The effect of interest rates on business performance in Kenya: A case study of sme’s in nairobi

Abstract

The study was being carried out to examine the relationship between interest rates and business performance in Kenya among several SME’s in Nairobi County. The specific objectives of the study were: To examine the trends of interest rates and business performance in Kenya, to find out the effect of interest rates on the ease of doing business in Kenya seen through number of SME’s growth in Nairobi County, and to determine the extent in which interest rates in Kenya affect performance in several SME’s businesses in Nairobi County. The study was descriptive and targeted Small and medium enterprises in Nairobi County. Data will be analyzed through descriptive and inferential statistics. The target population of this study is 240534 small and medium enterprises in Nairobi County, out of which 384 were sampled. Secondary data for the purpose was collected from Nairobi County Council offices, Central Bank website and World Bank website. Use of questionnaire as primary data was also a data collection method. Regression analysis and correlation coefficients analysis were used to analyze the data and find out whether there exists a relationship between interest rate spread and doing business. The study concludes that there is a negative correlation between the trends of interest rates in Kenya and of business performance in terms of ease of doing business. Therefore ease of doing business is dependent on the level of interest rates charged by the banks, with a negative relationship between the two. As the level of interest rates increase, the level of doing business by this target group decreases, and vice versa.