EFFECTS OF COUNTY GOVERNMENT POLICIES ON THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISE IN KENYA: A CASE OF KIAMBU COUNTY
Abstract
Small and Medium enterprises (SMEs) contribution to the Kenyan economy is widely acknowledged, they cut across all sectors of the economy and provide many employment opportunities and generate widespread economic benefits. However, SMEs face a mixture of success and failure with past statistics indicating that three out five fail within the first few months of operation. The purpose of this study was to investigate the effects of county government policies on the performance of Small and medium enterprises in Kiambu County, Kenya. This study employed a descriptive research design. The target population of this study was therefore 1,743 SMEs in Kiambu County and stratified random sampling was used to select 174 respondents from the target population. This study made use of primary data which was collected by use of semi-structured questionnaires. A pilot test was conducted to ensure the reliability and validity of the research instrument. This study generated both qualitative and quantitative data. Descriptive statistics as well as inferential statistics was used to analyze quantitative data with the help of a statistical program, Statistical Package for Social Sciences (SPSS version 21). The results were presented in frequency tables, pie charts and bar charts. The study also used correlation analysis as well as multivariate regression analysis to evaluate the relationship between the dependent variable and independent variables. The study found that taxation and licensing have an inverse and significant influence on the performance of Small and medium enterprises in Kenya. In addition, the study found that training and capital financing influence performance of Small and medium enterprises in Kenya positively and significantly. The study further established that high tax rates, tax complicity, tax compliance and bureaucratic tax payment procedures influence the performance of SMEs businesses. The study also established that licensing requirements, licensing procedure and business registration influences the performance of SMEs in Kiambu County. It revealed that topics covered in training, financing of training, training institution, duration of training and frequency of training influence SMEs performance to a great extent. The study also revealed that financing procedures, financing requirements for capital financing, amount obtained, duration of payment and interest rates influence the performance of small and medium enterprises to a great extent. The study recommends that the County government of Kiambu should develop a system for tax payment so as to enhance efficiency in tax collection and payment. In addition, the County government of Kiambu should streamline the licensing procedure and reduce the licensing requirements. Also, the County government of Kiambu should increase awareness on the training program for SME owners as well as the SME loans to entrepreneurs.
Key Word: Taxation, Licensing, Training and development, Capital Financing, Performance of SMEs in Kiambu County
Full Text:
PDFReferences
Abhijit, D. (2013). Lemon Problem and Pecking Order theory: An Investigation on Indian Corporate sector. Vilakshan: The XIMB Journal of Management, 10(2), 73-82.
Acs, Z. J. B., & Karlsson, C. (Eds.). (2009). Entrepreneurship, small and medium-sized enterprises and the macroeconomy. Cambridge University Press.
Adebisi, J.F. & Gbegi, D.O. (2013). Effect of Multiple Taxation on the Performance of Small and Medium Scale Business Enterprises. (A Study of West African Ceremics Ajeokuta, Kogi State). Mediterranean Journal of Social Sciences, 4(6), 323-234.
Adrian, T., Lewis, M. & Saunders, L. (2003). Research Methods for Business studies. (4th Edition). Hallow: Prentice Hall.
Ahiawodzi, A.K. & Adade, T.C. (2014). Access to Credit and Growth of Small and Medium Scale Enterprises in the Ho Municipality of Ghana. British Journal of Economics, Finance and Management Sciences, 6(2), 34-43.
Ahmad, N. H. (2009). Dissecting behaviors associated with business failure: a qualitative study of MSE owners in Malaysia and Australia. Asian Social Science, 5(9), 98-104.
Atiyet, B. (2012). The Pecking Order Theory and the Static Trade off Theory: Comparison of the Alternative Explanatory Power in French Firms. Journal Of Business Studies Quarterly, 4(1), 1-14.
Baurer. I. L. (2005). Tax administrations and SME in Developing countries: SME department, World Bank group.
Bertalanffy H. (1968). Systems theory. In Sourcebook of family theories and methods (pp. 325-355). Springer US.
Bontis, N., Chong, K. & Richardson, S. (2000). Intellectual capital and business performance in Malaysian industries, Journal of Intellectual Capital, (1), 85-100
Bouazza, A.M., Ardjouman, D. & Abada, O. (2015). Establishing the Factors Affecting the Growth of Small and Medium-sized Enterprises in Algeria. American International Journal of Social Science, 4(2), 101-121.
Bowen, M., Morara, M., & Mureithi, S. (2009). Management of business challenges among small and micro enterprises in Nairobi-Kenya. KCA journal of business management, 2(1), 16-31.
Cardoza, G., Fornes, G., Li, P., Xu, N., & Xu, S. (2014). China goes global: public policies’ influence on Small and Medium-size Enterprises’ international expansion. Asia Pacific Business Review, DOI: 10.1080/13602381.2013.876183.
Cheung, C. (2008). Entrepreneurship education in Hong Kong’s secondary curriculum: possibilities and limitations. Education Training, 50(6), 500-15.
Child, J. & Lu, Y. (2012). Institutional constraints on economic reform: the case of investment decisions in China. Organization Science (7): 60-67.
Chong, H.G. (2008). Measuring performance of small-and-medium sized enterprises: the grounded theory approach. Journal of Business and Public affairs, 2(1), 34-43.
Collis, D. J., & Montgomery, C. A. (2007), Competing on resources: Strategy in the 2004s. Harvard Business Review, 73 (July-August), 118-128.
Cooper, D. R., & Schindler, P. S. (2006). Business Research Methods. New Delhi: Tata McGraw Hill.
Creswell, J.W. (2006). Research design. Qualitative, quantitative, and mixed methods approaches. Thousand Oaks CA: Sage.
Eniola, A.A. & Entebang, H. (2015). Government Policy and Performance of Small and Medium Business Management. International Journal of Academic Research in Business and Social Sciences, 5(2), 34-39
Fowler, A. (2006). Beyond Aid to Social Entrepreneurship or Civic Innovation? Third Quarterly, 21(4), 637-654
Gibb, A., & Li, J. (2003). Organizing for enterprise in China: what can we learn from the Chinese micro, small, and medium enterprise development experience. Futures, 35(4), 403-421.
Gichuke, M. M. (2013). Factors affecting the growth of SMEs: a case study of motor Vehicle garages in industrial area, Nairobi. Available at: http://erepository.uonbi.ac.ke:8080/. Accessed 24th July 2014
Gichuki, C.N., Mulu-Mutuku, M. & Kinuthia, L.N. (2014). Performance of women owned enterprises accessing credit from village credit and savings associations in Kenya. Journal of Global Entrepreneurship Research, 4(16), 29-38.
Government of Kenya (2005). Sessional Paper No. 2 of 2005 on Development of Micro and Small Enterprises for Wealth and Employment Creation for poverty reduction. Nairobi: Government printer.
Greener, S.L. (2008). Business Research Methods. Copenhagen: Ventus Publishing ApS.
Janet, M. & Ngugi, K . (2014). Influence of Entrepreneurial Marketing on The Growth of Smes In Kiambu Town-CBD, Kenya. European Journal of Business Management, 1(11), 361-377.
Jibrilla, A.A. (2013). Impact of Government Interventions on Small Scale Entreprises in Mubi North Local Government Area, Adamawa State, Nigeria. Journal of Economics and Sustainable Development, 4(17), 121.
Johnson, S. & Nino-Zarazua M. (2011). Financial Access and Exclusion in Kenya and Uganda. The Journal of Development Studies, 47(3), 475–96
Kagame, V. S. (2014). Critical Analysis of the Taxation Policy on Small Businesses and Entrepreneurial Enterprises in Uganda. Journal of Economics and Sustainable Development, 5(10), 12-23.
Kamleitner B., Korunka C., Kirchler E. (2012). Tax compliance of small business owners: A review. International Journal of Entrepreneurial Behaviour & Research, 18(3), 330-351.
Kasiewicz S., Kurkliński L. (2014). Problems of regulations for SME in Poland – institutional and cultural context. Copernican Journal of Finance & Accounting, 3(2), 67–78.
Kauffmann J. M. (2006). Small business start-ups: success factors and support implications. International Journal of Entrepreneurial Behavior & Research, 4(3), 217-238.
Kauffmann, C. (2007). Financing SMEs in Africa. Paris: African development Bank & OECD development centre.
Kayanula, D., & Quartey, P. (2000). The policy Environment for Promoting Small and Medium Sized Enterprises in Ghana and Malawi, (Working Paper Series, Paper No 15). Manchester, England: University of Manchester, Department of Finance and Development Research.
Kenya National Bureau of Statistics (2012). Economic Survey, 2011. Nairobi: Government printer.
Kiambu County (2014). Licensing Office. Retrieved from www.kiambu.go.ke/
Kiambu County (2015). County Profile. Retrieved from www.kiambu.go.ke/
Kilby, P., (1965) Owner- Managership and Economic Development, New York: The Free Press.
Kimuyu, P., & Omiti, J. (2010). Institutional impediments to access to credit by micro and small scale enterprises in Kenya (Vol. 26). Nairobi: Institute of Policy Analysis and Research.
King, K. & McGrath, S. (2002). Globalization, Enterprise and Knowledge: Education, Training and Development in Africa. Nairobi: Kluwer Academic Publishers
Kothari, C. R. (2004). Research methodology: Methods and techniques. New Delhi: New Age International (P) Limited Publishers.
Kristiansen, S. (2010). Competition and Knowledge in Javanese Rural Business. Journal of Tropical Geography, Singapore 23(1), 52-70.
Lukacs, E. (2011). The economic role of SMEs in world economy, especially in Brazil. European Integration Studies, (1 (4), 3-12.
Lumpkin, G. T., & Dess, G. G. (2001). Linking Two Dimensions of Entrepreneurial Orientation to Firm Performance: The Moderating Role of Environment and Industry Life Cycle. Journal of Business Venturing, 16(5), 429 – 451.
M’Mithiaru, N.M. (2008). Factors Affecting Accessibility to Credit by Micro and Small Enterprises in Kenya: A case of Meru North District. Unpublished M.A. Thesis, Kenyatta University
Macharia, M.J. (2013). The effects of training on the performance of small and medium enterprises SMEs in Mt.Kenya region: A case of SMEs funded by K.I.E within Embu and Nyeri Districts. Retrieved from http://www.ku.ac.ke/
Mazumdar, D. & Mazaheri, A. (2009). The African Manufacturing Firm: An Analysis based on firm surveys in seven countries in sub-Saharan Africa, London: Rutledge
Mazzarol, T., & Choo, S. (2003).A study of the factors influencing the operating location decisions of small firms. Property Management, 21(2), 190-208.
Mbonyane, B. & Ladzani, W. (2011). Factors that hinder the growth of small businesses in South African townships. European Business Review, 23(6), 550-560
Mbugua, S. K., Njeru, A. & Ondabu I. T. (2014). Factors Affecting the Performance of Small and Micro Enterprises in Limuru Town Market of Kiambu County, Kenya. International Journal of Scientific and Research Publications, 4(12), 1-12.
Mbuta, W. (2007). Small and medium Enterprises Survey 2003 – 2004, Lusaka: MCTI
Mnewa, R., & Maliti, E. (2008). The Role of Small Businesses in Poverty alleviation: The Case of Dar es Salaam, Tanzania, Research report No. 08.2, Dar es Salaam, REPOA.
Mohamed, Y. & Mnguu, Y. O. (2014). Fiscal and monetary policies: Challenges for small and medium enterprises (SMEs) development in Tanzania. International Journal of Social Sciences and Entrepreneurship, 1(10), 305-320.
Morgan, N. A., Kaleka, A., & Katsikeas, C. S. (2004), Antecedents of export venture performance: A theoretical model and empirical assessment. Journal of Marketing, 68(1), 90-108.
Mugenda. A.G. & Mugenda.O.M. (2003). Research methods; Qualitative and quantitative Approaches. Nairobi: Kenya Acts Press.
Mukherjee, S., & Mahakud, J. (2012). Are Trade-off and Pecking Order Theories of Capital Structure Mutually Exclusive? Journal of Management Research (09725814), 12(1), 41-55.
Mungaya, M., Mbwambo, A.H. & Tripathi, S.K. (2012). Study of Tax System Impact on the Growth of Small and Medium Enterprises (SMEs): With Reference to Shinyanga Municipality, Tanzania. IJMBS, 2(3), 23-32.
Nabintu, N. (2013). Factors affecting the performance of small and micro enterprises (smes) traders at city park hawkers market in Kiambu County, Kenya (Doctoral dissertation).
Ngechu. M. (2004). Understanding the research process and methods. An introduction to research methods. Nairobi: Acts Press.
Nichter, S., & Goldmark, L. (2009). Small firm growth in developing countries. World development, 37(9), 1453-1464.
Njoroge, C.W. & Gathungu, J.M. (2013). The Effect of Entrepreneurial Education and Training on Development of Small and Medium Size Enterprises in Githunguri District- Kenya. International Journal of Education and Research, 1(8), 1-12.
Njoroge, I. M. (2012). Factors influencing the uptake of Youth Enterprise Development Fund loans in Kieni East district, Nyeri County. Retrieved from http://erepository.uonbi.ac.ke:8080/xmlui/handle/123456789/7191
Nkya, E. (2012). Institutional Barriers to Small-Scale Business Development: A Need for Flexibility in Tanzania Tax and Regulatory Systems. Working Paper. Morogoro, Tanzania: The Entrepreneurship Centre, Mzumbe University.
Nwokah, N.G. (2008), Strategic market orientation and business performance; The study of food and beverage organizations in Nigeria. European Journal of Marketing , 42 (3/4), 279-286.
O’Cass, A., Weerawardena, J., & Julian, C.C. (2004). Industry structure in marketing strategy and brand performance, Southern Cross University, e-publications, Available at: epubs.scu.edu.au/cgi/. Accessed 24th July 2014
Ocheni, S.I. (2015). Impact Analysis of Tax Policy and the Performance of Small and Medium Scale Enterprises in Nigerian Economy. Strategic Management Quarterly, 3(1), 71-94.
Ogbonna, B.U., & Ogwo, O.E. (2013). Market orientation and corporate performance of insurance firms in Nigeria. International Journal of Marketing Studies, 5(3), 105-116.
Oludele, A. A. & Emilie, C. K. (2012). Regulation, Awareness, compliance and SME Performance in Cameroon’s manufacturing and retail sectors. International Journal of Social Economics, 39(12).
Oludele, A. A. (2014). Regulation, SMEs' Growth and Performance in Cameroon's Central and Littoral Provinces' Manufacturing and Retail Sectors. African Development Review,26(4), 597–609.
Orodho, A. J. (2007). Techniques of Writing Research Proposal and Reports. Nairobi: HP Enterprises.
Peres, W., & Stumpo, G. (2010). Small and medium-sized manufacturing enterprises in Brazil under the new economic model. World Development, 28(9), 1643-1655.
Pissarides, F. (2011). Is lack of funds the main obstacle to growth? EBRD's experience with small-and medium-sized businesses in Central and Eastern Europe. Journal of Business Venturing, 14(5), 519-539.
Poutziouris, P., Chittenden, F., Michaelas, N., & Oakey, R. (2009). Taxation and the performance of technology based small firms in the UK. Small Business Economics, 14(1), 11-36.
Rankhumise, E. M., & Rugimbana, R. O. (2010). Micro enterprise owner perspectives on performance: Insights from selected municipalities in Mpumalanga Province, South Africa. African Journal of Business Management, 4(16), 3500-3507.
Reijonen, H., & Komppula, R. (2007). Perception of success and its effect on small firm performance. Journal of Small Business and Enterprise Development, 14(4), 689-701.
Republic Of Kenya, (2008). Economic Survey. Nairobi Kenya: Government Printers.
Republic Of Kenya, (2010). Economic Survey. Nairobi Kenya: Government Printers.
Republic Of Kenya, (2012). Economic Survey. Nairobi Kenya: Government Printers.
Republic of Kenya. (2009). Sessional Paper No. 2 of 2009 on Development of SMEs for Wealth and Employment creation and Poverty Reduction. Nairobi: Government Printers.
Republic of Kenya. (2013). Ministry of Economic planning report on SMEs, Nairobi: Government Printers.
Rochaa, E.A. (2014). The Impact of Business Environment on Small and Medium Enterprise Sector’s Size and Employment: A Cross Country Comparison. Retrieved from http://www.doingbusiness.org/
Ruirie, G. M. (2012). Determinants of growth of manufacturing SMEs in Kenya: A case study of industrial area in Nairobi. Available at: http://erepository.uonbi.ac.ke:8080/. Accessed 24th July 2014
Shariff, M. N., Chea, P. & Juhary, A. (2013). Moderating Effect of Government Policy on Entrepreneurship and Growth Performance of Small-Medium Enterprises in Cambodia. International Journal of Business and Management Science, 3(1), 57
Sharu, H. & Guyo, W. (2015). Factors Influencing Growth of Youth Owned Small and Medium Enterprises in Nairobi County, Kenya. International Journal of Science and Research (IJSR), 4(4), 973-987.
Smolarski, J. & Kut, C. (2011). The impact of venture capital financing method on SME performance and internationalization. International Entrepreneurship and Management Journal, 7(1), 39-55
Tolentino, A. L. (2005). Enterprise Management: Guidelines for the Analysis of Policies and Programmes for Small and Medium Enterprise Development. Geneva: International Labour Organisation.
Wanjohi, A.M. and Mugure, A. (2008). Factors affecting the growth of MSEs in rural areas of Kenya: A case of ICT firms in Kiserian Township, Kajiado District of Kenya.
Wawire, N.H.W. & Nafukho, F M. (2010). Factors affecting the management of women groups' Small and medium enterprises in Kakamega District, Kenya. Journal of European Industrial Training, 34(2), 128-152
World Bank (2008). World Development Report. Washington: World Bank.
Xiang, G. & Worthington, A.C. (2013). The Impact of Government Financial Assistance on SMEs in Australia During the GFC. Retrieved from https://www120.secure.griffith.edu.au/
Yahya, A.Z., Othman, S. & Shamsuri, A.L. (2012). The Impact of Training on Small and Medium Enterprises (SMEs) Performance. Journal of Professional Management, 2(1), 23-34.
Zhu X. (2011). China and the global business revolution. Cambridge Journal of Economics, 26(1), 119-37.
DOI: http://dx.doi.org/10.61426/sjbcm.v3i2.268
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 3.0 License.
PAST ISSUES:
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.