The Influence of Microfinance Institutions on Performance of Small and Medium Size Enertprises: a Case of Bomet Municipality-kenya

Abstract

This paper is meant to examine the ways in which microfinance institutions contribute to the growth of small and medium size enterprises and hence poverty reduction. Specially, the paper draws on a case of Bomet municipality and the role of microfinance institutions in the development process and the access of small and medium size enterprises to formal finance, especially from the microfinance sector. A number of research priorities relating to the links among financial policy, small enterprise development and poverty reduction are identified for the immediate attention of researchers engaged in contributing to the achievement of the millennium development goal and eradicating global poverty by the year 2030. The study used simple random sampling techniques in which a total of 150 small and medium size business enterprises responded to the structured and semi structured questionnaires and interview checklist. The data collected was analyzed and results presented in percentages, pie chart and bar graphs. The current capital value and interest income were used to determine the impact of microfinance institutions on performance of small and medium size enterprises before and after the acquisition of form of credit. The study confirmed that 87% of small and medium size enterprises accessed financial credit and 70% of them actually used them for business purposes. The study also confirmed that up to 72% had registered an increase in income even though 80% of them had not achieved their intended income growth. Faulu-Kenya Deposit taking Microfinance was the most accessible financing institution for small and medium size enterprises who sought financial support. The study confirmed that there was a relationship between financial credit and performance indicators of small and medium size enterprises