Factors Affecting Credit Access Among Small and Medium Enterprises in Murang’a County

Abstract

Small and medium enterprises (SME's) play a very significant role in the economy of any country.They provide employment and improve the standard of living of individuals-both the employers and employees. They are a major source of entrepreneurial skills and innovations; the objective of this study was to identify factors that influence credit access by SMEs in Murang’a county. This study was intended to be of great importance to individual entrepreneurs, potential investors, lending institutions, and the county government of Murang’a to facilitate enabling credit policies and other researchers. The target population was 1020 SMEs operating in Murang’a. The study used stratified random sampling and then applied the simple random sampling to select respondents from the selected stratas out of which 102 respondents were selected. Data was gathered using questionnaires. The data collected was subjected to factor analysis and regression analysis was carried out to establish the relationship between the identified factors and credit uptake. It was then presented in tables and graphs. From the study, it emerged that number of lending institutions, interest charged on loans, collateral security and literacy levels are the most significant factors that affect access to credit among SMEs in Murang’a. The study recommends that: informal borrowing they should be discouraged through trainings, There was need to seek alternative means of collateral security, there is need to continuously educate SMEs on how to manage finances, prepare books of account, prepare income and expenditure statements and how to prepare budgets. The researcher also recommends that the number of lending institutions can be increased by formation of SACCOs for different categories to improve the level of financial deepening.