The effect of micro-finance service on the growth of small and medium enterprises in Kajiado County

Abstract

The Small and Medium Enterprise (SME) sector has continued to play an important role in Kenyan Economy. Promotion of Small and Medium Enterprises (SME) sector in Kenya is a viable and dynamic strategy for attaining the national goals which includes employment creation, balanced development between sectors and poverty alleviation. All these form the foundation of strong national industrial base and domestic production structure that are very central to our government‘s vision to achieving newly industrialized country status by the year 2020 (sessional paper No.2(1996). Small and Medium Enterprises (SMEs) is an important sub sector for the Kenyan economy like many other developing countries since it employs about 85% of the Kenyan workforce. Various studies have been done in Kenya on SMEs and how they are influenced by microfinance services but none had focused on the effects of microfinance services on the growth of the SMEs. The main objective of this study was to find out the effects of microfinance services on the growth of Small and Medium Enterprises in Kajiado County. A quantitative descriptive design was used to study 9 types of business categories in Kajiado County. The study was on dependence and independence relationship. A multiple regression analysis was used. A partial correlation analysis was applied to determine the relative importance of each of the four variables; microcredit, micro insurance, training and micro saving, with respect to the effects of microfinance services on the growth of SMEs. The ANOVA analysis was used and intended to investigate whether the variation in the independent variables explains the observed variance in the outcome – in this study the annual growth in turnover. The findings of the regression analysis conducted established that the independent variables had a positive correlation with the dependent variable. ANOVA findings in this study showed that there was correlation between the predictor variables (Microcredit, Micro insurance, Training provided by MFIs and Micro savings) and response variable (Annual growth in turnover) since P- value of 0.001 is less than 0.05. This indicated that there was a strong positive relationship between the study variables.