MICRO CREDIT FINANCE AND FINANCIAL PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NYAMIRA TOWN, KENYA

The critical role played by small and medium enterprises in growing economy cannot be underestimated. Small and Medium Enterprises (SMEs) are characterized by rapid growth and the potential to create employment and boost the GDP. Performance of Small and Medium Enterprises (SMEs) are signs of economic growth in many counties in Kenya and beyond.Although there has been improved access to credit by SMEs overtime, SMEs have continued to suffer financial challenges. Existing research indicates that 50% of the SMEs operate in a financial deficit and some of the SME owners are still uncomfortable with such credit extended to them. Therefore the general objective of the study was to analyze Micro Credit Finance and Financial Performance of small and medium enterprises in Nyamira Town, Kenya.The specific objectives were to;determine the effect of microfinance loans on financial performance of SMEs in Nyamira Town, establish the effect of microfinance saving on financial performance of SMEs in Nyamira Town, assess the effect of microfinance insurance on financial performance of SMEs in Nyamira Town, and to establish the moderating effect of size on the relationship between micro credit finance and financial performance of SMEsin Nyamira Town, Kenya.To achieve the objectives of the study, null hypotheses wasdeveloped and tested. The developed hypotheses was: there is no significant effect of microfinance loans, savings and insurance on financial performance of SMEs and Business size has no significant effect on therelationship between micro credit finance and financial performance of SMEs. The study employedcorrelationresearch design. The target population was550 registeredSMEsas per register recordsTrade Department in Nyamira County. The study sampled 232ownersof SMEs through stratified random sampling technique. Primary data wasgathered by use of questionnaires. Data wasanalyzed by useof descriptive and inferential statistical methods. The test creterio was set such that the studyrejectedthe null hypothesis if the t-statistic value wassignificant. Validity and reliabilityof research instruments was conducted with the aid of piloy study. Data waspresented by use of tablesand figures. The study will be of significance to the County Government of Nyamira so as to developSMEs in the County for enhanced county revenue collection. The study found out that Micro Credit Financeis positively and significantly related to financial performance of SMEs. The study results imply that microfinance loans hada higher positive and significant relationship on financial performance with a person coefficient (r) of 0.604 followed by microfinance insurance and microfinance saving, r of0.595 and 0.570 respectively. The study also found out that business size plays a greater moderating effect onthe relationship between micro credit finance and financial performance of SMEs. The study thereforerejected the null hypothesesand concluded that microfinance loans, microfinance insurance and microfinance saving had a positive and significant effect on financial performance of SMEsin Nyamira Town. The study thus recommends that SMEsshould consider taking loans so as to expand their business and enhance financial performance. This can be undertaken through; favourable loan repayment terms by financial insitutions and reduction of loan application fees. It is also recommended that SMEs should insure their business and expand their savings so as to realize improved financial performance.