Influence of Microfinance Services on Growth of Small Business Enterprises in Kenyenya Sub-county – Kisii County, Kenya

Abstract

This study sought to determine the influence of microfinance services in the growth of micro and small scale business enterprises in Kenyenya sub-county, Kisii County, Kenya. Specifically the objectives were to: determine the influence of credits provided on the growth of micro and small scale businesses in Kenyenya sub-county, explore the extent to which training of entrepreneurs influences the growth of micro and small scale businesses in Kenyenya sub-county; establish the extent to which savings influence the growth of micro and small scale business enterprises in Kenyenya sub-county; examine the extent to which terms of service influence the growth of small business enterprises in Kenyenya sub-county. The study was conducted through a descriptive survey research design. A two stage sampling method was employed to select 162 small scale business enterprises in the district. Structured questionnaires and an interview schedule was developed, pre-tested and used for collecting quantitative data for the study from the sampled micro and small scale business enterprises. Descriptive statistics using frequency distribution tables and percentages was used to analyse data. The study showed that credit was not easily available to the local SBEs and when available the amount of credit obtained was rarely obtained and if it was obtained, it was lower than the amount requested. Nevertheless, among those who obtained requisite amounts of credit, business growth was noticed. Further, repayment conditions of loans for the SBEs were found to be a major challenge and therefore affected the business growth as 52% of the respondents invested their loans on current businesses, 21% invested the loans or part of the loans on other businesses, and 17% used their loans to repay other loans while up to 11% diverted the loans for family issues. The SBEs who obtained their money to repay loans from business profits were 55% and those who borrowed to repay from business sales were 26.5%. Up to 45% of the borrowers had defaulted in repayment due to tough repayment conditions and this affected the business growth. Mentorship programme provided to the SBEs was found to affect the growth of business enterprises in Kenyenya with those receiving mentorship programmes growing better than those without mentorship. The study recommends that SBEs credit availability be enhanced to reduce the level of restriction on lenders to facilitate business growth. Findings from this study will help in accelerating access to micro-credits from small scale business enterprises that are pre-requisite to growth of micro and small scale businesses, the findings will also help micro and small business owners to know their potential and importance of training to ensure proper management and business practices hence operate sustainable businesses.