Abstract:
The purpose of the study was to access factors affecting access to credit by Small and
Medium Enterprises (SMEs) from financial institutions in Kenya, a case study of Nyeri
County. The research was guided by the following objectives: to determine the influence
of firm’s characteristics on SMEs access to credit in Nyeri County, Kenya, to determine
entrepreneur’s characteristics on SMEs access to credit in Nyeri County, Kenya, to
establish the influence of financial characteristics on SMEs access to credit in Nyeri
County, Kenya.
A descriptive research design was employed to gather quantifiable information through
use of open and close-ended questions. The target population was 200 SMEs in
agriculture sector that have been in operation for more than 3 years. Stratified random
sampling was used to select a sample size of 67. Data was analyzed using descriptive
statistics and Statistical Package of Social Sciences (SPSS). Data obtained was coded
according to different variables and descriptive statistics such as frequencies, mode, mean
percentiles, variances and standard deviations was used to interpret. Tables, figures and
charts were used for analysis and interpretation of data. Pearson correlation and
regression analysis was done to determine the influence of independent variables on the
dependent variable.
The findings on firm characteristics and access to credit revealed that majority of the
respondents agreed that size of a firm and location affects access to finance and older firm
(more than 3 years) have more experiences of applying for loans than younger firms
below 3 years. Credit does not enable SMEs to meet their expansion plan.
The findings on financial characteristics and access to credit revealed that respondents
agreed that they have adequate book keeping records hence easy access to credit and
audited financial statements and lack of collateral affects access to finance. Financial
institutions are more reluctant to provide long term finance to SME’s and credit does not have a
positive effect on business performance and growth.
The findings on entrepreneur characteristics and access to credit revealed that banks
prefer women to men when issuing credit. Use of networking does not influences access,
groups/chama to financeuse of political ties and level of education / training does not
influence access to finance.
