Factors influencing the use of microcredit amongst the small and medium size enterprises: a case of the small and medium size enterprises at Mutindwa Market of Buruburu estate Nairobi Kenya

Abstract

Majority of the world's people find themselves unable to undertake economic activities partly because they lack the financial capacity to engage in such endeavors. However, micro finance interventions have been used as a measure to reduce the risks faced by the said poor households and of the Small and Medium size Enterprises (SMEs) in particular. The SMEs act as agents of economic and social growth and as vehicles to employment creation. This study investigated the factors that influence the use of microcredit amongst the SMEs based at Mutindwa market of Buru Buru estate.

Descriptive survey approach adopted in this research for primary data collection involved administration of a questionnaire to the SMEs. The study found out that there is a strong relationship between MFI loan use and the loan terms and conditions. MFls loans were noted to be popular because of their group lending model where security was by group guarantee demonstrating the fact that a majority of the loan consumers who are commonly women lacked tangible collateral. Skilis' training as one of the side benefits offered by MFls was also noted to have a strong influence on the consumption of these loans.

The study concludes that improving the lending terms and conditions especially through exploring a wide range of security options, pursuing a gender parity client-base and offering diversified business knowledge in favor of small-scale enterprises would provide an important avenue for facilitating their access to credit and accelerate the use of MF loans and the subsequent enterprises.