Factors affecting access to credit by small and medium enterprises in kenya: a case study of agriculture sector in nyeri county

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.