Effect of Credit Rationing on Financial Accessibility by Small and Medium Enterprises in Eldama Ravine Sub – county, Kenya

Chirchir, Stella Jerono; Maina, Kimani E.

doi:10.24940/ijird/2017/v6/i10/oct17095

Cited by 1 publication

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“…The requirement of a client to give collateral, absence of adequate records, nonexistence of credit history and poor cash flow influence credit rationing. The study by Chirchir and Maina (2017) revealed that firms with good credit history, older and large enterprises are not denied loans, risky ventures are credit rationed by financial institutions and firms that offer highly valued collaterals are not credit rationed.…”

Section: Literature Review Theoretical Reviewmentioning

confidence: 99%

Relationship lending and access to financial services by SMEs in Kenya

Kiring’a

Ndede²,

Wekesa³

2021

IJRBS

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Policymakers and scholars acknowledge the significance of small and medium enterprises in stirring the economic growth and development in developing and developed economies. In spite of the generally fast pace by which access to financial services for small and medium enterprises is being established, significant segments of the small and medium enterprises sector do not yet benefit from the expansion. This study, therefore, investigated the effect of relationship lending on access to financial services by small and medium enterprises in Kenya. The study was based on credit rationing theory and information asymmetry theory. The target population comprised 4,253 small and medium enterprises in Kenya. A sample size of 366 SMEs was used by the study. The study adopted a multistage sampling technique to obtain the SME respondents. Primary data was utilized and was acquired through semi-structured questionnaires. Data were analyzed using descriptive and inferential statistics utilizing Heckman two-stage regression model. The study findings showed that relationship lending had a positive and significant effect on access to financial services among SMEs in Kenya. The study concluded that relationship lending plays a critical role in access to financial services by SMEs in Kenya. The study recommends that SMEs owners should strive to meet the terms and conditions provided by lending institutions in their various financing practices while management of the lending institutions should adopt financing practices favorable to SMEs to increase their access to financial services.

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Section: Literature Review Theoretical Reviewmentioning

confidence: 99%