Abstract
This study examines the role of the Microfinance on funding of the Small and Medium Enterprises (SMEs) in Gorodola Harakallo town. This study was exploring the role of microfinance institutions on small and medium enterprise as well as the extent to which the small business have benefited from the credits scheme of microfinance institution. The specific objectives of this study were as follows; to determine at what extent role of microfinance lead to increase the volume of gross sales of participants and to understand other factors that affect SME’s growth. This study tries to answer two important questions: To what extent does microfinance lead to increase the growth of sale costumer? What are the factors that affect small and medium enterprise growth? The literature review also describes the objectives and function of MFIs, role of microfinance policy, development and policy of SMEs challenges and opportunity and relationship between MFIs and SMEs. With regard to the above objectives in mind, the research is carried out by gathering primary data through questionnaires and interviews with key informants. In addition, secondary sources of data have also been used. Eventually, using a mix of qualitative and quantitative tools, the study found out that SMEs have played positive role in improving income, creation of employment and improving the quality of life of the participants of the enterprises in the study area.
Highlights
1.1 Background of Study Funds of small and medium enterprise play a great role all over the world in economic, social and political development
According to this study indicates 41(82%) of respondents was save their money in micro finance institutions( commercial Banks of Ethiopia, oromia credit and saving association).while other 5(10%) respondents was found saving at traditional methods like home and only 4(8%)respondents was saving in iqub .Generally, it is possible to conclude that many of the respondents are saving in micro finance institutions which show that Microfinance institution (MFIs) are working closely with Small and Medium Enterprises (SMEs) sector and most are not saving in the traditional methods like at homes and Iqub
SMEs promote the development of an economy and it has been given adequate recognition that correspond with intensity of its contribution
Summary
1.1 Background of Study Funds of small and medium enterprise play a great role all over the world in economic, social and political development. Most developing countries have formulated and implemented a wide variety of SME development strategies in order to support the growth of the sector, there by transforming economies and generating substantial employment opportunities. This is clearly known small and medium enterprise to contribute significantly to employment creation, income. Small and medium enterprises in Ethiopia are currently excluded from the banking sector credit due to their size (too small to be served by banks) and inability to meet excessive collateral requirements. MFIs, on the other hand, have only been able to meet a small proportion of the demand from small and medium sized enterprises for finance due to limited liquidity, restrictive loan ceilings and strict collateral requirements
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