Pyrex Journal of Business and Finance Management Research

February 2016 Vol. 2(2), pp. 006-011

Copyright 2016 Pyrex Journals

Original Research Article

A Critical Review on Micro-financing of Small Businesses in Kenya

JO Maengwe1* and WI Otuya2

1Kisii University, Kisii, Kenya.
2Masinde Muliro University of Science and Technology, Kakamega, Kenya.

Corresponding Author E-mail:

Accepted 28th December, 2015


The Small business sector has continued to play an important role in the Kenyan Economy. The sector's contribution to the Gross Domestic Product (GDP) increased from 13.8% in 1993 to over 18% in 1999. The Economic survey of 2012 estimated that the contribution to the GDP of this sector currently stands at over 25%. It is the objective of every small business to grow into large enterprises. This paper seeks to identify the impact of Micro financing on Small Business Enterprises in Kenya. Specifically, this study proposes to establish the impact of Microfinance institutions (MFI's) on Kenyan Small and Medium Enterprises, to establish the products offered by MFI's to Kenyan small and medium enterprises and to establish why some customers are dropping off MFI's. The provision of financial services, especially credit plays an important role in the development of the economy. From the relevant studies done in this area and the accompanying literature review, Micro finance organizations provide financial services to their clients (small scale entrepreneurs), such as savings and credit services to finance their new business startups in order to engage in productive economic activities and thus contribute to the development in low income population. Thus, their growth has been attributed to the availability of micro credit opportunities in the country. It can thus be concluded that micro finance services have a major effect on the growth of Small businesses in Kenya. This concurs with Koech (2011) that the factors affecting growth Small businesses were capital markets, cost, capital access, collateral requirements, information access, capital management and cost of registration. Thus, micro finance services have made it possible for the poor to start small and medium enterprises in Kenya.

Keywords: Microfinance, Entrepreneurship, & sustainable development.

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