Microfinance Institutions’ Social Intermediation and Micro and Small Enterprises Survival in Thika Town
Wairimu, Zabron Chege
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The continuous rapid growth of microfinance institutions in Kenya seems not to offer enough solution to the micro and small enterprises survival challenges. More than a one-third of MSEs start-ups collapse within the first three years whereas, those that survive only very few graduate from micro and small to medium enterprises. It is the high rate of collapse and low rate of survival of MSEs that triggered this research to (or “intending to”) fill the existing gap on the missing linkage between MFIs and MSEs survival. This study evaluated the role of microfinance institutions social intermediation services on the survival of MSEs. Specifically, the study determined the most sought social intermediation services by MSEs in Thika. Second, it determined the role of entrepreneur characteristics in the adoption of MFIs social intermediation and the survival of MSEs in Thika Town. Third, it determined the role of the social intermediation services offered by MFIs on survival of MSEs in Thika Town. The study focused on Thika town because it is both an industrial town and a business hub. Descriptive research design was adopted to achieve the study objectives. Stratified and purposive sampling methods were used to select a sample 272 MSEs in Thika Town from which data was collected using a structured questionnaire. The collected data was analyzed and presented in forms of tables with Pearson’s Product Moment correlation used to determine the degree of relationship between survival of MSEs in Thika town and microfinance participation, training, group liability, and networking. The study found that; entrepreneur age, gender, education, and experience played a crucial role in accessing MFIs social intermediation services. Regular microfinance participation help reduce loan application and payment bureaucracy while keeping entrepreneur updated on available opportunities. Training equips MSEs owners with necessary managerial skills on financial management, book keeping, and business operations. Group liability eliminates the need for collateral security when accessing loan while it increases the amount of loan accessed. Networking increases business link widening goods and services markets and allows for formation of business clubs. Finally, it was found that training was the most sought service followed by group liability, microfinance participation, and networking. From the study findings, the researcher recommends that MSEs continue seeking for social intermediation services and especially networking to improve their competitiveness to create a competitive advantage over their competitors boosting their survival.