The influence of microfinance institutions on development of small and medium enterprises

Abstract

This study sought to investigate the influence of Microfinance Institutions (MFIs) on the development of Small and Medium Enterprises (SMEs) and aimed at evaluating the effect of micro-finance savings mobilization, micro-finance credit provision and micro-finance training services on development of SMEs. A case study design was adopted and data collected from a sample of 60 respondents using self-administered questionnaires, interview guide and documentary review guide. Data was analysed using SPSS Version 16 and findings were presented in a tabular format showing frequencies, means and percentages. The study revealed that Micro-finance savings mobilization affects development of SMEs. This is because Savings also improve welfare as a result of better access to small loans and are a means of security in times of emergency. The findings also revealed that micro-finance credit provisions contribute to development of SMEs. This is because micro-finance credit provision helps to smooth out the consumption patterns during the lean periods of the year and also that it enablesin making business at profit due to source of capital. From the study, it was also deduced that Micro Finance Training Services contribute tothe development of SMEs. This is because it has enabled SMEs to meet unexpected demands for cash without having to sell key income generating assets. Training has also enabled SMEs to get advice and technical assistance for problems as they come up. It is concluded that Microfinance Institutions in regards to savings mobilization, credit provision and training services contribution to the development of Small and Medium Enterprises (SMEs). It is recommended that the government needs to supplement efforts of microfinance institutions and allow more microfinance institutions to operate in all areas of the country especially the rural areas so as to meet the increasing demand of their services in such areas. Microfinance institutions should also establish programs that sensitize communities on development of SMEs and educating the communities on how to save and gain.