Micro Credit Access and Financial Performance of Micro, Small and Medium Enterprises in Baringo County, Kenya
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Date
2020
Authors
Toromo, Kipsafari
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Micro-small and medium-sized enterprises are the backbone of economic activity in
Kenya. The MSMEs in Kenya have not performed well as expected and thus has not
played anticipated and as required economic growth and advancement of Kenya. Medium
and Small enterprises have specific shortcomings that influence their development and
growth and thus limit their capacity to make a positive contribution to the sustainable
development of the economy. Among those issues is lacking access to credit services. The
specific objectives of this study were: to find out the relationship between micro-credit
access and financial performance, to determine the impact of micro-credit costs on access
to micro-credit by small and medium enterprises in Baringo central constituency, to
examine the impact of collateral requirements on micro-credit access by small and medium
enterprises and to develop the role of financial management skills training in Baringo
Central constituency. This study used descriptive research design. The most effective
sampling method was stratified random sampling. Data was then analyzed by descriptive
method and presentation was done in form of means, standard deviations, and percentages.
The study was carried out in Baringo County on business operators falling under MSMEs.
The researcher categorized each of the divisions as a stratum and 90 respondents were
selected from the four strata proportionately depending on the population of MSMEs in
each of the divisions. The researcher used structured questionnaires with both closed and
open-ended questions to collect the dataData from the research instrument were coded and
analyzed using the statistical package for social science Package (SPSS). The results of this
study reveal that micro credit terms, micro credit cost, collateral requirement and financial
management skills, affect the financial performance of MSMEs in Baringo Central
Constituency, Baringo County. Micro credit terms affect the financial performance of
MSMEs in Baringo Central Constituency, Baringo County positively (β1= 0.410, p< 0.05).
Micro credit costs have a negative and significant effect on financial performance of
MSMEs in Baringo central constituency, Baringo County (β2= -0.224, p< 0.05). Collateral
requirements have a significant and negative effect on financial performance of MSMEs in
Baringo Central Constituency, Baringo County (β3 = -0.184, p< 0.05). Financial
management skills training has a negative and significant effect on financial performance
of MSMEs in Baringo Central Constituency, Baringo County (β4= -0.196, p<0.05). The
study concludes that micro credit terms, micro credit cost, collateral requirement and
financial management skills are some of the variables significant in financial performance
of MSMEs in Baringo Central Constituency, Baringo County. Based on the conclusions
reached, the study recommends that the MSMEs in Baringo Central Constituency, Baringo
County should take into account the micro credit terms, micro credit cost, collateral
requirement and financial management skills since the study revealed a positive significant
effect on financial performance by this attribute. The findings of this study are significant
as they will enable decision makers to adjust their policies to eliminate obstacles hindering
micro credit access as well as improve financial performance in MSMEs.
Description
A Research Project Report Submitted to the School of Business in Partial Fulfillment
of the Requirement for the Award of the Degree of Master of Business
Administration (Finance) of Kenyatta University.
Keywords
Micro Credit Access, Financial Performance, Micro, Small and Medium Enterprises, Baringo County, Kenya