The Relationship Between Microfinance Services and the Financial Performance of Smes in Nandi District

Abstract

The purpose of this study was to determine the relationship between microfinance services and the financial performance of SMEs in Nandi County. Despite the apparent success and popularity of microfinance, no clear evidence yet exists that microtinance development have positive impacts. While there are tales and other inspiring stories purported to show that microfinance can make a real difference in the lives of those serv ed, rigorous quantitative evidence on the nature, magnitude and balance of microfinance impact is still scarce and inconclusive (de Aghion and Morduch. 2010). The causal research design was used to carry out this study. The target population of this study was all the medium and small enterprises in Nandi County. These arc the enterprises that deal with agricultural and other related activities that are registered and have a physical office in Nandi County. The simple random sampling method was applied to select a sample of 53 SMEs. The study used both primary and secondary data. Primary data was collected using semi-structured questionnaire to the owner/managers of the selected SMEs. Secondary data was taken from articles and from small and medium size enterprises, as well as website of major MFIs in the region: Faulu Kenya and Kenya Women finance Trust. The study utilized the SPSS software Version 18 to do the analysis as this involved quantitative analysis. A regression analysis w'as also performed on the variables to determine whether microfinance services have an effect on performance of SMEs in Nandi County.