Accessing Bank Loans By Jua- Kali Entrpreneurs In Nyeri Municipality, Kenya

Abstract

The growth of any business depends largely on its ability to source financial resources. Financial credit, such as bank loan, forms critical source of financial resource to many Business. Access to bank loan is however determined by the business ability to meet the bank requirement. This study sought to establish the ability of Jua Kali entrepreneurs to access bank loan in Nyeri Municipality. The study identified four objectives which included; identifying the source of financial credit to Jua Kali; identifying factors considered by banks when offering financial credit to Jua Kali; assessing the effect of the characteristics of Jua Kali entrepreneurs on their ability to access bank loans The study adopted the bank rationing behavior theory to guide the study, The theory posits that banks operating in financial market characterized with information asymmetry use borrower businesses’ and loans’ characteristics to determine whether to approve, ratio or reject loans applied. To achieve the objectives, the study adopted the survey method to collect data from a sample of 107 respondents consisting of 100 Jua Kali entrepreneurs and seven (7) bank managers, from a target population of 1091 consisting of 1083 registered Jua Kali business that had applied for bank loan for the last two years. The data collected was analyzed using SPSS where descriptive and inferential statistics were generated. The inferential statistics included Pearson’s correlation was generated between various borrowers characteristics, businesses and loan characteristics. The results indicated that those borrowers with others incomes apart from that of the business had a better chance of accessing bank loan that those who depended solely on the business earnings. Further, business earning and business value had a positive relationship with outcome of the loan applications. Generally, this characteristic was an indicator of the business ability to repay bank loan, which was a critical requirement by the banks.