Title: Micro and small enterprises and their role in local economic development: the case of Adama City, Ethiopia

Authors: Defferew Kebebe Tessema

Addresses: Department of Public Administration and Development Management, Addis Ababa University, Addis Ababa, Ethiopia

Abstract: This study examines the role of micro and small enterprises (MSEs) in local economic development (LED) in Adama City, focusing on employment creation, capital mobilisation, poverty reduction, and local government revenue generation. Based on data from 89 MSEs in metal, woodwork, and agro-processing sectors, the findings show that MSEs significantly contribute to job creation, capital growth, and improved living standard of owners and employees. However, gaps were observed in generating sufficient revenue for the city government. The study also attests that the potential contribution of the sectors to LED was challenged mainly due to the institutional capacity constraints, lack of adequate work experience, insufficient working capital, lack of working premises, and poor management and technical skills of owners and employees. Thus, the study highlights the need for all-rounded efforts (both from the sector themselves and concerned stakeholders including city government) to maximise the potential contribution of the sector towards LED.

Keywords: micro and small enterprises; MSEs; local economic development; LED; Adama City; Ethiopia.

DOI: 10.1504/AJESD.2025.149249

African Journal of Economic and Sustainable Development, 2025 Vol.10 No.3, pp.231 - 262

Received: 13 Jul 2024
Accepted: 26 Jun 2025
Published online: 20 Oct 2025 *

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