The Effects of Financial Services on Investment Decisions of Small and Medium Size Enterprises in Bomet County, Kenya

Abstract

Among the sectors of any economy, SME’s sector has been found to be the most effective engine of development in terms of employment creation and contributions to GDP. It spurs economic growth and plays a huge role in poverty eradication. Kenya, among many countries in both the developed and the developing world have started to give more prominence to the SME sector and are therefore putting in place supportive infrastructure to ensure the expansion and success of this sector. Many studies have been carried out on the topic of financial services and SMEs growth, profitability, and/ or performance, but none has been done on the effects of financial services on the investment decisions of SMEs. Therefore the purpose of this study was to find out the effects of financial services, namely: credit services, deposit and savings account services, and training, had on the investment decisions of SMEs in Bomet County, Kenya. The study employed descriptive research design and questionnaire was used as the main instrument of data collection. The researcher worked with a sample of 100 SMEs drawn from a population of 1,008 businesses licensed by the county government of Bomet. Data was analysed using both Excel and the Statistical Package for Social Sciences (SPSS) where patterns and relationships were established. A response rate of 74% was achieved which was then subjected to analysis. The multivariate regression model used established that each of the independent variables had a positive influence on the investment decisions of SMEs in Bomet county with credit services showing a comparatively higher effect. The ANOVA carried out showed that there is a positive correlation among the variables, but that the relationship was not significant enough to explain the variation. A recommendation is made that further studies be carried out on this topic preferably on a wider scale to allow for comparability and generalization of the findings.