Abstract
Financial inclusion has remained a critical driver toward poverty reduction in an economy. There has also been much focus on financial inclusion of women as they tend to be marginalized by the mainstream financial institutions. Kenya on its part has achieved high levels of financial inclusion. Access to bank services has been easy and at a low cost. Till 2016, access to credit has also been easy for all persons with bankable ideas in all sectors including agriculture for either gender. However, this changed after the review of the Banking Act that introduced the interest rate capping in the financial market. The purpose focused on increased collateral requirement and additional customer information requirements on the financial performance of women-owned Agribusiness small and medium enterprises (SMEs). The target population of this study was 950 licensed women SMEs with a sample of 274 licensed SMEs. From the study, collateral requirement due to interest rate capping had a negative and statistically insignificant effect (r = -0.114, p = 0.079) on the financial performance. On a positive note, the study found that additional customer information requirement due to interest rate capping had a positive and statistically significant contribution (r = 0.437, p = 0.000) on financial performance of agribusiness SMEs. The study concluded that effective maintenance of financial records not only helps SMEs access credit but also help them improve performance. This study strongly recommends capacity building among women on maintenance of financial records as it will improve access to credit and performance of their businesses.
Highlights
IntroductionAgriculture small and medium enterprises (SMEs) are often seen as unattractive clients to most financial institutions, this is due to their small asset base and their seasonal nature
A linearity test was conducted by using Pearson’s Product-Moment Coefficient Correlation (r).The findings of the correlation analysis showed that Collateral requirements had negative and insignificant contribution toward small and medium enterprises (SMEs) financial performance with r 5 20.114; p 5 0.079 0.05 at 0.05 significance level
The results indicated that introduction of the interest rate capping affected collateral value required by financial institutions with a high extent
Summary
Agriculture SMEs are often seen as unattractive clients to most financial institutions, this is due to their small asset base and their seasonal nature. The economic survey of 2017 established that there were about 1.56 million licensed SMEs and 5.85 million unlicensed businesses. The importance of small- and medium-sized enterprises in Kenya was reflected in the Economic Survey in 2014, which signified that 80% of the 800,000 jobs created in 2014 were in the informal sector, which is dominated by small- and medium-sized enterprises (Kandie, 2014; Irungu, 2017). The SME sector has been segmented in the following manner in Kenya, 40% are in the trade industry, 30% in the agriculture industry, 13% in the manufacturing industry, 15% in the service industry, and about 2% in the construction industry (Musando, 2013)
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