The study is mainly. aimed at investigating the problems encountered byrn1VET graduates in the due course of engaging and opera ting Micro andrnSmall Enterprises (MSE). Moreover. an attempt has been made to assessrnthe process of MSE development and Micro Finance loan delivery inrnrelation to 1VET graduates. To investigate the problems. initiallyrnavailable 81 target respondents from select ed three sub-cities namely.rnArada. Bole and Kirkos sub-cities have been taken as a sample targetrnand potential respondents. The selected three sub-cities couldrnreasonably represent the ten sub-cities of Addis Ababa. AVailabilityrnsampling method was used to select the respondents and include in therns tudy. In order to achieve the objectives of the study. descriptive surveyrnmethod has been employed. To meet the purpose of the study additionalrndocuments and related litera ture review has been made; in the meanrntime. prima IY data are collected through structured questionnaires. inrna ddition. interview. observation. and focu s group discussion also tookrnplace. Findings revealed that. 1VET graduates under the study arernsurrounded by various problems. such as the problem of finance. placernfor work and sales. the problem of market. technology. backwardness ofrnworking materials. poor business management. market research.rnfinancial management skill and lack of continuous training in businessrnand business related areas. are some. Those problems are not only thernproblem of target respondents but also they are the problems that hinderrnthe development of MSE sector as a major bottleneck. The researcherrnbelieves that the fmdings in the study are sensible and timely wake-uprncall. to all concerned bodies. It needs an urgent action to solve the majorrnbottleneck problems by filling those identified gaps that hindered thern1VET and MSE sector development; the powerful tools to bring about allrnrounded development in Addis Ababa.