Effect of Leasing Competence and Structure on Performance of Small and Medium Enterprises in Kisii Municipality, Kisii County

Abstract

In Kenya, leasing is bridging the current fixed-asset financing gap experienced by SMEs, and efforts have been made to improve the leasing competences of SME managers with the aim that they are able to negotiate for favorable lease terms which reflect firms’ cash flows. Despite these efforts, many SMEs use inefficient equipment and tools and others enter into unfavorable lease contracts. Lease competence was assessed in terms of leasing cash flow preparation and negotiation skills. Sales revenue, lease cash flows and lease operating costs were tabulated over the lease period. Summated weighted averages and multiple regression were used to analyze. Results were presented using tables and charts. The study established that most SME managers had low competence in preparation of expected cash flows. Also it was established that there is a significant relationship between leasing competence and lease structure on performance. The study concluded that SME managers be trained in long-term planning also most SMEs are straining to meet their contractual obligations in lease agreements. The study recommends more investment in initiatives to improve leasing competence of SME managers. Also study recommends to the Kenyan government to institute specific laws to regulate and govern lease transactions and put in place specific tax exemptions for lessee SMEs to ease cash outflow burden.

Keywords: Competence, Lease structure, Performance, Enterprises