Business Financing and Financial Performance of Small and Medium Enterprises in Turkana County, Kenya

Abstract

The purpose of this study was to examine the effect of business financing on the financial performance of small and medium enterprises in Turkana County, Kenya. Specifically, the study: examined the effect of commercial loan financing on the financial performance of small and medium enterprises; established the effect of trade credit financing on the financial performance of small and medium enterprises in Turkana County. A descriptive survey research design was used. The study was anchored on the information asymmetry theory and the financial intermediation theory. The target population comprised 325 small and medium enterprises in Turkana County. Stratified random sampling was used to select 83 small and medium enterprises for the study. The study used questionnaires as survey instruments for data collection which were administered to group chairpersons/ managers. Analysis of data was done using descriptive and inferential statistics. The study findings revealed the existence of a statistically significant regression effect of independent variables on financial performance of Small and Medium Enterprises in Turkana County. The study employed the F-distribution (F = 32.980) in predicting the dependent variable which indicated that the model significantly predicted how the independent variables affected the dependent variable (Financial Performance of Small and Medium Enterprises in Turkana County) which indicated an overall statistically significant model with commercial loan financing 54.9%, (t~3.056) of financial performance; and trade credit financing 67.2% (t~4.381) of financial performance of small and medium enterprises in Turkana County, Kenya. The study further recommended on each of the variables for management and policy consideration in future decision-making processes. The findings were expected to be of great assistance to management of other businesses. The study was also expected to add to existing literature in the finance field. Keywords: Business Financing, Financial Performance, Commercial Loan Financing, Trade Credit Financing