Determinants Of Loan Repayment Default Among Small And Medium Enterprises In Kisumu Central Sub County, Kenya

Abstract

Loan repayment default has been a challenge among SME`s in Kenya. This study checked determinants of loan repayment default among SME`s at Kisumu Central Sub-County, Kenya. The study adopted descriptive cross sectional survey design. Stratified random sampling and Yamane model were used to settle on sample size of 86 SME`s. Questionnaires were administered to owners/managers of SME`s that resulted in 65 successful responses. The Descriptive Statistics; mean, standard deviation, frequency cum percentages adopted to analyze the data. Factor analysis ascertained latent variables in the study. The study established that determinants of loan repayment default are grouped into Ownership, Borrower, Loan and Lender characteristics. The study revealed that ownership characteristics had an average mean of 3.5456, borrower characteristics had average mean of 3.7823, loan characteristics had an average mean of 3.7594, with lender characteristics having an average mean of 3.7594. Factor analysis shown KMO value of 0.473, thus not good as it was below standard threshold of 0.83 and Bartlett`s test significance at 0.000, implying all factors were taken into account. The study recommended stakeholders should establish policies that mitigate on the challenges of the Loan repayment default modeled around ownership, borrower, loan and lender characteristics