Financing options for micro and small enterprises: by investigating semi-formal and informal sources of finance (the case of oromia operating in sebeta town)

Abstract

This study aimed at uncovering the alternative sources of finance for practiced MSEs Operators in Sebeta town. The goal of the research is to provide the country’s policy makers, program administrators and developments practitioners with information to make sound policy and program decisions about financial sources and the reduction of financial barriers. The research process comprised of three distinct phases, such as 149 sample respondents MSEs owners/ operator, 4 experts financial institutions, such as 2 CBE, 2 MFI ( OCSSCO) and 2 experts of MSEs Development Agency, in total 6 experts and 149 MSEs owner/ operators in the total 155 sample respondents were used for analysis. Open-and- close- ended questionnaires and interviews also used as methodological tools or as instruments. Simple statistical techniques such as descriptive statistics and explanatory, including tables were used in analyzing and summarizing. Finally based on the major findings, conclusion and recommendations were also forwarded. The major findings the research revealed that the main sources of finance at start –up and post up for MSEs operators /owners were the equity section of the owners’ / operators (own funds).It is also indicated that barriers to accessing finance are largely due to lack of collateral, poor credit record, inadequate business skills and lack of entrepreneurship concept during starting-up, and lack of adequate working and investment capital during post-up stage of MSEs operators. The study also found that on the issue of what role the financial institutions should play in reducing barriers to finance, findings from the research suggested that more risk-taking by financiers, relaxing rigid credit assessment criteria.