Abstract:
Microfinance can be seen as a supply of loans, savings and other financial services to the
SMEs. Financial access can help firms start up and expand their businesses through inter alia
development of new products and production processes, and investment in human capital. A
variety of financial services (credit, savings, insurance, and payment facilities) are crucial for
growth in the SME life cycle. This study therefore sought to evaluate factors affecting
access of credit by small and medium enterprises in microfinance institutions. The
specific research objectives included determining: the extent to which SMEs characteristics
affect credit accessibility facilities offered by MFIs, the extent to which collateral of SMEs
affects credit accessibility from MFIs and to evaluate whether credit policies of MFIs affect
credit accessibility by SME. The study adopted cross-sectional survey design to achieve the
objectives. The study employed a sample of 244 from a population of 620 SMEs located
within Nakuru municipality. Primary data was collected from the study respondents using
structured questionnaires administered by the researcher. Data was analyzed with the help of
the Statistical Package for Social Sciences (SPSS) computer software. Both descriptive
statistics (frequencies, means and percentages) as well inferential statistics (correlation and
regression analysis) were used analyze to test the relationship between independent variables
(factors affecting access to credit) and dependent variable (Access to credit). From the results
of data analysis it was concluded that although the SMEs characteristics had the capability to
positively affect access to credit by SMEs, they were yet to be fully utilized to the advantage
of the SMEs in the study area. The MFIs requirements and credit policies negatively and
significantly influenced access to credit offered by the MFIs in the study area. The study
recommends that: the MFIs should seek to transform some of the critical characteristics of
SMEs such as size, industry sector and location to their advantage in order to enable SMEs
increase access to credit; endeavour to understand and meet the SMEs requirements for credit
such as helping them in preparing financial statements and credit scoring and MFIS should
address the various credit policies such as lack of training, collateral, past lending history
and cost of lending in order to increase SMES access to credit through capacity building.
