FACTORS AFFECTING CREDIT ACCESSIBILITY BY FINANCIAL INSTITUTIONS FROM MICRO AND SMALL ENTERPRISES IN KENYA: A CASE OF NYAMIRA COUNTY

Abstract

Micro and Small Enterprise (MSEs) are a strong option for Less Developed Countries (LDCs) to enable them create employment, generate wealth and reduce poverty. The biggest challenge of this development model in Kenya is that quite often than not, the MSEs die off before their second anniversary. One of the biggest constraints is their inability to access credit to boost their sustainability and survival. This study looked into the factors affecting accessibility to credit by MSEs in Kenya, a case study of Nyamira County. The specific objectives were; to determine the effect of collateral on credit accessibility by MSEs; to assess the effect of savings on credit accessibility by MSEs; to establish the effect of entrepreneurial behavior on credit accessibility by MSEs; and to analyze the effect of education and training on credit accessibility by MSEs in Nyamira County. The theoretical framework guiding this study was resource-based theory because credit is seen as additional financial resource to an enterprise. The methodology involved a descriptive survey design. The target population comprised of 74 MSEs sampled randomly from three markets in Nyamira County. Questionnaires were used to collect primary data and collection of relevant secondary data regarding MSEs was from the records of the County office in charge of markets. Data was analyzed using descriptive and inferential statistics, using SPSS version 17. Data presentation was done mainly using tables. The study established that, all the factors studied had varying effects on credit accessibility with savings having the highest effect and education level of customers with least effect. The study recommended that lending institutions should reduce the barriers to credit accessibility for overall economic development, the application of the concept of social business in Kenya, where the free market forces will direct capitalist resources to benefit enterprise development among the poor and also MSEs to use IT in their operations for efficiency and effectiveness. Furthermore, it recommended that MSEs should train their employees in customer care skills, in order to retain their customers as well as extend their market share.