Development of Micro and Small enterprises (MSEs) is one mechanism for alleviating
unemployment, especially for women. Ethiopia has developed policy as part of the
Growth Transformation and Plan (GTP) to develop MSEs to generate employment at the
initial stage and transform the enterprises into medium and large enterprises in the long
run. However, contrary to this objective, the growth of these enterprises has been very
slow by every standard. This study evaluates the factors behind the slow growth of the
enterprises by estimating the enterprise growth model captured by employment growth
over the span of the period that the firm has operated. We find that women owners, in
particular, face more severe credit, market and working premises constraints. We also
find that while enterprise growth is inversely related to initial size, financial literacy and
desirable managerial qualities of owners and managers positively contribute to
enterprise growth.
