Abstract:
Ethiopian MSEs are at early stage of development and face various constraints. One of the most crucial problems
is financial constraint for start-up and operational activities. In order to promote MSEs as engines of growth, it is essential to
understand the bottlenecks surrounding MSEs' access to finance. The main objective of this study is therefore to identify
factors enabling successful access to formal financial sources. 200 sample MSEs selected from three towns in west Oromia
region are used for this study. The finding indicated that; availability of collateral, MSE’s age, Sector of the MSEs, Legal
ownership, owner’s or manager’s age, owner’s or manager’s religion and Size of the MSE significantly determine access to
bank credit at p < 0.1. It was also found that Keeping accounting record, Sector, Legal ownership, owner’s or manager’s age,
owner’s or manager’s business experience and Size of the MSE significantly determine access to credit from MFIs at p < 0.1.
From supply side, high interest rate and long loan procedures are the main factors. This implies that though MFIs are
established to provide credit to MSEs, the system of credit provision is almost similar with banks
