Effects of Participation of Micro and Small Enterprises in Microfinance on Their Performance in Kenya

Abstract

The development of the microfinance sub-sector in Kenya is seen as a favourable catalyst for increasing performance of Micro and Small Enterprises (MSEs). Despite the development, MSEs continue to suffer from high levels of financial exclusion and shortage of operating funds. This scenarios raise policy questions on whether participation in microfinance has effects on performance of MSEs. While past studies on this relationship have demonstrated that the effects are mixed, an understanding of the effects on participation of microfinance on different segments on MSEs - especially the youth and women owned businesses and age of businesses, is necessary in designing relevant policy changes in the MSE subsector. To address this, the study used the 2016 FinAccess Dataset and estimated these effects using the propensity score matching technique. This model was considered suitable since it accounted for potential endogeneity biases associated with self-selection into participation, unobserved entrepreneurial abilities and risk taking behaviour of MSEs. Apart from showing that participation in microfinance has positive effects on performance of MSEs, the study has demonstrated that there is presence of constraints limiting the impact of microfinance especially in firms owned by the youth and women. As such, there is need for policy and product designs to address these hindrances even as participation in microfinance is encouraged. Based on the results, it is recommended that government and microfinance providers should design policies and products that increase firm participation in microfinance. This may be through scaling up financial literacy programmes and encouraging acquisition of permits. Finally, policy should address obstacles that hinder the youth and women owned MSEs from benefiting from microfinance.

Effects of Collective Action on Performance of Women-Oned Manufacturing Enterprises in Selected Counties in Kenya

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The Distinctiveness of Small Business Owners Openness, and Conscientiousness With the Influence on Financial Institution Risk Management With the Logistic Regression Analysis in the United States

“…Microfinance may significantly influence the success of SMEs. Obebo et al (2018) used a crosssectional survey to determine if small enterprises failed due to the financial exclusion or limited loan capabilities due to shortages in operating funds. The authors examined data collected from the 2016 FinAccess Dataset and observed the abilities and risks from owners of small enterprises.…”

Analisis Pengaruh Modal, Usia, dan Pendidikan Terhadap Pendapatan Pelaku Usaha Skala Mikro (Studi Pedagang Kaki Lima di Kelurahan Gading Kasri, Kota Malang)

“…Dalam konteks bisnis, biaya adalah segala hal yang dikeluarkan dalam rangka menghasilkan output dalam skala tertentu (Obebo, Wawiwe& Muniu, 2018). Biaya produksi merupakan semua beban yang harus dikeluarkan oleh produsen dalam rangka menghasilkan suatu barang/produksi.…”

“…Dengan skala permodalan yang meningkat, maka kegiatan produktif dari pelaku usaha juga meningkat, contohnya kemampuan produksi, pemasaran, dan penciptaan inovasi. Obebo, Wawiwe& Muniu (2018) menemukan bahwa selama pelaku usaha meningkatkan kualitas permodalan, maka kegiatan usaha dapat mencapai keunggulan kompetitif lebih besar dan kinerja bisnis lebih tinggi. Keunggulan kompetitif mampu meningkatkan omset penjualan karena produk dan nilai tambah produk/jasa mampu menguasai pangsa pasar.…”