Implication of Microenterprises’ and Entrepreneurs’ Characteristics on Microfinance Credit Demand in Kakamega County, Kenya

Abstract

The microenterprise (ME) sector is key in Kenya’s development process. In Kakamega County, the sector employs 30% of the labour force and continues to register remarkable growth than the agricultural and wage-employment sectors. The sector, therefore, contributes significantly to households’ incomes and livelihoods. Despite this, the sector exhibits varied entrepreneurs’ and MEs characteristics. Moreover, the sector is faced with a myriad of problems and constraints that affect its development. For instance, entrepreneurs’ inaccessibility to credit from mainstream financial institutions has been one of the major constraints to the development of the sector. However, to address this, microfinance institutions (MFIs) have developed credit-friendly programmes, preferably for entrepreneurs in self-help groups (SHGs). This notwithstanding, there still exist variations in MFIs-credit demand and utilization levels among entrepreneurs. It is however, not clear to what extent entrepreneurs’ and MEs characteristics vary and their role in influencing MFIs-credit demand and utilization levels among entrepreneurs in Kakamega County, which the study sought to investigate. Descriptive research design was used in this study, with a sample of 267 MFIs-credit assisted entrepreneurs drawn using stratified and proportional random sampling techniques. A semi-structured questionnaire, observations and key informant interviews were used to collect data. Data was analyzed using: descriptive statistics; chi-square, correlation and regression analysis. The study found out that significant differences (P<0.05)) exist in entrepreneurs’ and MEs’ characteristics. Moreover, the study found out that even though these factors significantly (P<0.05) influence credit demand levels among entrepreneurs, they only explain 24.9% of credit demand among entrepreneurs. To improve credit demand and utilization levels among entrepreneurs, the study recommends policies that will: promote education to make entrepreneurs less risk averse; encourage entrepreneurs to diversify their sources of income; and aim to improve business incomes and in particular, prices and markets for MEs products and services.

Keywords: Microenterprises, Entrepreneurs, Microfinance Institutions, Credit and Demand Levels.

DOI: 10.7176/JPID/62-04

Publication date:July 31^st 2023