Factors affecting performance of small and medium enterprises in Kenya: A case study of smes in Thika municipality
Abstract
Literature review indicates that SMEs play an important role in the economy of many
countries across the globe, be they developed or developing Nations. However, SMEs
have been said to report high rate of failures with many enterprises dying at an infant
stage. Very few of the SMEs grow to become big enterprises. The reason to this failure is
pegged on the various factors that continue to inflict stagnation of the industry in terms of
performance. They include: lack of access to credit, regulatory framework, management
issues, market barriers and education and training. Therefore this study is aimed at
investigating the factors affecting the performance of SMEs enterprises within Thika
Municipality in Kenya. This research employed the descriptive research design where by
data collected was presented without the researcher influencing the findings in anyway.
The research targeted SMEs enterprises in Thika and the unit of analysis comprised
owners-managers of manufacturing businesses, training, supermarkets, agriculture, estate
agents and hospitals. Target population was 330 and a sample size of 66 was taken. The
researcher used simple random sampling techniques to sample its respondents.
Questionnaires were used for the data collection. The research utilized descriptive
analysis of each of the questions asked in the questionnaires presenting their reliability,
mean and standard deviation. Inferential analysis was also applied to establish the
correlations of the factors and performance. Research findings will enable all the
stakeholders involved in the SME industry to identify the challenges facing the industry
so that they can be able to figure out how to counteract the same. Academia will also
benefit from the study. The study concludes that most SMEs in Thika Municipality
finance their businesses from bank loans, personal savings, loans from family and
relatives, through government institutions, and through Non-Governmental
Organizations; that respondents accessed finance for their businesses from commercial
banks, from NGOs, from micro finance institutions, from government institutions, and
from SACCOs; that high interest rates, lack of collateral, dislike to borrow from banks,
and fear of losing property prevented them from borrowing money from then banks;
Further, the study concludes that marketing is a barrier to enterprise performance; that
respondents market their products locally through media print, through dropping of
leaflets, through word of mouth, and through television; that Bureaucracy in registration
hinders enterprise's growth, that corruption diverting support programs from original
beneficiaries, Cumbersome laws and regulations, Political instability, High compliance
costs and High cost of tax/complexity of the custom system hinder enterprise's growth,
that lack of government support programs for SMEs hinders enterprise's growth and that
Illegal permits and licenses hinder enterprise's growth and that the Government through
its policies did not have a good will for the growth of SMEs. NGOs and government
institutions should grant SMEs some capital to help the fund their businesses. SMEs
owners should organize themselves in SACCOs to save for capital to [mance and boost
their businesses. The Central Bank should liaise with Commercial banks to lower interest
rates to encourage more SMEs to borrow money from the banks. Further, the banks
should review their security to pledge criteria so as to encourage more SMEs to borrow
money from the banks,