Influence of Financing Sources on the Performance of Building Contractors in Embu West Sub-county, Embu County, Kenya.

Abstract

The construction industry is an important sector with immense contribution to the socioeconomic development of nations. In Kenya and specifically in Embu County, there is growing demand for residential, commercial, industrial and other infrastructure buildings. But due to lack of financial capacities, most contractors are unable to meet the rising demand. One of the barriers to the performance of building contractors is financial insecurities related to access, use and servicing of capital. This study sought to examine the influence of financing sources on the performance of building contractors in Embu West Sub-County, Embu County, Kenya. The specific objectives of the research were to: determine the influence of private lenders on the performance of building contractors in Embu west sub-County; assess the influence of Savings and Credit Cooperative Organizations on the performance of building contractors in Embu west sub-County; examine the influence of banking institutions on the performance of building contractors in Embu west sub-County and establish the influence of personal savings on the performance of building contractors in Embu west sub-County. The study was grounded on the credit channeling theory and supported by credit rationing theory. The correlational survey design was used in the research inquiry. The study population was 120 building work firms in Embu west sub-County, Embu County, Kenya. A sample of 36 was chosen using stratified random sampling. Data was collected using semi-structured questionnaires. Reliability of the instruments was assessed using split-half method and tested using Cronbach`s Alpha method at 0.7. Data was analyzed using descriptive statistics namely: arithmetic mean, standard deviation and percentages. Pearson correlation coefficient was used to compute the relationship between variables at 95% confidence interval. The results revealed that sourcing of finances from private lenders, SACCOs and banking institutions had statistically significant influence on the performance of building contractors in Embu West, Embu County in Kenya. However, sourcing finance from personal saving had no statistically significant influence on the performance of building contractors in Embu West sub-County, Embu County in Kenya. It is recommended that building contractors should always seek for cheaper and less risky sources of financing so as to sustain their operations and performance. Also, lending institutions should strive to make lending easier and affordable by recognizing the constraining financial environment to building contractors.