Limited Use of Technology

The adoption of financial management technology is relatively low among Ethiopian SMEs. A
study by Muluye et al. (2021) emphasizes that many SMEs still rely on manual bookkeeping and
traditional methods for financial management. This reliance on outdated practices can lead to
errors, inefficiencies, and a lack of real-time financial data, hindering decision-making processes.

The challenges of financial management in SMEs in Ethiopia are multifaceted and

interconnected. Limited access to finance, lack of financial literacy, inadequate financial
planning, high operational costs, regulatory challenges, and limited use of technology all
contribute to the difficulties faced by these enterprises. Addressing these challenges requires a
concerted effort from the government, financial institutions, and educational organizations to
enhance financial literacy, simplify regulations, and improve access to financing options for
SMEs.

22
 CHAPTER THREE

Research Methodology
This study is based on principles of a case study research method with the assessment of finance
management practice to the expansion of small business enterprise.

3.1.Description of the study area

The study was conducted in Burayu Sub City town. Sheger City is a proposed model of urban
development established on 22 October 2022 that centers around the city Addis Ababa to provide
influence and economic benefit for other satellite cities. The administration contains 12 sub-
cities, 36 districts and 40 rural kebeles with its seat located in Saris area in Addis Ababa.[1]
Burayu Sub City was one of the historical towns in OROMIA region sorunding shaggar city.
located (15km from piassa) to Addis Ababa city administration office. Astronomically the town
is located in between a 9° 00′ 00″N- 9° 06′ 00″ N latitude and 38° 34′ 30″E -38° 43′ 30″ E
longitude. Relatively it is found north of Sebeta town and South of Sululta and MuloWoreda
West of Addis Ababa City administration and East of Wolemeraworeda. Just like other central
part of the country, the area has diverse climatic characteristics. As data on climatic condition of
Burau town is not available, attempts have been made to adapt the climate condition of Addis
Ababa where the nearest metrological station is located. The mean annual temperature, the mean
annual maximum and the mean annual minimum temperature of the area is reached to be about
14oC, 22oC and 6oC, respectively, (BTARDO, 2019)

3.2. Sampling techniques

To obtain reliable and relevant information on financial management practices over the past
three years, four micro and small-scale enterprises were chosen from a total of 105 enterprises.
From these four, 30 stakeholders were selected as the sample group, as they were deemed
capable of providing tangible and informed responses regarding both historical and current
financial management practices.

The study employed a mixed sampling approach to select participants. Initially, stratified
random sampling was used to account for the diversity among the 105 micro and small-scale

23
enterprises in Burayu Sub City, which differ in income, budget, and sector. From this population,
four enterprises were selected to represent these variations.

Within these selected enterprises, a purposive sampling technique was applied to choose 30
stakeholders who could provide reliable and detailed information regarding the financial
management practices of their businesses over the past three years. This purposive selection
ensured that the respondents were relevant and knowledgeable, enabling focused and insightful
data collection.

A purposive sampling technique was employed in this study, meaning participants were
intentionally selected based on their relevance to the research rather than through random
selection. This method does not provide every individual in the population an equal chance of
being selected but allows for more focused and insightful data collection.

Table 1 technique of sampling

S.NO Name of MSE Number of employee

1. 36
A&S wood & metal product manufacturing
2. 38
Gamme and his brothers wood and metal manufacturing
3. B2 furniture and metal work 30
4. Recycle plastic manufacturing 32
Total 136
Source by own survey 2017

3.3. Data source and data collecting tools

The researcher collected primary data through direct observation and questionnaires.
Additionally, secondary data was gathered by analyzing various relevant documents such as
enterprise reports, records, and other written materials that provide valuable information for the
study. These documents were obtained from institutions directly involved in the micro and small-
scale enterprises under investigation.

24
 3.5. Methods of data collection

The data for this study were collected from both primary and secondary sources using multiple
methods. Primary data were gathered through interviews, questionnaires, and direct
observation. Interviews were conducted to gain in-depth insights and personal experiences from
participants. Questionnaires were designed to collect basic demographic information and both
qualitative and quantitative data systematically. Direct observation allowed the researcher to
verify and supplement information gathered through interviews and questionnaires by witnessing
activities firsthand.

Secondary data were collected from existing documents and records available at the Small
Scale Industries Office in Burayu Sub City. These documents provided important background
information and historical data relevant to the financial management practices of the enterprises
studied.

Table 2: methods data collection

S.NO
Name of MSEs Number of NO. OF
employee RESPONDENT
1.
A & wood and metal product manufacturing 36 7
2. 38 8
Gamme and his brother wood and metal
product
3. 30 6
B2 Furniture and metal work
4. 32 9
BM furniture
Total 136 30
Source by own survey 2017

25
3.6. Data analysis techniques

Both quantitative and qualitative methods were used for data collection, with each method
analyzed separately. Descriptive analysis was employed to summarize and explain the results
obtained. Visual tools such as tables and percentages were used to present data gathered through
questionnaires and interviews. Participant responses to all questions were organized and
described based on their frequency and percentage.

The assessment of financial management practices in small-scale enterprises in Burayu Sub City
was analyzed and interpreted based on data from 30 randomly selected respondents. The analysis
included personal information of the participants.

Table 3: : personal information of the respondents

Items Category No of respondents

Male Female Total %

Age Young 8 2 10 33.4

Middle 10 3 13 43.3

Old 6 1 7 23.3

Total 24 6 30 100

Source own survey, 2017

These the above table 3 shows that the majority (43.3%) of male & females respondents are
make in the middle, age, white small respondents in both sex belongs to young (33.3) and old
(23.3) groups this indicate that more adults are engaged on small scale enterprises.

26
 Table 4: Educational status

Items Category No. of respondents

Male Female Total %
Primary 10 2 12 40
Education Secondary 7 2 9 30
Adult 6 1 7 23.4
Illiterate 1 1 2 6.6
Total 24 6 30 100
Source own survey, 2017

Table 4. Above reveal that the majority of respondents were educated (40%,primary, 30%
secondary & 23.4% adults ) and 6.6 of respondents do not have school education itinerate

27
 CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATIONs

In this chapter the data collected on assessment of financial management practice in small scale
enterprise in BURAYU SUB CITY town analyzed and interpreted based on 30 respondent that
are selected randomly.

4.1 Personal information

Table 5: personal information

Items Category No. of respondents

Male Female Total %
Age Young 8 2 10 33.3
Middle 10 3 13 43.3
Old 6 1 7 23.4
Total 24 6 30 100
Source own survey, 2017
Table 5 shows that the majority of respondents (43.3%) were middle-aged, with smaller
proportions of both males and females in the young (33.3%) and old (23.4%) age groups. This
indicates that more adults are engaged in small-scale enterprises.

Table 6: education status

No. of Respondent
Item Category
Male Female Total %
Primary 10 2 12 40
Secondary 7 2 9 30
Adult 6 1 7 23.4
Illiterate 1 1 2 6.6
Total 24 6 30 100
Source own survey, 2017
Table 6 reveals that the majority of respondents have some level of education: 40% completed
primary education, 30% completed secondary education, and 23.4% attended adult education
programs. Only 6.6% of the respondents were illiterate and had no formal schooling.

Question related to more detail information

28
 Table 7: Information about adequate financial management

Question Items Response Frequency percentage

Do you get Yes 8 27%

NO.1 adequate
financial No 22 73%
management
Information in Total 30 100%
time?
Source own survey, 2017
Based on Table 7, 8 respondents (27%) stated that micro and small-scale enterprises receive
adequate financial management information in a timely manner, while the remaining 22
respondents (73%) indicated that they do not. This suggests that the majority of these enterprises
lack timely access to essential financial management information, reflecting poor performance in
delivering or receiving such services when needed.

Table 8: Problem related to lack of financial management information

Question Items Response Frequency percentage

No.2 If your answer for Shortage of 16 53%
skilled man
question no 1 is no would
power
you please discuses Shortage of 8 27%
funds
briefly the problem for
Lack of support 6 20%
you lack FMI? from
government
Total 30 100%

Source own survey, 2017

According to Table 8, 53% of respondents indicated that micro and small-scale enterprises suffer
from a shortage of skilled manpower, particularly individuals with proper training in financial
management. Additionally, 27% cited a shortage of funds, and 20% pointed to a lack of support
from government offices. These responses suggest that the main barriers to effective financial
management in these enterprises are the lack of qualified personnel, insufficient financial
resources to manage and report on business activities, and inadequate government support,

29
including training programs and awareness creation on the importance of sound financial
management practices.

Table 9 The availability of financial document:

Question Items Response Frequency percentage

NO .3 Does your micro Yes 8 27%

and small scale
enterprise have Not 22 73%
all financial
documents?
Total 30 100%
Source own survey, 2017
As shown in the above table, 27% of respondents indicated that their micro and small-scale
enterprises have complete financial documents, although these are not properly utilized. The
remaining 73% reported that their enterprises either lack full financial documentation or do not
maintain such records at all. This suggests that shareholders or members have not given
sufficient attention to managing their businesses through proper financial management systems.

Table 10: How to follow financial management

Question Items Response Frequency Percentage

No. 4 Does your micro and Yes 12 40%
small scale enterprises No 18 60%
have follow and monthly Total 30 100%
closes its financial
Source own survey, 2017
As shown in the above table, 60% of respondents stated that their enterprises do not close their
financial accounts on a monthly basis, while 40% reported that they do. This indicates that the
majority of micro and small-scale enterprises does not consistently follow a proper financial
management system and fail to close their financial records on time.

30
Table 11: Problem related to lack of monthly cloths financial activities

Question Items Response Frequency Percentage

If your answer for Lack of knowledge 8 27%
No .5 question no 4 is about financial
would you identify Shortage of training 22 73%
the main problem Lack of support
from government
Total 30 100%
Source own survey, 2017
As shown in Table 6, out of the total respondents, 57% indicated that micro and small enterprises
suffer from a lack of financial knowledge. Additionally, 20% reported a shortage of training on
how to manage financial activities, and 23% identified a lack of support from government
offices. These responses suggest that the main challenges faced by these enterprises include
insufficient financial knowledge—particularly the absence of proper financial management
training—limited training opportunities on financial record-keeping, and inadequate government
support such as experience sharing and awareness programs on the benefits of effective financial
management.

Table 12:Resource uses in effective and efficient

Question Items Response Frequency Percentage

Do you believe Yes 6 20%
No. 6
that you SME No 24 80%
resource a Total 30
Source re used in 100%
effective and
efficient manner

Source own survey, 2017

As shown in the above table 20% of the respondents said that the micro and small scale
enterprise do not use their resource in effective and efficient manner

31
Table 13: Major factors that hindered the MSE resource to use in effective and efficient manner

Question Items Response Frequency percentage

NO.7 If your answer for Shortage of 10 33%
question no6 is No what skilled man
is the major factor which power
hindered your micro to Lack of good 6 20%
use its resource? training
Lack of modern 8 27%
machinery
Lack of financial 6 20%
management
system
Total 30 100%
Source own survey, 2017
The study reveals that (33%) of the total respondents responded that the major factor is lack of
skilled man power ,20% the respondents said that lack of good training and lack of financial
management system and the other 27% of the total respondents responded that lack of modern
machinery due to shortage of capital. From this we can conclude that there are different major
factor which hindered the micro and small scale enterprises resource to use ineffective and
efficient manner .among this lack of financial management system is the major factors one to
shortage of analysis their financial management practice. Source own survey, 2017

Table 14: Sufficient marketing opportunity

Question Items Response Frequency percentage

No.8 Do your micro Yes 10 33%
and small scale No 20 67%
enterprises have Total 30 100%
sufficient
marketing
opportunity?
Source own survey,2017
As show in the above table 67% of the respondent said that there is no sufficient marketing
opportunity and 33% of the total respondents said there is sufficient opportunity. From this it is
clear that the micro and small scale have no sufficient marketing opportunity.

32
Table 15: Major factors that makes insufficient marketing opportunity

Question Items Response Frequency percentage

No.9 If your answer Remoteness from 11
for question no 8 the center 37%
would you Shortage of their 8 27%
explain the major stores in central
factor marketing
Shortage of 7 23%
facility to send
their product
Quality of their 4 13%
products
Total 30 100%
Source own survey 2017

According to the results shown in the table, 37% of respondents identified remoteness from the
town center as a major factor limiting marketing opportunities. Additionally, 27% mentioned a
shortage of storage facilities in central markets, 23% pointed to inadequate transportation
facilities for delivering their products, and 13% cited product quality issues. These findings
indicate that insufficient marketing opportunities for micro and small-scale enterprises are
primarily due to remoteness, lack of storage space, and poor transportation access to central
markets.

Micro and small-scale enterprises are well known for their economic benefits, both to their
members and to the wider community. The table below highlights the economic advantages these
enterprises provide to their members.

Table 16: The economic advantage of small and micro enterprise and promote habit

Items No. of respondent

Does being a Category Male Female Total %
member has Yes 23 4 27 90
economic No 2 1 3 10
advantage Total 25 5 30 100
Do MSE Yes 24 6 30 93
promote the
habit
Source own survey 2017

33
Table 16 shows that 90% and 93% of respondents, respectively, agree that micro and small-scale
enterprises (MSEs) significantly benefit their economic performance. Additionally, the majority
of respondents believe that establishing MSEs in their area generates income, promotes saving
habits, and serves as a source of investment. This implies that MSEs play a vital role in
improving the economic status of individuals and contribute positively to the overall economic
development of the community.

Table 17: Income level of respondents after join to MS enterprise

Category No. of respondents

Male Female Total %
Very good 19 3 22 74
Good 6 2 8 26
No change - - - -
Total 25 5 30 100
Source own survey,2017

As indicated in the above table, 74% of the respondents reported a very good increase in income
after joining the enterprise. Additionally, 26% of respondents stated that their income increase
was good. None of the respondents reported no change in their income levels after joining the
enterprise.

Table 18: Employment opportunity of MS enterprise

Category No. of respondent

Male Female Total %
Very good 13 3 16 53
Good 11 1 12 40
No change 1 1 2 7
Total 25 5 30 100

Source Own survey 2017

As indicated in the above table, 53% of respondents reported that micro and small-scale
enterprises (MSEs) provide very good employment opportunities. Additionally, 40% of
respondents indicated good employment opportunities, while 7% reported no change in
employment opportunities. Overall, this suggests that micro and small-scale enterprises are an
important source of employment.

34
 CHAPTER FIVE

FINDING, CONCLUSION AND RECOMMENDATION

5.1.Finding

 Majority (43.3%) of respondents was middle-aged, and 80% were male.

 Indicates male dominance and strong adult participation in small-scale enterprises.
 Most had basic education: 40% primary, 30% secondary, 23.4% adult education.
 A small portion (6.6%) was illiterate.
 73% lacked timely financial management information.
 Key barriers: shortage of skilled manpower (53%), lack of funds (27%), and limited
government support (20%).
 73% lacked complete financial documents.
 60% did not track finances monthly.
 Training gaps (73%) and low financial knowledge (27%) were major reasons.
 80% said resources were not used efficiently.
 Main factors: lack of skilled labor (33%), outdated machinery (27%), and poor
financial systems (20%).
 67% lacked sufficient marketing opportunities.
 Caused by remoteness (37%), store shortages (27%), and transport issues (23%).
 90% reported increased income, and 93% improved saving habits after joining
MSEs.

 53% saw strong employment opportunities, with 40% describing it as good.

5.2. Conclusion

The study reveals that small-scale enterprises in Burayu Sub City are predominantly managed by
middle-aged males with basic education levels. Despite their significant role in local economic
development, most enterprises face critical challenges in financial management. A large majority
lack timely financial information, proper documentation, and regular financial monitoring due to
shortages of skilled manpower, limited training, and inadequate government support.

35
Resource utilization is generally inefficient, hindered by outdated machinery and weak financial
systems. Marketing opportunities are also insufficient, primarily due to remoteness and logistical
constraints. However, membership in micro and small enterprises has positively impacted
income levels, savings habits, and employment opportunities for many participants, highlighting
the sector’s vital role in improving livelihoods.

To enhance the performance and sustainability of these enterprises, focused efforts are needed to
improve financial literacy, provide training, strengthen government support, and address
infrastructural barriers.

5.3.Recommendation
The government and the owners of small scale enterprises are recommended to do the following
in order to develop small scale enterprises and to bring promising contribution to the economic
development of the town by small scale enterprises.

 Due to the immense contribution of small scale enterprises to the socio economic
development of the country much attention should be given to proper financial reporting
procedures in small scale enterprises.
 The government of Ethiopia is doing a lot to promote and sustain small business in the
country yet little is done in terms of financial management especially financial reporting. it is
the best way that the government of Ethiopia , through its revenue collection agency in
collaboration with different supporting bodies financial reporting education and training for
the small business owner and help prepare their financial reports at a minimal fee if not for
fee. Source own survey, 2017

 The financial institution should adjust their policy towards small scale enterprise and make
the financial environment conducive for easy accessibility of funds to small scale-enterprise.
 It is better if government should give awareness oriented information about financial
management.
 The financial institutions should adjust their policy towards small scale-industries and make
the financial environment conducive for easy accessibility of funds to Small scale-industry

36
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Edris, A., et al. (2020). "Financial Planning Practices Among Small and Medium Enterprises in
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Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA). "Annual Report on SME
Development in Ethiopia."

World Bank (2021). "Doing Business 2021: Comparing Business Regulation in 190 Economies."

Muluye, T., et al. (2021). "The Role of Technology in Financial Management Practices of SMEs:
Evidence from Ethiopia." *African Journal of Business Management*.

WASSHINGTON: western university press CRONIC (H 200) understanding enterprises

entrepreneurship and small business.

37
International accounting standards boards (2007) international financial reporting standards 2007
including international accounting standards and inter pretention as at jaunty 2007 (lexis
nixes 15B NI-4224- 1813-8)
Original text of IAS/IFRS,SIC and if RIC adopted by commotions of the European community
and publish EDIM official journal of European union HTTILE- European PU/ internal
marketing/accounting IASEN. HTM # adopted Commission
MEKELLE :CEPTRAL press (GIBREHIWOT ,A2005 )micro small enterprise

WOREDA bank:2000 and 2004 cited in T….2006 :J micro and small scale enterprise Source
own survey, 2017

TOSHOBOM WEKA 2006 .c.c2006.

MURPAY B. 1979 assessing the value of financial control technique to the small business
certified COUNTANT fl(2).p.93-5
The VARUBARE j.s-2009 small SCOLE industries and its financial problems.
LUTHERAL world federation of Ethiopian ,2006cited in (ETHER And MAMMO ,2009)
Roy and WHECTER ,2006:452-464
GYAPONG, 2010:196-205; Anderson ETAL ………1994:329-133 and STALYED and
morse,1965:31

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 TECHNO LINK COLLEGE

BURAYU CAMPUS

DEPARTMENT OF BUSINESS MANAGEMENT

6.QUESTIONNAIRE
Papered to collect data from micro and small enterprise in Burayu sub city town

Dear Respondents

These questionnaires’ is used to obtain information to curry out research on financial

management practice, micro and small enterprise in Burayu Sub City. The research work is used
fulfillment of BA Degree in BUSINESS MANAGEMENT. Therefore, you are honest and
accuracy on responding to all items of the questionnaires is very important to determine the
validity to this research.

Thank you in advance!!!

Direction

Read the following question carefully and answer them by circling the right and write your
opinion for question with open ended

(Don’t write your name) and Personal Data

Research of questionnaires form

NAME________________________________________

Age______________________ sex_____________________

Education status _______________________________

Position_______________________________________________________________________
________

1. Do you get adequate financial management information on time?

Yes no
If your Source own survey, 2017

39
2. answer for question number 1 is No would you please discussed briefly the problem for you
crack financial management information?
_____________________________________________________________________
___________________________________________________________________
________________________________________________________________

3. Does your micro and small scale enterprise have all financial documents?
Yes no
Mention, the types of these documents
_____________________________________

4. Does your micro and small scale enterprise have follow and monthly clock its financial?
Yes . no
5 If your answer question number if is no would you identify the main problem for it?

6. Do you believe that you MSE resources are used in effective and efficient manner ?
A. Yes B. no
7 .If your answer for question number 6 is no what is the major factors which hindered your
micro to use its resource
………………………………………………………………………………………………………
……………………………………………………………………………………..

8. Do your micro and small scale enterprises have sufficient marketing

A. Yes B. no
9 .If your answer for question number 8 is no would explain the major factors?
………………………………………………………………………………………………………
………………………

40