The Effects of Micro Finance Lending Policies On Performance of Small Scale Businesses

ABSTRACT The research investigated the effects of credit/lending policies on performance of small scale businesses in Akalo sub-county. Stratified random sampling was used where different forms of businesses were randomly taken in each stratum. They consisted of retail trade, agricultural product trade and other activities like service providers etc. This sampling method was used to get the required number of respondents. Data was collected using a questionnaire and analyzed using tables, chi square test and percentage. The objective of the study was to establishpeople's attitude towards the existing lending policies of Akalo SACCO Limited, to examine performance of small scale businesses and to establish the relationship between lending policy and performance of small scale businesses. The research methodology adopted both descriptive and analytical research design based on semi-structured questionnaires to gain an in-depth understanding of credit policy and its effects on the performance of small scale businesses. A sample size of 40 respondents was used. Stratified random sampling method was adopted for the study. Data was collected from both primary with the help of questionnaires designed using likert scales and secondary data got from staff of the Akalo SACCO. The study revealed that credit policies exist in Akalo SACCO; the clients were well aware of them and they had positive attitude towards the policies. The management was effectively implementing the policies and this has positively impacted on businesses of borrowers between the periods "2011-2013" where the performance was steadily stable. It is therefore this steady stability that necessitates the investigation of its probable cause. Besides this, there existed a strong positive relationship of between credit policies and business performance. This implied that the effectiveness of credit policies led to good performance of businesses. The SACCO should endure to further improve the good relationship that already existed between them and their members/borrowers. If this was done, if would make them continue to attract more borrowers which would eventually lead to the growth of the SACCO. The above measures when taken into consideration would strengthen the effectiveness of both the SACCO and small scale businesses towards achieving their set objectives and still enhance good performances