THE ROLE OF MICRO AND SMALL ENTERPRISES IN EMPLOYMENT CREATION AND INCOME GENERATION IN URBAN ETHIOPIA IN THE CASE OF YOUTHS IN AYIRA TOWN, WEST WALLAGA, OROMIA, ETHIOPIA

Developing countries such as Ethiopia are characterized by persistent challenges including low economic growth, rapid population expansion, high unemployment rates particularly among the youth and widespread poverty. In this context, Micro and Small Enterprises (MSEs) have emerged as vital instruments for economic transformation, especially in urban areas. They contribute significantly to employment creation, income generation, and the effective utilization of local resources, thereby fostering inclusive economic development. This study investigates the role of MSEs in employment creation and income generation among youth in Ayira town, Ethiopia. To achieve this objective, the study employed a mixed-methods approach using both primary and secondary data. A total population of 142 MSEs operating in the town was identified, from wh ich a sample of 66 respondents was selected using a stratified sampling technique. Primary data were collected through questionnaires, interviews, and focus group discussions, while secondary data were sourced from government offices, published and unpublished documents, and online resources. Descriptive statistical tools such as frequency distributions and percentages were used to analyze the data, and a logistic regression model was employed to examine the factors influencing the growth of MSEs, with employment creation and income generation as dependent variables. The findings revealed that MSEs have significantly contributed to job creation and income generation in Ayira town. However, the study also identified several internal and external challenges facing MSEs, particularly during the start-up and operational phases which include limited access to finance, lack of market linkages, inadequate infrastructure, and managerial capacity constraints. The study concludes that MSEs play a crucial role in reducing youth unemployment and improving livelihoods in urban Ethiopia. Based on these findings, the study recommends the implementation of supportive policies aimed at improving access to finance, strengthening institutional support, enhancing entrepreneurial skills, and creating a more conducive environment for MSE development. These measures are essential for harnessing the full potential of MSEs as engines of employment and economic growth in Ethiopia. Keywords: MSEs, employment creation, income generation, urban, youths