Determinants of Access to Finance for Micro and Small Scale Enterprises in Nekemte Town

Abstract

The objective of the study is to assess the determinants of access to finance by MSEs in Nekemte town using explanatory research design on the population of 22959 MSE firms of which 195 MSEs are computed as sample size. Simple random sampling technique is used to select the MSE firm operating in agriculture, construction, manufacturing, serves and trade sectors. Within the selected MSEs, operators with close information about MSE financing are selected for data collection using structured questionnaires and analyzed by SPSS 20 versions. The Binary logistic regression revealed operators education, MSE stage of growth, recording keeping, awareness of potential lenders and source of startup capital are significant determinants of access to finance. In conclusion, the finding reveled determinants of access to finance are observed from operators’, MSE firm, management performance and financing institution related factors that need the collaborative effect of various stakeholders. The study recommend the provision of awareness, training, business planning and experience sharing for MSE owners by service provider and microfinance institutions are advised to be flexible in their loan terms, loan procedures and loan size for MSE firms.

Keywords: determinants, access to finance, micro enterprise, Nekemte, small enterprise

DOI: 10.7176/RJFA/10-19-04

Publication date:October 31^st 2019