Effects of interest rates on the growth of small business enterprises: a case study of small business enterprises within Kericho County.
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Date
2014-07-08
Authors
Kikwai, Benson Kiprotich
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Abstract
Small businesses operate under harsh conditions and are not able to help spur required
high economic growth. Some of the key challenges to majority of small business is lack
of adequate and affordable credit and thus upset their desired growth. The small sector
contributes immensely to the growth of the economy but there is little facilitation in
terms of enacting a sound legal framework and increase resource allocation. This
research therefore aimed at establishing the effects of interest rates on the growth of
small enterprises. The study was guided by the following objectives; To determine the
effect of interest rates fluctuation on the growth of small enterprises, to evaluate the
effect of taxation on the growth of small enterprises and to establish the effect of credit
repayment terms on the growth of small enterprises. A descriptive research design was
used with a target population of 1500 respondents of which 306 of them were sampled ..
Questionnaires were used for data collection. The validity of the instruments used was
achieved by discussing the relevance of the research instruments with the supervisor to
ensure simple and accurate questions provide simple answers. Reliability was achieved
by pre-testing the same data in Kericho County. The findings showed that small
enterprises have suffered greatly due to high interest rates levied upon them by
financial lending institutions. High interest rates are caused by high economy due to
inflation, the drop in Kenyan shilling and high taxation on basic commodities by the
government. Conclusions are that there is high exposure to risks which include; theft,
fraud, destructions by fire among others. Banks faces risks in trying to collect the
amount loaned to these small scale enterprises. However, small enterprises are majorly
affected by inflexibility of their operations.
Recommendations are Small entrepreneurs are encouraged to do marketing activities
outside the County, and adopt new skills of doing business through computer aided
techniques. To mitigate risks, they are advised to insure the business premise. Majority
of small enterprises has collapse, therefore they are dormant, and this has affected the
operations of other businesses since their existence impact on the growth of other small
enterprises in order to ensure competitive environment is ensured. The government
through ministry of finance should regulate policies aimed at regulating the fluctuations
of interest rates by banks because this has impacted negatively to the growth of small
enterprises.
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Description
Department of Business Administration, 42p, 2013