The impact of lending policies adopted by the financial institutions when advancing credit to small and micro-enterprises in Kenya: A Case study of small and micro enterprises in Narok County

Abstract

The study investigated the impact of lending policies used by the financial and non-financial institutions in advancing loans to the small and micro enterprises sector in Kenya with SMEs in Narok County. This study assessed the role of institutional lending policies among formal and informal credit institutions in determining the access of small-scale enterprises to credit in Kenya. The study concludes that given the established network of formal credit institutions, improving lending terms and conditions in favour of small-scale enterprises would provide an important avenue for facilitating their access to credit. The research methodology was descriptive. This eased comparative analysis of the responses across different types of the SMEs. The target population of the study was all SMES in county, from which a sample was drawn. Questionnaires were used to collect data from a sample that is going to be drawn from target population with specific emphasis on Equity Bank Limited. The data collected was analyzed using both the qualitative and quantitative methods. The descriptive statistics such as the frequencies, percentages and mean statistics were used. The findings were presented using pie charts, bar charts and tables. The results of the study showed that the limited use of credit reflects lack of supply, resulting from the rationing behavior of both formal and informal lending institutions The study was of great significance as it brought out the most effective policies and innovative approaches when lending to the SMEs, the remedies were suggested on how the commercial banks are able to adopt relevant policies that extents their outreach to these special sector of the economy.