The Effect of Financial Inclusion on the Performance of Small and Micro-Enterprises in Injibara Town, Ethiopia

Abstract

This study examines how multidimensional financial inclusion influences small and micro enterprise (SME) performance in Injibara Town, Ethiopia. Using a stratified random sample of 170 SME owners and managers, this study assessed the effects of financial access, quality, use, service delivery, and perceived barriers on firm performance. Multiple regression revealed that service delivery was the strongest predictor (β = 0.647, p < .001), followed by access (β = 0.422, p < .001), quality (β = 0.219, p = .006), and use (β = 0.187, p < .001), while barriers showed no significant effect (β = 0.032, p = .556). The model explained 74.3% of the variance in SME performance (Adjusted R² = 0.743, F(10, 159) = 98.76, p < .001). These findings challenge access-centric inclusion paradigms, demonstrating that delivery efficiency and customer-centricity drive SME growth more than mere service availability. Policymakers and financial institutions should prioritize service delivery optimization, flexible product design, and capability-building interventions to convert formal access into tangible business outcomes in small-town contexts.