Perceived Impact of the 2007-2008 Global Financial Crisis on Small and Medium Scale Enterprises Clients in Kenya
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Date
2010Author
Njogu, Francis K
Type
ThesisLanguage
en_USMetadata
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The onset of 2008 financial crisis can safely be attributed to the collapse of USA and European housing markets. Stimulated by sub-prime mortgage, housing sector enjoyed boom across USA and Europe during 1998 to 2006. Yalmaz (2008) asserts that the worst part of the crisis is already over and the markets are suffering from what can be called 'the after shocks'.
This crisis has thinned foreign exchange of developing countries which sent a ripple effect throughout their economies. Small and Medium scale Entrepreneurs were affected in large and their operations put in jeopardy by the global financial meltdown. This study intended to evaluate some of the impacts of the crisis and ways by which the SMEs in Kenya managed to weather the credit crunch storm. A Survey study which tends to ask people questions about their behavior, attitudes and opinions was used for this investigation to address the main objective; 'The impact of the global financial crisis on SMEs in Kenya'.
The study reveals that SMEs in Kenya were indeed adversely affected by the financial crisis in areas that are critical to their performance. Firstly, the crisis led to a shortage of credit and that which was available was expensive due to a hike in interest rates. Due to a weakened purchasing power of consumers globally, both domestic and offshore demand for goods produced by SME also decreased remarkably thus shrinking the market. Lastly the cost of raw materials also increased especially for the agriculturally based businesses, which was majorly compounded by the drought and the post election violence that gripped Kenya at the time.
SMEs in Kenya came up with strategies to counter the financial crisis and top on the list was workforce downsizing in order to cut down on costs. Many businesses also postponed on investment and actively sought new markets for their products. Old business strategies of operation were also reformed to incorporate new factors introduced by the financial crisis in order to remain afloat.
Publisher
University of Nairobi, Kenya