| dc.description.abstract | The development of small scale enterprises (SME) has been identified as one of the strategies
for generating industrialization, employment generation and poverty reduction. This is as a
result of the recognition of their role in socio-economic development as a means for
generating sustainable employment and income in most developing countries, Kenya
included. This means that the sustenance of the SMEs is of paramount importance to the
improvement of livelihood of a critical mass of the population in the country. One way of
ensuring the sustenance of the SMEs is through the provision of capital for investment in
form of affordable credit facilities. Available firm-level data collected by the World Bank
show that access to finance is one of the main obstacles to SMEs doing business in most
developing countries. The limited access to finances, researchers allege had led to the
collapse of an appreciable number of the SMEs. None the less, researchers acknowledge that
mainstream banking institution appreciate that SME sector has one of the fastest growth rates
and have always been willing to invest in them. Thus, over the last ten years or so, it is
alleged that mainstream banks have begun to embrace SMEs as an important business partner
slowly edging aside micro financial institutions as SMEs source of credit. However, there is
limited empirical data on factors that have precipitated the turnaround in the perception of the
mainstream banking sector towards financing of SME sector. Specifically, data on the extent
and influence of these factors on the involvement of mainstream banks in the financing of
SMEs projects in developing countries in general and Kenya in particular are almost nonexistent.
This study therefore sought to review the involvement of mainstream banks in
financing of SMEs sector in Kenya with specific focus of Diamond Trust bank in an attempt
to contribute in bridging the existing knowledge gap. A case study research of Diamond Trust
Bank was designed to help seal this research gap by assessing the factors influencing the
involvement of banks in financing SME projects. A census survey of the 47 out of 57 bank
officers in charge SME programs in the country was undertaken with the 3 being involved in
a prior pilot study to pre-test the research instrument. Data was collected using selfadministered
questionnaires to branch managers, credit managers and asset finance manager.
Data obtained was analysed both quantitatively using descriptive statistics and inferentially
with the aid of Statistical Package for Social Sciences (SPSS) version 20 computer software.
Specifically, descriptive statistics in the form of frequencies, percentages, mean and standard
deviation were used to show various relevant distributions while the relationship between the
parameters was tested using Multiple Linear Regression (MLR). Results showed that the
factors such as profitability (mean = 4.5319; SD= 0.61218), competition (mean = 4.5036;SD
= 0.6074), public image (mean =4.0532; SD = 1.0085) and customer turnover (mean =
4.3298;SD= 0.7506) obtained very high mean rating indicating that they had an influence on
the bank’s involvement in financing of SME projects. Results from regression analysis
showed that profitability (β = 0.287) and public image (β= 0.118) have a positive influence
on the banks involvement while competition (β= -0.158) and customer turnover (β= -0.392)
influenced it negatively. Further, the results showed that the influence due to profitability,
competition and customer turnover were significant (p<0.05). It is therefore recommended
that the bankorganize training and workshops for customers to understand SME banking
products, include well-versed SME banking board members and enhancethe bank’s SME
customer service mechanism. Similarly, the negative influence of competition and customer
turnover on the bank’s involvement in financing of SME projects imply that the bank should
strategize on how best to strategically position itself to tap into the SME sector’s rich market. | en_US |
