The privatization drive and the Civil and Public Service reforms that began in the earlyrn1990s in Addis Ababa laid a foundation for an increased number of Micro and smallrnbusiness enterprises. By 2005, micro and small business enterprises were employingrnapproximately 251,081 persons in Addis Ababa city administration.rnThe entrepreneurs that set up these enterprises lacked business management skills andrncapital, and as such, many of them faced a number of problems. A survey was carried outrnto establish the causes of micro and small business failures in Addis ketema sub city asrncase study.rnThe objective of the study is to identify the underlying causes of micro and smallrnbusiness failures in Addis Ketema sub city, by investigating the sub cityâ€™s MSEs. Thernmain research instrument was in-depth interview with the owners of MSEs andrnauthorities involved in the implementation, respectively. The result of the in-depthrninterview was triangulated with secondary data sources.rnIt is concluded that the causes of small businesses failure are multidimensional andrndiverse. They include both internal and external factors. In practice, many of these arerninterrelated. The study established causes of micro and small businesses failure, amongrnwhich are: lack of capital, lack of business plans, high taxes, luck of land and premises,rnand, poor market, high rent charges and wrong pricing in the study area. The study wasrnconcluded by making a number of practical suggestions against business failure