Open Access Open Access  Restricted Access Subscription or Fee Access


Michael Njeru Njue, Marion Mbogo



Purpose: The purpose of this study was to highlight the factors hindering SMES from accessing the financial products offered by banks.

Methodology:The research design was descriptive survey study. The target population was 46 commercial banks .The sampling frame was the list of commercial banks given at the Central bank of Kenya Website. A sample of 17 banks was selected using random sampling. The second stage of sampling involved the selection of the respondents using a stratified sampling approach. The strata were the various departments that interact with SMEs in a bank. The respondents were the head of departments of the respective departments that form the strata. Both qualitative and quantitative data was collected using a questionnaire that consisted of both open ended and close ended questions. Data was analyzed using Statistical Package for Social Sciences (SPSS.

Results:It can be concluded that there were several factors that hindered SMEs access to financial products and services. In particular these factors included lack of credit worthiness information about SMES, lack of collateral limits the SME access to finance, low net value of the entrepreneurs in terms of assets and liabilities (Capital) limits SME access to finance borrower’s lack of honesty and trustworthiness (character) limits SME access to finances.

Unique contribution to theory, practice and policy:The study recommended that training be emphasized to SME entrepreneurs on financial matters, all gender to be treated equally, the banks to introduce financial education programs for SMEs to improve their access to credit, banks to further make use of a credit scoring system to assess the credit worthiness of small businesses and to introduce the use of new credit bureau regulations to increase SME finances.

This Abstract was viewed 251 times | PDF Article downloaded 750 times


financial products,small and medium enterprise

Full Text:



Agarwal, B. (2003). Gender and land rights revisited: Exploring new prospects via the state, family, and market. Journal of Agrarian Change, Vol. 3(1-2):184–224.

Anderson, S. and J.M. Balland. (2002). The economics of roscas and intrahousehold resource allocation. Quarterly Journal of Economics, Vol. 117(3):963–995.

Atieno R (2009). Linkages, access to finance and the performance of small-scale enterprises in Kenya. J. Account. Bus. Res., 3(1): 33-48.

Atterton, T. (2008). Developing human capital within kenyan financial services sector:with particular reference to delivering products to SMEs. FSD Kenya.

Beck, T. Büyükkarabacak, B. Rioja, F &Valev, N. (2008). “Who Gets the Credit? And Does it Matter? Household vs. Firm Lending across Countries”, Policy Research Working Paper 4661, World Bank

Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2005). Financial and Legal Constraints to Growth: Does Firm Size Matter? The Journal of Finance, 60 (1), 137-177.

Berger, & Udell. (2004). A More Complete Conceptual Framework for SME Finance. World Bank.

Berger, A. N., Frame, W. S., & Miller, N. H. (2005). Credit Scoring and the Availability, Price, and Risk of Small Business Credit. Journal of Money, Credit and Banking, 37 (2), 191-222.

Bhatt, N. S and Y. Tang (2004).Making Microcredit Work in Africa: Social, Financial and Administrative Dimensions. Economic Development Quarterly. 15(3).1103-1113

Biggs, T. (n.d.). World Bank. Retrieved October 1, (2008), from World Bank:

Bigsten, A., Collier, P., Dercon, S., Fafchamps, M., Gauthier, B., Gunning, J.W., Oduro, A., Oostendorp, R., Patillo, C., Söderbom, M., Teal, F., Zeufack, A., 2003. Credit Constraints in Manufacturing Enterprises in Africa, Journal of African Economies 12(1), March, 104-25.

Bihari S. C. (2011).Growth through Financial Inclusion in India.Journal of International Business Ethics Vol.4 No.1 2011

Bikki, R. and Joselito, G. (2003).Micro Finance Regulation in Tanzania: Implications for Development and Performance of the Industry. Africa Working Paper Series, No.51, 112-114.

Binks, M. R. &Ennew C. T. (1996). Growing Firm and the Credit Constraint, Journal of Small Business Economics, 8 (1), 17 – 25. DOI: 10.1007/BF00391972.

BNET. (2010). Overdraft: Definition and additional resources from BNET. RetrievedApril20,2010,fromBNET:

Carey, D., & Flynn, A. (2005). Is bank finance the Achilles' heel of Irish SMEs. Journal of Eurpean Industrial Training, 29 (9), 712-729.

CGAP. (2009). Financial Access 2009: Measuring Access to Financial services around the world. Washington DC: CGAP/ The World Bank Group.

Chen, J. (2000). Development of Chinese Small and Medium Sized Enterprises. Journal of Small Business and Enterprise Development, 13 (2), 140-147.

Chijoriga, M (2000). The Performance and Sustainability of Micro Financing Institutions in Tanzania.Journal of Microfinance, University of Dar es Salaam. 12(1) 42-43

Christine, P., & Bhatia-Panthik, S. (2007). Enterprise Development in Zambia:Reflections on the missing middle. Journal of International Development, 793-804.

Collier, P., Warnholz, J.L., 2009. Now’s is the Time to Invest in Africa, Harvard Business Review - Breakthrough Ideas for 2009,, February

Cooper, D., & Schindler, P. (2000). Business Research Methods. Boston: Irwin/McGraw Hill.

Cressy, R., & Christer, O. (1997). European SME financing: An Overview. Small Business Economics , 87-96.

Daniels, L., & Mead,D, (1998). The Contribution of Small Enterprses to HouseHold and National Income in Kenya. Economic Development and Cultural Change. Economic Development and Cultural Change, 47 (1), 45 -71.

Daniels, R. (2007). Financial Intermediation and the Micro-finance Sector in Africa .Development Policy Research Unit. University of Cape Town

De Soto, H., (1989), The Other Path: The Invisible Revolution in the Third World, New York, NY: Harper and Row

Deakins, D., North, D., Balddock, R. and Whittam, G. (2008) “ SMEs’ Access to Finance".: Is there still a debt finance gap

Dupas, P., & Robinson, J., (2008). Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya.

Elkan, W. (2008). Entrepreneurs and Entrepreneurship in Africa.World Bank Research Observer, 3(2): 171-187

Ellis, A., J. Cutura, N. Dione, I. Gillson, C. Manuel and J. Thongori (2007) Gender and Economic Growth in Kenya, Unleashing the Power of Women, The International Bank for Reconstruction and Development/World Bank, Washington DC

European Commission. (2005). SME Access to Fnance. European Commission.

Faulder, D. (2003). An Analysis of IFC Indian Private Equity Funds. IFC.


Fletschner and Kenney,(2011), “ Rural women’s access to financial services: credit, savings and insurance”.

Fletschner, D. and L. Kenney,( 2011), ‘Rural women’s access to financial services: credit, savings and insurance‘,ESA Working Paper No.11-07, March, Food and Agriculture Organization of the United Nations.

Fletschner, D. and M. Carter.(2008). Constructing and reconstructing gender: Reference group effects and women’s demand for entrepreneurial capital. Journal of Socio-Economics, Vol. 37: 672– 693.

Forman, M., & Gilbert, J. (1976). Factoring and Finance.London: William Heinemann.Fouillet, C., & Johnson, S. (2011). Spatial dimensions of the financial sector in Kenya 2006 - 2009. In F. Kenya, Financial inclusion in Kenya: Survey results and analysis from FinAccess 2009 (pp. 118-140). Nairobi: FSD Kenya.

Fraser, S.(2005) Finance for Small and Medium Sized Enterprises: A Report on the 2004 UKSurvey of SME Finances, Warwick Business School: Coventry

FSD Kenya. (2007). Financial Access in Kenya: Results of the 2006 National Survey. Nairobi: FSD Kenya.

FSD Kenya. (2008). The Potential for Credit Scoring for SME Lending in Kenya. Nairobi: FSD Kenya.

Gallardo, J. (1997, December). World Bank Group. Retrieved September 29, 2009, from WorldBank:

Gao, S. S. (1995). Leasing in Poland – Privatization,financing and current problems. European Business Review, 95 (5), 31–40.

Government of Kenya. (2006). Economy Survey 2006. Nairobi: Government Printer.

Government of the Republic of Kenya. (2008). Sector plan for financial services 2008 - 2012. Nairobi: Government of the Republic of Kenya.

Grunow, D. (1995). The Research Design in Organization Studies: Problems and Prospects. Organization Science, VI (1), 93-103.

Gugerty, M.K.(2007). You can’t save alone: Commitment and rotating savings and credit associations in Kenya. Economic Development and Cultural Change, Vol. 55(2):251–282.

Habisch, A., & Schmidpeter, R. (2001). Social Capital, Corporate Citizenship and Constitutional Dialogues. Corporate Citizenship as Investing in Social Capital , 11-18.

Hill, H. (2001). Small and medium enterprises in Indonesia: Old policy changes for a new adminstration. Asian Survey, 41 (2), 248-270.

IFAD.(2004). Livestock services and the poor. Rome.

IFC. (2005). African Region DepartmentKenya SME Country Study. Nairobi: IFC.

IFC. (n.d.). IFC SME - Leasing. Retrieved October 1, 2008, from IFC:

Institute of Policy Analysis &Research,(2000). “Redressing institutional impediments to micro and small scale enterprises access to credit in Kenya”

International Finance Corporation. (2006). Credit Bureau Knowledge Guide.Washington, D.C: International Finance Corporation.

International Finance Corporation. (2009). The SME Banking Knowledge Guide. Washington DC: International Finance Corporation.

International Trade Administration, US Department of Commerce. (2007). Trade Finance Guide:A Quick Reference for US Exporters. Washington DC: International Trade Administration, US Department of Commerce.

Investor Words. (2010, April 20). line of credit definition. Retrieved April 20, 2010, from Investor Words:

Isern, J. and Porleous, D. (2005). Commercial Bank and Microfinance: Evolving Models of Success, XGAP Focus Note, No. 28

Israel, Glen D. (2009). “Determining Sample Size.”Program Evaluation and Organizational Development, IFAS, University of Florida.PEOD-6.

Jappeli, P. (2001). The European Experience with Credit Information sharing. Journal of Banking and Finance .

Kapila, S. (2006). Unleashing The Entrepreneurial Potential of Micro and Small Enterprises in Kenya. Nairobi: Commission on the Legal Empowerment of the Poor.

Kazi, V. (2003). Improving Delivery of Microfinance for Enhanced Performance of Small and Medium size Enterprises in Tanzania: An Exploratory Study.Dar esSalaam University Press. 29-36


Paper submission email:

This journal follows ISO 9001 management standard and licensed under a Creative Commons Attribution 3.0 License.

Copyright ©