The Effects of Financial Institutions Intervention on the Growth of Small Enterprises in Kenya: A Survey of Public Service Transporters in Kisii Municipality

Abstract

The small enterprises (SEs) play an important role in the Kenyan Economy. According to the Economic Survey, the sector contributed over 50 percent of new jobs created in the year 2005. Despite their significance, past statistics indicate that three out of five businesses fail within the first few months of operation. Approximately 80% of Kenya enterprises are Small enterprises which are highly attractive to banks. There has not been clear understanding of the key drivers of small enterprises growth. Kisii town is a home of 20 financial institutions, all of which offer almost the same financial services to the small entrepreneurs within the Municipality and yet there is a mixture of growth and lack of it in small enterprises in the municipality. This project was to investigate the effects of the financial institutions intervention in growth of Small Enterprises in Kisii Municipality. The specific objectives were: To establish the role of credit provision on growth of Small enterprises in Kisii Municipality, to determine the adequacy of financial training offered by financial institutions in helping the small enterprises to grow, to determine the role of marketing information on growth of small enterprises in Kisii Municipality. From the sampling frame a representative sample of 90 respondents were obtained randomly and a survey was conducted on this sample using both structured and un-structured interview schedules. Data from the respondents was analyzed and translated into useful information using the statistical package for social sciences (SPSS) and the Minitab statistical software. Frequency distributions and multiple regression analysis were used to draw conclusions. Most of the businesses were more than a year in operation before the credit was granted. The study also established that most of the businesses obtained loans from banks. More than half of the sample had accessed credit from a bank. Second is micro credit financing institutions where the respondents reported to have got loans from SACCO, Chamas and friends and relatives also play a significant role in the provision of these services. The study revealed that interests could be expensive but manageable. The survey established that accessibility and availability of micro credit are positively related to financial performance of Small enterprises. The study concludes that accessibility to credit affects financial performance of Small enterprises positively. The easier it is to access credit, the higher the financial performance of the Small enterprises. However, access to credit is not that easier from the financial institutions considering the many requirements one has to meet before the credit is approved to the entrepreneur for use in the business. The study concludes that availability of credit positively affects financial performance of small and medium businesses. This is an indication that as credit becomes more available, the financial performance of business becomes better and hence a chance for business growth. Financial training was found to be playing a crucial role in growth of small enterprises, especially in assisting the businesses to repay back their loans in order to get more credit in future. The research further found out that the accessibility to marketing information and its availability to the entrepreneurs also affects the transporters in a positive way in their performance of the businesses.The study recommends that the government and financial institutions should make micro credit more accessible and available to enhance growth and development of Small enterprises through increased profitability as it was found that accessibility and availability of microcredit have positive impact on the performance of Small enterprises.The study also recommends that the government through it central bank should have financial policy that will help offer better interest rate that will enhances the accessibility of credit and enhance reduction of interest rates so as to uplift the financial performance of Small enterprises as it was found that high interest rates had a negative relationship with financial performance of Small enterprises.The study recommends further on financial training as it was found to be playing a crucial role in growth of small enterprises, especially in assisting the businesses to repay back their loans in order to get more credit in future. The researcher further recommends for the accessibility to marketing information and its availability to the entrepreneurs in order to positively assist the entrepreneurs in their day to day activities which was found to affect the financial performance of SMEs. The results of this study are expected to assist the county government and stakeholders to formulate and implement appropriate policies aimed at developing and empowering Small entrepreneurs.

Keywords : Enterprise, Experience, Finance, Demand, Competition, Entrepreneur