Antecedents for establishment of small and medium sized enterprises in kenya a survey of jua kali artisans in Laikipia-east district
Ndirangu, Mwangi Francis
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Small and Medium Enterprises (SMEs) play a significant role in the economy of Kenya, accounting for about 42% of the Gross Domestic Product (GDP). SMEs however has limited access to finance because of poor guarantees and perceived inability to repay loans (Ndung’u 2005). Lack of information, vague and grossly unclear government policies and competition from large enterprises all have not favoured their establishment and survival. However, according to 2010 Annual report by the Ministry of Local Government, establishment of SMEs has been on the rise. The study seeks to determine the factors influencing the establishment of Small and Medium sized Enterprises (SMEs) in Kenya despite the challenges stated. The study focuses on Laikipia-East District. The objectives of the study were to determine how, Microfinance Institutions, government policies, entrepreneurial culture and production development affect the establishment of Jua Kali SMEs. The study has reviewed existing literature in the area of study. The research design was a descriptive survey. The study applied stratified random sampling technique where 30% of the population from each stratum (each of the three geographical divisions making Laikipia-East District) amounting to 150 respondents. The data was collected by use of structured questionnaire administered door-to-door on each SMEs shop targeted per area. The analysis was done using quantitative techniques both descriptive and inferential. Graphs, tables and pie charts have been used to present frequencies and percentages. Findings show that the women entrepreneurs dominate enterprises in Laikipia East; the life span of many businesses ranged less than three years (73 per cent) and 3-5 years (14 per cent). Many businesses in the study areas have not been operating for more than 5 years. The market penetration rate was 3.25 per cent for urban areas while rural areas it was 0.9 per cent. The ratings for Micro-Financial Institutions (MFI) importance on SMEs establishment was supported by 68 per cent while its contribution was supported by 67 per cent. The non-financial services needed by the SMEs were information, business consulting for start-up and development, training, management information systems, business planning and strategy. The attachment of entrepreneurial culture to SMEs establishment and its contribution in enterprise development were rated at 67 per cent and 64 per cent respectively. Inferential data result indicates that association between financial support, government policies, entrepreneurial culture and product development are highly significant in SMEs establishment. It is recommended that the financial institutions should have a simpler way of assisting SME owners considering the difficulties they encounter as a result of lack collateral security. SME owners should be trained on business skills. The government should reduce the regulatory burden on small businesses. In order to eliminate single source bias, further research is recommended for a cross sectional study for many other areas with SMEs business clusters for generalization.