JUDIE 2.docx - FACTORS DETERMINING SMALL AND MEDIUM ENTERPRISE IN ACCESS TO FINANCE IN KENYA IN NYERI COUNTY NJARAMBA JUDIE WANGECHI Admission No A

JUDIE 2.docx - FACTORS DETERMINING SMALL AND MEDIUM...

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FACTORS DETERMINING SMALL AND MEDIUM ENTERPRISE IN ACCESS TO FINANCE IN KENYA IN NYERI COUNTY NJARAMBA JUDIE WANGECHI Admission No. A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DIPLOMA IN PURCHASING AND SUPPLIES MANAGEMENT TO THE KENYA INSTITUTE OF MANAGEMENT OCTOBER, 2017 Page 1 of 69
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DECLARATION Declaration by the student This research project is my original work and has not been presented to any other examination body. No part of this research should be reproduced without my consent or that of The Kenya Institute of Management. Name ______________ Sign ____________________ Date _____________ Admission Declaration by the supervisor This research project has been submitted for defense with my approval as The Kenya Institute of Management Supervisor. Name____________________Sign ____________________Date _____________ Lecturer supervising For and on behalf of The Kenya Institute of Management Name _______________________Sign ___________________ Date _____________ Branch Manager – Nairobi Branch Page 2 of 69
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ACKNOWLEDGEMENT My humble gratitude to Almighty God for giving me the strength to work hard; I am indebted to my supervisor ………………… for his professional guidance during the various stages of this research project. In addition, I am grateful to University of Nairobi for granting an opportunity to pursue Masters of Business administration specializing in Finance. Finally, I want to appreciate the support and sacrifice by my family especially my daughter Shanice and son Ethan during the study period. Thank you. Contents Page 3 of 69
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DECLARATION ......................................................................................................................................... 2 ACKNOWLEDGEMENT ........................................................................................................................... 3 ABSTRACT ................................................................................................................................................ 5 CHAPTER ONE .......................................................................................................................................... 6 Introduction ............................................................................................................................................. 6 1.1 Background to the Study .................................................................................................................... 6 1.1.1 Access to Credit .................................................................................................................................. 7 1.1.2 SMEs growth ...................................................................................................................................... 9 1.1.3 Credit access and SMEs growth ........................................................................................................ 10 1.1.4 Small and Medium Size Enterprises in Nyeri County ....................................................................... 10 1.2 Statement of the Problem ..................................................................................................................... 11 1.4 Value of the Study ................................................................................................................................ 13 CHAPTER TWO ....................................................................................................................................... 14 REVIEW OF LITERATURE ................................................................................................................. 14 2.1 Introduction ..................................................................................................................................... 14 2.2 Theoretical Review .............................................................................................................................. 14 2.2.1 Financial Inclusion Theory ............................................................................................................... 14 2.2.2 Imperfect Information Theory .......................................................................................................... 16 2.2.3 Financial Intermediation Theory ....................................................................................................... 16 2.3. Determinants of credit access ............................................................................................................. 17 2.3.1. Interest charged ................................................................................................................................ 18 2.3.2. Collateral security ............................................................................................................................ 18 2.3.3. Number of financial institutions ...................................................................................................... 18 2.3.4. Literacy level ................................................................................................................................... 18 2.4 Empirical Review of the Literature ...................................................................................................... 18 2.5 Conceptual Framework ........................................................................................................................ 25 Figure 2.1 Conceptual Framework ..................................................................................................... 25 2.6 Summary of the Literature ................................................................................................................... 25 CHAPTER THREE ................................................................................................................................... 27 RESEARCH METHODOLOGY ........................................................................................................... 27 3.1 Introduction ..................................................................................................................................... 27 3.2 Research Design .................................................................................................................................. 27 3.3 Population ............................................................................................................................................ 27 3.4 Sample ................................................................................................................................................. 27 3.5 Data Collection .................................................................................................................................... 29 3.6 Data Analysis ....................................................................................................................................... 29 CHAPTER FOUR ..................................................................................................................................... 31 DATA ANALYSIS RESULTS AND DISCUSSSION ............................................................................ 31 4.1 Introduction ................................................................................................................................. 31 Page 4 of 69
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4.2 Response Rate ..................................................................................................................................... 31 4.3 Background Information ...................................................................................................................... 32 4.3.1 Age of the Respondents .................................................................................................................... 32 4.3.2 Marital Status .................................................................................................................................... 32 4.3.3 Business Experience ......................................................................................................................... 32 4.3.4 Business Ownership .......................................................................................................................... 32 Figure 4.1 Legal Business Ownership ............................................................................................... 34 4.3.4 Number of Employees ...................................................................................................................... 34 4.3.5 Start-up Capital ................................................................................................................................. 34 Table 4.2 Amount of Start-up Capital ................................................................................................ 35 4.4 Pilot Results ......................................................................................................................................... 35 4.4.1 Reliability Analysis ........................................................................................................................... 35 Table 4.3 Reliability Analysis .................................................................................................................... 35 4.4.2 Validity Analysis ............................................................................................................................... 36 4.5 Descriptive Statistics ........................................................................................................................... 36 4.5.1 Collateral Security and Access to Credit ....................................................................................... 36 4.5.2 Interest Rate Charged and Access to Credit .................................................................................. 37 4.5.3 Literacy Level and Access to Credit ............................................................................................. 38 4.5.4 Number of Lending Financial Institutions and Access to Credit ...................................................
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