A Study on Sources and Challenges of Finance for Micro and Small Enterprises (The case of Jimma zone Agaro town)

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.