Influence of Equity Financing on the Growth of Micro, Small and Medium Enterprises. A Critical Literature Review

Abstract

Purpose:  Greatest potentials in driving economies of the developing countries such as Kenya are within the Micro, Small and Medium Enterprises sector which account for almost over 90% of the businesses in these countries. The overall objective of this study was to examine influence of equity financing on the growth of micro, small and medium enterprises. A critical literature review

Methodology: The paper used a desk study review methodology where relevant empirical literature was reviewed to identify main themes and to extract knowledge gaps.

Findings: The researcher concludes that MSMEs financed by the venture capitalist that were under study experienced growth in both financial and non- financial aspects as well as in the managerial practices. This study reaffirms the correlation between MSMEs growth in any economy and poverty or lifestyle degradation. The economic impact of venture capitalist has been realized by MSMEs in sales, profit and asset upsurge.

Unique Contribution to Theory, Policy and Practice: The study recommends that government owned venture capital firms need to be privatized to serve entrepreneurs better. The youth and women development funds which should be venture capital funds but are not as interest is paid by borrowers and no monitoring of businesses should be privatized to become a true venture capital fund to serve young entrepreneurs better. MSMEs using equity financed capital should be given tax concession to attract other SMEs financed by financial institutions. This will open an avenue for their growth after which they will be big industries. This study has shown that the influences of equity financing have been seen and felt and so more businesses should be encouraged to use this type of finance for economic development.