The impact of trade credit on the profitability of small and medium enterprises: a case study of Wang'uru Town (Kenya)
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Date
2012-06
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Kampala International University, College of Economics and Management
Abstract
The study sought to establish the impact of trade credit on the profitability of SMEs in Kenya
and \\'as dri,·en by mainly three objecti,·es. These objectives include; to establish the importance
of trade credit to the profitability of SMEs ,to identify the effect of credit policy on the
profitability of SMEs, and to establish the challenges of trade credit extension by SMEs in
\Vang·uru To\\·n.
To achie,·e these objectives, the researcher sampled eighty (80) respondents in Wang·uru To\\'n.
Structured questionnaire and intervie\\' guide ,,·ere designed to facil itate the acquisition of
relc\'ant data ,,·hich ,,·as used for analysis. Descripti,·e statistics which involves simple
percemage graphical charts and illustrations \\'as tactically applied in data presentations and
analysis.
The findings of the study reveal that majority of the respondents were aware of the importance of
trade credit in the profitability of SMEs and had credit policy in place. However the SMEs did
not realize the maximum benefits offered by trade credit e:-.:tension since majority of the
entrepreneurs could not access bank credit. had low levels of education. and lacked managerial
and entrepreneurial skills.
f"hc researcher noted that the SMEs play a vital role in the economic gr0\\1h and development of
a nation and the following should be implemented: The Government should: come up with
training ccmers for training managerial and technical courses for the SMEs entrepreneurs.
establish friendly small loaning system. gl\·e more funding to microfinance institutions si nce
the: are invoh·ecl more in Sf\fEs and the,· are more in contact ,,·ith the S\1Es than the
go,·ernment. On the other hand the financial institutions should: pro,·ide seminars. "·orkshops
and training to loan applicants. encourage group-based lending. develop lenient loan policies to
indi,·idual loans so that more entrepreneurs can apply for the loan. and pro,·ide ci,·ic education
on the classt's of loans oft~red. Finall,; the \!GOs should chir in in any effort that can ha,·e a
pt)siti\e impact on the grO\\th and de,·elopmcnt ofS\IEs. sue 1 as capacity;. building and tin:mcial
::support.
Description
A research report sui3mitted to the College Of Economics and Management Sciences ln partial fulfillment of the requirements for the Award of a Bachelor’s Degree in Business Administration of Kampala International University
Keywords
Trade, Credit, Small, Medium, Enterprises