Microfinance Services And The Financial Performance Of Small Scale Enterprises A Case Study Of Kcb Micro Finance Customers

Abstract

This is a new development from the old economic models, which emphasized on

economic growth. For instance (Keyness 1936) emphasized savings and

investment as a major component of economic growth. The African states

deprived of economic resources have been at the forefront at encouraging micro

finance institutions to pump their funds into micro and small medium enterprises

to quicken economic growth.

Ditcher-1986 and Little-1987, pointed out in their respective reports that small

enterprises are wasteful in their use of financial resources and that they are not

business focused. In view of the high cost of credit by Micro Finance institutions,

these small scale enterprises are usually unable to repay the loans disbursed to

them and so such end up worse off and stuck in debts. Other critics argue that

even though the sector is significant employer of poor, micro and small

enterprises are not part of a dynamic process of economic growth.

However, Boomgard-1989 observed that as a result of Micro Finance Institutions,

the small scale enterprises have been able to create jobs per unit of investment,

encourage local ownership, promote entrepreneurial skills and create

employment. This sector has also been able to produce goods and services for the

poor. On the other hand, there are those who believe that the priority of the

industry in Africa is first to become a sustainable business before it can scale up

to reach its target of nearly 800 million poor people (according to I 997 UNDP

development report). Contrary, others still believe that the priority of the industry

should be to develop market driven products and reach large numbers of the poor.