The Influence of Micro Finance Institution on the Development and Performance of Micro and Small Business Enterprises in Addis Ababa (Ethiopia)

Abstract

Micro and Small E nterprises are engines for both developing and developed countries according to their SMEs definitions but many developing countries SMEs face major challenges in Africa and also in Ethiopia, is formulating app ropriate development strategies that will capture the fi nancial service requirement of Micro, Small and Medium E nterprises which will acc ounts 80% of the business sector . Delivery of credit for Small and Micro E nterprises for developing countries like Ethiopia is increasingly being viewed as a strategic means of assisting the working poor society . Over ten years a considerable amount of mul ti and by lateral support has been channeled in to micro finance in Ethiopia (Addis Ababa) with a varying degree of success. Like all development intervention evaluation and impact assessment studies to ascertain achievement and failures of this programs w ould help a lot for further programs desi gn in Ethiopia(Addis Ababa) , the SMEs sub - sectors has tremendous growth in terms of income, capital accumulation, employment opportunity, business diversifications, up grading capital goods e .t.c . The Small and M ic ro E nterprises has there for attracted great attention of financial services providers to extend a range of financial offer for this target groups. However, little is still know of contribution of Micro F inan ce I nstitution s for the development and performan ce of the Small and Micro E nterprises. The study sought to establish the influence of Micro Finance I nstitution on the development and performance of Small and M icro E nterprises in Addis Ababa (Ethiopia) . The study employed both qualitative and quantitati ve data analytical methods, and a multiple regression was run to estimate the effect of Financial I nstitution s on the development and performance of Small and Micro E nterprises to source of credit and contributed to their development and performance in ter ms of productivity, competitiveness, profitability, introducing new technology, up grading capital goods, in increasing their market share and diversifying their business. It is recommended that there is a need of institutionalized public - private partnersh ip for crating conducive business working environment for SMEs operations this will redu ce on the numerous constraints challenging Small and Micro E nterprises so as to make the national benefits from their overall contribution to poverty reduction and crea ting employment opportunity. Thus the government and MFIs should develop the quality and accessibility of the service of supporting institutions by assigning employees that have accurate knowledge in the specific area to identify the SME s gaps and to provi de continuous follow up of the development and performance of Small and Micro Enterprises.