Influence of demographic profile in use of alternative sources of finance: the case of manufacturing small to medium enterprises (SMEs) in Kenya

Migiro, Stephen O.

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Title:	Influence of demographic profile in use of alternative sources of finance: the case of manufacturing small to medium enterprises (SMEs) in Kenya
Author:	Migiro, Stephen O.
Year:	2006
Periodical:	Journal of Social Development in Africa (ISSN 1012-1080)
Volume:	21
Issue:	2
Pages:	77-101
Language:	English
Notes:	biblio. refs.
Geographic terms:	Kenya East Africa
Subjects:	small enterprises business financing credit Economics, Commerce Small business finance demography
Abstract:	Research into small to medium enterprises (SMEs) suggests that the level of debt is a function of the character of the firm and that of the owner. The main objectives of the present study were to establish the extent to which enterprise profile influenced SME access to external finance, and to identify factors that influenced the choice of financing, and alternative finance used by SMEs in Kenya in three subsectors, metal and engineering works, wood and furniture, and garment and textile. The study also identified financing problems faced by SMEs and profferred possible solutions. Enterprise profile included data on gender and age of owners/managers, educational background of the operators, formal training in business management, age of the enterprise, enterprise size and form of business ownership. Using the survey method of research, the author presents evidence on the influence of SMEs' demographic profile on the use of alternative sources of finance based on empirical data. The results from the empirical survey revealed that enterprise profile influenced SMEs' access to external finance. Personal savings (own capital) was used as the main source of enterprise financing, followed by retained earnings, and friends and relatives. Most of the alternative sources of finance were not known to the SME operators. The findings have implications for the formulation of SMEs' finance policy in particular issues around the cost of capital, collateral requirement and information provision on existing sources of finance. Bibliogr., notes, ref., sum. [Journal abstract, edited]