The Role of Micro-Finance Institutions to the Growth of Micro and Small Enterprises (MSE) in Thika, Kenya (Empirical Review of Non-Financial Factors)

Micro and small enterprises (MSE) known as Jua Kali are the biggest employer in Kenya and accounts for 10 million and 8.3 million of this number are in the informal sector. It also continues to employ more each year–at an average rate of about two percent (ICPAK, 2010). This research report present specific insights on the contribution of microfinance service to the growth of MSEs in developing countries. The study sought to investigate the role of microfinance institutions on growth of micro and small enterprise (MSE) in Thika Municipality, Kenya. This was motivated by the need to fill-up the academic gap on contribution of microfinance services left by previous researchers. In order to achieve the study objective, a cross-sectional survey was carried that analyzed both secondary and primary data. Through random sampling technique, two hundred and eighty five MSEs and sixteen MFIs were selected. This included MSEs Owners and MFI managers, it represents 25.8 percent of the total MSE Owners as of 2009 Thika Municipal record was considered representative and reliable for generalization. Data collection was done using questionnaires and interview schedules to the different respondents. After the data was collected it was entered and cleaned before being analyzed using the statistical packages for social sciences software (SPSS windows version 13.0). The findings are presented using both tabular and graphical presentation. Statistics in the study demonstrate that MFIs offer services to customers (MSEs) had contributed growth which has been rapid over the years. Majority of businesses in Thika Municipality (56.8 percent) were owned by married people. Default rate was high while MFI loan was second main source of capital (38.6percent) contrary to Oketch (1995). The main reason for their saving was for expansion of and growth of business the same sentiments echoed by Jagongo (2009). Finally, 76.9 percent business was initiated with capital less than ten thousand Kenyan shillings. This low seed capital explains why MSEs have stagnant growth. Finally the businesses that received MFI services reported growth in sale, revenue and number of employees employed. The study recommended that government should set policy regarded essential in improving loan repayment period and loan amount. From research it is clear that there exists a large unexploited saving mobilization and utilization potential.