Role of Microfinance Institutions on Financial Performance of Small and Medium Enterprises in Eldoret Town, Uasin Gishu County, Kenya

Abstract

The objective of this study was to establish the role played by microfinance institutions on financial performance of small and medium enterprises in Eldoret Town, Uasin Gishu County. The microfinance variables were provision of credit services and training. The financial performance parameters are net profit ratio, current ratio and inventory turnover ratio. Theory guiding the study was the compensatory profit theory. Descriptive survey research design was employed for the study. The study population was small and medium enterprises in Eldoret town, Uasin Gishu County. Sample of 100 SME's were drawn through stratified sampling from a target population of 996 licensed SME's. Questionnaires and document analysis were used to collect data. The test-retest technique and construct validity were used to measure the reliability and validity of the questionnaires and the data obtained respectively. Data were analyzed by use of descriptive and inferential statistics and presented in form of tables and explanations provided. The study established that Microfinance Institutions played a crucial role in financial performances of small and medium enterprises by providing credit and training on financial skills. The study also established that provision credit and training was an active role of Microfinance Institutions on financial performance of SME's. The study recommends that Microfinance Institutions should continue with its role in providing credit to SME's as credit is the backbone of the SME's. The study recommends that Microfinance Institutions should take a more active role in provision of trainings in financial management since a number of SME's don't access the service.