PRACTICE AND CHALLENGES OF: ACCESS TO CREDIT FOR SMALL AND MICRO ENTERPRISES: IN THE CASE OF ARADA SUB CITY OF ADDIS ABABA CITY ADMINISTRATION

Abstract

This thesis attempted to evaluate the nature of access to credit for small and micro firms in terms of The practice and issues they encounter using the case of Arada Sub City Addis Ababa, Ethiopia. Data were gathered from sample respondents who worked for SMEs using questionnaires and Interviews. Through the use of a mixed research approach and an explanatory and descriptive Study design, 200 SMEs were selected by a random selection technique. Data from both primary and secondary sources were gathered, and descriptive analysis was used to examine the result. The thesis particularly assesses how these four objectives—credit standards, credit accessibility, credit adequacy, and challenges for SMEs to receive credit—have an impact on the subject at hand. The findings of the study indicate that funds are available for SMEs; however they are insufficient for their operation. Despite the fact that they can obtain financing from banks and MFIs, SMEs mostly rely on their own earnings and savings as a source of capital. Lack of collateral, a lengthy loan application process, and high interest rates have all been noted as significant obstacles to getting a loan from banks and MFIs. These findings are expected to help both SMEs and financial resource providers come up with appropriate methods to bridge the gap toward promoting economic and societal advancement of SMEs.