Influence of Credit Risk Education on Access to Credit by Micro Enterprises in the Formal Sector in Kenya
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Date
2023Author
Karimi, Ann,
Baimwera, Bernard
Miluwi, Joshua
Type
ArticleLanguage
enMetadata
Show full item recordAbstract
Access to credit from financial institutions for the purpose of financing state-regulated micro enterprises in Kenya has been largely based on personal judgment, resulting in a lack of
available credit from banks and other financial organizations due to the high rate of credit
default. This has severely restricted the prospects of entrepreneurs funding their enterprises. In
order to address this issue, a study was conducted that investigated the influence of credit risk
education on access to credit by micro-enterprises in the formal sector in Kenya. Credit risk
education and access to credit were the independent and dependent variables. The study was
guided by collective risk theory to hypothesize the interconnection between the variables. To
accurately capture the insights of the research, a descriptive survey design was employed, with
the target population being 1,215,184 formal sector micro-enterprises in Kenya recorded by
the Business Registry. A sample size of 384 respondents was determined using the Cochran
formula. A stratified proportionate sample technique was employed comprising eight regions
in Kenya. Informed consent from respondents was acquired and confidentiality maintained in
data collection. The study gathered and analyzed primary data using semi-structured
questionnaires. Descriptive and inferential statistics were used from grouped data obtained
from the overall Likert scale. Cronbach’s alpha was used to test reliability and factor analysis
for validity. Logistic regression was applied to investigate the relationship between the study
variables using advanced SPSS version 23. The results indicated that credit risk education had
a positive influence on access to credit. However, the low levels of credit risk education, have
hindered access to credit for financing the regulated micro-enterprises, thereby affecting the
performance of the MSMEs sector. Based on these findings the study recommends that the
Government of Kenya develops strategies for active engagement to promote credit risk
education to enhance access to credit.
Publisher
International Journal of Professional Practice (IJPP)