Abstract:
The study was being carried out to examine the relationship between interest rates and business
performance in Kenya among several SME’s in Nairobi County. The specific objectives of the
study were: To examine the trends of interest rates and business performance in Kenya, to find
out the effect of interest rates on the ease of doing business in Kenya seen through number of
SME’s growth in Nairobi County, and to determine the extent in which interest rates in Kenya
affect performance in several SME’s businesses in Nairobi County. The study was descriptive
and targeted Small and medium enterprises in Nairobi County. Data will be analyzed through
descriptive and inferential statistics. The target population of this study is 240534 small and
medium enterprises in Nairobi County, out of which 384 were sampled. Secondary data for the
purpose was collected from Nairobi County Council offices, Central Bank website and World
Bank website. Use of questionnaire as primary data was also a data collection method.
Regression analysis and correlation coefficients analysis were used to analyze the data and find
out whether there exists a relationship between interest rate spread and doing business. The
study concludes that there is a negative correlation between the trends of interest rates in Kenya
and of business performance in terms of ease of doing business. Therefore ease of doing business
is dependent on the level of interest rates charged by the banks, with a negative relationship
between the two. As the level of interest rates increase, the level of doing business by this target
group decreases, and vice versa.
