Micro Credit Access and Financial Performance of Micro, Small and Medium Enterprises in Baringo County, Kenya

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.