Microfinance and Survival of Micro & Small Enterprises in Ethiopia

Abstract

The objective of the article is to examine the effect of microfinance on the survival of micro & small enterprise in Ethiopia using a survival analysis approach. A survey method was used and 340 MSEs were randomly selected. Cox Proportional Hazards analysis and Kaplan Meier survival analysis techniques were employed. The survival time was measured using MSEs business age. The study revealed that the highest failure of MSEs was recorded in the urban agriculture and construction sectors. The findings suggested that gender, working premises, level of education, loan grace period, borrowing cost, access to microcredit, access to new markets and the ability to produce new product types are the significant factors that determine MSEs survival. The study concluded that microfinance has a significant positive effect on MSEs survival. Therefore, MFIs should enhance their prevailing policies and strategies to upsurge loan to Micro and Small Enterprises, augment savings mobilization to realize the intended goals of fighting poverty, dropping unemployment and encouraging economic growth in Ethiopia.

Keywords: MSEs, Survival, Cox Proportional Hazards, Kaplan Meier, Ethiopia

DOI: 10.7176/RJFA/15-1-01

Publication date: January 31^st 2024