College of Engineering and Technology

Department of Construction Technology and Management

Post-Graduate Program in Construction Engineering and
Management
THE CONTRIBUTION OF "SMALL AND MICRO ENTERPRISE’’
AND THE CHALLENGES IN CONSTRUCTION INDUSTRY:
(The Case of Small and Micro Enterprise contractors in West Guji Zone)

By;
Sara D.
September 2021 1
1. INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Objectives of study
1.3.1 Generally Objectives
1.3.2 specific Objectives
1.4 Basic research question
1.5 Significance of the study
1.6 Scope and limitation of the study
2. RESEARCH METHODOLOGY
2.1 research Area
2.2 Target population
2.3 sampling techniques
2.4 data collection methods
2.5 data analysis
2.6 validity and reliability
3. RESULT AND DISCUSSION
3.1 Summary of survey response
3.2 contribution factors
3.3 performance factors
3.4 challenges factors
3.5 challenges improvement mechanism
4. Conclusion and Recommendation

2
 1. INTRODUCTION
1.1 Background of the study

 Small and micro enterprise (SME s) are one of the most important forces for the
development of construction industry around the world (Drbie & Kassahun,
2013).
 Study conduct by (Goshu Fufa MBA, 2015) revealed that SMEs are an important
contributor to economic growth and employment creation in Ethiopia.
 The construction industry dominated by SME s who face an emerging trend of
unique challenges in the implementation of projects(Kulemeka et al., 2015).
 The Majority of local entrepreneurs establishing micro businesses are susceptible
to failure that is attributed to both internal factors (wrong pricing, negative cash
flows, poor record keeping, management problems, lack of planning and faulty
products) and external factors government taxation, load shading, in adequate
capital, poor markets and high rents )in construction industry.
 Cont.…

 The main factors that affect the performance of SMEs in developing countries is not
their small size but their isolation, which hinders access to markets, as well as to
information, finance and institutional support(Chowdhury et al., 2013).
 The argument that small businesses in Africa are crucial in the role they play in
employment creation and general contribution to Construction industry development.
 Therefore, the study is to assess the contribution "small and SME “in the construction
industry and the challenges, and to develop improvement strategies
 1.2 Statement of the Problem

 SMEs have an important role to play in the development of the construction industry
(Africa, 2016).
 SMEs are considered as the engine of growth in most economies due to their significant
contribution in terms of employment creation (Arthur-aidoo, 2018) .
 study conducted by (Dinku, 2013) revealed that SMEs contractors in Ethiopia are
instruments to generate greater employment .
 Concerning the capacity building needs and how their successes can be achieved, so that
SMEs can be assisted in a way that is truly able to build their capabilities in today’s
construction sector (Lee et al., 2020).
 There is no adequate industry that contribute job opportunity and capacity of
employment in West Guji since it recently established as one of Oromia zone. However,
now it found on growing in aspect of construction industry that SMEs have been
participating as stakeholder.
 Cont.…

 Performance of SME s in cost, time and quality aspect are factors that needed
sustainability of construction industry.
 The projects executed by SME s firms achieved the desired cost and time
performance level, as contended by Uduak (2006: 2) and Ibrahim et al. (2014).
 The challenges that face stakeholders such as the Small and micro enterprise
(SME s) during construction phase are the one of construction industry
development obstacle.
 Study conducted by (Ali et al., 2020),revealed that critical factors challenges
SMEs are financial indiscipline by contractors, lack of experience and track
records, corruption, poor design and specifications, lack of entrepreneurship skills
and delay in payment for work done.
 Cont.…

 The reason of this study was conducted is to assess the contribution and
performance of SMEs contractors in this construction industry development.
 In addition, the study was identify the challenges of SME s and improvement
mechanism to overcome such problems and make them progress while being
active participants of the construction industry.
 1.3 Objective of study

1.3.1 General Objective

 The general objective of the research was to assess the contribution of “small and micro
enterprise (SME) “in the construction industry and the challenges, and to develop
improvement strategies...
1.3.2 Specific Objectives
The followings are the specific objectives of the study.
 To investigate contribution of Small and Micro Enterprises in West Guji Zone
 To identify the performance of Small and Micro Enterprises on construction projects in
quality, cost and time aspects.
 To identify the major challenges face Small and Micro Enterprises in construction
industry.
 To identify ways to minimize challenges of Small and Micro Enterprises in construction
industry.
 1.4 Research Questions

In order to assess the contribution and impact of "small and micro enterprise (sme)
“development and the challenges in construction industry, the study were attempt
to answer the following basic research question.
 What are the contribution of Small and Micro Enterprises on construction
industry development?
 What are the performance of Small and Micro Enterprises on construction
industry in quality, cost and time aspects?
 What are the challenges of Small and Micro Enterprises in construction
industry?
 What are the ways to mitigate problems and challenges of Small and Micro
Enterprises in construction industry
 1.5 Significance of the study

 This research was conducted to finding the contribution, performance and

challenges of Small SMEs in construction industry development.
 The study would be helpful SMEs, consultants, clients and government
agencies that need to gain a better understanding into the major challenges
facing SMEs and its improvement mechanism in construction industry.
 The other significance of this study to determine contribution and
performance of Small and Micro Enterprises in construction industry.
 1.6 Scope and limitations of the
Study

 There are different types of contractors in the construction industry business

classified based on their size and specialization.
 The scope of this thesis is to assess the contribution, performance and the
challenges of SMEs contractors and its improvement mechanism in
construction industry those registered in WGZ.
 Due to different constraints such as finance and time, the study was limited
in respondents such as SMEs contractors ,client and consultant in WGZ.
 2.RESEARCH DESIGN AND
METHODOLOGY
2.1Research area
 This study area was done in WGZ.
 West Guji is zones of Oromia Region that located in southern of Oromia
Ethiopia.
 WGZ is bordered on the south by Borena, on the west by the
Southern Nations, Nationalities, and Peoples Region, on the north by the
Gedeo Zone of Southern Nations, Nationalities, and Peoples Region and
Sidama Region and on the east by the Guji Zone.
 2.2 Target population.

 In research, population can be defined as the aggregate of all possible study

objects about which a statement is intended(Dorak, 2012).
 For the purpose of this study, the population targeted are the clients (project
office), SMEs, and consultant located in West Guji Zone.
2.3 Sampling method
 According to (Hamed Taherdoost, 2020),the sampling technique be
appropriate for giving chance to any population to be selected. There are two
types of sampling methods.
 These are Probability sampling and nonprobability sampling (Hameed
Taherdoost, 2016).
 Cont.…

 probability sampling as a method where each member of the population has

a known probability of being selected to be part of the sample.
 In Non-probability sampling, items for the sample are selected deliberately
by the researcher; his choice concerning the items remains supreme
 From non-probability sampling, purposive sampling used for this study.
 this type of sampling was regarded as non-probability sampling method and
it is distinguishable in that the researcher choses participants based his/her
pre-knowledge that they meet characteristics of the representative.
 2.4 Data Collection Method

 The study used both primary and secondary sources of data.

 The primary data sources of the study was collected through distribute
questioners to Small and Micro Enterprises (SMEs), consultant and Project
office members.
 Based on the literature review, the structured five point Likert scale
questionnaire were designed by the researcher under the supervision of my
advisor who is called Dr. Desalegn Girma to collect information from clients,
consultant and SMEs respondents that can help in giving answers for the
research questions.
 Cont.…

 Conducted a pilot study revealed that fixed rate for different site
location , cement availability problem, delay of document evaluation
and need of corruption by admiration body are the main challenges that
SMEs face
 The questionnaire has five section
2.5 Data analysis methods
 The term analysis refers to the computation of certain measures along
with searching for patterns of relationship that exist among data-groups
(Kothari, 2004 p.122). A descriptive statistical method was used to
analyses the questionnaire surveys.
 Cont.…

 Mean score used to indicate respondents responses level on contribution,

performance , challenges of SMEs in construction industry based on a 5-point
Likert scale where (1 =Very low 2 = Low 3= medium 4=High 5 =very
High).
 In addition, level of respondents agreements on challenges improvement
mechanism based on a 5-point Likert scale where (1=Strongly agree
2=Agree 3=Neutral/Not sure 4=Disagree 5=Strongly disagree) interpreted by
mean scores.
 Analysis of data collected by questionnaire survey done by using statistical
analysis Statistical Package for Social Scientists (SPSS) for descriptive
statistics (mean and frequency) and graphical presentations such as pie.
 Cont.…

 In addition, inferential statistical analysis such as Spearman’s rank order

correlation was used as an index of association between the study variables
and grouped respondents views.
2.6 Validity and Reliability Test
 Validity test indicates the degree to which an instrument measures what
supposed to measure while Reliability refers to consistency.
 To insure the validity of the questionnaire, Criterion-related validity test
(Spearman test) was used which measures the correlation coefficient
between each factors .
 Cont.…

 The Cronbach’s Alpha measure was above 0.8 in this

study, which is an acceptable measure of reliability.

Reliability Statistics

Cronbach's Alpha N of Items

.810 73
 Table 4. 1 Summary of survey response

3. RESULTS AND DISCUSSION

3.1 Summary of survey response

Respondents Group No of questionnaire Distributed No of returned
distributed questionnaire in questionnaire questionnaire in
percentage returned percentage

SMEs 90 67.7% 85 66.41%

Consultant 19 14.3% 19 14.84%

Client 24 18% 24 18.75%

 3.2 Contribution of SMEs in Construction
Industry Development

 In order to ranks and measuring the level of contribution, Performance and

challenges of SMEs in construction industry, a researcher used mean score based
on a 5-point Likert scale where (1 =Very low 2 = Low 3= medium 4=High 5
=very High).
Accordingly, the rating level of agreement were arranged as follows
 Very low ( 1≤Average mean <1.5)
 Low ( 1.5≤Average mean <2.5)
 Moderate ( 2.5≤Average mean <3.5)
 High ( 3.5≤Average mean <4.5)
 very High ( 4.5≤Average mean <5
 Cont.…

Contribution factors Clients Consultants SMEs Overall respondents

Mean Ranks Mean Ranks Mean Ranks Mean Ranks Contributi

on level

Employment creation 3.42 1 3.37 1 3.38 1 3.38 1 Medium

Building employee 2 2 2 2 Medium

capacity 2.92 2.95   3.18 3.09

Incubator for the growth       Medium

of companies ( platform 3 3 3 3
for the birth of 2.58 2.37 2.72 2.64
companies)
 Cont.…

 SMEs contribution in Employment Creation

 However, it leveled as medium contribution; Employment Creation was
ranked in first position with 3.38 mean scores.
 SMEs creates job opportunity for both partner and employee during
construction works.
 Since different industry did not expanded in WGZ, Unemployment expected
to increase. Nevertheless, according to this survey SMEs contractors in
WGZ moderately created employment opportunities.
 This finding confirmed by Study conducted by (Goshu Fufa MBA, 2015)
that revealed SMEs are important vehicles of employment creation.
 Cont.…

 SMEs contribution in Building employee capacity.

 human capacity building refers to activity to generate knowledge, skills, and
expertise to improve the thinking ability that may assist in increasing
productivity and sustenance in performance.
 The findings revealed that SMEs role in building employment capacity was
ranked in second position with 3.09 mean scores.
 The study conducted by (Ph et al., 2017) concluded that SMEs are significant in
human capacity building in Nigeria is supported this finding result.
 Cont.…

 SMEs as Incubator of Organizations

 The construction industry as a whole largely made up of small firm.
 Informal approach to the coordination and control of a firm’s activities becomes
harder and costlier as the firm grows and that formalizing these management
activities would become vital for future growth.
 This is particularly related to SMEs as they are said to act as incubators for the
creation of larger firms (Jamil & Mohamed, 2011).
 Funding revealed that SMEs contribution in companies incubators in WGZ is
medium and was ranked in third position with mean scores 2.64. There
 Correlations
  Employmen Building Incubator for
t creation employee growth of
capacity companies
Spearman's rho Employment creation Correlation 1.000 .613** .474**
Coefficient

Sig. (1- . .000 .000

tailed)
N 128 128 128
Building employee Correlation   1.000 .575**
capacity Coefficient

Sig. (1-   . .000

tailed)
N   128 128
Incubator for growth Correlation     1.000
of companies Coefficient

Sig. (1-     .
tailed)
N     128
**. Correlation is significant at the 0.01 level (1-tailed).
 Cont.…

 Result from the correlation analysis show that positive significant associations
exists between Employment creation , Building employee capacity and
Incubator for growth of companies variables (p < 0.01).
 This implies that an increase in one variable was strongly associated to an
increase in another significantly correlated variable and vice-versa.
 This implies that an increase in one variable was strongly associated to an
increase in another significantly correlated variable and vice-versa.
 In other words, an increase in the Employment creation is strongly associated
to an increase in the corresponding Building employee capacity and vice-
versa.
 Cont.…

 Categories Respondents response correlation on contribution factors

Correlations
  Client Consultant SMEs
Spearman's rho Client Correlation Coefficient 1.000 1.000** 1.000**
Sig. (1-tailed) . . .
N 3 3 3
Consultant Correlation Coefficient   1.000 1.000**
Sig. (1-tailed)   . .
N     3
SMEs Correlation Coefficient     1.000
Sig. (1-tailed)     .
N     3
**. Correlation is significant at the 0.01 level (1-tailed).
 3.3 Performance of SMEs in Construction
Industry

Performance parameters Clients Consultants SMEs Overall respondents

factors
Mean Ranks Mean Ranks Mean Ranks Mean Ranks Level of

Performan
ce

Quality 2.96 1 3.26 1 3.36 1 3.27 1 Medium

Cost 2.71 3 3.16 3 3.12 3 3.05 3 Medium

Time 2 2 2 2 Medium
2.75 3.21 3.20 3.12
 Cont.…

 SMEs Quality performance

 Quality in its simplest form can be defined as ‘meeting the customer’s
expectations,’ or ‘compliance with customer’s specification.
 Quality of workmanship, materials and construction methodology are essential
factors that required for product quality.
 overall respondents depicted that the performance of SMEs in quality aspects
found at medium level and was ranked in first position with mean scores 3.27.
 This result indicated that SMEs produced quality products however; WGZ in
which they registered is far away from capital city
 This finding confirmed by researcher (Sousa, 2015) ,who concluded that the
maturity of an SME affects the success of performance measurement system and
quality management systems.
 Cont.…

 SMEs Time performance

 A successful time performance indicates that the projects were completed on or
before the agreed Completion dates
 The findings of this study show that the time performance SMEs Contractors in
construction industry is medium and was ranked by overall respondents in
second position with 3.12 mean value.
 This study implies that SMEs moderately performed their project in time
expected however, they constrained with different factors.
 Cont.…

 SMEs cost performance

 Cost performance is ability to finishing project under or with estimated budget in stated
quality and completion date.
 Overall respondents of this study perceived that SMEs cost performance in
construction industry is medium and ranked in last position with mean scores 3.05.
 This finding confirmed with research conducted by (Ogbu & Olatunde, 2019) that
noted SMEs performance is better on cost and quality (both the ratio of the final
account value to the initial contract sum and the number of re-works decrease as firm
experience and certification increases).
 Cont.…

 SMEs performance factors correlations.

Correlations
  Quality Cost Time

Spearman's rho Quality Correlation Coefficient 1.000 .281** .451**

Sig. (1-tailed) . .001 .000

N 128 128 128
Cost Correlation Coefficient   1.000 .511**

Sig. (1-tailed)   . .000

N   128 128
Time Correlation Coefficient     1.000

Sig. (1-tailed)     .
N     128
**. Correlation is significant at the 0.01 level (1-tailed).
 Cont.…

 Categories Respondents response correlation on performance

factors
Correlations
  Client Consultan SMEs
t
Spearman's rho Client Correlation 1.000 1.000** 1.000**
Coefficient
Sig. (1-tailed) . . .
N 3 3 3
Consultant Correlation   1.000 1.000**
Coefficient
Sig. (1-tailed)   . .
N     3
SMEs Correlation     1.000
Coefficient
Sig. (1-tailed)     .
N     3
**. Correlation is significant at the 0.01 level (1-tailed).
  Technical factors
Technical factors Overall respondents
Mean score Ranks Challenges Level
Poor cost break down skill 3.63 6 High
Poor quantity estimation practices 3.59 7 High
poor drawing understanding 3.58 8 High
Poor contractual understanding 3.80 4 High
Poor scheduling performance 3.80 3 High
poor work methodology skill 3.80 5 High
Poor resource allocation skills 3.39 9 Medium
Poor communication skill 2.71 13 Medium
Poor record keeping skill 3.81 2 High
Lack of software skill 3.88 1 High
Lack of skilled manpower 3.21 10 Medium
poor entrepreneurial Skill 3.10 11 Medium
 Cont.…

 among the technical factors listed in questionnaire, lack of software and poor
record keeping skill were ranked in first and second position with mean scores
3.88 and 3.81respectively as technical factors in which SMEs highly challenged in
WGZ .
 The purpose of a software is to enhance the quality of output with minimal effort,
which cannot be achieved through manual means.
 poor; scheduling performance, contractual understanding ,work methodology ,cost
break down, quantity estimation and drawing understanding skill were also
ranked beside to poor record keeping respectively and expressed as high SMEs
technical challenges with mean ranges from 3.80 to 3.58
 Others technical factors such as Poor; resource allocation, skilled labor,
entrepreneurial, employees motivation and communication skill are moderately
challenged SMEs contractors..
 Cont.…

 Conflict of Interest factors

Conflict of Interest factor Overall respondents

Mean score Ranks Challenges Level

Argument of members on advance sharing 3.14 Medium

3
Argument of members on profit sharing 3.76 High

1
Argument of members on tools/equipment 2.86 Medium
division after work finished

4
Conflict with labor on their salary payment 3.70 High

2
 Cont.…

 Finding revealed that conflict of interest between SMEs members on profit and
labor salary payment are highly challenged SMEs in construction industry and
were ranked in first and second position with mean scores 3.76 and 3.70
respectively.
 conflict of SMEs members on sharing of advance and tools/equipment after
work finished are moderately challenged SMEs and were ranked in third and
fourth position with mean scores 3.14 and 2.86 respectively.
 Any conflict between stakeholders leads failures of contractors’ performance in
construction industry.
 This finding supported with research conducted by (Jha & Iyer, 2006) that
noted conflicts among team members is high-ranking failure of SMEs.
 Cont.…

 Management related factors

Management related factors Overall respondents

Mean score Ranks Challenges Level

Lack of cash flow management 3.54 High

4
poor labor management 3.15 Medium
6
Poor risk management 3.66 High
1
Poor equipment management 3.27 Medium
5
Poor wastage management 3.55 High
2.5
Failure to provide safe working 3.55 High
environment
2.5
 Cont.…

 Finding respondents perceived that poor management of; risk, Wastage, working
environment and cash flow are top factors with which SMEs highly challenged in
construction industry
 Poor Practicing of risk , Wastage, working environment and cash flow management
are resulting in fatalities which may also be costly to the firms and project profits.
 Reduced risk ,wastage on site such as reinforcement, formwork and concrete and
others are important factors for SMEs success in construction industry.
 This result is supported by (Ankomah et al., 2021) who found that Notwithstanding
SMEs significant contributions, they face fundamental problems such as huge
material wastages among others.
 Poor equipment and labor management were ranked in fifth and position with mean
scores 3.27 and 3.15 respectively as management factors that moderately challenged
SMEs in construction industry.
 Cont.…

 Procurement factors
Procurement factors Overall respondents
Mean score Ranks Challenges
Level
Negotiate bid 4.02 1 High
Focus on lowest bidder 3.76
2 High
Inaccuracy of Engineer quantity estimation 3.31
5 Medium
Delay of Bid document evaluation by clients 3.13
6 Medium
Incompleteness of contract document 3.05
7 Medium
Delay for variation approval 3.63
3 High
Inaccessibility of site information 2.99
8 Medium
Suspension of projects due to drawing modification period 2.85

9 Medium
Delay of submitted claim responses 3.41
4 Medium
 Cont.…

 Negotiate bid, least bidder strategies and Delay for variation approval are top
factors that were ranked in first, second and third position with mean scores
4.02, 3.76 and 3.63 respectively as high challenges of SMEs contractors in
construction industry.
 Negotiated tendering is directing appointment of a selected bidder based on
relativeness or performance of bidder that did not create equal chance for SMEs
bidder in competition to get job opportunity.
 claim responses delay, Engineer quantity estimation Inaccuracy and bid
document evaluation delay, contract document incompleteness, site information
inaccessibility and projects suspension which challenged SMEs moderately and
 Cont.…

 Financial related factors

Financial related factors Overall respondents
Mean score Ranks Challenges Level
Working capital shortage 3.86 6 High
High Interest rate on Loan 4.05 3 High
Lack of cash flow statement 3.59 9 High
Lack of Owner‘s equity 3.90 5 High
Lack of collateral 3.98 4 High
Problems on obtaining advance payment 3.14 11 Medium
Delay of payment for work done 3.85 7 High
Non-payment of interest on delayed payments 4.30 1 High
Non consideration for cost of remove and replace underground 3.77

installation not specified in contract 8 High

High percent of advance payment deduction from interim payment 3.25

10 Medium
4.08
 Cont.…

 non-payment of interest on delayed payments, fixed rate for different site

location, high Interest rate on loan ,Lack of collateral and Owner‘s equity were
ranked as high top five financial factors that challenged SMEs with mean
scores 4.30,4.08,4.05,3.98 and 3.90 respectively .
 This finding concluded as clients did not pay interest for delayed payment.
 This result is supported by studies carried out by (Issues, 2019), that stated in
delay payment for work done and non-payment of interest on delayed
payments are key factors affecting the financial, managerial and technical
capacities of SME construction firms .
 As result of finding implies, clients practiced fixed rate for different site
location.
 This factor is important for clients and contractors to consider location of
project at market price analysis.
 Cont.…

 Working capital shortage, payment delay for work done, non-consideration for
cost of remove and replace underground installation not specified in contract, and
Lack of cash flow statement are others financial related factors were ranked in
sixth, seventh , eighth and ninth with mean value 3.86,3.85,3.77 and 3.59
respectively and expressed as high challenges of SMEs contractors.
 Working capital and Owner‘s equity are essential resource that helps SMEs for
their business sustainable in construction industry. If SMEs face shortage of these
resource, they not launching their business and expand a company.
 Overall respondents perceived that high percent of advance payment deduction
from interim payment and challenges during obtaining advance payment factors
has medium challenges on SMEs success.
 Cont.…

 Marketing related factor

Marketing related factor Overall respondents
Mean Ranks Challenges Level
score

Low access to appropriate technology 3.94

 3 High
Lack of available market information 3.83
4 High
Availability and distribution problem of cement 4.52

1 Very High
Low profit margin due to competent with general 3.45

contractor
5 Medium
High rate of price escalation 4.23
2 High
 Cont.…

 respondents perceived that availability and distribution problem of cement in

market extremely challenged SMEs and was ranked in first with 4.52.
 This implies SMEs contractors in WGZ was influenced with lack of efficient
cement distribution channel. Non-availability of this cement material adversely
affected SMEs on working progress.
 High rate of price escalation , low access to appropriate technology , Lack of
available market information and low profit margin due to competent with
general contractor were ranked in second, third and fourth position with mean
scores 4.23, 3.94 and 3.83 respectively as high challenges of SMEs.
 Low profit margin due to competent with general contractor was ranked in last
position with mean score 3.45 and expressed as market factors that moderately
challenged SMEs.
 Cont.…

 Corruption related factors

Corruption related factors Overall respondents
Mean Ranks Challenges Level
score
Need of bribe by administration to create job 4.46

opportunity for SMEs

1 High
Partiality during Bid document evaluation 3.94

2 High
Need of bribes by Engineer for certificate 3.73

approval
3 High
Need of Bribe by finance sector to facilitate 3.71

payment
4 High
 Cont.…

 overall respondents’ perceived that need of bribe by administration to create job

opportunity for SMEs was ranked in first position with 4.46 mean scores and
seemed as high corruption factors that challenged SMEs contractors in WGZ .
 Finding implies that SMEs cannot get easily job opportunity without give bribe
for administration.
 Especial this condition challenged a beginner SMEs to get job opportunity since
they had not capital capacity for give corruption for concerned who create job
opportunity.
 Partiality during bid document evaluation, need of bribes by Engineer for
certificate approval and finance sector to facilitate payment were ranked in
second, third and fourth position with mean scores 3.94, 3.73 and
3.71respectively and expressed as high level of challenges on SMEs growth.
 Cont.…

 Environmental related factors

Environmental related factors Overall respondents
Mean score Ranks Challenges Level

weather condition 2.73 7 Medium

Security problem 2.98 5 Medium
Lack of confidence to small contractors by 2.92

clients 6 Medium
Political interference to create job 3.88

opportunity 3 High
Transportation cost due to Remoteness from 3.88

capital city 2 High

Inadequate of infrastructure 3.88
4 High
Lack of regular training by government 4.26
1 High
 Cont.…

 Lack of regular training by government, existence of Political interference to create job

opportunity for SMEs and transportation cost due to Remoteness and Inadequate of
infrastructure were ranked in first, second , third and fourth with mean value 4.26,
3.88,3.88and 3.88 respectively .
 Evidence of finding expressed these environmental factors as high challenges of SMEs
contractors in WGZ.
 Absence of training given by government have negative impact on growth of SMEs.
 This finding confirmed by research conducted by (Project & Engineering, 2019) that
revealed lack of trainings result in inadequacy of technical and managerial skills required
in project implementation
 Others environmental factor that overall respondents expressed it as medium challenges of
SMEs in construction are Security problem , Lack of confidence to small contractors by
clients and weather condition
 Cont.…

 SMEs Challenges categories

Environmental related factors Overall respondents

Mean score Ranks Challenges Level

Technical factors 3.49 5 medium

Conflict of Interest factor
3.36 7 medium
Management factors 3.45 6 medium
Procurement factors 3.35 8 medium
Financial factors 3.80 3 High
Marketing factor
3.99 1 High
Corruption factors 3.96 2 High
Environmental factors
3.51 4 High
 Cont.…

 Overall respondents ranked categories of Marketing, Corruption, financial and

Environmental related factors in first, second, third and fourth position with mean
scores 3.99, 3.96, 3.80 and 3.51 respectively as high challenges of SMEs in
construction industry. The location or environment of the SMEs determined their
marketability.
 These factors hindering the development of SMEs not only in developing country,
but also over the word.
 This result in line with the findings of (Ullah, 2019) that revealed financial
constraints negatively affect both firm sales growth and employment growth
while corruption has no direct impact on growth.
 Technical, Management ,Conflict of Interest and Procurement factors are
moderately challenged SMEs in WGZ .
  CiF TF MgtF PF FF MrtF CoF EF  

                   

Spearman's rho CiF Correlation 1.000 .096 .139 .092 -.020 .233** .152* .047  
Coefficient
Sig. (1-tailed) . .141 .059 .152 .412 .004 .044 .301  

N 128 128 128 128 128 128 128 128  

TF Correlation   1.000 .267** -.306** -.153* -.030 .062 -.138  

Coefficient
Sig. (1-tailed)   . .001 .000 .043 .370 .243 .060  

N   128 128 128 128 128 128 128  

MgtF Correlation     1.000 .153* -.050 .253** -.030 -.007  

Coefficient
 SMEs challengesSig. factors
(1-tailed)correlations
    . .042 .286 .002 .369 .468  

N     128 128 128 128 128 128  

PF Correlation       1.000 .438** .173* .117 .332**  

Coefficient
Sig. (1-tailed)       . .000 .025 .095 .000  

N       128 128 128 128 128  

FF Correlation         1.000 .200* .259** **

.549  
Coefficient
Sig. (1-tailed)         . .012 .002 .000  

N         128 128 128 128  

MrtkF Correlation           1.000 .408** .188*  

Coefficient
Sig. (1-tailed)           . .000 .017  

N           128 128 128  

CoF Correlation             1.000 .194*  

Coefficient
Sig. (1-tailed)             . .014  

N             128 128  

**. Correlation is significant at the 0.01 level (1-tailed).

*. Correlation is significant at the 0.05 level (1-tailed).
 Cont.…

 a positive relationship was found between CiF and MrtF (r =0.233, p < .05), TF and MgtF
(r = .267**, p < 0.01), PF and FF (r = .438, p < 0.01), FF and EF(r =. 549**, p < 0.01),
MrtF and CoF(r =. 408**, p < 0.01), which are statistically significant at 99% confidence
level.
 It implies that increasing of one challenges would increasing other and vice versa.
 This means technical factors such as lack of; software, labor,entrepreneurial and resource
allocation skill would leads management challenges such as poor cash flow, labor and
wastage management skill. As result of finding from correlation, indicated increasing of
procurement factor would increasing financial factors that challenged SMEs contractors.
 There is also positive correlation between CiF and CoF(r =.152*, p < .05), FF and MrtF (r
=.200*, p < .05), MrtF, EF (r =.188*, p < .05), and CoF and EF(r =.194*, p < .05).
 Cont.…

 Correlation of respondents idea on SMEs Challenges

Correlations
  clients consultants SMEs

Spearman's rho Clients Correlation Coefficient 1.000 .714* .929**

Sig. (1-tailed) . .023 .000

N 8 8 8
consultants Correlation Coefficient   1.000 .833**

Sig. (1-tailed)   . .005

N     8
SMEs Correlation Coefficient     1.000

Sig. (1-tailed)     .
N     8
*. Correlation is significant at the 0.05 level (1-tailed).
**. Correlation is significant at the 0.01 level (1-tailed).
 3.4 Challenges improvement mechanism in
Construction Industry

 In order to measure the Challenges improvement mechanism, a researcher were

presented with eight statements and asked to indicate their level of agreement on
a 5-point Likert scale where 1=strongly agree, 2=agree, 3=moderate/neutral,
4=disagree and 5= strongly disagree.
 Accordingly, the rating level of agreement were arranged as follows
 Very High ( 1≤Average mean <1.5)
 High ( 1.5≤Average mean <2.5)
 Moderate ( 2.5≤Average mean <3.5)
 Low ( 3.5≤Average mean <4.5)
 Very Low ( 4.5≤Average mean <5
 Cont.…

Challenges improvement mechanism Overall respondents

Mean score agreement Level

Developing technical skill through training and sharing from others 1.66 High
advanced company
Developing management skill through training and sharing from 1.67 High
others advanced company
Promoting ethical practices 2.10 High
Facilitate financial accessibility for SMEs 1.66 High

Working and make discussion with team on any issue to hinder 1.63 High
conflict will occur between members
Facilitate market information for SMEs 1.63 High
Improving procurement strategies 1.71 High
Improving environmental related condition that challenges SMEs 1.98 High
 Cont.…

 Evidently, from Table above, eight statements on SMEs challenges improvement

mechanism, overall respondents expressed High levels of agreement with all
eight statement with different mean score shown in above table
 As result of finding responded by overall respondents depicted, practice of
training and sharing experience from advanced company can improve technical
and management skill of SMEs.
 This finding confirmed by research conducted by (Seyoum et al., 2016)
revealed that training is one of the significant factors for MSE
growth .corruption is act of somebody need money in illegally way to fulfill
their interest.
 4. CONCLUSION AND
RECOMMENDATION

 4.1 Conclusion
 Results of the finding revealed that SMEs’ contribution in West Guji Zone is
not as expected, it is average in terms of employment creation, building
employ capacity and being incubator for future larger company and similar
result were found in terms of performance, average level of quality, time and
cost performance of projects.
 Concerning the challenges, the results implies that marketing, corruption,
financial and environmental related factors are the top four challenge
categories with which SMEs highly challenged in construction while
technical ,management conflict of interest and procurement related factors
were found to impact at medium level.
 Cont.…

 5.2 Recommendation
 SMEs contractors should be adapted practice of sharing experience and training
from other experienced company to improved their technical skill such as
software performance, rate analysis, quantity estimation, record keeping, resource
allocation, work scheduling and methodology skill and drawing and contract
understanding performance
 clients should be using competitive tendering strategies to create job opportunity
for an eligible bidder , paid for work done on time and consider interest for
delayed payment deserved for SMEs contractors.
 Result of finding responded by overall respondents revealed, need have bribe by
administration to create job opportunity is extremely challenged SMEs
contractors in West Guji Zone. Therefore, administration should be create job
opportunity for SMEs fairly and based on their performance without any
corruption.
 u r
y o
f o r
K S c e
N i en
HA a t
T p

Sara D. September 2021

BHU