THE ROLE OF MICROFINANCE INSTITUTIONS IN THE GROWTH OF SMALL AND MEDIUM ENTERPRISES: IN THE CASE OF DILLA TOWN

The main aim of this study was to examine role of Microfinance institution in growth of<br> Small and Medium enterprises in Dilla town. This study was conducted by using both<br> descriptive and explanatory research design in collaboration with mixed research<br> approach. The study was conducted in related with SMEs operated in Dilla Town, taking<br> a sample of 100 owners/managers of SMEs, which are drawn from total of 532 SMEs by<br> using stratified sampling as per simple random sampling procedure. Data was collected<br> by using self-administered questionnaires distributed to the respondents and having 77%<br> response rate. The collected data was analyzed by using both descriptive and inferential<br> statistical techniques: among descriptive statistics; frequency and percentage was used<br> whereas inferential statistics and simple OLS regression analysis for which loan from<br> MFIs is used as independent and sales of SMEs as dependent variable. The results<br> showed that 62.34% of financing source for SMEs operated in Dilla town is supported by<br> MFIs, average yearly growth of sales is over 11.6% and 64.94% of sales growth of SMEs<br> was contributed by loan from MFIs. The regression result also supported that the<br> relationship of loan from MFIs highly affect the growth of SMEs by having 100%<br> coefficient of determination and 65% slop between predator and explanatory variables.<br> This was concluded that, there was significant effect of independent variable on<br> dependent variable. The study recommends that stakeholders should perform the issue<br> what they did and take an action for succession of SMEs.