Factors that influence the financing of micro and small enterprises (MSEs) by commercial banks in Kenya

Abstract

The research project was an investigation on factors that influence commercial banks when financing micro and small enterprises (MSEs) in Kenya. This study used a descriptive survey. The target population for this study was commercial banks that are registered and regulated by the Central Bank of Kenya. MSEs licensed by the City Councilor Nairobi were also targeted 101· the study. According to the CBK (20 I 0), there are 43 Commercial banks in Kenya. A census study was used given that the population of' 43 commercial banks was considered to be small. For the MSEs licensed by the Nairobi City Council in the month of July 20 II, a sample of 73 MSEs was targeted representing 30% of the MSEs that were identified to be within the CBO. Primary data was collected by use of a structured questionnaire. The questionnaire used both open and closed ended questions. The questionnaire was largely designed using a Likert Scale. i~i~quefstionnaires were administered on the basis of "drop and pick later" or picked iriunediately depending on the availability of the respondents. The data was analyzed using the Statistical Package lor Social Sciences (SPSS) and Ms Excel spread sheets. The data has been described using frequencies and means. Presentation has been done using charts and tables. Overall findings were that all the key aspects that were under review in this study i.e. records, management style, collateral and business plans do playa role in in Iluencing provision of credit though in varying degrees. It is impojtan: that the MSEs embrace them and strive to meet all the aspects that the banks consider important. The study therefore recommends that the MSEs tailor their efforts to improve on the aspects that will make them improve on their influence to attract credit from the banks and also the banks should sensitize and train the MSEs on the key influences that they look for when considering granting loans to the MSES. Similar studies should be done in other counties to establish the factors influencing the ability of MSEs to attract finance from commercial banks.