Factors influencing credit financing of small and medium scale enterprises : a case of SMEs in Nyeri Town

Abstract

This study was carried out to determine the factors influencing credit financing of small and medium scale enterprises in Nyeri town. The cadre of SMEs understudy was all the registered SMEs in Nyeri town. The main objective of this study was to investigate the factors that influence credit financing for the small and medium scale Enterprises in Nyeri town. The literature review identified what other researchers have done in the area of credit financing of small and medium scale enterprises. The study conceptualized to determine the relationship between the dependent and independent variables. The study employed the descriptive survey research design and employed a questionnaire to collect data from 280 SMEs in Nyeri town. The researcher sampled 280 SMEs out of the population of 5600 SMEs using a simple stratified sampling technique. The questionnaires were pre-tested in a selected sample of 56 businesses within Nyeri town which were similar to the actual sample which was used in this study. Data was collected through questionnaire. The questionnaires were administered through a pick and collect technique. The analysis was done through descriptive statistics and findings of the study were presented in form of tables, charts and graphs. The study revealed that most of the businesses are service provider and very few are involved in manufacturing which may be due to the fact that Nyeri town is predominantly a rural town with very few industries. It was also noted that majority of the SME'S operators are women which account to 60.4% of the business in Nyeri town. The main hindrance to the accessibility of credit to SME'S the study revealed was lack of collateral since most businesses were small with low turnover. The study recommends among others that the government should come up with an integrated training framework for SMEs to enable them attain appropriate skills that would enhance competition in the sector.