Factors influencing access to finance among enterprises in the cultural and creative sector in Nairobi County, Kenya
Ogutu, Erick Otieno Jean
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Businesses within the Cultural and Creative Sector (CCS) are credited with contributing substantially to the economies of many countries worldwide to the extent of being described as the next frontier for economic growth through creating jobs and contributing to tax revenue. Whereas Kenya’s regulatory framework for the broader segment of Micro, Small and Medium Enterprises (MSMEs) is in place and interventions by public, not-for-profit and private sectors well established, little focus has been placed on facilitating the growth of cultural and creative enterprises which have mostly remained small-sized and informal. This study seeks to investigate the influence of business owner attributes, firm characteristics and exogenous factors on access to finance by cultural and creative sector enterprises. Using descriptive survey research design, the study targets research on a sample of 215 simply randomly selected firms in Nairobi City County, Kenya. Data analysis is objective based while analytical techniques range from descriptive frequencies to inferential statistics. Results show that, mobile money and SACCOs had the highest success rates (above 94%) of access to financial services for creative sector enterprises in Nairobi even though they were the least preferred. Creative sector enterprises preferred commercial banks whose success rate of access to financial services was low at 25%. CCS enterprises seek financing mostly to innovate on products through research (M=4.00, SD=1.04), to digitize operations such as sales (M=3.89, SD=1.35), marketing and communication (M=3.77, SD=1.08). The greatest constraints to access to finance in the creative sector were high interest rates (M=4.44, SD=1.009), cumbersome funding requirements such as collateral (M=4.14, SD=2.877) and lack of be-fitting credit product (M=3.77, SD=1.432). Key challenges facing CCS the firms include investors not understanding the creative sector (M=4.53, SD=0.964), lack of supportive policies such as intellectual property protection (M=4.24, SD=0.887), lack of IP collateral tools (M=4.04, SD=0.882). The probability of cultural and creative sector enterprises accessing finance in commercial banks decreases by 0.076 among younger business owners, increases by 0.012 among businesses that have operated for longer and increases by 0.194 for managers with a lengthy business experience and good business networks (ceteris paribus for each variable). The probability of access to finance within SACCOs increases by 0.024 among businesses that have operated for longer and, ceteris paribus, by 0.133 among businesses whose owners had entrepreneurship training. Access to finance among informal savings groups (chamas) decreases by 0.036 among businesses with higher duration of operation in the creative sector and also, separately, increases by 0.415 among businesses whose owners have entrepreneurship training. Registration status of the business was critical with access to finance within commercial banks, SACCOs and informal savings groups (chamas) increasing by 8.7%, 36% and 67%, respectively, if the business was registered. Favorable financial services provider (FSP) policy on CCS financing, ceteris paribus, increases the probability of access to finance within commercial banks and SACCOs by 7.5% and 14.5%, respectively. In conclusion, there is a desirable mix of individual attributes, business characteristics and exogenous factors which, if addressed, would increase chances of access to finance for majority of CCS businesses in Nairobi. These attributes include years of experience (the more the better), access to technical training in CCS business, access to business networks as well as having the owner register their creative enterprise to formalize business operations to increase access to finance.