Relationship Between Microcredit and the Growth of Small and Medium Enterprises in Kenya

Abstract

ABSTRACT The accessibility of credit by SMEs is usually considered as an important factor in the growth of SMEs. Credit helps SMEs improve their income levels, alleviate poverty and create job opportunities. This study sought to evaluate the relationship between microcredit and the growth of SMEs in Kenya. To achieve this objective, the study employed a correlation research design. Data was collected using a semi-structured questionnaire from SMEs in Nairobi County. A total of 50 questionnaires were administered to various SMEs but the researcher managed to obtain 48 completed questionnaires representing a response rate of 96% .The researcher adopted a dropand –pick-later approach where questionnaires were issued in the morning and picked in the evening to allow the respondents to complete the questionnaires. The collected data was edited, coded and entered for analysis using the Statistical Package for Social Sciences (Version 17.0) computer package. Both descriptive and inferential statistics were used. The research findings revealed that there was a very strong positive relationship (R= 0.852) between the variables. The study also revealed that 72.7% of demand for growth in SMEs could be explained by use of microcredit. From this study it was evident that at 95% confidence level, the variables produced statistically significant values and could be relied on to explain growth in SMEs as a result of microcredit. Growth in SMEs was evident in terms of increased employees and entity’s total equity. The research findings were presented in pie charts, bar graphs, and tables for clarity. The findings of this study will be of great use to the government, lending institutions in formulating microcredit policies so as to promote the microcredit in Kenya.