The Effect of Microfinance Services on Financial Performance of Small Medium and Enterprises in Narok County

Abstract

The main purpose of the study sought to investigate the effect of microfinance services on financial performances of SMEs in Narok County. The study was guided by specific objectives as follows: to determine the significance of microfinance services on promoting SMEs growth; to find out the contribution of microfinance services on facilitating SMEs access credit; to analyse the effect of lending rates of microfinance institutions on financial performance of SMEs and to determine the effect of small frequent deposits to microfinance institutions on financial performances of SMEs in Narok county. The study adopted a descriptive research design. The study target population was 93 selected enterprises. Structured questionnaires were used for data collection. The completed questionnaires were reviewed and edited for accuracy, consistency and completeness. The responses were then coded and entries made into Statistical Package for Social Science (SPSS version 20). The data was analysed using descriptive statistics, such as mean scores, percentages and standard deviations. Regression and correlation analysis was applied to show the relationship between variables. The study findings established that the existence of MFIS services has contributed to the development of SMES; the provision of credit has increasingly been regarded as an important tool for raising the incomes of youths, mainly by mobilizing resources to more productive uses; making credit more accessible, the rates for borrowing and the lending rates have been lowered at fair rates for easy access and availability to credit hence the financial performance of the SMEs is increased and the promotion of SMEs and, especially, of those in the informal sector is viewed as a viable approach to sustainable development because it suits the resources in Narok County. The study recommended that basic business skill training should accompany the provision of micro loans to improve the knowledge of the poor to use these funds in growth of their enterprises; MFIs should addresses capital investment decisions, general business management and risk management in Narok County; policies should be placed to regulate the growth of SMEs in the region and provide support for the starting entrepreneur; MFIs should develop practical strategies and approaches in implementing and supporting the bold ambition of reducing poverty in Narok County; microfinance services in its entirety should report effect on savings, income and investments alongside non-financial study specifically investigating these aspects and MFIs should also consider the performance of the business before allocating money to the business owners.