Microfinance Credit Accessibility and Financial Performance of Small and Medium Enterprises in Machakos County, Kenya

Muema Joseph Munguti,Lucy Wamugo

doi:10.33019/ijbe.v4i1.250

Abstract

SMEs in Machakos County have been characterized by poor financial performance which has been linked to financial access. Financial access is one of the keys that drive the development of SME in the country, particularly access to bank financing since banking sector plays a key role in serving this segment. This study specifically sought to determine the influence of collateral security, loan-income ratio and geographical branch penetration on financial performance of SMEs. Study adopted census survey due to small population size. Respondents were supplied with semi-structured questionnaires with aim of getting their views regarding financial accessibility and SME performance. Findings of the study indicated that collateral security, loan-income ratio, and geographical branch penetration has a significant positive effect on financial performance in Machakos County, Kenya. This research recommends that SME’s should improve their core capital, strengthen their financial management practices, foster financial innovation, and literacy within firms.

Highlights

In recent years, economists and policymakers around the world working on economic and financial development are increasingly interested in topic of financing of SMEs
This is mainly because SMEs play a big role in economy and they account for the lion's share of firms operating in the country and contribute largely to employment (Abayo & Oloko, 2017)
Research focused on business growth whereas the current study examined the financial performance metrics in general

Summary

Introduction

Economists and policymakers around the world working on economic and financial development are increasingly interested in topic of financing of SMEs. In recent years, economists and policymakers around the world working on economic and financial development are increasingly interested in topic of financing of SMEs This is mainly because SMEs play a big role in economy and they account for the lion's share of firms operating in the country and contribute largely to employment (Abayo & Oloko, 2017). Most big and influential companies around the world mainly start as SMEs underlining importance of financing them since in the future, through investment and diversification, they could develop and become key contributors to economy (Badulescu, 2012). World Bank (2015) estimates that 70% of all SMEs in developing economies lack access to credit facilities making it difficult for them to survive.

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Results

Conclusion