Document 2
Document 2
FINANCIAL ECONOMETRICS
GROUP ASSIGNMENT
NAME ID NO
1. Meseret Dagne---------------------------------------------------------------0536/13
2. Birhanu Sintayehu ----------------------------------------------------------0179/13
3. Keleab Gashaw ----------------------------------------------------------0433/13
4. Kassahun Gedefaye -------------------------------------------------------0441/13
5. Ayele Esubalew ------------------------------------------------------------0125/13
6. Yodahe Legesse ----------------------------------------------------------- 0818/13
7. Andualem Matebie--------------------------------------------------------0086/13
8. Yohanis Dejen ----------------------------------------------------------------0825/13
9. Gizachew Mayebet----------------------------------------------------------0361/13
10. Helen Lema -------------------------------------------------------------------0920/13
Developing countries rely heavily on micro and small enterprises (MSEs) to guide them toward
their growth objectives. The MSE sector has played a key role in bringing about economic
transition by effectively utilizing the skills and talents of a large number of people without
requiring high-level training, large sums of capital, or sophisticated technology, and by providing
adequate quality and reasonably priced goods and services to a large number of people.
Nonetheless, a major impediment to MSEs contributing positively to the economy is still access
to financing.The primary objective of the study was to analyse the key factors influencing access
to financing by giving 377 randomly selected MSEs in Hawassa Town a semi-structured
questionnaire. In order to determine the key variables influencing credit availability from official
financial institutions, the hypotheses were put to the test using OLS estimator method. The
study's conclusions showed that important variables affecting MSEs' ability to obtain credit
include the operator's age, educational background, business sector, age of enterprise, interest
rate. Considering how crucial MSEs are to producing income, reducing poverty, and creating
jobs, all governmental and non-governmental organizations ought to provide MSEs with
sufficient funding.
CHAPETR FOUR
This chapter interprets data analysis and research findings in light of the study's goals and the
research questions that were formulated to direct the investigation.
the analysis is based on the valid 377 questionnaires response from customers.
The STATA tool was used to analyse and interpret the data that were gathered through
questionnaires. Descriptive statistics, regression analysis, and correlation were also used for data
analysis. Frequencies and percentages are used to summarize the respondents' demographic
information for age, sex, and level of education.
I.e. The demographic data from this analysis includes the respondents' age, sex, occupation, and
level of education.
The term "gender" distinguishes the set of learned expectations, behaviours, and attitudes about
being a man or woman from our biologically determined traits collectively termed our sex. The
study found that both gender were involved in data collection and thus the findings could not
suffer from gender biasness. That means, both of them are engaged in branding and consumer
buying behaviour, both are at the same position to acquire what they wanted.
In the table 1 above out of 377 participants 244 were male (64.72 percent) and 133 were female
(35.28 percent) respondents, where both of them where used in data collection.
The age at which an individual becomes eligible to take on specific civil and personal rights and
responsibilities; typically, this is over the age of 18, so the researcher uses a range of age groups
to ensure that the research is done and relevant to a wide range of people. The fact that there
have been no complaints of age bias has made the research findings clear. To obtain a broad
range of responses on the topic, the study uses respondents of various ages.
Age of respondents
Frequency Percent
18-35 158 41.91
36-50 127 33.69
≥ 51 92 24.4
Total 377 100
According to the table 2 above the age of 18-35 were 158equivalents to (41.91 %), 36-50
were127 equivalents to (33.69%) and 51+ and they were 92 equivalents to (24.4%). Generally18-
35 age groups have many respondents compared to other groups but different age group
employed in this research.
4.1.1.3 Characteristics of response on education
Formal or informal education is possible. Informal education refers to the general social process
through which people pick up the skills and knowledge required to live within their respective
cultures. The process through which instructors guide students through courses of study in
institutions is referred to as formal education. For this reason, respondents with both types of
education are included in the study.
Educational attainment
Frequency Percent
No formal education 189 50.13
Primary school 106 28.12
Secondary school 82 21.75
TVET/College & above 0 0
Total 377 100
Regarding respondent educational level, table 3 revealed that the higher number of
participants were No formal education (50.13%), followed by primary school (28.12 %) and
also 21.75 and 0 percent of the respondents were secondary school and TVET/College & above
respectively.
4.2 ECONOMICETRIC RESULTS AND DISCUSSIONS
When two or more explanatory variables have a strong correlation with one another and do not
contribute distinct or independent information to the regression model, this is known as
multicollinearity in regression analysis. The fitting and interpretation of the regression model
may be complicated if there is a significant degree of correlation between the variables.
When two or more predictor variables in a regression model exhibit little variation or are
moderately or highly correlated, this is known as multicolinearity. Multicolinearity is detected
using a variety of techniques, including variance inflation factors, partial correlation analyses,
Eigen values and condition index analyses, and pairwise correlation analyses among repressors.
The most popular detection techniques, including the correlation matrix and high variance
inflation factor (VIF), were used in this study.
In our case, there is no perfect multicollinearity problem. Because the calculated VIF test is less
than 10 and the TOL value is not less than 0.1
2 Test for heteroscedasticity
When the variance of the disturbance term changes as the values of the independent variables do,
it is known as heteroscedasticity, and it is a common issue in cross section data. The Cook-
Weisberg (breusch-pagan) test was used in the study to assess heteroscedasticity, and the results
show that Prob> chi2 = 0.0000 and chi2 (1) = 20.37. The Cook-Weisberg test yielded an
insignificant result, indicating that there is significant homoscedasticity in the residuals'
regression on the predicted values.
Goodness-of-fit establishes the discrepancy between the observed values and those expected of
the model in a normal distribution case. There are multiple methods to determine goodness-of-
fit.Goodness-of-fit tests are statistical methods that make inferences about observed values. For
instance, you can determine whether a sample group is truly representative of the entire
population. As such, they determine how actual values are related to the predicted values in a
model. When used in decision-making, goodness-of-fit tests make it easier to predict trends and
patterns in the future.
In our study, goodness of fit is tested by using Stata and by that test about 9 percent of
dependent variable is explained by explanatory variable the rest is explained by residual term.
CHAPTER 5
5.1 Summary
The purpose of this research was to look into factors that affect MSEs in Hawassa Town's ability
to obtain financing. 377 sample MSEs were chosen through random sampling. A structured
questionnaire was used to obtain primary data from owner managers and MSE operators. The
data generated by the cross-sectional study was then analysed using OLS estimators.
The characteristics of the operator (age, gender, and educational attainment), the firm (age, size,
and sector), and the institution (interest rate) were the main subjects of the study, as well as how
these factors affected the ability to obtain financing from official financial institutions.
Although much of the sample MSE were males (64.72%) there was only a very small difference
between the percentage of male operators with access to credit (35.28%) and the percentage of
female with access to credit (20.69%). This implies that that gender does not have an effect on
MSEs’ access to credit from formal financial institutions. The same thing applies to age of the
operators. The mean age of respondents was years 51.5, with minimum and maximum ages of 18
and 85 years respectively. There is huge difference between the mean age of those who were able
to access credit from formal financial institutions and those who did not indicating that age of the
operators does have an effect on MSEs’ access to credit from formal financial institutions.
The results of the OLS model also indicate that enterprise size and had statistically significant
effects on access to credit from formal financial institutions. In contrast gender of the operator,
enterprise age, perception about interest rate and educational level of the operators, age of
operators, employment size of MSEs, sector and perceptions about lending procedure and had no
effect on MSEs’ access to credit from formal financial institutions.
5.2 Conclusion
One of the biggest challenges facing MSEs is obtaining financing, both to launch and to run their
businesses. It is therefore very important to identify the main factors that influence access to
financing. Based on the results, the study comes to the conclusion that personal savings are the
main source of working capital and start-up funding. On the other hand, friends and family are
the main source of start-up funding, followed by "equb" and microfinance. Informal financial
institutions are also the main source of credit for working capital. The size of an enterprise had a
statistically significant impact on its ability to obtain financing from finance in Micro and Small
Businesses. Conversely, MSEs' access to credit finance in micro and small enterprises was
unaffected by the operator gender, operator age, enterprise age, educational level, enterprise
sector, the ENT size (>4).and affected by interest rate, ENT size (<4).
5.3 Recommendation
The micro and small enterprise (MSE) sector is facing financial challenges that have impeded its
role in the economy, despite the sector's enormous importance to Ethiopia's economy in terms of
job creation and the alleviation of extreme poverty. A multitude of factors impact MSEs' ability
to obtain financing. It is crucial to acknowledge their diversity and create policies and assistance
initiatives to mitigate these issues. Therefore, it's critical to have a proper understanding of these
factors in order to meet MSEs' financial needs, support their growth, and enable them to
accomplish their goals of reducing poverty and creating jobs. Additionally, it will support the
development of strategies and policies by governmental and nongovernmental organizations
aimed at addressing the financial requirements of MSEs.
We have sent along the following recommendations based on our findings and conclusions.
The identified determinants of access to finance varied in terms of their complexity and severity,
leading to the cooperation of organizations and the focus of MSE service providers. The
following is an explanation of the researcher's main recommendations to minimize factors that
affect financial access:
It was recommended to MSE firm managers establish up experience sharing with similar
companies in Hawassa town
It was recommended to MSE firm management to include as many members or operators
as possible in their MSE firms
The owners and managers of MSE firms were advised to create goods and services that
the community needs in order to successfully operate their MSE businesses.
It was recommended that MFIs providing credit to MSE firms should exercise flexibility
in terms of loan terms for MSE firm borrowers within the study area.
It was suggested to the MFIs to improve the loan application process for MSE businesses.
It was recommended that MFIs provide the MSE firms with the requested loan size.
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