Effect of financial development initiatives on growth of small and medium manufacturing enterprises in Nairobi county.

Abstract

Small and medium-scale enterprises play an important role in the process of industrialization and economic growth in both developed and developing economies. However, limited access to finance is noted as a major obstacle to development of SMEs in Africa majorly because of their perceived higher risk that makes the formal financial institutions reluctant to lend to them. This is further reinforced by inadequate financial instruments and lack of developed financial markets. The role of financial market development on economic growth and enterprise development has been studied in several settings with mixed findings. Finance and development nexus studies that attempt to unravel the effects of accessing and utilizing financial services on SMEs has arrived at mixed and conflicting findings. Though a lot has been done to address the recurring phenomenon of lack of access to finance, the problem is notably still pervasive, requiring further investigations on the level of access to finance by SMEs and the cost involved in obtaining such funds where available especially in Nairobi County which is a largely Metropolitan County characterized by development of SMEs in sectors notably: trade and commercial services, manufacturing, financial services and construction. The study focused on 451 SMMEs in the manufacturing sector in Nairobi County with a sample of210 SMMEs and the researcher heavily relied on primary data which was analyzed using SPSS. Data was analyzed using correlation and regression analysis. Charts, frequency distribution tables, and bar charts were used in presenting the findings.