Effect of Collateral Requirement by Micro Credit Institutions on Performance of Small-scale Youth Enterprises in Rarieda Sub County, Kenya

Abstract

Credit availability is very key for the growth of any business enterprise within Kenya. These credits improve business performance in terms of increase market access, profitability and product innovativeness. Small scale youth enterprises play important role in job creation and poverty creation in Kenya but they have not been able to access credit due to security required and this affects their performance. There has been need to determine the relationship between collateral requirement by microcredit institutions and performance of small-scale youth enterprises. The purpose of this study was therefore to determine the effect of collateral requirement by microcredit institutions on performance of small-scale youth enterprises owned by youths in Rarieda Sub county, Kenya. The study used a sample of 53 respondents from a target population of 204 youth entrepreneurs using descriptive research design. From research study it was concluded that these businesses which had accessed loan using collateral registered improved performance as opposed to those who did not accessed loan due to lack of collateral. Hence the study concluded that lack of collateral negatively affects performance of small-scale youth enterprises. The research is hopes that the findings of this study will contribute to the existing literature on collateral requirement and performance of enterprises