Effect of Financial Innovations on the Growth of Small and Medium Enterprises
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Date
2013-09Author
Nzove, Eunice M
Type
ThesisLanguage
enMetadata
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Commercial Banks in Kenya have tried to develop financial products tailored for Small
and medium enterprises in a bid to grow profitability while reducing financial
inaccessibility for this enterprises. This has however not been embraced by many
enterprises.
This study was carried out to examine the effect of financial innovations on the growth of
small and medium enterprises. The study was motivated by challenges faced by SMEs
despite their numbers and importance in growth of the economy. The study sought to
establish the effect of product innovations, service innovations, new organizational forms
as well as new production processes on growth of SMEs.The study adopted a descriptive
survey design. The target population for this study was SMEs in Nairobi central business
district and major banking institutions in Kenya. The study considered managers of all
levels and sales executives who are believed to have adequate knowledge and experience
in formulating financial innovations and presenting the ideas to prospective SMEs. This
formed a total population of 66 banks and 98608 SMEs. Purposive sampling was used to
select 11 banking institutions based on their branch network within Nairobi and other
major towns in Kenya. Systematic and random sampling techniques were used to select
SMEs to participate in the study. A sample size of 478 SMEs was determined using
Krejcie (1970) model and generated by Morgan (1990). Data was gathered using
structured questionnaires. Quantitative techniques of data analysis were undertaken to
generate descriptive statistics on responses provided. Further, a regression analysis was
undertaken to determine the strength of relationships between financial innovations and
growth of SMEs.
The study findings indicated that banks had financial innovations such as small-scale
business loans, small-scale business accounts, mobile banking, e- banking and direct
marketing. Business loans, business account and mobile banking were specific innovation
tailored towards SMEs. Most SMEs indicated financial innovations such as business
SME business accounts, SME credit facilities and direct marketing strategies improved
their customer relations and efficiency in their banking operations. SMEs were found to
have been faced by challenges that barred them from growth. A regression analysis
revealed that service innovations by financial instructions had the highest influence on
growth of SMEs. The study recommended intervention on the side of the government in
educating and training SMEs on managerial skills, enhancing accessibility to credit
facilities, and increase efficiency in the disbursement of loans to SMEs.
Citation
Nzove,Eunice M.,September,2013.Effect Of Financial Innovations On The Growth Of Small And Medium Enterprises.Publisher
University of Nairobi College of Humanities and Social Sciences