The Effect of Micro Finance Services on the Growth of Small and Medium Enterprises in Kericho County

Abstract

The purpose of the study was to evaluate the effect of micro finance services on the growth of SMEs. The study focused on the SMEs in Kericho county. A descriptive survey research design was applied to investigate four broad business category types in Kericho county. Data collection from the sampled businesses was done by use of structured questionnaires. Stratified random sampling method was used to select 80 businesses from a list of 1264 and this sample was taken as a representative of the population in the county. The findings were presented by use of tables with frequencies, percentages, means and standard deviations. Multiple-regression analysis was carried out to explore the association between the growth of SMEs and provision of micro credit, mobilization of savings and provision of managerial training as the predictor variables. From the study, the respondents generally agreed that Micro Finance Institutions (MFIs) have positively influenced the growth of their businesses through their provision of micro finance services. The regression-analysis results established that that there is a strong and significant relationship between growth of SMEs and provision of micro credit, mobilization of savings and provision of managerial trainings of magnitudes 0.750, 0.738 and 0.300 respectively. The ANOVA results also confirm the existence of a statistically significant relationship between the growth of SMEs and the predictor variables of micro credit, micro savings and training with an F value of less than 0.05. From the findings of this research study, it was concluded that the growth rate in revenues of SMEs is influenced by the changes in the provision of microcredit, mobilization of savings and provision of managerial trainings and that the association is significant and positive. The study also concludes that provision of microcredit and mobilization of savings leads to high growth of SMEs as depicted by the strong positive association and correlation. The study recommends that government and other developments partners need to facilitate the accessibility of micro finance services from MFIs to SMEs in order to enhance an accelerate a sustained growth of SMEs as well as to improve and enrich the services of MFIs. The other recommendation is that in the future a study should be conducted across the country so that the findings can be representative of the whole nation.