Ethiopia - Access to Finance and Its Challenges

Contents

CHAPERT ONE        2

1.Introduction        2

1.1 Background        2

1.2 Statement of the problem        3

1.3 Research Questions        4

1.4 objectives of the Study        5

1.5 Scope of the Study        5

1.6 Significance of the Study        6

1.7 Definition of Terms        6

2. Research Design and Methodology        7

2.1 Research Design        7

2.2 population and Sampling Technique        7

2.3 Types of Data and Methods        7

2.4 Research Ethics        8

2.5 Methods of Data Analysis        8

BIBLOGRAPHY        9

CHAPERT ONE

1.Introduction

1.1 Background

Private sector is a carrier of economic growth of any country by involving highly on the industrialization process and other sectors of the economy.  For a developing country such as Ethiopia, whose economy is still predominantly agrarian, the private sector plays a vital role in the overall economic growth of the country. As indicated by Alemayehu Geda (2008); the role of private businesses in Ethiopia is becoming an instrument of employment and income generation, human development and poverty alleviation, export promotion, import substitution and entrepreneurship and hence the driving forces behind the growth of the country economy. Therefore, policies and initiatives to develop private businesses and to increase their competitiveness are a priority for Ethiopia.

But the private sector development in Ethiopia is still at low level owing to its internal weakness

and other constraints. Several studies on problems of private sector development in Ethiopia by

Ethiopian Investment Commission, Ethiopia Chamber of Commerce and sectoral association and World Economic Forum reveal that Private entrepreneurs’ in general and small and medium enterprises’ in particular limited access to credit is reported to be the most pressing and binding constraint for doing business in Ethiopia.

According to the Ethiopian Development Strategy (published 2011) the working definition for categorizing private enterprises is based on capital and Labor. Small and Medium Enterprises(SMEs) fall under the group that have labor force between 5-99 and capital ranging from Birr 100,000 -1,500,000.

The private sector is expected to play a key role in Ethiopia’s journey to become a middle-income country in the next decade. However, Ethiopian firms face significant financial constraints, because financial institutions do not accommodate their needs, a new World Bank Group (WBG) study found. The same report indicates reveals that without adequate support from financial institutions, small and medium businesses are not able to grow, or create more job opportunities.