Assessing Role of Financial Institutions in Growth and Productivity of Micro and Small Enterprises in Yirgalem Town Administration; Sidama Zone, Ethiopia

Abstract

MSEs have become important economic activities particularly in providing employment and other business activities for unemployed and low income households. The objective of this study is to determine the role of financial institutions in growth and productivity of MSEs in Yirgalem town. For the study, 132 members of MSEs were randomly selected by using stratified random sampling and data from selected individuals have been collected by using structured questionnaires. Descriptive statistics were used to summarize data and multiple linear regression was used to find the role of financial and non-financial factors in growth and productivity of MSEs. The study result revealed that factors like access to bank and finance, level of criteria expected to fulfill for borrowing, loan sufficiency, inefficiency of time allowed and other support like motivation and training are significant predictors from role of bank and micro-finance in growth and productivity of MSEs. Age of the MSEs Members, educational level, main activities, experience, and service were significant demographic factors. The growth and productivity of MSEs increase by 4.409 and 3.2 percent respectively for every one level increase in education holding all other factors constant and like.  Thus, minimizing the level of criteria required to access money, improving accessibility of capital, sufficient loan and improving education of the members; it is possible to make MSEs profitable and productive.