Evaluation of Micro-Credit Finance on Financial Performance of Small and Medium Enterprises in Nakuru County, Kenya
Mokua, Angela Kemuma
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Small and Medium enterprises play an increasing role in the contemporary knowledge invention function as a conduit of economic development. SME’s are the backbone of many economies and notably a source of employment as well as a major source of tax generation, provide solutions to societal and growth problems such as food security, besides entrepreneurship is a social safety net for women and youth. Providing monetary services to SMEs plays a crucial task in determining how they carry out their businesses as they require an array of enabling and supporting financial services in order to enable them in actual fact utilize profuse resources in their field of specialty and to recognize their full potential. The banking sector in Kenya over the years has regarded the sector as risky and not viable commercially. The research study objective was an evaluation of micro-credit finance and financial performance of Small and Medium Enterprises (SMEs) Nakuru County, Kenya. The research adopted a descriptive research design; the study used a sample of 106 respondents out of whom 65 responded. Data analysis was done using SPSS version 22.0. The study established that increase in interest rates affected the financial performance of SME’s to a great extent, The study also established that strict credit policies affected access to credit thus affecting the financial performance of SME’s. The study also established income level of entrepreneurs affected the financial performance due to inability to finance the accessed credit. The study concludes that micro credit banks in Nakuru County are emphasizing on interest rate and income capability to increase financial performance. Based on the study it clearly stipulates that sales per annum, initial capital investment, total value of assets and net profit measures the financial performance capability for any SME’s businesses. The study recommends that the management of micro finance banks should take into consideration on interest rate and particularly on how to lower the interest rates. This enabled the management to create a comprehensive understanding that can be leveraged to influence more SME’s to take up loans and thereby increase financial performance. The study also recommends that government should come up with rules and regulations to prevent the customers from being exploited through high interest rates and other incidental fees. This enabled more customers to take up loans thereby expanding their SME’s businesses. The study recommends that the Management of banks and other key players in monetary sectors should formulate better policies that are favorable to small and medium enterprises to enable them access credit facilities easily.