dc.description.abstract | Small and medium enterprises continue to fail from the problems that microfinance institutions
claim to offer solutions to. A survey by Kenya National Bureau of statistics, (2007) indicate that
three out of five SME businesses fail within the first few months of operation. A gap exists in
finding out the effect of Microfinance institutions and growth and development SMEs. This
study therefore sought to establish the effect of microfinance institutions of growth and
development of small and medium enterprises. The study was guided by the objectives; to find
out the role of MFIs in financing, provision of financial literacy, development of management
skills and facilitating market networking among SMEs in Machakos town. The study was
expected to establish the practical role of perceived solutions provided by microfinance
institutions and how this affects growth of SMEs. A survey design was used to accomplish the
study objectives. Data was gathered from managers of MFI institutions as well as SMEs within
Machakos town. Stratified sampling was adopted to select 66 SMEs and five microfinance
institutions to participate in the study. Data was collected via a questionnaire whose validity and
reliability was established in the pilot test. Quantitative data analysis was undertaken to generate
both descriptive and inferential statistics, this was done using statistical package for social
sciences (SPSS). Presentation of data was done in tables and interpretation made based on
research objectives. The study findings indicated that microfinance institutions provide a series
of products and service that include small-scale business accounts, business management
training, marketing services and financial literacy skills. Of all these, small-scale business loans
are the major product offered by Microfinance institutions as indicated by 36.36% of the
respondents. Small-scale business accounts, Business management training, and marketing
services all rated 18.18% while financial literacy skills are the least offered represented by 9.1%.
Among the financing facilities offered by the MFIs, provision of suitable loan products to SMEs,
follow up programmes for the loans provided and favorable interest rate are the most benefiting
facilities of financing. The study recommends MFIs to plan for seminars and workshops to train
the SMEs on financial literacy, management skills and facilitation of ICT use. Further, MFIs
should develop a regular needs assessment among SMEs so as to provide relevant products. A
related study can be done to analyze the economic factors affecting microfinance institutions in
financing SMEs. | en |