Effect of Credit and Education on Performance of Micro and Small Enterprises in Kenya

Abstract

Purpose: The purpose of this study was to establish the effect of credit and owner/manager educational qualification on performance of micro and small enterprises in Kenya and their joint effect using the 2016 MSMEs survey data. Methodology: This is cross-sectional data collected from a population of 50,043 enterprises. A sample of 384 enterprises was used in the analysis as obtained using Fisher's (2003) formula for computing sample size from a large population. Inferential statistics was used to interrogate the relationship between the variables. Results: Regression results indicated that both access to credit services and educational qualification had a positive and significant effect on performance of the sampled enterprises. Further analysis indicated that the joint effect of the two variables was greater than their individual effect. Unique contribution to theory, practice and policy: Recommendations of this study are that the central Bank of Kenya should focus more on lending and credit facilitation programs in order to encourage greater bank-led financing to the sector to help bridge the unmet demand for credit and that micro and small enterprises should be encouraged to establish good credit history with various lending institutions to enable them access credit facilities from financial institutions. In addition, owners/managers of the enterprises should be provided with training on managerial and technical skills to complement their educational qualifications in running the enterprises.