Relationship Between Access to Finance and Performance of Small and Medium Size Enterprises in Kasarani Sub-county, Kenya

Abstract

Although SMEs have the capacity to significantly and positively impact the global economy, they are faced with many challenges in the developing countries. The SME sector is highly volatile and is mostly associated with business shrinkage and closure and thus the government has continued to make significant efforts to ensure the sustainability and growth of the SME sectors. According to Sessional Paper No. 2 of 2005, three out of five businesses find it hard to survive and fail within the first five years of operation implying that most SMEs fail despite their significant role in the economy. Most SME’s failure results to job losses, low liquidity, increased insecurity and subsequently economic growth downfall. This examination proposed to discover the impact of access to finance on financial performance of SMEs in Kasarani Sub- region. The investigation's populace was all the 839 SMEs in Kasarani Sub-area while the example estimate was 85 appropriated over the different wards inside the sub-county. The independent factor for the examination was access to finance assessed by the proportion of advances requested for to the credits given. The control factors were leverage estimated by the aggregate obligation to total resources proportion and firm size assessed by natural logarithm of aggregate resources. Financial performance was the needy variable which the examination looked to clarify and it was estimated by yield from resources. Secondary information for 5 years was collected (January 2013 to December 2017) on a yearly premise. An enlightening descriptive cross-sectional research structure was utilized in the examination, and a multiple linear regression model was utilized in breaking down the relationship between the factors. Information investigation was embraced with the guide of the Statistical package for social sciences version 21. The consequences of the examination created R-square estimation of 0.135 implying that that about 13.5 percent of the variation in the SMEs in Kasarani Sub-area' monetary execution can be clarified by the three chose indicator factors while 86.5 percent in the variation of budgetary execution of SMEs in Kasarani Sub-province was related with different components not canvassed in this exploration. The examination additionally discovered that indicator factors had a frail association with budgetary execution (R=0.367). ANOVA results demonstrate that the F statistic was huge at 5% level with a p=0.000 thereby the model was fit to clarify the connection between the chose factors. The outcomes further uncovered that access to finance and firm size delivered positive and factually noteworthy qualities for this examination while leverage was observed to be a measurably unimportant determinant of financial performance of SMEs in Kasarani Sub-area. This investigation suggestions are that means should be taken to upgrade fund openness among SMEs in Kasarani Sub-region as this will enhance their budgetary execution.