Determinants of performance of small and micro enterprises in Kakamega Central District, Kenya

Abstract

Small and Medium Enterprises (SMEs) in Kenya have not performed creditably well and hence have not played the expected vital and vibrant role in the economic growth and development of Kenya. This situation has been of great concern to the government, citizenry, operators, practitioners and the organised private sector groups. Often, the governments at various levels through budgetary allocations, policies and pronouncements have signified interest and acknowledgement of the crucial role of the SME sub-sector of the economy and hence made policies for energizing the same.

The purpose of this study was to establish the determinants of performance of small and micro enterprise sin Kakamega Central District, Kenya. The study had the following objectives: to examine how financial factors influence the performance of small and micro enterprises in Kakamega Central District; to establish how socio-cultural factors influence the performance of small and micro enterprises in Kakamega Central District; to determine how personality factors of the entrepreneur influence the performance of small and micro enterprises in Kakamega Central District and to establish the influence of environmental factors on the performance of small and micro enterprises in Kakamega Central District.

The study employed descriptive survey research design whose purpose was to determine the determinants of performance of small and micro enterprises in Kakamega Central District, Kenya. The sample size consisted of 100 SMEs obtained from a total population of 1,500 registered SMEs under Single Business Permit. The respondents were selected through simple random sampling techniques and the businesses were categorised through stratified random sampling. The research instruments used were the questionnaire and the interview schedules. The questionnaire contained open ended questions that required respondents to give descriptive answers and closed ended questions that required a definite answer. On validity of the instruments, the researcher used content validity while through pilot testing process was used to test reliability of the questionnaires using Cronbach's alpha coefficient which yielded a = 0.79.

The study findings indicated that the performance of a business is largely influenced by its financial base and correlation results proved that inadequate financial base negatively and significantly influenced the performance of SMEs in Kakamega Central District; social-cultural factors though positively influenced the performance of SMEs, their influences were low; personality factors had positive insignificant correlations on the performance of SMEs, an implication of low influence of personality factors on the performance of SMEs and results on the environmental factors significantly and negatively influenced the performance of SMEs.

The following recommendations were made: the government should tackle accelerated development and upgrade of rural/urban road and rail network, insecurity, water and air transport system and other infrastructural facilities head on and review tariff in favour of local manufacturers; the government should reduce the tax rate for SMEs to zero percent (0%) within their first three years of life and then to 20% from the fourth year and beyond. SMEs located in rural areas should enjoy 10% tax rate from their fourth year of operation.

The researcher then analysed the data and presented the results in form of frequency tables. The government should through its business development services provide support in the areas of capacity building and skills upgrade and identification of sources of funds with attractive interest rates. The findings of this study may be useful to the Ministries of Gender and Social Services officials, Trade, academicians and researchers in their improvement of policies and practices on SMEs.