Funding Sources on The Perfomance of Small and Medium Sized Entrepreneurial Projects in Starehe Sub-county, Nairobi County.

Abstract

The SME sector is a significant contributor to the Gross Domestic Product of several African economies. They constitute more than 90 percent of the businesses registered in Kenya and are responsible for 83% of the employment opportunities. Many of them are located Starehe Sub-county. However, their performance continues to be poor due to lack of funding. This is because it leads to inadequate liquidity within these projects affecting their day-to-day operations as well as lack of capital making the growth and expansion of these projects very slow. This study sought to investigate the influence of fund sources on the performance of SME Projects in Starehe Sub-county, Nairobi County Kenya. The objectives of the study were: to investigate the influence of Banks and Microfinance Institutions on the performance of SME Projects, assess the influence of SACCOs on the performance of SME Projects, Determine extent to which mobile loans influence the performance of SME projects in and examine the Influence of informal funding on the Performance of SME Projects in Starehe Sub-county. The study was grounded on the Pecking Order Theory and supported by the Keynesian Economic Theory. The study used a mixed method research design where it utilized both a correlation and descriptive survey design. The Target population was 14000 SME Project Owners in Starehe Sub-county. These are specifically those who deal in household goods. The sample size of was selected through stratified sampling. Data was collected through a questionnaire that was administrated through in person interviews. The instruments’ reliability was assessed through the Split Half Method and examined using the Cronbach’s Alpha Method at 0.7. The collected data was analyzed through the use of descriptive statistics. These were: arithmetic mean, percentages and standard deviation. To compute the relationship between the variables the Pearson Correlation Coefficient was used at 95% confidence interval. The statistics found the following: Funding from Banks and Microfinance Institutions, SACCOs and Informal Funding had significant influence on the performance of SME Projects in Starehe Sub County, Nairobi County in Kenya. It was also found that Mobile Loans had no significant impact on the performance of SME Projects in Starehe Sub County Kenya. It is recommended that SME Project owners maintain strong relationships with their suppliers and develop a strong savings culture as these are the main sources of informal funding. It is also recommended that formal lending institutions such as Banks, Microfinance and SACCOs revise the lending terms and processes so as to make their funds more appealing and accessible to SME Project owners.