Effect Of Micro-finance Credit Requirements On The Level Of Credit Uptake Of Small Scale Enterprises In Nairobi County, Kenya
Maluga, Arnold M
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This study sought to establish the effect of micro-finance credit requirements on the level of credit uptake of small scale enterprises in Nairobi county, Kenya. The study was guided by three objectives which are to determine the effect of micro-finance interest rates, to evaluate the effect of micro-finance credit repayment duration, and to assess the effect of microfinance collateral requirements on the level of credit uptake of Small Scale Enterprises in Nairobi County, Kenya. Some theories used to support the objectives included financial inclusion theory, imperfect information theory, and financial intermediation theory. The study used descriptive research to collect data; open and closed questionnaires were in the collection of data. The target population was 21,000 small scale enterprises out of which only 56 were sampled but only 48 questionnaires were used in the actual study of the research. To enhance validity the questionnaire was reviewed by the project supervisor. The researcher thereafter analyzed the data through sorting and editing of the questionnaire to avoid errors. MS excel was used to help in data entry and to spot any inconsistency. It was found out that the objective of the study affected the uptake of loan by the small scale enterprises. The study found out that interest rates had great effect to the level of credit uptake by SMEs and that if the interest rates were high then the uptake was low, credit payment duration affected the repayment rate of uptake; if the duration was longer then SMEs would opt for credit uptake than MFIs which offered short repayment period. The study found that collateral requirement was a major hindrance to SMEs taking up the loans. The study recommendation enabling environment for small scale enterprises to grow and thrive, therefore there is a need to develop strategies to enhance increased access to microfinance credit for small scale enterprises from commercial banks and other financial institutions and government to set up policies that will ease microfinance credit to small scale enterprises research. The study suggested for other areas to establish how interest rate, collateral requirement and credit repayment duration affects the profitability of the small scale enterprises and their operations.