Impact of credit on microenterprise development in Kenya
Kibas, Peter Berachesebe
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Permalink
https://hdl.handle.net/2142/20473
Description
Title
Impact of credit on microenterprise development in Kenya
Author(s)
Kibas, Peter Berachesebe
Issue Date
1995
Doctoral Committee Chair(s)
Nelson, Robert E.
Department of Study
Education
Discipline
Education
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Finance
Education, Business
Language
eng
Abstract
The purpose of this study was to determine the use and impact of non-governmental organization's (NGOs) loans on microenterprises in Kenya. The study also identified barriers perceived to be hindering microenterprises from growing. This was an exploratory naturalistic type of inquiry. The results were obtained through structured interviews and observations of microenterprises which had obtained loans. Thirty-five entrepreneurs were interviewed, 16 from the Manufacturing Sector, 9 from the Service Sector, and 10 from the Trade Sector. The population consisted of about 1,000 microenterprises who were active members of the Juhudi Credit Scheme in Eldoret.
Data for this study was analyzed by using content analysis. The responses were summarized under common themes and presented in form of tables, percentages and frequencies. The findings indicated that the loans were mainly applied in the following areas: reinvested in the businesses, invested in new enterprises, and diverted to household use. The respondents reinvested most of their first loans in the businesses and used increasing proportions of the second and third loans in creating new enterprises. The proportions of the second and third loans utilized in creating new enterprises increased in all the three sectors while the proportion reinvested in the businesses decreased.
As a result of the loans, respondents indicated improvement in their sales, profits, assets, cash flow, management practices, and family welfare. New jobs and linkages with other organizations had also been created. Most of the jobs including apprenticeships, were created in the Manufacturing Sector. The NGO loans did not appear to have assisted the microenterprises to grow vertically and become small scale enterprises. However, the loans did assist them to grow horizontally. Most respondents had become more entrepreneurial in starting new enterprises and in diversifying their businesses.
Barriers which affected the growth of microenterprises during the loan period included: lack of sufficient working capital, insufficient managerial and technical skills, lack of suitable premises, economic uncertainty, lack of equipment, and domestic issues. Various strategies adapted to overcome some of these barriers included: borrowing additional funds, subcontracting services, diversifying business activities, renting tools and equipment, and making sales on cash basis.
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