Role of micro-finance institutions in the growth of small scale enterprises: a case study of Eldoret Town
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Date
2010-10
Authors
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Journal ISSN
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Publisher
Kampala International University, School of Economics and management
Abstract
The study assessed the role of Micro Finance Institutions (MFis) n the growth and
development of Small-Scale Enterprises (SSEs) in Eldoret Town. It sought to exp10re
the contributions that micro-finance institutions have made to assist in the growth of
small-scale enterprises and the barriers to effective micro financing. The study also
investigated the impact of MFI credit on SSEs growth using three indicators; number
of employees, monthly sales, and total value of assets. Eldoret town has about 8000
SSEs. All the SSEs operating in Eldoret town that received some form of credit from
MFis comprised the research population in this study. A questionnaire of both
closed-ended and open-ended questions was used to collect data Data were analyzed
using both descriptive and inferential statistics. The study employed a case study
design of Eldoret Municipality MFis, it targeted a population of respondents
comprising of trading, service and manufacturing SSEs which were chosen by simple
random sampling. Data were collected using questionnaires. Descriptive techniques
were used to analyze the data and correlation analysis was used to test the hypothesis.
MFI credit plays a significant role in improving the performance of the SSEs and in
fostering positive change like business expansion, opening of new branches and
introduction of new products, services and acquisition of new assets. Correlation test
results revealed that credit acquisition led to a significant increase in number of
employees, monthly sales, and total value of assets, which are used as indicators of
SSEs growth. The results however noted that high interest rates and some
preconditions to credit acquisition like group formation and collateral requirement
limited access to credit and affected the process of credit repayment.It was concluded
that MFis play a significant role in the growth and development of SSEs through
employment creation and poverty reduction. It was recommended that in order to
create more positive impact in the development and growth of SSEs, the MFis should
remove or flex some of the marginalizing preconditions, reduce their interest rates,
and intensify their auxiliary services like continuous training and supervision. The
study is expected to benefit MFis, SSEs, Government, Municipal council and
scholars.
Description
A research report presented to the school of postgraduate studies in partial fulfillment of the requirement of the Degree of Master of Business administration of Kampala International University
Keywords
Micro-finance institutions in the gr, Small scale enterprises, Kenya