Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia

Deresse Mersha; Zerihun Ayenew

doi:doi:10.11648/j.ijber.20170605.13

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Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia

Deresse Mersha, Zerihun Ayenew

Published in International Journal of Business and Economics Research (Volume 6, Issue 5)

Received: 5 May 2017 Accepted: 20 May 2017 Published: 25 September 2017

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Abstract

Ethiopian MSEs are at early stage of development and face various constraints. One of the most crucial problems is financial constraint for start-up and operational activities. In order to promote MSEs as engines of growth, it is essential to understand the bottlenecks surrounding MSEs' access to finance. The main objective of this study is therefore to identify factors enabling successful access to formal financial sources. 200 sample MSEs selected from three towns in west Oromia region are used for this study. The finding indicated that; availability of collateral, MSE’s age, Sector of the MSEs, Legal ownership, owner’s or manager’s age, owner’s or manager’s religion and Size of the MSE significantly determine access to bank credit at p < 0.1. It was also found that Keeping accounting record, Sector, Legal ownership, owner’s or manager’s age, owner’s or manager’s business experience and Size of the MSE significantly determine access to credit from MFIs at p < 0.1. From supply side, high interest rate and long loan procedures are the main factors. This implies that though MFIs are established to provide credit to MSEs, the system of credit provision is almost similar with banks.

Published in	International Journal of Business and Economics Research (Volume 6, Issue 5)
DOI	10.11648/j.ijber.20170605.13
Page(s)	100-110
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Access to Finance, Determinant Factors, Micro and Small Enterprises, Formal Financial Institutions

References

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APA Style

Deresse Mersha, Zerihun Ayenew. (2017). Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia. International Journal of Business and Economics Research, 6(5), 100-110. https://doi.org/10.11648/j.ijber.20170605.13

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ACS Style

Deresse Mersha; Zerihun Ayenew. Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia. Int. J. Bus. Econ. Res. 2017, 6(5), 100-110. doi: 10.11648/j.ijber.20170605.13

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AMA Style

Deresse Mersha, Zerihun Ayenew. Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia. Int J Bus Econ Res. 2017;6(5):100-110. doi: 10.11648/j.ijber.20170605.13

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@article{10.11648/j.ijber.20170605.13,
  author = {Deresse Mersha and Zerihun Ayenew},
  title = {Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia},
  journal = {International Journal of Business and Economics Research},
  volume = {6},
  number = {5},
  pages = {100-110},
  doi = {10.11648/j.ijber.20170605.13},
  url = {https://doi.org/10.11648/j.ijber.20170605.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20170605.13},
  abstract = {Ethiopian MSEs are at early stage of development and face various constraints. One of the most crucial problems is financial constraint for start-up and operational activities. In order to promote MSEs as engines of growth, it is essential to understand the bottlenecks surrounding MSEs' access to finance. The main objective of this study is therefore to identify factors enabling successful access to formal financial sources. 200 sample MSEs selected from three towns in west Oromia region are used for this study. The finding indicated that; availability of collateral, MSE’s age, Sector of the MSEs, Legal ownership, owner’s or manager’s age, owner’s or manager’s religion and Size of the MSE significantly determine access to bank credit at p < 0.1. It was also found that Keeping accounting record, Sector, Legal ownership, owner’s or manager’s age, owner’s or manager’s business experience and Size of the MSE significantly determine access to credit from MFIs at p < 0.1. From supply side, high interest rate and long loan procedures are the main factors. This implies that though MFIs are established to provide credit to MSEs, the system of credit provision is almost similar with banks.},
 year = {2017}
}

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TY  - JOUR
T1  - Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia
AU  - Deresse Mersha
AU  - Zerihun Ayenew
Y1  - 2017/09/25
PY  - 2017
N1  - https://doi.org/10.11648/j.ijber.20170605.13
DO  - 10.11648/j.ijber.20170605.13
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 100
EP  - 110
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20170605.13
AB  - Ethiopian MSEs are at early stage of development and face various constraints. One of the most crucial problems is financial constraint for start-up and operational activities. In order to promote MSEs as engines of growth, it is essential to understand the bottlenecks surrounding MSEs' access to finance. The main objective of this study is therefore to identify factors enabling successful access to formal financial sources. 200 sample MSEs selected from three towns in west Oromia region are used for this study. The finding indicated that; availability of collateral, MSE’s age, Sector of the MSEs, Legal ownership, owner’s or manager’s age, owner’s or manager’s religion and Size of the MSE significantly determine access to bank credit at p < 0.1. It was also found that Keeping accounting record, Sector, Legal ownership, owner’s or manager’s age, owner’s or manager’s business experience and Size of the MSE significantly determine access to credit from MFIs at p < 0.1. From supply side, high interest rate and long loan procedures are the main factors. This implies that though MFIs are established to provide credit to MSEs, the system of credit provision is almost similar with banks.
VL  - 6
IS  - 5
ER  -

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Author Information

Deresse Mersha

Department of Accounting and Finance, Jimma University, Jimma, Ethiopia
Zerihun Ayenew

Department of Management, Jimma University, Jimma, Ethiopia

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APA Style

Deresse Mersha, Zerihun Ayenew. (2017). Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia. International Journal of Business and Economics Research, 6(5), 100-110. https://doi.org/10.11648/j.ijber.20170605.13

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ACS Style

Deresse Mersha; Zerihun Ayenew. Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia. Int. J. Bus. Econ. Res. 2017, 6(5), 100-110. doi: 10.11648/j.ijber.20170605.13

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AMA Style

Deresse Mersha, Zerihun Ayenew. Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia. Int J Bus Econ Res. 2017;6(5):100-110. doi: 10.11648/j.ijber.20170605.13

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@article{10.11648/j.ijber.20170605.13,
  author = {Deresse Mersha and Zerihun Ayenew},
  title = {Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia},
  journal = {International Journal of Business and Economics Research},
  volume = {6},
  number = {5},
  pages = {100-110},
  doi = {10.11648/j.ijber.20170605.13},
  url = {https://doi.org/10.11648/j.ijber.20170605.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20170605.13},
  abstract = {Ethiopian MSEs are at early stage of development and face various constraints. One of the most crucial problems is financial constraint for start-up and operational activities. In order to promote MSEs as engines of growth, it is essential to understand the bottlenecks surrounding MSEs' access to finance. The main objective of this study is therefore to identify factors enabling successful access to formal financial sources. 200 sample MSEs selected from three towns in west Oromia region are used for this study. The finding indicated that; availability of collateral, MSE’s age, Sector of the MSEs, Legal ownership, owner’s or manager’s age, owner’s or manager’s religion and Size of the MSE significantly determine access to bank credit at p < 0.1. It was also found that Keeping accounting record, Sector, Legal ownership, owner’s or manager’s age, owner’s or manager’s business experience and Size of the MSE significantly determine access to credit from MFIs at p < 0.1. From supply side, high interest rate and long loan procedures are the main factors. This implies that though MFIs are established to provide credit to MSEs, the system of credit provision is almost similar with banks.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - Determinants of Access to Formal Financial Sources of Micro and Small Enterprises (MSEs) in West Oromia Region, Ethiopia
AU  - Deresse Mersha
AU  - Zerihun Ayenew
Y1  - 2017/09/25
PY  - 2017
N1  - https://doi.org/10.11648/j.ijber.20170605.13
DO  - 10.11648/j.ijber.20170605.13
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 100
EP  - 110
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20170605.13
AB  - Ethiopian MSEs are at early stage of development and face various constraints. One of the most crucial problems is financial constraint for start-up and operational activities. In order to promote MSEs as engines of growth, it is essential to understand the bottlenecks surrounding MSEs' access to finance. The main objective of this study is therefore to identify factors enabling successful access to formal financial sources. 200 sample MSEs selected from three towns in west Oromia region are used for this study. The finding indicated that; availability of collateral, MSE’s age, Sector of the MSEs, Legal ownership, owner’s or manager’s age, owner’s or manager’s religion and Size of the MSE significantly determine access to bank credit at p < 0.1. It was also found that Keeping accounting record, Sector, Legal ownership, owner’s or manager’s age, owner’s or manager’s business experience and Size of the MSE significantly determine access to credit from MFIs at p < 0.1. From supply side, high interest rate and long loan procedures are the main factors. This implies that though MFIs are established to provide credit to MSEs, the system of credit provision is almost similar with banks.
VL  - 6
IS  - 5
ER  -

Copy | Download