would require a reliable savings institutions to enable them maximize on their growth
opportunities .MFIS should establish effective saving programs by transforming their capabilities
to support SMEs saving services.
2.4 Empirical review
Microfinance institutions can be identified as four main types in Kenya: credit unions/member
based organizations, non-governmental micro financial institutions, formal finance institutions
and informal microfinance providers. [CITATION Mun131 \t
\l 1033 ] Describes credit unions
as members owned and governed deposit taking financial institutions that provide services only
to their members. They rely on their member saving as the main source of funds .such
institutions are supervised by ministry of finance of country and governed by their own
regulations. [ CITATION Mun134 \l 1033 ] Describes informal financial providers as groups or
individual who provide or savings in an informal setting. They can be divided into individual
providers and collective clubs or merry go rounds in Kenya known as chamas.
[CITATION Coo12 \t
\l 1033 ]
Conducted a study on the impact of microfinance services on the
growth of SMEs in Kenya. The study targeted 50 SMEs in Nairobi and established that SMEs
largely depend on microfinances for growth. A significant percentage of
SMEs was found to
access and do seek micro credit for their business .the study also established that microfinance
services have helped enterprises to change their status through growth in sales level from micro
to small to medium. Though SMEs have easy access to micro finance the study indicated that
they have no exemption from strict requirements when applying for loans. The study concluded
that microfinance services have a strong positive impact on the growth of SMEs in Kenya.
2.5 Research gap
There are various studies that have been conducted internationally and locally on micro
financing on how they influence economy and women empowerment programs.[ CITATION
Git13 \l 1033 ] Studied micro financing for low income earners .the study explained that from
11
year 2006 there has been an upward trend in borrowing, more people are taking up loans to start
small, business which are helping to create informal jobs amidst the crowding in formal sector.
He also found that people need to be educated on micro financing programs show different
business opportunities to venture into.
[ CITATION Sch14 \l 1033 ]
Disagrees implying that micro financing leads borrower to debt traps.
The problem of micro financing lies with SMEs who possess little capital ,lack of economies of
scale their business encounter low productivity that result to minimal earnings which cannot lift
the poor out of their poverty situations. This study therefore sought to fill the gap by determining
the effects of micro financing on end users who comprises of SMEs.
