Impact of development financing on financial performance of Nairobi County MSMEs

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dc.contributor.authorJama, W. H.
dc.date.accessioned2024-10-24T16:18:59Z
dc.date.available2024-10-24T16:18:59Z
dc.date.issued2024
dc.descriptionFull - text thesis
dc.description.abstractThis study sought to assess impact of development financing on financial performance of Nairobi County MSMEs. MSMEs are crucial to Kenya's economy, driving employment, GDP output, and inclusive growth. However, they face significant challenges such as insufficient financing, costly credit, and limited financial literacy. The study specifically aimed to address the following objectives: (i)examine the effect of E-lending on financial performance of MSMEs in Nairobi County, Kenya; (ii) assess the influence of collateral-free credit on the financial performance of MSMEs in Nairobi County; and (iii) determine the effect of business grants on the financial performance of MSMEs in Nairobi County. This research sought to understand the financial performance of MSMEs and assess the impact of DFIs to address these challenges. The study's insights can help policymakers and financial institutions develop tailored solutions to foster MSME growth and recovery, especially in the post-COVID-19 context. The study was anchored on Financial Intermediation Theory which helped demonstrate how financial intermediaries like Development Finance Institutions (DFIs) reduce transaction costs and enhance financial access for MSMEs. E-lending, collateral-free credit, and business grants illustrate the theory by facilitating efficient fund transfers, lowering financial barriers, and supporting MSME growth. It was also supported by Innovation Diffusion Theory. The research found that electronic lending, collateral-free credit, and business grants enhance financial access and promote business growth for MSMEs. The adoption of these financial solutions by DFIs illustrates the spread of these innovations, significantly increasing transaction volumes and reducing financing barriers in Kenya. A descriptive research design underpinned and guided the study. The target population comprised registered MSMEs in Nairobi County, with a study sample size of 120 participants. The primary research tool used was a structured questionnaire, while SPSS software supported the analysis of descriptive and inferential statistics. E-lending emerged as a significant contributor to SME financial performance, facilitating easier access to financing and improving profitability, as evidenced by studies in various contexts such as Nakuru CBD and Kyushu city. Collateral-free credit also played a vital role in enhancing MSME performance by removing financing barriers, leading to improved profitability and business expansion. Additionally, business grants were found to be crucial for SME growth, particularly for newer firms, although their effectiveness varied among different types of businesses. To optimize their impact, it was essential for grant providers to refine distribution systems, targeting support towards start-ups and younger enterprises while ensuring efficient resource allocation. Keywords: E-lending, collateral-free credit, business grants, MSMEs, financial performance, Development Finance Institutions, Nairobi County, financial access, innovation adoption, financial intermediation, GDP output, inclusive growth, COVID 19.
dc.identifier.citationJama, W. H. (2024). Impact of development financing on financial performance of Nairobi County MSMEs [Strathmore University]. http://hdl.handle.net/11071/15582
dc.identifier.urihttp://hdl.handle.net/11071/15582
dc.language.isoen
dc.publisherStrathmore University
dc.titleImpact of development financing on financial performance of Nairobi County MSMEs
dc.typeThesis
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