“Factors Affecting the Capital Growth of Micro and Small Enterprises. A case of Shager City, Burayyu Sub City

Abstract

This study examines the role of Microfinance Institutions (MFIs) in supporting the growth of Micro and Small Enterprises (MSEs) in Burayu Sub-City, Sheger. To achieve this objective, an explanatory and descriptive research design was employed, utilizing a mixed research approach to explore the intricate relationships between various factors that influence capital growth in MSEs. Key variables examined include access to finance, loan requirements, proper training, and market accessibility. Both primary and secondary data sources were utilized to ensure a well-rounded perspective on the subject matter. Stratified random sampling was used to gather information 268 respondents were selected from the total of 813 MSEs as a sample. A self administered structured questionnaire was distributed among the target population, allowing for the collection of firsthand insights from MSE owners and operators. The findings indicate that access to credit, loan criteria, training, market access, sales volume, and profitability significantly influence MSE growth. However, challenges such as high interest rates, small loan sizes, and lengthy approval processes hinder business expansion. The study reveals that MSEs benefiting from MFI services are 7.45 times more likely to grow with credit access, 9.94 times with proper training, and 56.93 times with increased profitability. Based on these findings, it is recommended that MFIs enhance financial accessibility, lower interest rates, and introduce flexible loan structures. Additionally, collaboration between government, the private sector, and academia is essential for fostering financial inclusion and sustainable business growth.