Abstract:
Lease financing is an alternative means of and sophisticated mechanism to fill gaps of finance
accessing. The aim of this study was to examine the major challenges of lease financing of small
and Medium Enterprises in Ethiopia particularly from Development Bank of Ethiopia. The
research focused to assess the overall challenges related to adequacy of leasing laws that
challenges the Small and Medium Enterprise leasing business from Development Bank of
Ethiopia. In this research, mixed approach; both quantitative and qualitative methods was used.
Both primarily and secondary data were used as evidence for the research. Primary data was
collected by questionnaire and interview; whereas secondary data was collected by document
analysis. 125 respondents were selected as sample size of the research. Out of the sample size of
125 questionnaires were distributed for the respondents of the research, 108 questionnaires were
returned for analysis only 17 questionnaires were not returned for analysis. To select the sample
respondent’s purposive sampling techniques was used due to it’s an essential for the research
objectives. The data would be analyzed through descriptive statistics by using the statistical
software for social science (SPSS). Since Development Bank of Ethiopia is the only bank which
implement Small and Medium Enterprise lease financing program the supply side population
was development bank of Ethiopia its own and the Small and Medium Enterprise lease financing
directorate of the bank have been identified as target sample based on purposive sample design.
Based on the result, the study has identified challenges that the bank faces as, the bank’s Small
and Medium Enterprise selection criteria, poor supply chain with the absence of proper and
excess suppliers of capital goods, macro-economic instability like inflation, unemployment and
currency fluctuation, poor quality of financial statements of Small and Medium Enterprises, lack
of enough demand of Small and Medium Enterprises, lack of know-how about Small and Medium
Enterprise Lease financing, poor management of credit risk by the bank and lack of proper
internal policy and procedures that minimizes the cost associated with Small and Medium
Enterprise lease financing loans. The study has given that recommendation to parties who were
directly concerned with small and medium Enterprise lease financing based on the nature of
identified problems they were used the research as input to give solution on the focused
problems.
