Financing of Small and Medium Enterprises (SMEs) in Kenya

The article’s objective is to find out the sources of capital for SME in Kenya and its formal financing accessibility. The study was done in Kakamega Municipility with the targeted audience consist of 1,420 active enterprise and SMEs. The study was done using primary data which collected using questionnaire and guided interview.

Majority of the sources of capital was come from personal savings, loan from commercial bank and trade credits from the suppliers. In another words, most of the SMEs did not rely on commercial banking for start-up capital. Less than half of the SMEs were applied for the business financing but out of the total number of application, 90% of them were succeeded in their application. 70% of the application applied for Ksh 200,000 of formal financing

However in Africa, SMEs were weak due to a series of problems which are small local markets, underdeveloped regional integration and very difficult business conditions. Thus Africa did not become as a center of interest for the mainstream investors.

The study also proved that there were two (2) main reasons why the SMEs did not apply for the formal financing which were:-

(a)           The financing was not needed.

(b)          The cost of financing was too high

Reference

Kihimbo B. W, Ayako B.A, Omoko, K.W, and Otuya W.L. (2012), Financing of Small and Medium Enterprises (SMEs) in Kenya : A Study of Selected SMEs in Kakamega Municipality