Influence of Microfinance Services on Small and Medium Enterprises Performance.a Survey of Smes Within Kajiado County

Abstract

Past statistics indicate that three out of five businesses fail within the first few months of operation (Kenya National Bureau of Statistics, 2011). While there are various reasons for such failure, one central reason attributed by researchers like Damanpour et al, (2009) is lack of proactive and sustainable adoption of financial services innovations. Therefore, the purpose of the study is to determine influence of microfinance services on Small and Medium Enterprises performance in Kajiado County. It specifically sought to determine the influence of microfinance financial training on SMEs Performance; establish the influence of micro insurance on SMEs Performance; and, evaluate the influence of business loans accessibility on SMEs Performance in Kajiado County, Kenya. The Games Theory of Microfinance, Uniting theory of microfinance, Poverty alleviation Theory and Diffusion Theory anchored the study. The study was hinged on descriptive survey research design. For this study, the 167 SMEs, with their 167 managers in Kajiado was targeted. The study employed census method to gather data from the entire population. The study specifically used questionnaires as the primary data collection instrument. Document checklist was used to scrutinize financial documents of the SMEs over a period of two years. To ascertain the reliability of research instruments, pilot study to test for both was done in neighboring Nairobi County. Consequently, the Cronbach’s coefficient alpha model that gets the standard alpha coefficient formula classified the results and gave a significant figure result. To therefore ascertain content validity, the research supervisor was used to check the instruments and advice on suitability or validity of the said instruments and feedback was used to revise the instruments accordingly. Firstly, quantitative data gotten from the instruments was classified then coded and later analyzed using descriptive statistics in the form of frequencies, percentages, means and standard deviations. Later, inferential statistics in the form of Pearson’s Correlations and regressions was used to help test the Hypotheses at the 95% confidence level. The results show that lack of financial training, micro insurance and loan accessibility by microfinance institutions had a negative influence on performance of SMEs in Kajiado County. The study thus recommends that: The microfinance institutions’ management need to engage in robust seminars and workshops in order to train SME owners/managers on effective SME management. The SME owners/managers should on their own acquire training to help them manage their businesses better. The microfinance institutions’ management need to diversify their insurance portfolio to cover a wider scope of SME needs and operations. The microfinance institutions’ management need to demystify and strategize loan accessibility issues by reducing bottlenecks for SMEs and easing security needed to access loans. The Government need to recalibrate existing policy that touch on loaning to SMEs to make it easy for SMEs to access loans, get trained better and overall manage their SMEs better.