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Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia

Received: 5 May 2017     Accepted: 20 May 2017     Published: 25 September 2017
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Abstract

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.

Published in International Journal of Business and Economics Research (Volume 6, Issue 5)
DOI 10.11648/j.ijber.20170605.13
Page(s) 100-110
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Access to Finance, Determinant Factors, Micro and Small Enterprises, Formal Financial Institutions

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  • APA Style

    Deresse Mersha, Zerihun Ayenew. (2017). 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, 6(5), 100-110. https://doi.org/10.11648/j.ijber.20170605.13

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    ACS Style

    Deresse Mersha; Zerihun Ayenew. Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia. Int. J. Bus. Econ. Res. 2017, 6(5), 100-110. doi: 10.11648/j.ijber.20170605.13

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    AMA Style

    Deresse Mersha, Zerihun Ayenew. Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia. Int J Bus Econ Res. 2017;6(5):100-110. doi: 10.11648/j.ijber.20170605.13

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  • @article{10.11648/j.ijber.20170605.13,
      author = {Deresse Mersha and Zerihun Ayenew},
      title = {Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia},
      journal = {International Journal of Business and Economics Research},
      volume = {6},
      number = {5},
      pages = {100-110},
      doi = {10.11648/j.ijber.20170605.13},
      url = {https://doi.org/10.11648/j.ijber.20170605.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20170605.13},
      abstract = {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.},
     year = {2017}
    }
    

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    T1  - Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia
    AU  - Deresse Mersha
    AU  - Zerihun Ayenew
    Y1  - 2017/09/25
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    N1  - https://doi.org/10.11648/j.ijber.20170605.13
    DO  - 10.11648/j.ijber.20170605.13
    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
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    EP  - 110
    PB  - Science Publishing Group
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    UR  - https://doi.org/10.11648/j.ijber.20170605.13
    AB  - 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.
    VL  - 6
    IS  - 5
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Author Information
  • Department of Accounting and Finance, Jimma University, Jimma, Ethiopia

  • Department of Management, Jimma University, Jimma, Ethiopia

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