The Relationship Between Business Enviroment and Financial Performance of Small, Micro and Medium Enterprises (Smes) in Nakuru County

Abstract

Most countries in the world depend on the operations of Small, Micro and Medium Enterprises as they play an important role in terms of employment and economic growth. Most people in Kenya depend on Small and Medium Enterprises (SMEs) for employment and economically prosperity, however with the limited support extended to SMEs most are unable to operate sustainably to meet the needs of the growing markets. The purpose of the study was to identify the relationship between business environment on financial performance by SMEs in Nakuru County. The study was guided by four objectives which included: relationship between the level of financial access on financial performance of SMEs, relationship between level of registration process on financial performance of SMEs, relationship between level of financial education and training on financial performance of SMEs and relationship between level of innovativeness on financial performance innovativeness of SMEs. The study was guided by three theories that is Perking Order Theory, positive accounting theory and decision usefulness theory. Descriptive survey design was adopted as the study design while systematic random sampling was used to sample the SMEs in Nakuru East and Nakuru West Sub counties. From a target population of 200 Small and Medium entrepreneurs, a sample of 133 was subjected to the research. Data was collected using questionnaire method. Data was analysed using both descriptive and inferential statistics with the help of IBM SPSS Statistics version 21. Descriptive analysis involved the use of frequencies, percentages, mean and standard deviation in order to summarize the results of the various study variables. Inferential analysis involved the application of Pearson correlation to determine the nature of relationship between the dependent and independent variables. Reliability test for this study was 0.7 hence the instrument was reliable. Three out of five SMEs are faced with shortcomings within first few months according to past surveys. The SMEs will be selected using stratified random sampling with the sample size of 200 SME in both Nakuru West and Nakuru East while the study will be adopted descriptive survey employing the use of questionnaires and interviews to collect data. Descriptive statistics is where data was analysed using percentages, frequencies, figures and tables. To establish relationship between dependent variable and independent variable, the use of statistical package for social science, data was analysed based on statistics and person’s product moment correlation co-efficient. The study findings revealed that there is need to have more emphasis on banks to provide more financing opportunities to business and ensure there is continuity in training in financial education to SMEs.