WambuguFactors Influencing Business Performance Of Micro And Small Enterprises (MSEs) The Case Of J

CHAPTER ONE INTRODUCTION 1.1 Background to the study Microfinance offers promise for alleviating poverty by providing financial services to people traditionally excluded from financial markets. Small-scale loans can relieve capital constraints that might otherwise preclude cash-strapped entrepreneurs from investing in profitable businesses, while savings services can create opportunities to accumulate wealth in safe repositories and to manage risk through asset diversification. While this promise of microfinance is widely touted, it is infrequently subject to careful evaluation using detailed data (Osterloh et al, 2006) Micro and Small enterprises form an integral part of the Kenyan society. In Kenya, the MSEs are credited with creating 80% of all new jobs and have hence formed part of government strategy in job creation, poverty eradication and economic growth (Sessional Paper No.2 of 2005) There are many players purportedly working to assist in the growth of MSEs from both the public and private sector. The public sector has mainly non-profit oriented organizations, which are funded by the government of Kenya or by the donor community while on the other hand the private sector has both the non-profit and the for profit institutions. The non-profit^ms^itutions are mainly NGOs most of which are religious and philanthropic groups. The not- for profit players are few and far apart while compared to the for profit institutions which have penetrated to most parts of Kenya including into very remote areas. The For-profit institutions include Banks, Micro-finance institutions, SACCOs, ROSCAs, merry-go-rounds, shy-locks among others. (Central Bank, 2007) Microfinance refers to small-scale financial services such as cash loans, money transfers, direct deposits, savings, and insurance made accessible primarily to the poor. Two prominent features of successful microfinance institution building are group lending and savings (Yaron, 1994). 1
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