The effect of micro finance institutions services on the financial performance of micro and small enterprises in Ndia division

Abstract

Micro finance institution in Kenya offer loans, savings services and other financial services to small and medium enterprises and individuals. Microfinance institutions in Kenya operate through opening branches, traditional groups, Point of sale Devices (POS) and mobile banking. The study attempted to establish how the micro finance services affect financial performance of small medium enterprises either positively or negatively. This is because the easier it is to access credit, the higher the financial performance of the small medium enterprises. The study found that accessibility and repayment of Loans affects financial performance of MSEs positively. The easier it is to access repay Loan, the higher the financial performance of the MSEs. The study also found that increase in sales positively affects financial performance of Micro and small enterprises. The two variables under the study were not significant to the financial performance of the MSEs. This is because they explained only 72.8% of SMEs‟ financial performance. The research therefore recommends that government and other policy makers should enhance more accessibility and availability of micro credit for increased profitability and growth of MSEs. Also recommends that governments and central banks should work together for lower interest rates. The researcher suggests that further studies should be done to establish other factors that account for the 27.2% change in financial performance of MSEs.