Effect of Private Equity and Debt Financing on the Growth of Small and Medium Enterprises in Kakamega County, Kenya

Abstract

The principal reason for the review was to set up the impact of private value and obligation financing on the development of small and medium enterprises in Kakamega County, Kenya. Specifically, the study sought: to assess the relationship between Private Equity and SMEs’ growth; to establish the relationship between debt finances and growth of SME’s and to examine the strategies that impact access to private equity and debt financing by SMEs. The study embraced a descriptive survey research design. The populace in this review was 3097 out of which a sample size of 341 respondents was acquired. The data were examined using descriptive statistics, such as mean scores, percentages, and standard deviations. The results were presented in frequency tables, charts, and graphs. Linear Regression analysis was applied to show the relationship between variables. Various tables, charts and bar graphs, and diagrams were used to present the data for easy interpretation. The study findings established that SMEs need all market participants to ensure the continued growth of microfinance and thus the continued impact on poverty alleviation in developing countries; lack of access to credit is a major constraint inhibiting the growth of SME’s sector; external borrowing of SMEs is considered to be the cheapest source of financing because of the tax benefits. The study recommends that SME’s should invest in the right model especially in the private equity space; SME’s should have an appropriate capital structure that generates the maximum profit; Microfinance should serve as a substitute and improve the living standard of the inhabitants and profitable SME’s, which have a lot of tangible assets, should be offered as collateral for debt, may have a higher target debt ratio.