The Relationship Between Credit Accessibility and Growth of Small and Micro Enterprises in Langata Constituency

Abstract

The purpose of the study was to establish the relationship between credit accessibility and growth of SMEs in Langata Constituency. Access to credit was measured in terms of collateral, literacy level, interest rates and the number of financial institutions. The study relied on imperfect information theory and pecking order theory. Descriptive design was employed in this research. The target populations for this research included all 500 registered small scale enterprises in Langata Constituency as at December 2016, from which a sample of 100 respondents was obtained. Questionnaire was the primary tool for data collection. Quantitative data collected was analyzed by use of descriptive statistics. Test of the relationship between independent and dependent variables was done through use of regression statistics. The study found out that the number of lending institutions has a positive relationship towards growth of SMEs. On contrary, entrepreneurial literacy is negatively related to SMEs‟ growth. When control variables were included, still the number of lending institutions was significant in increasing the growth of an SME. In addition, findings revealed that education level of the owner manager had higher chances of growing his/her business. The study therefore recommends that policies should be put in place to necessitate credit facilities to SMEs.