| dc.description.abstract | Finance is a key input in the development and growth of business enterprise. One of
the reasons why firms form linkages and relations with one another as well as with
financial institutions is to access credit for business growth. Credit contributes to
enterprises development in a number of ways. Access to external resources allows for
flexibility in resource allocation and reduces the impact of cash flow problems on
firm activity. Firms with access to funding are able to build up inventories to avoid
stocking out in periods of crisis, while in conditions of macroeconomic instability, use
of credit increases growth of surviving firms. A significant portion of credit in Kenya
is extended through the banking system, though there are some other institutions such
as savings and credit cooperative societies, finance companies and micro finance
institutions that provide credit, mainly targeting small and micro enterprises.
However, availability of data for the latter is very limited. The study sought to
examine the effect of business credit availability on economic growth in Kenya. A
descriptive design was selected for this study where time series data was collected
from 1980 to 2014 on GDP in local currency, private sector credit as a percentage of
GDP, bank lending rates, and industrial production as a percentage of GDP. The
analysis was done using descriptive analysis, correlation analysis and regression
analysis. The regression results showed that private sector credit had a negative and
significant effect on GDP, p < .05. The results also showed that lending rates had a
positive but insignificant effect on GDP, p > .05. Further, the results showed that
industrial production had a negative but insignificant effect on GDP, p > .05. The
study concludes that business credit availability influences economic growth while
lending rate and industrial productivity do not affect Kenya’s economic growth. This
study recommends that business credit to the private sector needs to be increased in
order to improve how it affects economic growth as higher levels of business credit
are desired in the economy. | en_US |
