Microfinance Services And Financial Performance Of Small And Medium Enterprises In Meru Town, Kenya

Small and Medium Enterprises (SMEs) is a significant sector in the economy of Kenya as well as many other developing economies. The sector provides employment to approximately 85% of the country’s workforce (about 7.5 million Kenyans). Insufficient business capital, underdeveloped savings strategies and poor financial knowledge are major constraints hindering financial performance of SMEs in Meru Town. This study was necessitated to determine the effect of microfinance services on financial performance of Small and Medium Enterprises in Meru Town. The following were specific objectives study: to investigate the effect of credit, savings plans and entrepreneur training services respectively on financial performance of SMEs in Meru Town. The study was embedded on three theories namely; theory of Financial Intermediation, Financial Growth Nexus theory and Agency theory. The target population consisted of 310 SMEs that operated within Meru Town. The study adopted purposive sampling to select the respondents and picked a single respondent from each of the sampled SMEs. 93 respondents from the population was taken as a sample size for the study. Collection of Data was done using a questionnaire. Responses in the questionnaires were tabulated, coded and analyzed using descriptive analysis by use of SPSS program version 21. Central tendencies and dispersion were measured using mean and standard deviations respectively. Multiple regression analysis was employed to analyze data. The relationship between the independent variables (microfinance services) and the dependent variable, (financial performance) was tested using multi-linear regression analysis. The ANOVA results documented a p-value of 0.038 indicated that the overall model was a good fit.