Financing preferences of micro, small and medium enterprises in Kenya: A discrete choice experiment

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dc.contributor.authorKimani, Stephanie Muthoni
dc.date.accessioned2022-02-10T13:42:23Z
dc.date.available2022-02-10T13:42:23Z
dc.date.issued2020
dc.descriptionSubmitted in partial fulfillment of the requirements for the Degree of Bachelor of Business Science Financial Economicsen_US
dc.description.abstractMSMEs are universally acknowledged as key drivers of economic growth, due to their significant contribution to production, employment and innovation (Keskin, Senturk, Sungur & Kiris, 2010). However, despite their contribution to economic development, studies found that small firms faced more financial constraints as compared to large finns (Beck, 2007). As a result, governments and international bodies such as the World Bank prioritized implementation of policies and initiatives to boost SME growth. On the other hand, private banks and other fmancial service providers seized the opportunity to realize profits by expanding their services to the informal sector. Despite these efforts, evidence exist that MSMEs prefer to use informal sources of finance to meet their financial needs and obligations. It is not clear whether this is as a result of preferences or financing constraints. This study adopts the use of both revealed preferences from the 2016 MSME survey by KNBS (Kenya National Bureau of Statistics) as well as discrete choice experiment to elicit financing preferences of MSMEs in Kenya. A choice experiment is administered to a sample of small-scale enterprises in Nairobi to assess how they value a range of financial products. DCE data collected is analyzed using McFadden's conditional logit model with unknown parameters estimated using maximum likelihood procedure. The results from the choice experiment are consistent with revealed preference data collected from the MSME 2016 survey. Conclusively, the study finds that interest rates are the most important attributes followed by form of collateral and speed of accessibility. Moreover, the most preferred source of financing was found to be Mobile banking, SACCOs followed by Commercial Banks. Lastly, the study supports that the Discrete Choice Experiment is effective in studying the financing preferences of small businesses in Kenya due to the convergence of stated and revealed preferences.en_US
dc.identifier.urihttp://hdl.handle.net/11071/12651
dc.language.isoenen_US
dc.publisherStrathmore Universityen_US
dc.titleFinancing preferences of micro, small and medium enterprises in Kenya: A discrete choice experimenten_US
dc.typeUndergraduate Projecten_US
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