Factors affecting the performance of small and medium enterprises in the Jua kali sector in Nakuru town, Kenya

Abstract

Interest in the role of small and medium-sized enterprises (SMEs) in the development process continues to be in the forefront of policy debates in developing countries. The role of finance, management skills, macro-environment factors and infrastructure have been viewed as a critical element for the performance of small and medium-sized enterprises. Therefore, this study sought to evaluate the factors affecting the performance of SMEs in the Jua Kali sector in Nakuru town. The specific objectives included to; investigate the extent to which access to finance by SMEs affect their performance, determine the effect of management skills on the performance of SMEs, examine the extent to which macro-environment factors affect the performance of SMEs and determine the effect of infrastructure on the performance of SMEs in Jua Kali sector. The study adopted a survey research design and employed a stratified random simple sampling. Primary data was collected from 262 study respondents using structured questionnaires. Data was analyzed with the help of the Statistical Package for Social Sciences computer software. Descriptive statistics such as frequencies means and percentages analyze and present the data. Inferential statistics such as correlation and regression analysis were used to test the relationship between independent variables (factors) and dependent variable (performance). Results of data analysis supported the following key findings that access to finance had the potential topositively affect performance of SMEs although they were yet to be fully utilized to the advantage of the SMEs in the study area. Management skills were found to positively and significantly affect performance of SMEs yet had only been marginally adopted by the SMEs in the study area. Macro environment factors were found to significantly affect performance of the SMEs in the study area. Infrastructure did not significantly affect performance of SMEs in the study area. The study recommends that SMEs should improve access to finance through negotiations for better lending terms and conditions and collateral requirements. The study results indicated that as number of years in operations increased the performance increased. The SME businesses should focus on acquiring appropriate management skills such as financial, marketing and entrepreneurial skills. SME businesses should effectively strengthen the macro environment in order to increase their performance. The infrastructure especially in terms of electricity and roads should be improved in order to increase their performance.