Abstract:
SMEs have been recognized as being great contributors to the Kenyan economy offering both
employment and platform for innovative ideas. They form a larger percentage of the businesses
that operate in Kenya as compared to their counterpart, the large companies. They are however
faced by many constraints that hinder their performance and consequently their growth. One of
the main constraints that have been highlighted over the years is the financial constraint. The
need for finance is of paramount importance for the success of any firm, be it big or small. The
purpose of this research was to investigate the factors that influence SMEs’ access to funding.
The literature explored in this research highlight three main factors, namely firm’s, financial and
entrepreneurial characteristics. These form the independent variables in the theoretical
framework that influence the dependent variable, that is, access to external funding. The analysis
involves primary data obtained through questionnaire and interviews and secondary data from
journals, books and internet.
This report contributes as a wake up call to the financial system to be more and more SMEs’
sensitive and offer financial services that are all inclusive. The financing gap, in the credit
market, that exists between large and small companies need to be abridged. This can be achieved
by creating an enabling environment for SME, formulating regulatory framework that is SMEs’
friendly, segmenting NSE for SMEs’ listing. SMEs are also called up to keep good financial
report and to form linkages or associations to ease the burden of accessing funds
