Policy Challenges of Livelihood Diversification through Small Businesses: Evidences from Three Districts of Rural Ethiopia

Abstract

The role of small businesses is often neglected by the rural development policies of Ethiopia. In these regards, the present Ethiopian government had also been criticized by some quarters for pursuing countryside development strategies that neglect the contribution of small businesses in the countryside. The knowledge gaps due to the lack of empirical or theoretical attention have been revealed in the policies and strategies of developing countries including Ethiopia where there is no development policy that detects and expand a rural small business. Therefore, this research will assess the challenges of livelihood diversification through small businesses in three districts (Oda Jalela, Lege Lencha, and Mede Telila) of rural Ethiopia. The minimum sample size is 122, but 150 households were taken for greater precision and accuracy. To reach to the intended target sample, the households were stratified into three wealth groups, rich, medium, and poor based on the classification of district officials. From each stratum, the required number was selected based on proportional random sampling techniques. The major finding of the study is lack of initial capital, lack of business awareness, lack of technical skill, and lack of inputs are cited as the major entry barriers. On the other hand, as far as location distribution of entry barriers, it shows some variations. With regard to participants’ constraint to expanding a small business, the majority of them reported that lack of capital, lack of market, and poor infrastructure was their major constraints. To conclude, deferential treatment becomes imperative as the challenges are not the same in all study districts.