INFLUENCE OF COMMERCIAL BANKS' COLLATERALS LENDING STRATEGY ON THE GROWTH OF SMES IN KENYA
DOI:
https://doi.org/10.47941/jbsm.64Keywords:
Collaterals lending strategy, growth SMEsAbstract
Purpose: The purpose of the study was to establish the influence of commercial banks' collaterals lending strategy on the growth of SMEs in Kenya.
Methodology: The researcher used purposive sampling to select respondents. The sample size was comprised of 352 respondents. The study used questionnaires to collect data from the field. Both quantitative and qualitative data gathered was coded and analyzed using Statistical Package for Social Sciences (SPSS) computer software. Descriptive statistics was used to analyze the data in frequency distributions and percentages which were presented in tables and figures. Inferential statistics were used to analyze qualitative data.
Results: The study found out that commercial banks' collateral have a negative and significant effect on SMEs growth. (r=-0.96, p=0.000).
Unique Contribution to Theory, Practice and Policy: The study also recommended that commercial banks to flex terms and conditions for credits for the SMEs. The study found out that an increase in collateral and covenants leads to a decline in performance of SMEs. Therefore, commercial banks need to make credit terms to be friendly to the creditors in this case the SMEs owners. Small businesses often have difficulty in providing sufficient and good-quality collateral to banks. The banks should typically agree to accept collateral in any term and also should be more inclined to accept the balance of a checking account, finished commodity, guarantees of another company or a bank and securities as collateral.
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