Micro and small-scale enterprises are important both to the individual and to the nation. To the individual, they provide employment and raise the standard of living of both employers and employees. To the nation, they complement large-scale modern sector enterprises, they utilize agricultural and other raw materials that warrant only small-scale production, they mobilize resources otherwise left out of the mainstream formal mobilization channels and they provide the necessary platform for takeoff into large-scale modern production by many indigenous Ethiopians. Micro and small-scale enterprises contribute more enormously to the socioeconomic development of once country. According to Ministry of MSME (2014) of India , the micro and small sector alone accounts for more than 95% of the industrial units and contributes 45% of the manufacturing output and 40% of the total export. Micro and small-scale enterprises are the main sources of employment in developed and developing countries and especially in helping the industrialization of rural and for those backward areas. Micro and small-scale enterprises play an important role in one country economy and it is increasingly viewed as an important engine for employment creation and economic growth.

Micro and small-scale enterprises can also face many obstacles their limit their long-term survival and development that reduces the performance of the enterprises. A study conducted by International Finance Corporation (IFC, 2013) based on responses of more than 45,000 firms in developing countries found that the top obstacles to the operations of micro and small-scale enterprises are a poor investment climate. Especially, the study found that red tape, high tax rates, and competition from the informal sector are main challenges and also inadequate infrastructure, especially an insufficient or unreliable power supply. Whereas informality is a major hindrance of micro and small-scale enterprises in middle-income countries are an inadequate power supply is the most important challenge for companies in low-income countries. Typically, micro and small-scale enterprises also face higher transaction costs than larger enterprises in obtaining credit (Saito and Villanueva, 1981). Poor managing and accounting practices have in a weak position to the ability of smaller enterprises to raise finance. This leads to lack of adequate information which is associated with lending to micro and small-scale enterprise borrowers have restricted the flow of finance to smaller enterprises. In spite of the longstanding supply-side credit policies, the share of credit flow to small enterprises appears to be deteriorating, as economic liberalization proceeds. For example, according to the ministry of finance of India, the cost and availability of credit is a major issue facing and challenging the small enterprises in India (Ministry of Finance, 2013).

Researchers also identified lack of access to external finance and weak capital base, inexperience in the field of business, particularly lack of technical knowledge plus inadequate managerial skills, lack of planning and lack of market research as causes of micro and small-scale enterprises failure (Murphy et al., 1991). Sufficient financial resources are also required for the firms to make a continuous investment in terms of employee training and education, and to initiate any innovation process in an effort to sustain their competitive advantage (Dyer et al., 2014). It is said that the performance of enterprise depends on the type of industry and country it operates (Lampadarios, 2016). The contribution of micro and small-scale enterprise to development are generally acknowledged.

Bloch and Bhattacharya (2016) concludes that small businesses tend to have a higher failure rate as compared to large organizations, although they are commonly perceived as an engine of a country's economy. For example, in Malaysia, it was found that higher number of small and medium-sized enterprises (SMEs) indicated a worse performance in the first quarter of 2016 as compared to 2015 (SME Corp, 2016). Many failure stories of SMEs reveal that their characteristics which include reactive, fire-fighting mentality, resource limitations, informal strategies, flexible structures, and lack of strategic planning processes may have contributed to their failures (Gnizy et al., 2014).

Moreover, inadequate resources issue can often influence these firms to focus on short-term rather than long-term goals, inhibit them from further development and exploitation of opportunities existing in the environment. There are also various empirical studies verifying strategic importance of technological usage is well acknowledged in the literature as a factor that could enhance business success (Chatzoudes et al., 2015). Firms that utilize the latest technology tend to capture customers more than their competitors (Valacich and Schneider, 2014). Specifically, small firms that have timely access to technical, industry knowledge, and insights into the latest technological breakthrough will be more successful. By adopting information and communication technologies, this can ease collaboration between small enterprises and their supply chain partners (Greene et al., 2015).

Other study also shows that, scholars reported internal resources and capabilities including but not limited to management skills, marketing skills, and technological capabilities (Bouazza et al., 2015). According to Chen and Zhang (2015), mainly, technological factors were responsible for enterprise success. Other studies have also shown the significant role of government supports through policies, financial, market access, technical, and infrastructure in enterprise success (Rantšo, 2016) and furthermore, a study conducted by Chowdhury et al. (2013) concludes that, lack of conducive business environment restricts the development and growth of enterprises.

The solution for solving the problem of economic growth in developing countries often resides in the performance of micro and small-scale enterprise industries. Micro and small-scale enterprises are widely recognized for their role in social, political and economic development. Their importance is apparent in its ability to provide reasonably priced goods, services, income and employment to the number of peoples. Consequently, the efficiency of micro and small-scale enterprises is closely associated with the efficiency of the country. The intention of this paper is also to scrutinize factors affecting the performance of micro and small-scale enterprises. Since, micro and small-scale enterprise in Ethiopia, in Guraghe zone, Wolkite town also employs a huge population, there positive performance can bring hope to the problem of unemployment in the zone.

Statement of the problem

Guraghe zone is endowed with many micro and small-scale enterprises. Wolkite town is also one of the towns which is endowed with this sector in this zone.

In addition to this, there is good weather condition which is favorable for many youth and entrepreneurs who want to engage in this enterprise. But, the growth and performance of micro and small-scale enterprises are neither documented and nor conducted by other researchers in this area before. Status of the nature of micro and small-scale enterprises in the area will determine major problems and possible solutions will be identified and concrete information will be identified and gathered and can also be documented for improvements of the performance of micro and small-scale enterprises highly.

The growth entrepreneurship in Wolkite town will be lead to increase in the number of micros and small-scale enterprise in the town. Micro and small-scale enterprises play a key role in economic development and contribute to the large extent to employment and poverty reduction in the town. The statement of the problem was mainly, to identify the factors that affect the performance of micro and small-scale enterprise in this zone in case of Wolkite town and the role of micro and small-scale enterprises in economic development in case of this town.

Objective of the study

General objective

The general objective of the study is to assess the factors affecting the performance of micro and small scale enterprises in Guraghe zone, in cases of Wolkite town.

Specific objective

(1) To identify factors affecting the performance of micro and small scale enterprises in Wolkite town.

(2) To identify the role of micro and small scale enterprises in economic development of the town.

Significance of the study

Based on this title, the overacting purpose of the research is to enhance our understanding of micro and small-scale enterprises performance. This research was thus intended to identify key challenges affecting the enterprises and to make an appropriate condition for readdressing and method of eliminating of them. The finding of the study will help policy maker and target groups to see the need to support the enterprises, which will create employment for the youth and also equip them with modern infrastructure and for groups, to have solutions to some of the problems.

The study will be beneficial to the following parties

Entrepreneur and manager

For the purpose of policy formulation that will create a suitable environment for micro and small-scale enterprise to increase business growth and the consequent social standard improvement.

Zone administration of Guraghe zone

The research will assist zone administration of Guraghe zone when formulating policies on planning so as to assist them to build holistic policies that will include all members in the zone of micro and small-scale enterprises

Future researchers

The study is much significant to research institutions, students, and other researchers and they will get the useful findings in their investigation in the area of study.

Scope of the study

In Wolkite town, there are many micro and small-scale enterprises operating and each of them faces some challenges, which normally prevent them from growing and also to contribute to the economy effectively. With the context, this study focus on factors affecting the performance of micro and small-scale enterprise in Wolkite town which will go a long way to represent the challenges facing micro and small-scale enterprises in the town. Looking at the limitation of this study, the researcher focuses on selected micro and small-scale enterprises, like manufacturing, construction, trade and the service sector. The research will be limited to the factors affecting the performance of micro and small-scale enterprises in Wolkite town. This study will have abundant to fail.

Limitations of the study

The characteristics of this study will have a certain limitation in the applicability of the findings. First, a more detailed questionnaire with more specific questions could be more helpful to gain a better description of the factors affecting the performance of micro and small-scale enterprises. Second, related to time, funds, infrastructure and logistics constraint, which limited the intensity of the spread or area of coverage study. Third, since the researcher chooses the participants for the purpose of the interview. This may have biased the data in such a way that only the view of the individual in the population is represented and ignores the views of other members. Some respondents to fail to complete questionnaire given then and this limited the number of responds who were involved in the study despite the researchers' efforts and approaches to explain the potential benefits of the study to them. However, the research aims to overcome this limitation to a great extent by supplementing interviews with focus group discussion and observation.

The purpose of this study is to investigate the factors affecting performance of micro and small-scale enterprises, age, sex, family size, educational level, access to business information, access to infrastructure, access to financial services, and access to managerial skills. The results from data analysis indicate that certain factors which are critical to the success of business performance have a positive relationship with the performance of the business. Some of the enterprises were found to still be at start-up stage mainly due to lack of access to business information, access to financial services, access to infrastructure, and access to managerial skills and the like. In general, based on the data collected and analyzed, the performance of micro and small-scale enterprises in Guraghe zone, the case of Wolkite town is highly affected due to lack of appropriate infrastructure and low level of education.

The findings show that the performance of micro and small-scale enterprises was affected by age, sex, family size, access to business information, access to infrastructure, access to financial service, and access to managerial skills. Therefore, based on the findings of the study, the researcher recommends the following:

(1) The government, non-government organization and micro and small-scale enterprise development agencies should motivate, help, and advise the owner or manager and the participants of the enterprises on their overall business activities.

(2) Giving training on business issues, arrange forum and exhibition for experience sharing and solve the credit infrastructure, supply, and market access problem in collaboration.

(3) Micro and small-scale enterprise operators should device effective marketing strategies

(4) Micro and small-scale enterprises operators should improve their access to business information, access to infrastructure, access to financial service and access to managerial skills by working and making links with different enterprises.

(5) Finally, further research should be conducted to examine factors associated with the performance of micro and small-scale enterprises from time to time

The author has not declared any conflict of interest.

The author would like to sincerely thank my advisor Ms. Tiru and Mr Sead Aliyi for their constructive comments, valuable suggestions and good guidance; and the staff and management of all the micro and small scale enterprise office of Wolkite town for their response and full cooperatives to research questionnaire.