The Effect Of Microfinance Service On The Growth Of Youth- Owned Micro-Small And Medium-Sized Enterprises In Kitui County, Kenya

Abstract

The emergence of microfinancing as a catalytic force for the growth of youth-owned MSMEs has been significant, as it represents a powerful means to promote entrepreneurship and tackle financial exclusion among underserved communities. This study examined microfinance services' effects on the growth of youth-owned MSMEs in Kitui County, Kenya. Notably, it examined how microcredit, micro-savings, training, and business consultancy services affected the growth of these enterprises. The study was geographically constrained within Kitui County and concentrated in MSMEs, allowing a narrow geographical focus. This helped acquire a clean and full picture of local dynamics and the reasons propelling youth-owned MSMEs. The findings intended to guide policymakers toward determining the appropriate response to the growth challenges facing Kitui County youth-owned MSMEs. The research's underlying theories were resource-based and social capital theories. The study was based on a descriptive research design, and questionnaires were used as the primary data collection tools. The population of the study was 2,814 youth-owned MSMEs in Kitui County. The Yamane formula was applied to determine the sample size. With this method, the sample size was determined to be 350 MSMEs. The questionnaires were subjected to an editing process to make sure they were precise, complete, and reliable based on respondents' answers. The responses were coded and then analyzed using Statistical Package for the Social Sciences (SPSS) v.26. Inferential statistics, specifically regression analysis, assessed the nature and magnitude of the relationship between the independent and dependent variables. The study found that the availability of micro-savings, microcredit, business consulting, and training services significantly and positively affected the growth of Kitui County youth-owned MSMEs. Additionally, it found that MSMEs in the area had access to microfinance services and that most MSME owners knew about them. Furthermore, the study has discovered that microfinance service provision promotes the growth of the youth-owned MSME industry to an average extent. The study concluded that MSMEs should first do capacity, due diligence, and risk assessments before obtaining loans. It is also recommended that microfinance institutions improve MSMEs' capacity by encouraging a saving culture, financial literacy, and financial management capability, which would raise awareness and help improve payment capacity. The study significantly contributed to the work of industry practitioners, researchers, and policymakers. It emphasized the need for well-targeted interventions and policies to encourage entrepreneurship and economic empowerment amongst the youth in rural areas. These recommendations addresses the unique challenges surrounding MSMEs and foster sustainable growth and development.