Factors Influencing Growth of Small and Microenterprises in Nairobi Central Business District

Abstract

Aims: The study sought to examine the factors influencing growth of Small and Medium Scale Enterprises in Nairobi Central Business District in Kenya. The study was guided by the following specific objectives: to examine the extent to which access to credit influences growth of SMEs in Nairobi CBD; to explore the extent to which age of the firm influences growth of SMEs in Nairobi CBD; and to assess the extent to which level of education of the entrepreneur influences growth of SMEs in Nairobi CBD. The specified econometric model has firm growth as the dependent variable, and the independent variables include access to credit, age of the firm and education level.

Study design: The study adopted a descriptive research design.

Place and duration of the study: Given the nation-wide spread of SMEs in Kenya, the population of interest in this study included all registered SMEs in manufacturing sector of Nairobi CBD. The study took a period of one month.

Methodology applied: The study targeted 80 questionnaires, however 75 questionnaires were successfully filled and returned (93.8%) response rate. The collected data from the questionnaire and secondary sources was systematically organized in a manner to facilitate analysis. The data pertaining to profile of the respondents and the organizations were analyzed using content analysis. Quantitative data was analyzed using content analysis while quantitative data was analyzed using descriptive statistics, which include frequencies, percentages, means cores and standard deviations. In order to establish the relationship between the independent and dependent variables, inferential statistics were used. A Statistical model was specified to examine the effect of access to credit on the growth of the SMEs in Nairobi CBD.

Results: The factors were ranked in terms of extent of influence of each factor on growth of SMEs, where only responses related to (5) a very great extent; (4) to a great extent; and (3) to a moderate extent were considered. The rankings show that whereas access to credit was considered as having the highest positive influence on growth of SMEs, educational level of the entrepreneur was ranked second and age of the SMEs was ranked third. Multiple regression analysis was employed to evaluate constraints to customer satisfaction by determining the magnitude and or direction of the relationship between the study variables.

Conclusion: There is a strong demand for the government to elaborate and implement policies and strategies for financing SMEs as well as for developing and improving financial institutions and financial instruments; there is a need to harmonize those policies and strategies as well as the instruments for implementing them; and the legal framework plays an important role in the creation and successful operation of SMEs and should encourage a simplification of the procedures involved in the creation, financing, training and other aspects of the SME sector.

Keywords: Access to credit, small and medium scale enterprises, firm growth, start-up capital, survey method, econometric method.