Government Policy as an Influence of Credit Accessibility on Small and Medium Enterprises in Kenya: A Case of Kisumu County, Kenya

Abstract

Globally, Small and Medium Enterprises (SMEs) play major role in economic growth through credit accessibility. Credit accessibility and socioeconomic growth has a strong correlation (Christen, Rosenberg and Jayadeva, 2004). Studies indicate that in both advanced economies and developing countries, SMEs contribute on average 60%, about three-quarters of total formal employment in the informal sector (Ayyagari et al, 2007). Therefore, SMEs have become important contributor to the Kenyan economy towards vision 2030.The sector contributes to the national objective of creating employment opportunities, training SMEs operators, generating income and providing a source of livelihood for the majority of low-income households in the country (Republic of Kenya, 1989, 1992,1994), accounting for 12 - 14% of GDP. With about 70% of such enterprises located in rural areas, the sector has a high potential for contributing to rural development. Credit accessibility will result in employment creation, human socio-development and growth to Small and Medium Enterprises (Helms 2006). Everyday around the world, an average of 20,000 SMEs socioeconomic lives grows and are saved from extreme poverty because of the credit accessibility they get from MFIs. Most SMEs with credit accessibility have strong growth and able to mitigate development challenges; (Sachs 2005).

In Kenya, credit accessibility has to a larger extent helped in the growth of the socioeconomic rural community (Betty, 2006), currently through innovative approaches, many commercial banks and other microfinance institutions targets the SMEs vide group lending's, progressive lending, regular repayment schedules, and collateral substitutes with a view to growing SMEs ventures.