The dynamic role of small enterprises in developing countries as engines through which the growthrnobjectives of these countries can be achieved has long been recognized. In the face of a rapidly growingrnlabour force where public sector hiring slowed and the growth of the large modern pri vate sector hasrnrelati ve ly stagnated, the role of the small as well as micro enterprises in employment creation isrnindi spensable. Despite the fact that Smal l Enterprises have been recognized as a major contemporaryrnsource of employment and income in a growing number of developing countries, yet relati vely little isrnknown about the characteristics and patterns of change in these enterprises.rnMost past research in this area, however, have been static in their orientation, providing a picture of howrnthings look "today" or as of the time of the study. This argument holds true to our case that studies onrndynamic aspects of small enterprises are almost non-existent.rnThe aim of the study is to examine and identify factors affecting growth of employment in smallrnenterprises. This study used cross-sectional data collected through a fie ld survey in Bahir Dar town of thernAmhara Region. The method employed is a multiple linear regress ion analysis that makes anrneconometric estimati on on 76 small manufacturing enterprises to determine the explanatory factors ofrnthe ir employment growth. The explanatOlY variables considered in the study represent firm and ownermanagerrncharacteristics and business practices. The results at must do not reveal any surpri ses comparedrnto other similar previous empirical researches conducted elsewhere. Factors found to innuencernsignificantly small manufacturing enterprise growth in Bahir Dar are market size, young age of thernentrepreneur, age of the enterprise and reliance on external sources of finance i.e. Bank loan. However,rnsex of the owner, size of the firm, post-h igh school level of education and experience of the entrepreneurrnha ve no significant effects on the growth performances of small enterprises as far as the study area isrnconcerned.rnThe findings give ri se to several policy implications that are crucial for the improvement of the sector'srnperformance. These include policy makers have a role in di spelling the myth, particularly among financernor credit providers (mainly banks), that small enterprises in general and women owners in particular arernhigh-ri sk borrowers of capital. The fi ndings call for public policies such as the youth employmentrnstrategy, which among others encourages the young entrepreneurship. Blanket policy approaches tornsmall ent erpri se growth may not be effective. Poli cies targeted at small enterprises that are wi lling torntake ri sk and able to grow are preferable. The findings also call for introduction of guarantee schemes tornsupport small-sized enteqJrises that can not meet bank and finan cial collatera l requirements