Eefects of Microfinance Services on the Financial Performance of Small and Medium Scale Enterprises in Elgeyo Marakwet

Abstract

SMEs play a crucial role in the social, economic development across the globe. However, the growth of these enterprises is constrained by various challenges such as insufficient resources, poor financial and managerial skills, and other factors. Microfinance institutions have emerged to offer solutions to the SMEs to enable them record good financial performance. In Elgeyo Marakwet County, the microfinance services have become crucial for the SMEs. However, based on the existing evidence, limited research has focused on the role of MFIs on SMEs. Therefore, this study sought to determine the role of microfinance services SMEs in Elgeyo Marakwet. The study sought to determine how microfinance lending services, savings services, and training services affect SMEs performance in Elgeyo Marakwet County. A descriptive research design was used in this study. The target population included all the SMEs in Elgeyo Marakwet. The sample size comprised of 237 SMEs selected from various sectors. Primary data was collected using questionnaires while secondary data was collected from existing business records, business journals, and other relevant publications. The data was analysed using SPSS. The descriptive analysis helped to give a description of the respondents and the businesses. Inferential analysis on the other hand was used to determine the relationship between the independent variables and the dependent variables. This was done using regression analysis method. Based on the analysis, microfinance services explain 752 % variation in the performance of the SMEs in Elgeyo Marakwet as indicated by R2 = 0.752. Micro lending services had statistically significant contribution to SMEs performance as the p value obtained (Sig.=0.001) is less than 0.05. This implies that the more the SMEs seek loans from the MFIs the higher the chances of the businesses to record good performance. Micro savings services had statistically significant contribution to SMEs performance as the p value obtained (Sig.=.038) is less than 0.05. This implies that the more the SMEs embrace the MFIs savings the higher the chances of the businesses to record good performance. Microfinance training services had statistically significant contribution to SMEs performance as the p value obtained (Sig.=017) is less than 0.05. This implies that the more the SMEs owners undergo the training the higher the chances of the businesses to record good performance. Based on the analysis, the study recommended the MFIs to educate the SMEs and increase awareness on the importance of taking the microfinance loans in order to expand their businesses. The MFIs are also recommended to embrace and increase savings and to intensify their training program in order to benefit the SMEs.