Challenges for Small and Micro Enterprises in Accessing Finance (Case of Wolaita Soddo Town)

Abstract

- Small-scale enterprises have become an important contributor to Ethiopia’s economy. The purpose of this paper was to bring to light one of the major prerequisites, namely access to finance aspects, of the small scale enterprises which are foundation in accelerating economic growth. The main objective of the paper is to identify the challenges that small businesses in Wolaita soddo town face in accessing finance from financial institution through identifying the dominant means of financing small businesses and factors influence the extent of accessing finance. This study would have adopted descriptive statistics and econometric analysis. The target population would have been drawn from all micro and small enterprises in Wolaita Sodo town. The data for this study would have been gathered through the use of primary and secondary sources from 282 respondents. The study would have used stratified random sampling technique to select the sample. Both quantitative and qualitative data analysis methods were adopted. Besides, descriptive statistics, the linear regression model were used to determine the covariates of the likelihood of having a loan from a formal financial institution. From the study findings, it can infer that, sources of initial capital influences accessibility to credit facilities to a great extent followed by purchase of fixed assets financed by and major obstacles of SMEs access to credit facilities. This study recommends that the credit giving institutions come up with programs of educating the MSEs on how they can go about obtaining credit facilities