Challenges And Practices Of Government Revolving Fund Loan: The Case Of Burayu Administrative City, Oromia Special Zone

Abstract

Small and medium enterprises (SMEs) have an important role to play in the development of the country. The main objective of the study is to investigate the factors affecting the business performance of SMEs in Ethiopia in the case of Burayu Town. By taking the research objectives and questions into consideration, a mixed research approach was used. Likewise, as for the research design, both descriptive and explanatory research was used. The study used purposeful and stratified sampling techniques. By using a structured questionnaire, the data were collected from 259 SMEs operators like owners and/or managers operating in the six kebeles of Burayu Town that engaged in manufacturing trade, service, construction, urban agriculture, livestock, and mining sectors with a response rate of 88%. For the purpose of analysing the obtained data, both descriptive and inferential statistics were used. The result of descriptive statistics has shown that the mean values of Political-Legal, financial, market, infrastructural, management, and entrepreneurial factors were low, which indicated that all of the variables of the study affect the business performance of SMEs’ in the study area. Besides, the result of inferential statistics indicated that all variables of the study have a significant positive influence on the business performance of SMEs’. Among the variables of the study, a financial factor has the most significant positive influence on SMEs’ business performance, followed by infrastructural factors. The independent variables the Political-Legal, financial, market, infrastructural, management, and entrepreneurial factors explain 81.8% of the variance in SMEs’ business performance. Finally, based on the findings, the study was recommended that financial institutions such as banks and microfinance institutions should improve access to finance problems of SMEs operators, all other governmental institutions should give attention and improve access to infrastructural, political-legal factors, access to market and entrepreneurship related training in order to improve the performance of SMEs in Burayu Town