The Effect of Leadership on Small and Medium Sized Enterprises Debt Management: a Case of Kandara Town

Abstract

The study sought to establish the effect of leadership on SME’s debt management. Leadership has been measured using leadership skills, styles and ethics in leadership. The study was conducted to establish the effect of leadership on SMEs debt management at Kandara town. Over the years, a great deal has been written about leadership, with particular emphasis being paid to identifying the core traits and personal characteristics of effective leaders. However, there still remains scarcity in the studies conducted locally, particularly on the SME sector. Moreover, there is no consensus on the exact relationship that exists between leadership and debt management in spite of the high SME failure rate and importance in the country has been established. The study adopted the descriptive research survey design. Population of the study consisted of small and medium enterprises in Kenya. Due to the size and dispersion of this target population, the study was limited to small and medium enterprises within Kandara town. This entailed a total of 187 SMEs in Kandara town as per the Murang’a County Integrated development plan (2013 – 2017). The study adopted simple random sampling to obtain 30% of the study population. This totaled to 56 SMEs; these SMEs were studied. The study used entirely primary data which was collected through use of structured questionnaires with both close ended and open ended questions. The questionnaires were organized into sections, each section addressing the specific research question. They were administered by drop and pick method. To enhance reliability and validity, the questionnaire was pre-tested on 10 respondents who were selected using purposive sampling from SMEs in Nairobi County. The qualitative data from the open ended questions was analyzed using content analysis because the focus was be on interpretation of the results rather than quantification while quantitative data from the close ended questions was entered into statistical package for social sciences (SPSS) version 23 and analyzed through the use of descriptive statistics which included frequencies, percentages, standard deviation and arithmetic mean. Correlation and multiple regression analysis were used to show the relationship between the study variables. The study found that leadership skills, leadership styles and leadership skills had significant effect SMEs debt management. Leadership was found to have significant positive effect on the SMEs debt management. The leadership skills which were crucial in improving SME debt management included communication skills, financial planning, listening to others views, and negotiation skills. The study concludes that leadership has significant positive effect on SMEs debt management at Kandara town. Therefore, effective leaders will lead to improved SME performance in terms of debt management. Today’s organizations need effective leaders who understand the complexities of the rapidly changing global environment. For small businesses to prevail, they need practitioners with knowledge, skills, and education appropriate for their operations. The study therefore recommends that the government and development partners to regular conduct leadership training workshops on SMEs leaders. This can be done by through the County governments so as to reach SMEs leaders in rural areas. The training should cover personal leadership and financial management, record keeping.