The perceived impact of credit reference bereaus in accessing finance by small and medium enterprises (SMEs) in Kenya
Abstract
This study was set out to evaluate the perceived impact of Credit Reference Bureaus in
accessing finance by SMEs in Kenya. The study therefore sought to determine what
impact does presence of credit reference bureaus have in relation to accessing finance by
SMEs since the adoption of credit reporting in Kenya in 2010. All stakeholders in
Kenyan markets now realise that SMEs are the “missing middle”. Their size and demand
for credit has outgrown the capacity of microfinance institutions (Mc Donald et al, 2007).
It is therefore necessary to evaluate how credit reference bureaus affect access to finance
by SMEs nationwide.
The research adopted the descriptive research design which was most appropriate in
attaining the objective of the study. The target population of this study comprised of all
SMEs in Kenya. The study used both primary and secondary data. Primary data was
obtained through self-administered questionnaires with closed and open-ended questions.
Questionnaire was used since the study was concerned also with variables that cannot be
observed such as views, opinion, perception and feeling of respondent. The sample size
of this study consisted of the top 100 SMEs in Kenya in year 2011.The top SMEs in Kenya were identified through a survey carried out by KPMG and Nation Media Group.
The study found that sharing of credit information had not reduced collateral
requirements for commercial/business loans by commercial banks and collateral
requirement was a major obstacle that had been a constraint to accessing financing for
operation and growth of their businesses. Credit bureaus could alleviate a firm financing
constraints by providing information on individuals borrowing and bill paying habits. It
enabled the lenders assess credit worthiness, the ability to pay back a loan, and this
affects the interest rate and other terms of a loan.
Further research should be undertaken to evaluate the status and structure of the credit
bureaus. Research should also be undertaken to determine perceived impact of credit
reference bureaus in accessing finance by other sectors in Kenya.
Publisher
School of Business, College of Humanities and Social Sciences, University of Nairob, Kenya
Description
MBA Project