Abstract:
The role of micro and small enterprises (MSEs) in employment and income generation is
increasingly recognized and has become a major playing field for the purpose of
enhancing growth and alleviating poverty. This study examines finance as a success or
failure factor for micro and small enterprises. The study was conducted based on a
survey covering strata method selected MSEs in the Finfine Special Zone, Burayu
Administrative Town. Interviews and questionnaires have been used as a tool to gather
information.
The main objective of this study is to examine whether firms have continued access to
finance or not. Moreover, the study emphasized the loan size, interest rate, terms of
loans, and timely disbursement of the loans.
From the study, the biggest problems identified are a lack of access to finance and the
inappropriate delivery of loans. Moreover, MSEs are facing difficulties in bringing
collateral, disbursement of loans on time, interest rate, loan size, and other availability of
financial instruments. These problems are hampering MSEs in their initial expansion,
diversification, promotion, and growth to some exte nt.
The success of MSEs is measured in terms of their capital, number of employees,
revenue, expansion, and diversification of work. From the analysis and discussions, it
was possible to identify that finance was the major problem for MSEs. On top of this, the
relationship between lack of access to finance and the success of MSEs was negative.
This was consistent with the theories, and it implies that finance is a determinant for
MSEs.
Most MSEs stated that lack of access to finance constrains their initial, growth,
expansion,. Indeed, financial sector policies often work against the ability of financial
institutions to serve MSEs, though often unintentionally. Lack of competition in financial
institutions limits MSEs' access to finance. High risk and high transaction costs (real or
perceived) associated with bank lending to MSEs likewise constrain access to finance.
