Factors Affecting Financial Performance of Small and Medium Enterprises (SMEs): A Case of Manufacturing SMEs in Kenya

Abstract

Small and Medium Enterprises (SMEs) do play a vital role in various economies across the world. SMEs in Kenya not only have a share in Kenya’s Gross Domestic Product (GDP) but also constitute a larger portion of Kenya’s employment openings. For longevity of SMEs in Kenya, the financial aspect cannot be ignored. Technology and human capital cannot be ignored either since it is out of well-trained work force that Research and Development (R&D) can be conducted in support of innovation related activities and outcomes which largely support the technological aspect of a firm. The study applies Descriptive research whereby data collected was analyzed using regression analysis that confirmed econometric least square model of the study. The study has confirmed a direct relationship between SMEs financial performance and the independent variables; bank credit, technological costs, GDP, growth in number of SMEs and employee costs. The study is highly recommended for use by stakeholders in SMEs and Government of Kenya in efforts to ensure external financing is available to SMEs.