DETERMINANTS OF FIRMS ACCESS TO FINANCE: A STUDY IN MICRO, SMALL AND MEDIUM ENTERPRISES IN WOLAITA ZONE, SODO TOWN

Micro, Small and Medium Enterprises (MSMEs) play a vital role in the global economy. It had a major part in creating jobs and as a source of social stability, either there is major contribution for MSMEs in Ethiopia as it faces great economic challenges that need cooperation from all stakeholders. However, access to finance is still one of the greatest obstacles facing MSMEs all over the world and prevents them from developing. Thus, the purpose of the study was to investigate the factors that influence MSMEs? access to finance. The factors that were addressed included strong business plan, credit history, collateral requirements, awareness of funding opportunity, and availability and credibility of financial statements. The target population was 366 MSMEs that are operating in Wolaita Zone, Sodo Town. The research focused on a sample size of 188 MSMEs. Data obtained from research instruments was analyzed using the Statistical Package for Social Science (SPSS) version 20.0. Descriptive statistics was used to summarize the data collected from the sample respondents in a meaningful form including tabulations, figures and percentages. ANOVA and multiple linear regressions were also used in inferential part of the study. The findings of the study implied that there is significant relationship between business plan and access to finance by MSMEs; there is no significant relationship between credit history and access to finance by MSMEs; there is significant relationship between collateral requirements and access to finance by MSMEs; there is significant relationship between awareness of funding opportunity and access to finance by MSMEs; there is significant relationship between availability and credibility of financial statements and access to finance by MSMEs; The study findings are significant since they would enable the stakeholders to come up with appropriate regulation, funding programs, and schemes toward improvement of access to finance by MSMEs.