Entrepreneurial Financing Practices and Growth of Youth Owned Micro and Small Enterprises in Kenya

Abstract

Despite the importance of MSEs to the Kenyan economy, the rate at which new firms are formed, have stagnated and the already established MSEs younger than 5 years are collapsing a great deal. This study thus sought to establish the effect of entrepreneurial financing on growth of youth owned Micro and Small Enterprises in Kenya. The study was guided by the following specific objectives; to establish the effect of digital credit on growth of youth owned Micro and Small Enterprises in Kenya, to assess the effect of banks and microfinance lenders on growth of youth owned Micro and Small Enterprises in Kenya, to determine the effect of equity financing on growth of youth owned Micro and Small Enterprises in Kenya, and to find out the effect of investors on growth of youth owned Micro and Small Enterprises in Kenya. The study was anchored on technology adoption theory, influential theory, pecking order theory, and agency theory. The researcher used descriptive research design. The target population for this study was 2672 MSEs in Kenya. Yamane formula was used to determine study sample size which was 348 owners of the MSEs. The researcher used simple random sampling to select the sample. Questionnaire was used as the research tool. The study piloted the questionnaire on 17 MSEs from Kiambu County (5% of sample size). The study employed both quantitative and qualitative methods of data analysis. Qualitative data analysis involved coding and systematically putting into themes the open ended questions which was analyzed through content analysis and presented in prose form. Quantitative data was analyzed using descriptive and inferential statistical techniques. Descriptive statistics was used to present the main characteristics of the sample and involved use of mean, measures of dispersion and percentages. Correlation analysis was used to investigate the relationship between study variables. The study used SPSS version 25 software to carry out regression analysis. Data was presented using tables, and figures to make them reader friendly. The study concludes that digital credit has a positive and significant effect on growth of youth owned Micro and Small Enterprises in Kenya. In addition, the study concludes that banks and microfinance lenders has a positive and significant effect on growth of youth owned Micro and Small Enterprises in Kenya. Further, the study concludes that equity financing has a positive and significant effect on growth of youth owned Micro and Small Enterprises in Kenya. The study also concludes that investors have a positive and significant effect on growth of youth owned Micro and Small Enterprises in Kenya. In addition, the youth owned SMEs should consider interest rates charged, repayment duration and collateral required before accessing the credit facility Keywords: Entrepreneurial Financing Practices, Growth, Micro and Small Enterprises