“Contribution of Microfinance Services to the Growth of Micro, Small and Medium Enterprises in Bungoma County, Kenya”.
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Date
2016
Authors
Simiyu, Douglas Wafula
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Microfinance institutions in Kenya continue to put in a lot of effort to take microfinance
services closer to the people and to MSMEs who do not have opportunities to access
formal financial systems. Despite all these efforts, MSMEs have stagnated in terms of
growth. It is in this respect this research investigated the contribution of microfinance
services to the growth of MSMEs in Bungoma County. The main objective of this study
was to determine the contribution of microfinance services to the growth of MSMEs in
Bungoma County. This was motivated by the need to fill up the academic gap on the
effect of microfinance institutions on growth of SMEs left by other researchers.
Specifically, the objectives were: To establish the contribution of financial intermediation
to the growth of MSMEs in Bungoma county, to examine the contribution of savings to
the growth of MSMEs in Bungoma County, to investigate the contribution of market
networking to the growth of MSMEs in Bungoma County and to determine the
contribution of capacity building to the growth of MSMEs in Bungoma County. This
study was conducted through a descriptive survey research design. The target population
was 728 registered MSMEs in the county as well as nine microfinance institutions in
Bungoma County. The sample size was 74 registered MSMEs and 18 representatives
from the six microfinance institutions in Bungoma County. The sampling technique was
stratified random sampling because most MSMEs in Bungoma County are not
homogeneous. A questionnaire was used to collect data and its validity and reliability
were established in the pilot test. Qualitative and quantitative data were generated in this
research. Both quantitative and qualitative methods were used in analyzing data.
Qualitative data analysis was used in analyzing information obtained from open ended
questions from the questionnaire. Quantitative analysis involved drawing inferences
using statistical package for social sciences (SPSS). A multiple regression analysis was
undertaken to establish the relationship between dependent and independent variables.
The strength of the relationship between dependent and independent variables was
measured by carrying out Z-test at 5% level of significance and 95% level of confidence.
The study outcomes showed that the most popular microfinance service provided by
microfinance institutions is the provision of small scale business loans as indicated by
46.7% of the respondents. Provision of savings services accounted for 26.7% showing
that MFIs encourage MSMEs owners to save with them. Capacity building and mobile
banking services in equal measure accounted for 13.3%. Though they are present, they
are not as popular as small scale business loans and savings services. Promotion of
marketing services is the least popular microfinance service with 6.7% response. The
research recommended that MSMEs should be encouraged to access small scale business
loans in order to boost their capital which eventually promotes growth, Capacity building
services should be carried out through seminars which equips MSMEs with updated
management practices to help keep up with competition, Marketing should also be
embraced through establishment of networks and effective channels of communication
and MSMEs should also be encouraged to save funds with MFIs.
Description
A Research Project Submitted in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Business Administration of Kenyatta University