In Ethiopi a, the size of the labour force co ntinues to grow more rapidly than the abil ity of therneconomy to provide new employment opportunities. Sti ll now a lmost a ll of the studies werernundertaken in major cities of Ethiopia where those studies are not inclusive in the sense thatrnresearch undertaken in speci fic town may not be applicable in a ll areas as the factors determiningrnthe growth and expansion ofMSEs differ among different areas.rnThe object ive of this study is therefore, to examine contribution of MSEs in generatingrnemployment opportunity and income generation, to ident ify the opportunities avai lable for therngrowth, expansion, challenges that hindered the development of MSEs, to measu re effic iencyrnlevel and ident ify factors affect ing the performance of MSEs to the local economic deve lopmentrnof indu strial sector in Oromia Reg ional State, Sendafa Bekie.rnThe study used both secondary data and survey method. The survey method involved 104 MSErnoperators. The sample was taken from formally registered MSEs by the Sendafa Bekie Trade andrnMarket Expansion o ffice and MSEDA office. Among the reg istered MSEs, lentil processin g,rnsewing clothes, metal work, wood work and food related of the indu str ial sector were selectedrnbased on a combinat ion of high proportionate share and economic importance in the town.rnThe findings of the study have important implications to the employment creation for 1637 localrnunemployment fi'om 2006107- 2010/1 I, which is vital to reduce unemployment, improverncommunity livelihood through diversify ing income generat ing mechanism which is 9,423 ,081.50rnbirr earned by 1637 employees and the MSE business owners paid taxes 675,801.9 birr to thernlocal government. However, the ir major constrai nts were lack of suffic ient capital and training.rnLack of finance and trai ning were the most crit ical constrain ing factor for the study area. ThernSendafa Bekie loca l government has to fac ilitate the growth of MSEs by accessing necessaryrninfi'astructural facilit ies and work premises. MSEs especially in dustrial sectors require educated,rnwell trained, and tech no log ica lly sk i II workers. Creation of awareness of ent repreneurs to fo llowrna product diversification strategy through training, mass media, experience exchange, bestrnpractice and scaling-up of best practices arrangements were vital