Bank Lending Requirements and Credit Accessibility by Small and Medium Enterprises in Central Business District, Nairobi City County, Kenya
Loading...
Date
2023-11
Authors
Kirop, Jepkemoi Jane
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
For Kenyan SMESs, access t0 credit persists as an issuc, hindering growth and economic
contribution. Due to their assessment of SME default risk, banks show caution when
extending credit. On the basis of KNBS Economic Survey (2020), just 26.6% of SMEs
have access to credit, while the remaining 73.4% rcly on alternatives such as selffunding,
family support, or friendly assistance. The purpose of this study is to
investigate whether bank lending standards affect the availability of credit for SMEs in
Nairobi City County, Kenya. To investigate whether business owners' character affects
small and medium enterprises' credit accessibility in Nairobi City County, Kenya. By
Financial Intermediation Theory, Firm Characteristics theory, Pecking Order Theory,
Human Capital theory, and Ex-ante theory, this study is guided. With a descriptive
survey design, the study adopted. In Nairobi, the target market size includes a total of
10,767 small and medium-sized enterprises. Small and medium-sized enterprise (SME)
owners numbering 386 formed the study sample. Through questionnaires, the study
collected primary data. Using the drop-and-pick-later method, the researcher collected
data. SPSS enabled analysis and coding capabilities according to the study's needs.
Frequencies, mean, and standard deviation was organized into a table for descriptive
statistics presentation. Also entailing correlation analysis and regression analysis, the
study conducted inferential statistics. The findings revealed a statistically significant
positive correlation (r = 0.741) and a significant relationship (p < 0.000). between
character attributes and credit accessibility. The study also found that regression
analyses indicated that business owners' character exhibits a positive and significant
effect on credit accessibility (= 0.623; p<0.05). There is a strong positive correlation
between loan agreement terms and credit accessibility, with a correlation coefficient of
(r = 0.825; p < 0.00). The regression analysis shows that loan agreement terms has a
positive and significant effect on credit accessibility for small and medium enterprises
(SMEs) in Nairobi City County, Kenya's central business district (CBD) (B= 0.825;
p<0.05). There is a strong positive correlation between business capital and credit
accessibility, with a correlation coefficient of 0.721 and a significant relationship (p <
0.000). Business capital has a statistically significant positive effect on credit
accessibility (B = 0.604; p < 0.05). There is a strong positive correlation between
collateral and credit accessibility, with a correlation coefficient of 0.880 and a
significant relationship (p < 0.000). Collateral has a statistically significant positive
effect on credit accessibility (B = 0.797; p < 0.05). With a Pearson correlation
coefficient (r = 0.858, p-value 0.00), there is a strong positive correlation between loan
repayment capacity and credit accessibility. Regression analysis- shows that loan
repayment capacity has a significant positive effect on credit accessibility (B = 0.859;
p<0.05). The study concluded that character attributes, collateral, business capital, and
loan repayment capacity are all significant factors that influence credit accessibility for
SMEs. The study recommended that policy makers and practitioners should focus on
initiatives that help SMEs improve these factors to increase their credit accessibility.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment for the Award of Degree in Masters of Business Administration (Finance) of Kenyatta University November, 2023
Keywords
Bank Lending Requirements, Credit Accessibility, Small and Medium Enterprises, Central Business District, Nairobi City County, Kenya