Formal Credit Financing and Financial Performance of Small and Medium Enterprises in Nanyuki Town, Kenya.
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Date
2018
Authors
Ndemi, Emily Gakatha
Mungai, John
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
Abstract
The current study sought to investigate the
effects of formal financing on financial
performance of small and medium
enterprises in Nanyuki Town, Kenya. The
study was conducted in Nanyuki Town
which has a fine mix of thriving SMEs that
are the drivers of economic life in the town.
The target population was made up of the
SMEs and their owners in the town. The
study targeted 765 SMEs in Nanyuki town.
The sample was selected using stratified and
simple random sampling technique. A
sample of eighty-eight respondents was
selected. Information was collected using
questionnaires deployed utilizing drop-andpick-later technique. Data was analyzed
utilizing both inferential and descriptive
statistics aided by SPSS software version 21.
Correlation analysis as well as multiple
linear regression were employed to
determine effectively the effect and nature
of associations between the variables. The
study established poor liquidity condition
for the SMEs with both the current ratio and
quick ratios standing 1.47:1 and 0.55: 1
respectively which are below the globally
accepted standards of 2:1 for current ratio
and 1:1 for quick ratio. The profitability of
the SMEs was also relatively low with the
return on assets standing at an average of
6.67%. The Pearson correlation analysis
results indicated a positive association
between formal financing option and
financial profitability of SMEs. The study
recommended that stakeholders and
especially the government devise measures
to assist SMEs boost their ability to access
alternative funds from formal institutions
and other alternatives such as government
affirmative funds. The government should
consider incentives to formal financial
players who establish special facilities
targeting SMEs and enhance efficiency of
affirmative funds targeting SMEs
Description
A research article published in International Academic Journal of Economics and Finance
Keywords
financial performance, formal financing, small and medium enterprises
Citation
Formal credit financing and financial performance of small and medium enterprises in Nanyuki town, Kenya. International Academic Journal of Economics and Finance, 3(2), 179-196