Commercial Banks Financing to Micro Small and Medium Enterprises A Study in Ethiopia

Abstract

Micro, Small, and Medium Enterprises (MSMEs) are vital for the economic development newlineof nations. Businesses in developed and developing countries usually established as newlineMSMEs and gradually grow into big companies that employ many workers, significantly newlinecontribute to the GDP of a nation, and solve socio-cultural problems. Despite the newlineimportance the sector has, it faces different issues that attracted the attention of researchers newlinein the world. Researchers in different parts of the world conducted a variety of studies and newlinetried to solve the MSMEs problems. However, stakeholders in different countries could newlinenot get similar suggestions due to the unique characteristics of MSMEs in different newlinecountries. Since different countries define the MSME sector in terms of diverse attributes newline(parameters), the meaning and definitions of MSMEs were not universally agreeable. Some newlineNations use headcount, some consider annual turnover as an attribute, and others still use newlinea balance sheet to categorize enterprises into MSMEs. To solve problems in defining and newlineclassifying enterprises, conducting intensive research and come up with comparable newlineattributes at least for countries in the same economic status is essential. In addition to the newlinelack of universally accepted definitions, the MSMEs sector faces different impediments newlinethat seek the attention of researchers. These impediments extend from enterprise-level newlineproblems like entrepreneurs behavioral biases to external factors including access to newlinefinance. newlineThough limited access to finance is often referred to as the major constraint that affects the newlineperformance of MSMEs, the researcher argued that performance enhancement problems newlineof MSMEs are attributed to behavioral biases of owner-managers. The behavioral biases, newlinereferred to as behavioral finance, is the suppressing factor that affects the effect of bank newlinefinancing on the performance of MSMEs. Therefore, the main objective of this study was newlineto analyze the impact of commercial bank finance newline