Abstract:
The purpose of this study is to determine the source and challenges of finance for
Micro and Small Enterprises in Agaro Town in Jimma zone, oromia state. The
study uses descriptive research design. The study targeted a sample of 227 from a
target population of 552 MSEs located in Agaro town. Stratified random sampling
was utilized in selecting the respondents for the study. Primary and secondary
data was collected from the study respondents using questionnaires and focus
group discussion which were scheduled. And analyzed descriptively and presented
through figures, tables, percentages, bar charts, pie charts and tabulation to show
differences in frequencies. Statistical Package for Social Sciences (SPSS) version
20.0 was used to aid in coding, entry and analysis of quantitative data obtained
from the closed ended questions. Binary logistic regression was used to identify
major source and challenges or determinants of access to finance .The study
revealed out that the key source of finance for MSE was personal saving followed
by microfinance institutions which are informal and semiformal source of finance
respectively. while the research further revealed out that the major challenges
hindering micro and small enterprises from accessing credit facilities to be age of
operator, educational status of the operator, business sector, duration of
business, type of fixed asset they possessed, number of employee they have,
interest rate amount and repayment period. Therefore considering the role of
MSEs in employment generation, income generation and poverty alleviation, all
stakeholders(government or non-government organizations ) have responsibilities
to facilitate sufficient access of finance for MSE.
