Effect of financial accessibility on the sustainability of manufacturing Small and Medium Enterprises in Nairobi County, Kenya
Date
2023
Authors
Kimondo, M.
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Access to finance has remained one of the notable factors that impede the sustainability of small and medium-sized enterprises in the developing world. This study aims to investigate the effect of financial accessibility on the sustainability of manufacturing small and medium-sized enterprises (SMEs) in Nairobi County, Kenya. The elements of access to finance that are in the interest of this study include cost of credit, interest rate, credit rationing and business risk. The specific objectives were to analyse the influence of loan processing fees on the sustainability of manufacturing small and medium enterprises (SMEs); to establish the influence of interest rate on the sustainability of manufacturing small and medium enterprises (SMEs) in Nairobi County, Kenya; to determine the influence of credit rationing on the sustainability of manufacturing small and medium enterprises (SMEs) in Nairobi County, Kenya; and to find out the influence of business risk on the sustainability of manufacturing small and medium enterprises (SMEs) in Nairobi County, Kenya. The study was underpinned by the Delegated Monitoring theory, Relationship Lending Theory and legitimacy theory. The study adopted descriptive research design methodology, which involved the collection of first-hand data from the operators of manufacturing SMEs in Nairobi County, Kenya. Stratified sampling technique was used to select the manufacturing SMEs that were involved in the study. A total of 89 participants were involved in the study. Data collection involved administration of online questionnaire to the participants using online communication platforms. The study documented positive effect of loan processing fees on sustainability of manufacturing small and medium enterprises in Nairobi, Kenya. Secondly, there was a negative and not significant effect of interest rate on sustainability of small and medium manufacturing companies in Nairobi County. Thirdly, there was positive and significant effect of credit rationing on sustainability of manufacturing small and medium enterprises. Further, there was positive and not significant effect business risk and sustainability of manufacturing small and medium enterprises in Nairobi, Kenya. From the findings it can concluded that loan processing fees, legal fees, insurance fees and negotiating fees have inverse effect on sustainability of manufacturing small and medium enterprises in Nairobi County, Kenya. Secondly, sustainability of manufacturing small and medium enterprises is significantly affected by inflation rates and total cost of credit. Thirdly, credit access was limited by number of loans applied by manufacturing companies, type of loan products applied for, repayment period and collateral required. Further, the higher the price fluctuations, competition and emergence of technologies that hinders the odds of sustaining firms. There is need for evaluation of measures aimed at minimizing credit access costs through mitigation of loan processing fees, legal fees, insurance fees and negotiating fees. Moreover, there is need for adoption of time series approaches while managing price fluctuations, competitiveness and emergence of new products
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Citation
Kimondo, M. (2023). Effect of financial accessibility on the sustainability of manufacturing Small and Medium Enterprises in Nairobi County, Kenya [Strathmore University]. http://hdl.handle.net/11071/13396