ASSESSMENT OF ACCESS TO FINANCE AND ITS AVAILABILITY FOR SMALL AND MEDIUM ENTERPRISES IN ADDIS ABABA CITY ADMINISTRATION GULELE SUBCITY

Abstract

Small and Medium Enterprises (SMEs) play a major part in most economies. Although SMEs play an imperative part within the financial development of a nation lack of access to finance remain major challenges of their growth and operations. The purpose of this study is to investigate factors influencing access to finance and its availability for SMEs in Addis Ababa Gulele sub-city. The study used both descriptive and explanatory research design with mixed research approach. The study used primary data that collected from 364 respondents. The result show that on average, 73.9% of sampled SMEs applied for loan them over the past 6 months to accessed financing in different ways. On average, 47% of sampled SMEs needed but no have accesses to finance while the remaining 31% of them applied for loan but was not no applicable and only 22% of sampled firms have access to finance. Moreover, the result show that majority of firms that have access to finance (78%) are obtained the fund from banks. The size of the firm, collateral requirement, awareness and cost of borrowing have a statistically significant effect on the access and availability of finance for SMEs in case of Addis Ababa Gulele sub city. Finally, Government has to establish an agreement either loan or finance with banks and microfinance institution by providing funds/finance which only serve to finance small & medium enterprises (SMEs) by creating a control mechanism through national bank to avoided miss use of finance.