Recently Micro and Small Enterprises (MSEs) has got a due attcntion in bccause of itrncon tri bution in creation of job opportunities, increase income of the poor and hence povertyrnreduction. Ethiopia is also one of the countries where MSEs has been given due consideration asrna safety net for the poor to help them overcome the adversities of poverty. For the developmentrnof the sector various support programs have been undcrtaki ng.rnThis study was conducted 10 assess the contributions of MSEs in generating incomc of the poorrnin Badesa town, Oromia regional state. Both primary and secondary sou rces were cons idcred torngeneratc relevant data. The primary data were coll ected from sam pic respondents throughrninterviewing as a major 1001 and focus group di scussion as supportive tool. In add ition,rnsecondary sources of data have also been used. The study covers all 103 MSEs in the town .rnFinally, data generated were analyzed through qua litative and quantitative methods to drawrnconclusion and recommcndations. Generally, find ings of the study indicated that MSEs havernplayed positive role in income, creation of employment and improving the quali ty of life of thernparticipants of the enterprises of the MSEs in the study area. Despite its undeniable contribution inrnthe creating job oppOliunities and improving the living standard of the poor, the growth of MSEsrnsectors have been hindering by different problems in the town both at start up and operationalrnlevel. This research study reveals that process of entry, lack of market, di sagreement/lack of trustrnbetween members, inadequate supply of goods/ raw materials, lack of cred it facilities, laCK ofrnskill, shortage of working place, business environment and infrastrucmral problems are the mainrnchallenges for MSEs growth in the town. The degrees of severi ty of each problem are differentrnin all sectors. Supportive interventions were needed to overcome lhese and hence achieve vigorrnMSEs in the area.