INFLUENCE OF BANK LENDING POLICIES ON CREDIT UPTAKE AMONG CONSTRUCTION RETAIL SMALL AND MEDIUM ENTERPRISES IN KENYA: A CASE OF KAJIADO NORTH SUB-COUNTY
Abstract
The main objective of this study was to establish the influence of bank lending policies on credit uptake among construction retail SMEs in Kenya, a case of Kajiado North Sub County. The study specifically sought to establish the effect of interest rates and collateral requirement on the credit uptake by hardware entrepreneurs in Kajiado North sub County. The population of the study consisted of 800 licensed hardware shops in Kajiado North sub County. Proportionate stratified random sampling was employed to collect data from hardware entrepreneurs in Kajiado North Sub County to actualize the objectives of this research. Information was collected by use of a questionnaire. Data was tabulated quantitatively in form of charts, tables and percentages and analyzed using SPSS version 22 and Ms. Excel. It was notable that there existed a strong positive relationship between the indepedent variables and depedent variable. The study contributed the body of knowledge by determining that credit uptake among construction retail SMEs in Kenya is greatly affected by bank interest rates and collateral requirements. This study contributes to the existing literature in the field of entrepreneurship by elaborating exiting theories, models and empirical studies on the role of banking lending policies on credit uptake among construction retail SMEs in Kenya. The study thus contributes to the existing knowledge in entrepreneurship by reviewing theories and models that can be applied to improve credit uptake among construction retail SMEs. The study is a milestone for further research in the field of credit uptake among construction retail SMEs in Africa and particularly in Kenya. The current study should therefore be expanded further in future in order to enhance credit uptake among construction retail SMEs. Existing literature indicates that as a future avenue of research, there is need to undertake similar research in other organizations in Kenya and other countries in order to establish whether the explored factors can be generalized to credit uptake among construction retail SMEs.
Key Words: Interest Rates, Collateral Requirements, Credit Uptake, Retail and Medium Enterprises
Full Text:
PDFReferences
Aryeetey, C., & Ahene, N. (2004). Disequilibrium in the UK corporate loan market. Journal of Banking and Finance, 28, 595-614.
Ayyagari, M., Beck, T., & Demirgüç-Kunt, A. (2007). Small and medium enterprises across the globe. Small Business Economics, 29(4), 415-434.
Baata R., (2008). The Credit Scoring Toolkit: Theory and Practice for Retail Credit Risk Management and Decision Automation. New York, Oxford University Press.
Banking Survey,(2013).The cost of banking in Kenya. Think business,Nairobi,Kenya.
Beck, T., Demirgüç-Kunt, A., Laeven, L., & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance, 25, 932-952.
Berger, A. & Mak, S. (2011). Financial and legal constraints to growth: does firm size matter? Journal of Finance, 60(1), 137-177.
Besanio, R. N. & Thakor ,L, (1987). What determines the Access to Credit by SMEs in Argentina? Documento de Trabajo Nro48.
Bester, M., (1994). Financing SMEs in Europe. Four papers by: Rym Ayadi; Beat Bernet and Simone Westerfeld; Tom Franck and Nancy Huyghebaert; Vítor Gaspar, Simona Bovha- Padilla and Reinhilde Veugelers. SUERF-The European Money and Finance Forum; Vienna.
Bonin J and Huang Y.P. (2001), “Dealing With the Bad Loans of the Chinese Banks”, Journal of Asian Economies, Summer.
Calice, C (2012). Financing obstacles and growth: an analysis for euro area non-financial corporations. ECB Working Paper No. 997.
Central Bank of Kenya (2013). Bank Supervision Annual Report, 2013.Central Bank of Kenya, Nairobi.
Central Bank of Kenya (2012). Bank Supervision Annual Report, 2012.Central Bank of Kenya, Nairobi
Central Bank of Kenya (2011). Bank Supervision Annual Report, 2011.Central Bank of Kenya, Nairobi
Central Bank of Kenya (2009). Bank Supervision Annual Report, 2009.Central Bank of Kenya, Nairobi
Chelagat K.N.(2012) . Determinants Of Loan Defaults By Small And Medium Enterprises Among Commercial Banks In Kenya. Published journal.
Cooper, S. & Schindler, D. (2007). ‘Corporate Social Reporting and Stakeholder Accountability: TheMissing Link’, Accounting, Organizations and Society, Vol. 32, No.7-8, pp. 649 67.The Copenhagen Charter (1999). http://www.stakeholder.
Cowan D.C. and Cowan M. A (2007). A survey based assessment of Financial Institution use of Credit Scoring for Small Business Lending. SBA Advocacy No. 283.
Crowley, J. (2007). Interest Rate Spreads in English-Speaking African Countries. IMF Working Paper, WP/07/101.
Financial Sector Deepening ,Kenya (2010). Financial Sector Development and Economic Growth: FSD Kenya, Nairobi.
Financial Sector Deepening ,Kenya. (2008). The potential for credit scoring for SME lending in Kenya. Kenya: GrowthFin.
Financial Sector Deepening ,Kenya (2007). Financial access in Kenya: Results of the 2006 National Survey”. FSD Kenya, Nairobi.
Frempong, F. (2007).The impact of firm and entrepreneurial characteristics on access to debt finance by SMEs in King Williams’ Town, South Africa. International Journal of Business and Management, 6(8).
Githinji,M.N (2012).Relationship between credit scoring practices by commercial banks and access to credit by SMEs in Kenya.Kenya.
Hisrich, Robert D., Michael P. Peters & Dean A. Shepherd, (2005). Entrepreneurship. 6 ed. New York: McGraw-Hill Irwin.
Irwin, D., & Scott, J. M. (2010). Barriers faced by SMEs in raising bank finance. International Journal of Entrepreneurial Behaviour & Research, 16(3), 245-259.
Jimenez, A. (2006). Does direct foreign investment affect domestic credit constraints? Journal of International Economics, 61(1), 73-100.
Kagio, L. M (2010).The Relationship between Loan portfolio and the Level of NPLs of Commercial Banks in Kenya.MBA, Unpublished Project, University of Nairobi.
Kenya financial access survey ,(2009).Determinants of Access to credit by individuals in Kenya.
KCB. (2006). Non-Performing Debts Policy. Nairobi: KCB.
Kombo,K & Tromp B. (2006). “Research methodology concepts” vol. 4, no. 2, 117-136.
Latimer Asch (2000). Credit Scoring: A Tool for More Efficient SME Lending. New ideas from the world of SMEs.Vol. 1, No. 2 November 2000.
Mach, T.L. & J.D.Wolken (2012), “Examining the Impact of Credit Access on Small Firm Survivability”, Finance and Economics Discussion Series, 2011-35, Board of Governors of the Federal Reserve System (US).
Mugenda, O. M., & Mugenda, A. G. (2004). Research Methods: Quantitative and Qualitative Approaches. Acts Press, Nairobi.
Mugenda, O. M., & Mugenda, A. G. (2003). Research Methods: Quantitative and Qualitative Approaches. Acts Press, Nairobi.
Nelson, C.R. & G. W Schwert, 2006. Short-term Interest Rates As Predictors of Inflation On Testing the Hypothesis that the Real Rate of Interest is Constant. American Economic Review. 67, p.478-86.
Ngugi, M.W., (2012).Credit rationing in markets with imperfect information. Unpublished journal. Ngugi, R.W., (2001). An Empirical Analysis of Interest Rate Spread in Kenya. African Economic Research Consortium, Research Paper 106.
Payle, N. (1997). Industry effect on the determinants of Unquoted SMEs Capital Structure. International Journal of the Economic of Business, 7(3), 297-312.
Porter, J. (2004). “Private Sector Credit Information: The U.S. Case.” In Credit Reporting Systems and the International Economy edition. Margaret Miller.
Portuos, W. (2006). The term structure of Japanese interest rate: The equilibrium spread with asymmetric dynamics. The Japanese and International Economies. Vol 18, pp 84-98.
Robinson, E., (2002). Research Methodology, Methods and Techniques (2nd ed.). New Age International (P) Ltd.
Rocha, R, Farazi, S, Khouri, R & Pearce, D, (2011). “The Status of Bank Lending to SMEs in the Middle East and North Africa Region: World Bank Policy Research Working Paper 5607. The World Bank, Washington DC
Shelly, Y. (2004). Access to external financing: theory and evidence on the impact of monetary policy and firm-specific characteristics. Journal of Banking and Finance, 30, 199-227.
Steven, R. (2006): Operational Risk (10th Edition), Securities and Investment Institute,24 Monument Street, London.
Thanh, Vo Tri, Dionisius Narjoko, & Sothea Oum (Eds.). (2009). “Integrating Small and Medium Enterprises (SMEs) into the More Integrated East Asia”, ERIA Research Project No.8, 2009.
World Bank (2012), “Global Investment Promotion Best Practices, Investment Climate 2012”.US.World bank.
Yongqian, L.C., Edelman D.B. & Crook J.N., (2012). Credit Scoring and Its Applications. SIAM Monographs on Mathematical Modeling and Computation, SIAM: Philadelphia.
DOI: http://dx.doi.org/10.61426/sjbcm.v3i4.396
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.