Credit guarantee schemes and financial performance of women-owned Small Medium Enterprises in Nairobi, Kenya: moderating role of demographic characteristics

Abstract

Credit guarantee schemes have been widely implemented across many countries as a strategy to empower women-owned enterprises by easing their access to finance. This study sought to investigate the impact of credit guarantee schemes on the financial performance of women-owned SMEs in Nairobi, Kenya. The study specifically focuses on examining how access to credit guarantee loans, participation in credit guarantee supported capacity-building initiatives, and the availability of credit guarantee safety nets affect the financial performance of women-owned SMEs. Additionally, the study aims to assess the moderating effect of demographic characteristics in the relationship between credit guarantee schemes and the financial performance of women-owned SMEs in Nairobi. The study was grounded in financial intermediation theory and agency theory. A positivist research philosophy guided the study, and a combination of descriptive and correlational research designs was employed. The target population comprised 1,291 women-owned SMEs that have benefited from credit guarantee schemes, from which a sample of 306 enterprises were selected using Slovin’s formula. Primary data was collected through structured questionnaires and analysed using SPSS version 29. Descriptive statistical techniques, including means and standard deviations, alongside inferential statistical methods, were applied. Multiple linear regression analysis was utilized to determine the effect of credit guarantee loans, capacity-building interventions, and safety-net mechanisms on the financial performance of women-owned SMEs in Nairobi. The study found that credit guarantee loans, credit guarantee capacity building and credit guarantee safety nets have positive and significant effect on financial performance of women-owned SMEs in Nairobi. Demographic factors significantly moderate the effect of credit guarantee loans and credit guarantee safety nets on financial performance of women-owned SMEs but not with credit guarantee capacity building. The study concludes that credit guarantee schemes influence financial performance of women-owned SMEs. The study recommends that government agencies and financial institutions should expand and strengthen credit guarantee loan schemes targeted at women-owned SMEs to enhance access to affordable and unsecured credit. The study recommends that policymakers and implementing agencies should integrate and strengthen capacity-building programs as a mandatory component of all credit guarantee schemes targeting women-owned SMEs. Training should be continuous rather than one-off, and delivered through accessible platforms such as local business forums, digital learning, and mentorship programs. Further, the study recommends that policymakers and financial institutions should strengthen and institutionalize credit guarantee safety nets such as loan insurance schemes, risk-sharing mechanisms, repayment restructuring options, and emergency financial support systems.