Determinant Of Financial Inclusion In Micro And Small Business Enterprises In The Case Of Ambo Town, West Shewa Zone, Oromia Regional National State, Ethiopia

Abstract

Micro and small businesses (MSEs) create jobs at a low cost and assist society's progress toward wealth and growth. Financial inclusion issues have gained more attention around the world. The aim of the study is to investigate the determinant factors that affect the financial inclusion of micro and small enterprises in Oromia in the case of Ambo Town. The study used explanatory research design and mixed research approach with both primary and secondary source of data utilized. A two-stage sampling techniques were used in this investigation. Out of the total 2,244 MSEs units, 488 respondents were sampled for the study using stratified and simple random sampling techniques. Descriptive statistical tools and a multiple linear regression model are applied. The study examines the determinant factors that influence financial inclusion in small and medium enterprises in Ambo town. The finding of the study reveals that; supply side factors, demand side factors, market opportunity, and collateral requirements has a positive effect on the MSEs access to finance and statistically significant at 1%, 5%,and 10% significance level. The results showed that individuals and their relatives are the main source of finance for the majority of MSEs for two major reasons. In addition to that access to infrastructure, access to finance and government policy are the major factor affecting MSEs engaged in construction sector. The major independent variables affecting growth of MSEs engaged in manufacturing sector are access to infrastructure, working premises, and government policy and market linkage. Access to finance, market linkage and business management capacity are the determinant factor hindering the growth of MSEs operating trade sector. Access to infrastructure, market place and government policy were the determinant factor affecting the growth of MSEs operating service sector. Access to working premises, market linkage, and government policy and owner motivation are affecting the growth of MSEs operating urban agriculture sector. Hence, government organizations concerned with the promotion and development of MSE’s Needs to work with the factors in each sector for economic growth.