The Impact of Political Instability on the Performance of Micro and Small Enterprises: A Case Study of Amhara Regional State, Ethiopia

Abstract

This study investigates the underlying factors contributing to political instability in Ethiopia’s Amhara Regional State. In recent years, the region has witnessed persistent unrest and a state of emergency resulting from conflicts between government forces and the Fano militia group. Employing a quantitative research design, the study seeks to identify and analyze the major socioeconomic, institutional, and governance-related determinants of instability. Data were gathered from a representative sample of 385 respondents, proportionately drawn from government officials, opposition party representatives, civil society members, activists, religious and community leaders, and business representatives. The findings reveal that Policy and Regulatory Uncertainty, Conflicts, Litigation, and Contractual Discrepancies, Operational Disruptions, and Government instability: Frequent changes in leadership or government policies. Leadership collapse, weak governance structures, limited institutional accountability, and inadequate economic opportunities are the predominant factors driving political instability in the region. Regression analysis further confirms that these variables significantly and positively influence the level of instability (B = 0.434, p < 0.01), indicating that deficiencies in governance and institutional effectiveness substantially increase the likelihood of political unrest. The study concludes that sustainable peace and political stability in Amhara Regional State require comprehensive governance reforms, institutional capacity building, and inclusive policy measures addressing the structural roots of instability. Such interventions are essential for promoting long-term stability, economic resilience, and social cohesion in the region.