Effect of microfinance services on the growth of women owned small and medium enterprises in Ruiru Sub-county

Abstract

Women in developing economies are the highest contributors towards economic growth through the economic activities they engage in. The failure of most of these women entrepreneurs especially I in the rural and semi- urban areas is largely due to the inability to fully exploit the Microfinance Institution services offered to them. The objective of the study was to establish the effect of micro finance services on the growth of women owned small and medium enterprises in Ruiru Sub County. To achieve this objective, the study focused on three MFI services including Micro credit, Business Management Training and Group savings. Each variable was analyzed to determine its effect on the growth of SMEs which was measured in terms of percentage growth in sales. The study adopted descriptive research approach and targeted a population of 467 women owned SMEs in Ruiru Sub County. A random sample of 47 SMEs was taken, being the 10% as recommended in Mugenda and Mugenda. Questionnaires were sent and the dully filled and returned ones were analyzed using spss computer software package. Regression and correlation analysis was done. The study established that women needed collaterals to qualify for micro credit facilities, while loan application procedures were long and interest rates on micro loans were high. The study also established that business training services were offered to a very small extent, attendance was not regular and there was no follow up on implementation advisory services offered during such training. The study also established the women SME owners highly engage in group savings, that level of group savings influence the amount of micro credit given. The study also revealed that there was a strong positive correlation between group savings and growth of women owned SMEs, while there was a weak correlation between micro credit and growth of women owned SMEs and also a weak correlation between training and growth of women owned SMEs in Ruiru Sub County. The study recommended that; Microcredit should be tailored to meet specific needs of women owned SMEs so s to accept alternative collaterals and interest rate be designed to be friendly. The study also recommended that Business Management training hours be increased and regular follow up on implementation by SME trainees be made and closely monitored. Group savings should also be encouraged to improve group synergy. In summary, it was noted that most 32 (68%) of the female entrepreneurs were of the view that micro credit services were valuable, but conditions for obtaining microcredit were restrictive. They also agreed that a greater portion of their training needs are not met by MFI services due to few hours of training and lack of follow up. They agreed that group savings is a key tool in spearheading business growth.