Effects of micro- finance institutions' services on sustainability of small enterprises: A survey of small enterprises in Huruma Estate, Eldoret Town

Abstract

This study examined the effects of microfinance institutions on the sustainability of small enterprises in Eldoret Town. The purpose of the study was to determine the contribution of micro-finance institutions on the sustainability of small enterprises in Huruma Estate, Eldoret Town. Specific objectives of the study were; to establish the effects of microfinance lending conditions on the sustainability of small enterprises, to determine the effects of microfinance training on the sustainability of Small enterprises in Eldoret town and to investigate the contribution of microfinance project appraisal on the sustainability of small enterprises. The theoretical framework was based on Signaling theory and Agency theory. Of the (129) respondents one hundred and eleven (111) respondents were able to successfully fill and return the questionnaires issued. The population consisted of over 400 respondents from Huruma Estate. Stratified and simple random technique was used to select a sample of one hundred and twenty nine (129) respondents. Primary data was collected using structured questionnaires. Data was analyzed using descriptive statistics and a regression analysis was done on the variables. Findings were presented in frequency tables and percentages. Multiple regressions were done to ascertain the relationship between the independent variables and dependent variable. Findings of the study showed that; there is an inverse relationship between sustainability of Small Enterprises and Microfinance Institutions services'. When lending conditions are in favor of the small business owners, sustainability improves by 0.376 (37.6percent). Similarly, increase in frequency of training of small business owners will result to an improvement in sustainability of small businesses by 0.767 (76.7percent). It is notable that, lending and training were the only significant variables in the multiple regression model as shown by their P values (0.000) respectively being less than 0.05 level of significance, P 0.05. Results on hypothesis testing also revealed that; there is a significant relationship between lending conditions, training services and sustainability since their P values (0.000) respectively were less than 0.05 (P 0.05. The study concluded that, lending conditions were impeding entrepreneurs from accessing credit from the microfinance institutions. Training by microfinance institutions on the other hand were not adequate. The study recommended that, microfinance institutions should not impose conditions that are unlikely to be fulfilled by borrowers wishing to access credit. This way, they will make more profits by lending to more people and entrepreneurs will as well make investments. Microfinance institutions should rather improve on their credit recovery strategies.