Determinants of Access to Finance for Micro and Small Enterprises (MSEs) in the case of Ambo Town

Abstract

Access to source of initial capital is a fundamental and still remains a challenge for the start up business. Especially it is challenging for those developing countries in Sub-Saharan African countries including Ethiopia. Thus, the purpose of this study is to investigate what factors explain micro and small Enterprise’s access to finance in Ambo town. Although the financial determining variables in obtaining source of finance are studied by different researchers around the world and locally studied by few researchers in different regions, to my knowledge, no study has been conducted on the matter and no solution on these obstacles have been recommended in Ambo town. The study is designed as descriptive and employed the quantitative approach, in which stratified sampling was employed to select 345 micro and small enterprises from the overall enterprises in Ambo town. In order to find out major determinants the study use Statistical Package for Social Science version 24 to run major variables regarding to determinants of MSEs. The major findings of the study shows that the demographic implication variables have their own factors on access to finance for MSEs including; educational level of owner, legal form of business, gender, marital status and age of owner manager, as well as the major determinants had it’s own bottleneck on access to finance for the MSEs in Ambo. The findings have the following major recommendations’. it is required more effort from the micro and small Enterprises side to overcome their drawbacks by extending the highest educational level for themselves and starting business with maturity age and it is good after marriage. Also forming their business as partnership is highly recommended to have an access to initial financial sources. On the other hand Microfinance institutions have to facilitate the supply of finance by improving long time for loan process and other bureaucracies. And Policy makers of government bodies have to minimize the large amount of advance savings to supply loan to MSEs.