Aspects Influencing the Loan Uptake of Women Enterprise Funds by Small and Medium Enterprises in Thika Town Kenya

Abstract

Small and Medium-sized Enterprises play an important role in the economic development of a Country and their access to financial assistance is therefore important. In the developed regions, Small and Medium-sized Enterprises access financial assistance without challenges, but this is not the case in developing countries. The Kenya government has taken an initiative of supporting Small and Medium-sized Enterprises by providing them with friendly loans which are disbursed through bodies such as Women Enterprise Funds (WEF) and Youth Funds. In spite of Government effort to support Small and Medium-sized Enterprises, the loan uptake is not optimal, yet there are still members of vulnerable groups who struggle economically. The purpose of this research was to analyze the aspects influencing the loan uptake of Women Enterprise Funds by Small and Medium-sized Enterprises in Thika Town. The study had four objectives as follows; to analyse the significance of access to information about Women Enterprise Fund on the uptake of the loans; to analyse the significance of cost of lending on the uptake of Women Enterprise Funds loans; to analyse the effect credit rating on the uptake of loans at the Women Enterprise Fund and to establish the effect of financial literacy training on the uptake of Women Enterprise Funds.Descriptive survey design was used and a sample of 169 respondents was selected by simple random sampling from a target population of 564 women owner-managers. Prior to actual administration of the instruments, an introduction and a pre- authorization letter from the institution introducing the researcher to the small and Medium Enterprises was acquired. The study showed that lack of financial training hampers the uptake of loans by Small and Medium-sized Enterprises. In addition, high interest rates did not prevent women businesses in Thika town from accessing credit. Most of women enterprises have a problem with bookkeeping which presents a challenge when they seek credit as it is a requirement. Information on available funding opportunities are not accessible to many women enterprises. The financial training literacy among women entrepreneurs in Thika Town is low and inadequate. Although lack of financial training literacy has a negative effect on access to loans, its effect was not a significant determinant of accessing Women Enterprise Funds. The cost of financing was high hence resulting into an inverse relationship with access to loans by women enterprises in Thika Town. Information about Women Enterprise Funds is important for the targeted beneficiaries who are women entrepreneurs. There was little information about how to access Women Enterprise Funds among women entrepreneurs in Thika Town. Information about Women Enterprise Funds significantly impacted the loan uptake making it a significant determinant of access to Women Enterprise Funds loans among women enterprises. Credit rating among women enterprises was poor hence a negative relationship with access to Women Enterprise Funds loans. Credit rating is ta significant determinant of access to Women Enterprise Fund loans and their uptake. This study recommends that Women Enterprise Funds government and financial institutions should provide women entrepreneurs with financial training literacy. Women enterprises need to seek financial training before making major financial decisions that could have detrimental effects on their businesses. The financial providers and Women Enterprise Fund need to find ways of guaranteeing repayment of their loans rather than relying on collateral alone which could lock out many deserving women entrepreneurs from accessing loans.The relevant financial services providers and lenders should be generous with information to make sure it reaches their targeted customers or beneficiaries. Women Enterprise Fund should be flexible in terms of the amount that can be advanced to women enterprises.