FACTORS AFFECTING THE FINANCIAL PERFORMANCE OF MICRO AND SMALL ENTERPRISES IN WERABE TOWN ADMINISTRATION CENTRAL ETHIOPIA REGION

ABSTRACT<br> MSE is a significant component of many developing nations’ development plans, including Ethiopia. Through the creation and implementation of a micro and small enterprise development strategy, the government of Ethiopia has been encouraging the development of MSEs, and the number of MSEs in the nation is constantly increasing. The goal of this study was to identify the factors affecting the financial performance of MSEs in Werabe town administration. The study employed a descriptive and explanatory research design, selecting 265 samples at random from a population of 785 to gather information from the owners and managers of MSEs. After stratifying the sectors, the samples were chosen at random from each stratum using proportionate allocation. The study utilized questionnaires as the primary method for data collection. Tables, charts, and percentages were used to present the data after it was analyzed using descriptive statistics. According to the multiple linear regression analysis, factors such as the age and experience of the owners/managers, financial-related issues, lack of government support, and limited market access significantly impacted the financial performance of MSEs in Werabe town. The relevant government body overseeing MSEs in Werabe town should increase the number of microfinance institutions to enhance the performance of MSEs. It is also advised to focus on better implementation of financial strategies, such as ensuring sufficient working capital, improving access to financial institutions, and supporting the development of business plans for MSEs to boost their performance.