The Micro and Small Enterprise, Small Business

Advice / Change and Organization


The Micro and Small Enterprise, Small Business
Amare Alene , Accountant, Ethiopia

Definitions of Micro and Small Enterprises, Small Businesses.


The terms Micro-enterprise and small-enterprise refer in the first place to the SIZE of the business. For a long time, the concept of ‘informality’ has also been used to characterize micro and small enterprise, INFORMALITY here refers to the informal nature of the employment process (no contract of employment and low wages) and to the fact that most of such business are not registered. However for a meaningful classification of firms into categories, the size of firm or the degree of informality does not provide usable yardsticks. A number of other characteristics of enterprises and of the entrepreneurs who set up and run them must also be taken into account. At present in most countries, a COMBINATION OF THE NUMBER OF WORKERS AND INVESTED CAPITAL are used as a yardstick.
Worldwide, individual countries apply their own definitions and criteria in defining categories of small-scale enterprises. For instance, the definition applied to micro-enterprises in Ethiopia is different from the one used in developed countries such as the USA and UK. Attempt is therefore made below to cite some of the definitions given to such categories of enterprise by different countries including Ethiopia.
A micro or small business enterprise is a specific form of small enterprise. It almost involves businesses with informal characteristics. Such enterprises usually include small service businesses, bakeries, metal working business, small furniture maker’s repair and maintenance business, copying business, small scale food production business, etc… The lower limit in the microenterprise category is the one-person business. The upper limit is often fairly arbitrarily, drawn at business with a maximum of 10 employees and/or maximum capital of about US Dollar 50,000. This definition usually refers to the category set by most developed countries.
Note that studies indicate that this group (micro-enterprise) provides most jobs in the industrial sector of many developing countries varying from 40 percent to 90 percent.

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