DETERMINANTS OF PROJECT FINANCING: EVIDENCE FROM SELECTED SMALL AND MEDIUM SIZE ENTERPRISES IN ADDIS ABABA

Abstract

At the global level, the key role played especially by small and medium sized enterprises in economic development and their contribution to economic diversification and employment opportunity is widely recognized, and so is the reality that these enterprises face financing constraints around the world, both in developed and developing markets. Therefore, it was not surprise that the Ethiopian government strategic focus is supporting of small and medium enterprises during all national growth and transformation plan. However in reality these enterprises suffer financial constraints for their respective projects. Thus, the purpose of this study was to explain determinates of project financing of small and medium enterprises in Addis Ababa administrative city. The study is design and employed the quantitative approach. Stratified sampling was used to select 174 small and medium enterprises in Addis Ababa. Binary logistic regression model was run using SPSS version 25. The major finding of the study shows that there exists significant but negative relation between project financing and collateral requirements. Cost of borrowing, enterprises business skill and leverage determine project financing. In contrary enterprises operational age, past financing experience did not affect project financing. Finally the study recommended further study area on public private partnership for project financing practice for small and medium enterprises in Ethiopia.