The effect of funding constraints on the growth of small scale enterprises in soapstone industry of Kenya.

Abstract

The main objective of this study was to investigate and assess the effect of funding constraints on the growth of small scale enterprises in soapstone industry of Kenya. The problem stems from the lack of access to funding for small scale enterprises hence the need to analyze these small scale enterprises financial requirements against the availability of the funding institutions and the funding constraints (in terms of land title deeds; opening of accounts, an surety). The researcher endeavored to identify the funding constraints for the soapstone industry operators and the possible skills required for one to be a soapstone industry operator. In this regard research design was used to examine and describe the relationship and associations between types of funding and the small scale enterprise development. The targeted population was estimated 1,200 small scale enterprise soapstone operators whose characteristics were grouped into age bracket, type of business and education level. Systematic random sampling procedure was employed to select the respondents to represent the larger population. The instruments used to collect data were the questionnaires, interview schedules and observation forms. Data analysis was done using descriptive statistics and percentages. The findings indicated that the amount earned does not effectively support the growth of soapstone industry. Collateral, bank accounts and high interest rates for loans were found to inhibit access to funds. Soapstone industry was found to contribute to the Kenyan economy through improved infrastructure, employment and tax revenue to the government. The study concluded that the soapstone industry is a major source of income for SMEs and the local community and that the economy is supported by the soapstone industry in foreign exchange earnings. Based on the above findings the following recommendations were proposed. Government intervention and involvement is required to provide basic institutional structures for capacity building and build linkages with financial institutions to attract funding, there is need for collaboration and participation through partnerships at all stages of the value chains, and there should be a financial strategy implementation plan for the soapstone industry to enhance its production.