Factors Affecting Growth of Micro and Small Enterprises: The Case of Enticho Town

Abstract

This study examines the internal and external determinants influencing the growth and sustainability of Micro and Small Enterprises (MSEs) in Enticho Town, Tigray, Ethiopia. Although MSEs play a central role in job creation, income generation, and structural transformation, their growth remains constrained by multiple financial, infrastructural, and institutional factors. Using quantitative cross-sectional research design, primary data was collected from 155 MSE operators across manufacturing, trade, service, construction, and urban agriculture sectors. The data were analyzed using descriptive statistics, correlation analysis, and multiple linear regression to identify the most significant predictors of enterprise growth. The findings reveal that infrastructure quality, workplace conditions, internal managerial capacity, and marketing capability are key positive contributors to MSE growth. Financial constraints and governance related challenges, including complex regulations, taxation burdens, and administrative inefficiencies negatively affect performance and limit expansion. The regression model explained a substantial proportion of the variation in MSE growth, underscoring the combined effect of internal competencies and external enabling conditions. The study concludes that sustainable MSE development requires integrated interventions that address financial access, infrastructure, capacity building, and institutional reforms. Improving access to credit, investing in enabling infrastructure, strengthening entrepreneurial and managerial skills, and enhancing transparent governance are essential for fostering a supportive business ecosystem. The findings provide important insights for policymakers, local administrators, development partners, and practitioners involved in promoting inclusive economic growth.