Financing Micro and Small Scale Enterprises: An Emperical Survey in Urban Ethiopia

Abstract

Using Simple descriptive analysis of the data from the Ethiopian Urban Household socio- economic survey, the paper found out that micro and small enterprises are financed from own savings. However these forms of savings have been found to finance businesses that return small amount of capital and mostly service-oriented activates investments in lair businesses call for external resources but the only external finance available to micro and small enterprise is borrowing from friends and negatives which have again a number of drawbacks existence of asymmetric information and lack of bankable collateral might explain lack of access to formal credit to this sector given the significance of bank credit to the sector the paper suggests two possibilities or micro and small enterprises access to formal credit namely group lending scheme through the provision of package program and active risk sharing among creditors borrowers and the government.