Determinants Of Lease Financing Practice: Thecase Of Sme’s In Bureau Town

Abstract

The main objective of this study was to investigate the determinants of lease financing practices In case of SMEs in Burayu town based on demand side factors that restricted SMEs to participate in lease financing. Descriptive and explanatory research designs were used. Both qualitative and quantitative research approach were applied. Both primary and secondary data were collected. To identifying the respondents from the study population, simple random sampling method was adopted. Based on this, 92 sample SMEs were drawn from total population of 1200 SMEs in the study area. The collected data were analyzed through descriptive statistics and logit model. The study found that education level of SMEs manager, capital of SMEs, age of SMEs, sufficient term period of shed contract, experience of SMEs manager and access to electric power significantly and positively affected SMEs participation decision. The result of the study showed that the capital of the SME was significantly increased because of lease financing Activities. Therefore, lease financing practice should be encouraged by government and nongovernment organizations through supporting training of SMEs’ managers, advising SMEs those have long age in business to participate in lease financing, giving advice for the firm how they can enhance their capital, develop the culture of experience sharing between the managers of different SMEs in order to get divert knowledge and gaining experience from each other. Increase shed contract for the firm, and improving electric power by installing new transformer around shed area is important in order to increase SMEs participation in lease financing