Joseph Mwangi Gichure

Jomo Kenyatta University of Agriculture and Technology, P.O. Box 62000-00100 Nairobi, Kenya

Dr. Willy Mwangi Muturi

HOD Economics, Accounting and Finance Department JKUAT, P.O. Box 62000-00100 Nairobi, Kenya

Dr. Patrick Mwangi Ngumi

CEO Institute of Certified Public Accountant of Kenya, P. O. Box 20371-00100 Nairobi

CITATION: Gichure J.M, Muturi W.M (PhD), & Ngumi P.M (PhD). (January, 2016) Relationship Between Collateral Requirements and Access to Finance by Small and Medium Enterprises in Kenya. International Journal of Economics & Finance (IJEF)), volume 2 (1), 71- 86. ISSN 2105 6008

Abstract

The purpose of the study was to establish the relationship b e twe en Collateral Requirements and access to finance by Small and Medium Enterprises i n Kenya. The study used both descriptive and inferential statistics. The specific objective of the study was to examine the relationship between collateral requirements and access to finance by SMEs in Kenya. The study used both correlational and descriptive survey design. Questionnaires were used collect data from the respondents. Purposive, Stratified and simple random sampling were used to draw a sample SMEs owners. The study used qualitative and quantitative data. The results indicated that the respondents were in agreement that collateral requirements determined access to finance by SMEs in Kenya. The study indicated that the SMEs faced challenges in accessing finance due to collateral requirement by banks. Coefficient o f correlation between collateral requirements and access to finance by SMEs was -0.603. The re g r e s s i o n m o d e l s h o w e d t h a t collateral requirements e x p l a i n e d 36.4%, of access to finance by SMEs in Kenya. The study concluded that reduction of collateral requirements by banks can improve access to finance by SMEs in Kenya.

Key words: Collateral Requirements, Small and Medium Enterprise, Access, Finance

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