Factors determining the performance of micro and small enterprises in Kenya: a case study of ngong' Division, kajiado district

Abstract

Micro and Small Enterprises (MSEs) playa crucial role in the development of the Kenyan economy. The sector is not only a major source of employment, goods and services, but also plays a significant role in promoting competition, innovation and enhancing enterprise culture which are necessary for private sector development and industrialization. However most MSEs in Kenya are not able to generate permanent and highly remunerative jobs, have high mortality rate and only a few graduate to medium and large-scale enterprises with high value added products that can compete with internationally produced goods. The main objective of this study was to determine, model and estimate the statistical significance of the institutional factors that influence performance of the Micro and Small Enterprises using a sample of 150 enterprises in Ngong Division, Kajiado District. The study employs an econometric analysis using Ordinary Least Square (OLS) linear regression analysis where profitability is used as a proxy for good performance. The study found that sex of entrepreneur, location of business, access to information, age of the business, initial capital, ownership of business and business activities have a positive and significant effect on profitability. However, job training and experience were found to be significant but inversely related to profitability. Education level of the entrepreneur, access to credit, accessibility to advisory services, formality status and membership to support group though insignificant were found to be positively related to profitability. Given the important role the sector plays in the development of the country, the study recommends provision of a conducive policy environment that enhances the growth and performance of MSEs. Specifically, this study proposes the following policy measures to promote the sector and they include: provision of affordable credit, micro leasing, business management skills, formation of membership support organizations, encouragement of females to venture into more risky but profitable businesses, improvement of access to information, promotion of marketing, product design and development, provision of infrastructure, diversifying research and development and improving the legal and regulatory framework