Factors affecting access to credit by microenterprises in Garowe punt land

Abstract

In developing countries, despite the efforts by various stakeholders, lack of access to credit is almost universally indicated as a key problem facing MSE’s. The main objective of the study was to evaluate factors affecting access to Micro Finance by Micro Enterprises. The researcher also set out to establish the influence of collateral requirements on accessibility of credit facilities by MSEs, determine the influence of cost of credit on accessibility of credit facilities by MSEs, The study used quantitative and comparative research design. This study used firstly purposive sampling in selecting enterprises market, and then cluster sampling to determine enterprises in each zone, and finally used systematic sample for determining the study respondents. This study collected quantitative data on the challenges affecting factors affecting access to micro finance by micro enterprises and financial institutions using a questionnaire. In addition, the study found out that the collateral requirement is very high, while accessing to credits. This is because of the banks are willing to reduce the risk of losing their loan and as well as the study found out that the cost of credit is one of the major factors, which are constraint to access to microfinance by enterprises in Garowe, Puntland. However, the study recommends that Microfinance institutions should simplify the collateral requirements in order to increase the accessibility to microfinance by micro enterprises. The study recommends that Micro finance institutions and banks should reduce their bank’s profit charge of which they charge to micro enterprises. The study also recommends strengthening the other processing system and