| dc.description.abstract | It is to be appreciated that SMEs and mostly manufacturing SMEs that deal with value
addition are very important in terms of employment, wealth creation, and solving many
other social problems which come with unemployment and slower economic growth.
However many problems encounter SMEs and as a result most SMEs fail before three
years after their start. Given this high failure rate, it becomes vital to study the impact of
credit policy on financial returns of manufacturing SMEs. This is to gather more insights
that can ensure that SME survive, grow and play their expected role in economic growth
and development. Therefore, this study sought to determine the effect of credit policy on
profitability of manufacturing SMEs in Nairobi County.
The study adopted a descriptive research design. The target population was all the
manufacturing in Nairobi County from which 50 SMEs were sampled. The study used
secondary data which was obtained from SMEs financial statement for five years from
2009 to 2013. Multiple regression analysis was used to analyze data. The significance of
the results was tested using using t-test, z tests and the ANOVA.
The study found that credit policy is positively related to manufacturing SMEs
profitability with a coefficient of correlation of 0.83 and coefficient of determination of
0.69. Credit policy was also found to have strong positive relationship with growth in
sales as shown by coefficient of correlation of 0.896 and R
thorough credit appraisal to ensure reduced costs of bad debts and debt administration
costs. The government and policy formulators should come up with ways of reducing
cost of financing to ensure that manufacturing SMEs are able to finance receivables since
the lower the cost of financing, the higher the credit sales hence increase in sales and
profitability. | en_US |
