Influence of credit reference bureaus on access to credit by small and medium enterprises in Kitale munipality, Trans-Nzoia county

Abstract

The Credit Reference Bureaus (CRBs) were introduced into the banking industry by the Central bank of Kenya in order to ascertain the credit worthiness of customer for loans. Thus, in Kenya, access to credit has in the past been complicated due to stringent conditions imposed by commercial banks and credit providers. This study therefore sought to establish the influence of CRBs on access to credit by small and medium enterprises in Kitale Municipality, Trans-Nzoia County. The study was guided by the following objectives: to investigate how credit reference bureaus policies, influence access to credit facilitates by SMEs; to investigate how CRBs procedures influence access to credit facilities by SMEs; to determine how financial base of CRBs influence access to credit facilities by SMEs; to establish how the nature of CRBs influence access to credit facilities by SMEs. It was hoped that the findings of the study would give valuable information to institutions within the Ministry of Finance, Attorney General office and Ministry of Trade that are directly linked to SME‟s on how CRB‟s were perceived by the SMEs. The study utilized a descriptive survey design. The target population comprised of 500 SME‟s registered with Kitale Municipal Council. Respondents were grouped in strata of Small and Medium enterprises owners‟ and Kreijcie and Morgan formula was used to determine a sample size of 289 SME‟s. Random sampling technique was used to get the intended respondents in each stratum. Data was collected by use of questionnaires. Piloting of the study was carried out in the neighboring Eldoret Municipality to ascertain the validity and reliability of the instruments. Data analysis included the use of descriptive and inferential statistics. Descriptive statistics involved the use of frequency tables, percentages. The findings revealed that the CRBs have policies that guide their operations and that the Policies of CRBs have great influence on their daily operations however, many lenders do not know that there are policies that guide their access to credit facilities .This accounted for 55% of the respondents. On the hand the lack of knowledge on application of procedures may have led to frustrations on access of credit facilities as many may think nothing is happening or that it‟s taking too long to access credit. This was as shown by 37% of the respondents. On the financial base 20% of the respondents did not know the influence of the financial base to credit facilities. A further 24% disagreed that the nature of CRBs influenced access to credit facilities. The researcher recommended that the procedures be clearly explained to the clients to enable decision making on whether they were willing to go on with the process; the CRBs should ensure they have a sound financial base to ensure that they are buffered financially in case of defaulting by the SMEs. And that the legality of the CRBs should be displayed at all times for ease of client view and understanding.