Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia
International Journal of Business and Economics Research
Volume 6, Issue 5, October 2017, Pages: 100-110
Received: May 5, 2017; Accepted: May 20, 2017; Published: Sep. 25, 2017
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Deresse Mersha, Department of Accounting and Finance, Jimma University, Jimma, Ethiopia
Zerihun Ayenew, Department of Management, Jimma University, Jimma, Ethiopia
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Ethiopian MSEs are at early stage of development and face various constraints. One of the most crucial problems is financial constraint for start-up and operational activities. In order to promote MSEs as engines of growth, it is essential to understand the bottlenecks surrounding MSEs' access to finance. The main objective of this study is therefore to identify factors enabling successful access to formal financial sources. 200 sample MSEs selected from three towns in west Oromia region are used for this study. The finding indicated that; availability of collateral, MSE’s age, Sector of the MSEs, Legal ownership, owner’s or manager’s age, owner’s or manager’s religion and Size of the MSE significantly determine access to bank credit at p < 0.1. It was also found that Keeping accounting record, Sector, Legal ownership, owner’s or manager’s age, owner’s or manager’s business experience and Size of the MSE significantly determine access to credit from MFIs at p < 0.1. From supply side, high interest rate and long loan procedures are the main factors. This implies that though MFIs are established to provide credit to MSEs, the system of credit provision is almost similar with banks.
Access to Finance, Determinant Factors, Micro and Small Enterprises, Formal Financial Institutions
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Deresse Mersha, Zerihun Ayenew, Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia, International Journal of Business and Economics Research. Vol. 6, No. 5, 2017, pp. 100-110. doi: 10.11648/j.ijber.20170605.13
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