Abstract:
The objective of this study was to investigate the role of financial institutions on the growth of
small and medium enterprises. To achieve this objective the researcher was used mixed method
(both quantitative and qualitative) approach. This study used both descriptive and explanatory
research designs. The necessary data for this study was collected from primary sources. In this
study, the target population was small and medium enterprises in the Bonga town on different
economic activities such as, service, constructions, manufacturing, retailer and urban
agriculture. The researcher was use stratified sampling techniques to select sample from the
population. The researcher was use multiple OLS regression analysis was used the reason to
use OLS the dependent variables of the study are continuous data The researcher was used
annual sales as a measure of firm growth as dependent variable because of the difficulty of
obtaining realistic information on profits earned. To measure dependent variables the
researcher was used the following independent variables such as education level, firm age, firm
size, borrowing cost, simplicity, and access to market. The finding, with respect to the
relationship between SMEs growth and loans from financial institutions, banks and MFIs, the
result of regression analysis showed that there was there was positive relationship between
education level, age of business and firm with growth of SMEs and the influence of these
variables was significant. SMEs have an obstacle in obtaining access to product and service
from financial institutions. Inadequate collateral, difficulty of processes, fear of inability to
repay, and high borrowing cost. The recommendation of author it is necessary to include
educated person in the organizations to get technological advantage and finding alternative
finance source and financial institutions assist SMEs without strict and unattainable criteria or
make the criteria simple and attainable, also at a lower borrowing cost to make their products
accessible and available
