institution: mount kenya university

INSTITUTION: MOUNT KENYA UNIVERSITYDATE: 10/07/2016NAME: SAMIRA DIBA KANATO REG NO: BECF/2014/58251SCHOOL: BUSINESS AND ECONOMICSDEPARTMENT: ECONOMICS COURSE: BACHELOR OF SCIENCE IN

ECONOMICS AND FINANCESUPERVISOR: DR. PHELISTA W. NJERU

SIGN:

Proposal for the Research projectsTOPIC: INVESTIGATING FACTORS AFFECTING YOUTH CREDIT ACCESIBILITY IN KENYA (A CASE OF COMMERCIAL BANKS)SIGN

CHAPTER ONE

Introduction

I. OVERVIEW........................................................................5

II. BACKGROUND OF STUDY..................................................................................5

III. SUMMARY & STATEMENT OF THE PROBLEM.....................................................5

IV. SPECIFIC OBJECTIVES OF THE STUDY................................................................7

V. THE PURPOSE OF THE STUDY...........................................................................7

VI. RESEARCH QUESTIONS.....................................................................................8

VII. PROCEDURES/SCOPE OF WORK........................................................................8

VIII. LIMITATIONS.....................................................................................................9

IX. BUDGET............................................................................................................9

X. ASSUMPTIONS OF THE STUDY...........................................................................9

XI. THEORETICAL FRAMEWORK............................................................................10

XII. CONCEPTUAL FRAMEWORK............................................................................10

Chapter 2

2.0 literature review ……..………………….……………………………………………………..10

2.1 Introduction …………………………………………………………………………………….10

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2.2 Theoretical review ..………..………………………………………………………………….102.2.1 Entrepreneurship and small and micro enterprise …………………………………..10

2.2.1.1youth substence, small and micro enterprise ……………………………..…………11

2.2.1.2simple accumulation of youth on small and micro enterprises …………………...11

2.2.1.3Broad accumulation small and micro enterprises ……………………………………11

2.2.2 The level of literacy …………………………………………………………………………12

2.2.3 Interest rate …………………………………………………………………………………..12

2.2.4 Collateral ……………………………………………………………………………………..13

2.2.5 The number of lending institution ………………………………………………………..14

2.3 Review of analytical litereture ……………………………………………………………14

2.3.1 The level of literacy …………………………………………………………………………14

2.3.2 The interest rates on Loans ………………………………………………………………..15

2.2.3 Collateral ……………………………………………………………………………………..15

2.2.4 The number of lending institution ………………………………………………………..15

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2.3 Research gap to be filled by the study ………………………………………………...16

chapter 3

3.0 Research Design and Methodology ……………………………………………………23

3.1 Introduction …………………………………………….…………………………………….23

3.2 Research Design………………………………………………………………………………23

3.3 Target Population……………………………………………………………………………..23

3.4 Sampling Design………………………………………………………………………………25

3.5 Data Collection Instruments and procedures…………………………………………..26

3.6 Data Analysis Procedures and presentation…………………………………………….26

APPENDICES4.0 Apendix I………………………………………………………………………………………..27

4.1 questionares………………………………………………..………………………………28-30

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CHAPTER ONEINTRODUCTION:

I. Overview

This chapter presents the background to the study, statement of the

problem, purpose of the study, study objectives, research questions,

significance, limitations, scope and assumptions of the study. The

chapter also highlights the theory on which the study is based and the

conceptual framework that will guide the study.

I. Background of StudyYouth and young entrepreneurs are key drivers of growth and

development in all economies. That is why empowered youth and

young entrepreneurs in Kenya accounts to contribute greatly to the

growth and developments of the county’s Economy.

Hence it is imperative to have a study that examines factors affecting

youth credit accessibility from commercial banks credit and how to access

those credits facilities.

II. Summary & Statement of the problem

Globally, business growth is predicated upon many factors, among

these is the ability of the business people to access credit facilities.

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Ninety percent of all small and micro enterprise which are mainly run

by youth collapse in their first year of startup, due to lack of financial

resources and unequal access to finance by SMEs and large

enterprises which has undermined the role of SMEs in the economic

development of most African countries.

Thus like in Kenya there is a widespread concern that financial

institutions are not providing enough support to new economic

initiatives and in particular to the expansion of SME sector which is a

major factor for growth and development of entrepreneurs especially

youth, number of studies have shown that youth faces many problems

when accessing commercial bank finance. Studies carried out in both

developing and developed countries have observed that youth

traditionally face difficulty in obtaining bank credit due to many

reasons. e.g., financial institutions remain highly liquid and reluctant to

expanding credit other than to most credit worthy borrowers which in

most cases excludes the small enterprises. Accessing credit is

considered to be an important factor in increasing the development of

small businesses and creating job opportunities for youth. Hence there

is need to investigate these factors that affect access to bank credits.

If these factors are understood well, it would be possible to put in place

policies that enhance access to commercial banks credits by youth in

Kenya. A number of studies conducted in this area have been limited in

scope. This research aims to fill this gap by investigating factors

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affecting youth credit accessibility from commercial banks credits,

using dataset from commercial banks in Kenya.

III. Specific objectives of the studyThe main objective of this study is to examine the factors that affect

access to bank credit by youth. However, to achieve this, the study will

be guided by the following specific objectives.

i. To find out whether the access on information on banks

credits services are available to youths in Kenya.

ii. To find out whether the interest rate charged affect the

accessibility of credit by youth in Kenya.

iii. To establish whether the level of literacy among the youth in

Kenya affects their access to credit.

iv. To investigate whether the number of lending institutions in

Kenya available affects the accessibility of credit.

v. To establish whether the demand for collateral by banks

affects the accessibility of credit.

IV. The purpose of the studyBased on the problem statement above, the purpose of this study is to examine in one study factors affecting youth credit accessibility from commercial banks credit services.

V. Research questions 1. How does Bank policy influence interest rates during credit

accessibility among young entrepreneurs in Kenya?

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2. How does the credit awareness from banks in Kenya

influences credit accessibility among young entrepreneurs?

3. What is the relationship between the information to youth

and collaterals during credit accessibility among young

entrepreneurs in Kenya?

4. Evaluating the role of youth requirements to credit access

and its influence on managerial competencies during credit

accessibility among young entrepreneurs in Kenya?

VI. Procedures/Scope of WorkThe study will be carried out in Thika and Isiolo town only. Thika and

Isiolo town will be chosen because of their cosmopolitan nature and

high concentration of small and medium sized enterprises and study

population will be drawn from the young entrepreneurs holding

accounts with commercial banks. And the two towns is a typical

representation of other areas in Kenya as far as youth are concerned.

The factors includes; the access to information and credit awareness,

the interest rate charged on credit, the literacy levels of the borrower,

the number lending institutions available, and the demand for

collateral by the financial institutions.

VII. Limitations A limitation as used in the context of research is any hindrance

or anticipated constraints or potential weaknesses of the study

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imposed by the methodology of the research. This study will be

conducted in these two towns only due to time and resource

constraints.

VIII. BudgetThe proposed costs and budget of the project will roughly be as

the following. The researcher will incur the cost individually.

Description of Work Anticipated Costs

Phase One Travelling costs & miscellaneous costs 3000.00

Phase Two Collecting & compiling of information 2000.00

Phase Three Typesetting, printing & binding 1000.00

Total Ksh 6000.00

x. Assumptions of the studyBroad access to financial services is defined as an absence of price and

non-price barriers in the use of financial services. Hence, access

implies the degree to which financial services are available at fair

price. This study assumed that bank credit is unfairly priced.

XI. Theoretical Framework1. The Interest rate on credit2. Literacy levels of traders.3. Number of lenders.4. The demand for collateral5. Independent variables and Dependent variables.

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XII. Conceptual framework Figure1.1.Conceptual framework of factors affecting access to bank finance by youth.Independent variables Dependent variables

Intervening factors

The conceptual framework depicted in figure 1.1 shows the

independent and dependent variables that will be investigated in this

study. The researcher is to recognise that other intervening factors

may be at play. For instance some youth for one reason or another

may not necessarily require the bank credits what they need may only

be equipping with the right skills to start and successfully run their

projects and businesses.

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Information as a factorAvailability of friendly policies to youthTraining, Educating and equipping youth with the skills

Access to bank finance

BorrowersNon borrowers

Information as a factorAvailability of friendly policies to youthTraining, Educating and equipping youth with the skills

Voluntary self-exclusion No need Cultural/ religious reasons

CHAPTER 2

2.0 LITERATURE REVIEW.

2.1 introductions

This chapter seeks to review the various issues which in one way or another may help the researcher, to address the key factors which affect the accessibility of credit among the youth and SME’S within the Thika and Isiolo town. These factors range from the access to information on credit facilities, literacy levels, the number of credit

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lending institutions, the interest rates charged and the demand for collateral from traders by financial institutions.Youth, young entrepreneurs and small and micro enterprises are the life blood of the economy. They are at the fore front of the government effort to promote enterprise, innovation and increased productivity. Thus entrepreneurship and small and micro enterprises will continue to be the main providers of new jobs. Those role and importance of entrepreneurship and small businesses to the economies of both the developed and the developing nations has been the subject of increased scrutiny particularly in the last decade. This is due to belief that a prosperous youth entrepreneurship and a dynamic SME sector were crucial to performance of a dynamic economy. However for this two sectors to continue to growing unbated there is need for flow of credit financing, which is currently not the case. The study seeks to find out the factors that prevent accessibility of credit from commercial banks to finance this important sector of Kenyan economy.

2.2 Theoretical Review

2.2.1 Entrepreneurship and small and micro enterprises.

Entrepreneurship has traditionally been defined as the process of designing, launching and running a new business, which typically begins as a small business, such as a startup company, offering a product, process or service for sale or hire. Thus it has been defined as the capacity and willingness to develop, organize, and manage a business venture along with any of its risks in order to make a profit. While definitions of entrepreneurship typically focus on the launching

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https://en.wikipedia.org/wiki/Profit_(accounting)

https://en.wikipedia.org/wiki/Startup_company

https://en.wikipedia.org/wiki/Small_business

https://en.wikipedia.org/wiki/Business

and running of businesses, due to the high risks involved in launching a start-up, a significant proportion of businesses have to close, due to a lack of funding, bad business decisions, an economic crisis or a combination of all of these or due to lack of market demand.SME’s are much easier to describe than to define. Further that there is no generally accepted operational or numerical definition of what constitute an SME. Countries and in many cases individual institutions within them have developed classifications and definitions that reflect the nature and compositions of that country’s settings. Definitions may also reflect the nature and context of the industrial sector or the market under consideration; for example different criteria would be considered appropriate for firms engaged in manufacturing, construction, retailing hospitality and tourism, and professional services etc.According to the Wikipedia the internet encyclopedia, the SME is a business that often is unregistered ,run by an individual, has five or fewer employees and started with a seed capital of not more than three million Kenya shillings.According to the Gemini report of 1995, the entrepreneurship and SME sector comprises of 98% of the businesses in Kenya, contributing to 30% of employment and creates 75% of all new jobs in the country. The report also states that of the total GDP in the country entrepreneurship & SME‘s contributes about 12-14%. Further two thirds of the enterprises generates incomes equal to or below minimum wage, with enterprises owned by men and those in urban areas generating more incomes.The report further defines three types of SME’s based on the type of people involved their capital and income generating activities:

2.2.1.1 youth subsistence small and micro enterprises.

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https://en.wikipedia.org/wiki/Risk

These enterprises have their productivity so low that they only manage to generate enough income for immediate consumption. They work on the basis of ‘getting by’. They constitute about 70% of the total economic sector, in Kenya.

2.2.1.2 Simple accumulation of youth on small and micro enterprises.

These generate income sufficient to cover their activities, although without enough surplus to permit capital investment. This segment is more fluid and represents a transitional phase towards one of the other two types it covers a moment in which a micro enterprise begins to evolve its production towards growth, when the trader can cover costs although still has no capacity for growth or investments. However it can also be a step in the productivity decline.

2.2.1.3 Broad accumulation of youth on small and micro enterprises.

These are enterprises with sufficient productivity to accumulate a surplus and invest it in the growth of the business it forms a small segment of the whole sector (about 4% of the total). In this there is an appropriate combination of productive factors and commercial positioning, which allows the sector to grow with ample profits.Beaver(2002), in his conclusion of the issue of youth on small and micro enterprises definition and classification, realized that it’s a complex one and he encouraged readers to use their innate business and common sense to dictate suitable criteria that are helpful in a given sector or operating context.

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2.2.2 The level of literacy

Education and skills are needed to run a business. Majority of young people carrying out SME’s in Kenya are not quite well informed in terms of education and skills. According to King and McGrath (2002), those with more education and training are more likely to be successful in the sector. The literacy level was reflected in their ability to carry out managerial routines. The routine includes making decisions on financial investment and management. This affects the decision on the external funding of his enterprise.The low literacy levels of the youth who are SME’s owners are evidenced by the declining levels of the primary and secondary school enrolment of students in Kenya. This makes an entrance to the ‘the juakali sector ‘increasingly the last resort for the disadvantaged students with relatively low levels of education.At the site, www.ilo.org, it’s observed that an entrepreneur’s level of education is directly correlated with his ability to make financial decisions of his business. Kenya’s declining level of education has, had negative impact on entrepreneur’s ability awareness on how and where to get loans to improve their businesses.With low ability to read and write, therefore an entrepreneur is at a disadvantage in the loans market. Information on availability of loans, and the rate of interests charged, is communicated through newspapers, in which a good level of literacy is required to read and interpret.Saleemi (1997) explains that; complete, accurate and precise information is necessary for financial decisions including obtaining business loans. The literacy level is again observed in the ability to have appropriate book keeping skills. The banks often demand cash flows and other financial records as a prerequisite for approving of credit.

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Due to low literacy levels most youth and SME traders are unable to differentiate the loan products offered by the financial institutions. Also since most of these services are offered in commercial banking sectors, most traders are discouraged from applying for the loans. Further inadequacy in financial management skills and strategic planning put the youth in a disadvantaged position in competing with large firms which are run by well-educated professional managers.

2.2.3 Interest rates on loans.

Every business needs financing, even though at first glance it might appear that funding is unnecessary. It’s important that financing be as efficient as possible, Stutely (2003). Stutely argues that the borrower should be able to put the cost of all financing on the same basis, comparing them and come up with the one that gives the lowest cost financing option.Commercial banks have often been criticized for having high interest rates charged on loans. But sometimes, there are factors beyond their control. For example the amount of interest payable on loans depend on interest rates charged, which is driven by the base lending rate of interest set by the Central Bank of Kenya. The amount of interest rate charged is sometimes, intertwined with the security of the loan, and the use for which it’s to be used, or the nature of the business. That is the more secure loans are charged low interest rates due to, their low risks involved. This leads the youth to the micro finance institutions, who lend unsustainable interests short term loans. The high interest rates, discourages the young entrepreneurs in the country from borrowing. It’s because the interest payment come out of profit and can be reduced by the borrowing business if profit and trading conditions are unfavorable. A loan does not carry ownership right, if a trader is unable to meet the loan and the interest repayment then

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bank or lender may decide to foreclose on the business and appoint a receiver to take a day to day running of the business. the receiver has to decide whether the business is able to continue trading under its guidance and generate enough cash to pay , the creditors or whether the business should be closed, the assets sold off and the cash generated used to pay the bank and the creditors. This may discourage young business people who may fear such situations to happen to their businesses. Another contributing factor to discouraging interest rates is the structural weakness inherent in Kenyan commercial banks. They do not have stable source of funding, they can only lend on short term basis. Apart from becoming a problem to youth who seek funding over a number of years, the lending rate is high since the commercial banks may lack stable financial source. All this contribute to the rate being a constraining factor in accessibility to credit among the youth in Kenya.

2.2.4 Collateral.

Formal banking institutions always demand collateral to act as a security on loans. This is often in the form of houses or deed to some immoveable assets. This precondition plays a major part in the accessibility of loans among the youth or young entrepreneurs since majority of them cannot attain these requirements. The situation may be more complicated for women entrepreneurs, who may not have right of ownership to expensive property including land and houses.In the site www.allbusiness .com, collateral is again highlighted as a major constraint to credit accessibility. In a survey conducted at the site 92% of the firms surveyed had applied for loans, and were rejected while others had decided not to apply since they ‘knew’ they would not be granted for lack of collateral. Therefore, while most of the entrepreneurs, in this study recognized the importance of loans in

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improving their businesses, they cited collateral as a major impediment to loan accessibility and therefore business growth. Almost all respondents started their businesses from their own savings or loans from relatives since they did not demand security.Beaver (2002), explains that the historical development and the associated culture, of the banking system underpins the problem of the emphasis on the provision of collateral as a primary condition in lending. Banks have always adopted a risk averse stance towards young small firms, with an accompanying inability to focus on the income generating potential of the venture, when analyzing the likelihood of loan repayment.Therefore, although there has been a considerable progress in the lending to the young entrepreneurs, banks remain cautious because many of these young people have neither, collateral nor, asset registers.

2.2.5 The number of lending institutions.

The number of financial institutions offering credit services to youth is a constraint to the development of the sector. In a study conducted in the site, www.allafrica.com, by a non-profit organization, World Women Banking providing credit access to poor women, fewer than 2% of low income entrepreneurs, worldwide have access to credit facilities. It was further noted that the banking sector penetration in a typical sub-Saharan African country stands at 1% of GDP, far below far below a more advanced such as Brazil where penetration approaches 25% or industrialized nation where its 85%.In Kenya, there are less than 50 commercial banks serving a population of 34 million people. Among the major commercial banks and other market share includes, Commercial bank(14.7%), Barclays (14.26%),and Standard Chartered(8.4%), there are also banks

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classified as small banks which includes; Consolidated, Habib, Faulu, Victoria, Equatorial Fidelity Bank among others.Just 60% of Kenyans have access to banks or microfinance institutions with 30% of rural users having no access to banking services at all, according to the data by Financially Deepening Kenya (FSD),Business Daily(may 6 2009) this further shows shortage in supply of financial services including credit compared to demand.Recently, this increase in demand for this services has lend to emergence of mobile telephone money transfer services with the introduction of the M-pesa, Airtel-Money and Orange-Money services by mobile telephone companies ,safaricom, Airtel and Orange respectively. With over 25 million subscribers, the M-pesa is becoming an important financial transaction tool for young business people with the un banked even turning it into a banking institution and the service has it is currently, is trying to offer credit service like Mshwari and small entrepreneurs, who require micro finance products including loans are running away from the commercial banks. The growth of mobile money transactions shows the demand for formal financial services including credit services far outstrips the supply.In Thika and Isiolo town, the concentration of banking services is even much lower with few branches of the major banks operating. The other lending institutions operating include the micro finance companies.Wanjohi and Mugure (2008), in acknowledging that credit sources remain a major challenge among the youth, found out that, in the climaxing of the year 2008, money lenders in the name of ‘pyramid schemes’ came up promising hope among the small investors that they can make it to financial freedom through soft borrowing. The rationale behind turning to these schemes among a good number of entrepreneurs is to seek source of credit which is not available among the formal financial institutions.

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2.3 Review of analytical literature.

2.3.1 The level of literacy.

The low levels literacy is working against the growth of the sector. For example due to this, including low levels of business knowledge, there are no associations representing the youth in these regions. Low literacy levels leads to poor communication within the sector, and externally and makes it difficult to undertake campaigns, or lobbying for better loan services. Information flows among the different actors in the sector are quite in adequate. Due to low literacy levels again there is no organization in charge of promoting and providing, incentives for the creation of the type of the information exchange needed between the borrowers and the lenders in the sector. Therefore, the entrepreneurs in this sector should lobby for the creation of such an organization to fight for their welfare.Weaknesses in the information and knowledge flow in this sector therefore, translate into greater difficult in the communication and information provision, on the source and the type of credit available.Youth small businesses informal nature increases their vulnerability in contract relationships with their lending institutions as the entrepreneurs are uninformed contract laws pertaining to credit. There’s therefore a perpetuated vicious cycle of poverty among the youth with regard to information and literacy levels. Low literacy levels produces low levels of information and the low levels of information tend to legitimize the ignorance on the type and source of the loan service in the market.

2.3.2 The interest rates on loans.

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As a factor affecting accessibility of credit the interest rate charged, on loans ranks high. It also affects the rate of repayment of the loans leading to high rate of default on loans. Commercial banks have been criticized for overcharging their clients by setting high interest rates. Most of these interest rate range from 18-20%. With poor business performance worsened by the global and local economic depression, most businesses are not only unable to repay their current loans but are discouraged from accessing more credit.Close monitoring of the lending institution by the central bank is required to avoid escalation of interest rates which discourages growth of the sector by reducing the accessibility of credit. The government should also increase competition in the lending sector by creating a fund exclusively for the micro finance institutions. And create a microfinance department within the central bank, instead of being lent by the commercial banks. This will enable them to borrow at competitive rates. It will enable them to; end at lower interest rates and increase available of loans as they pass the benefits to their clients.

2.2.3 Collateral.

Among other factors, lack of collateral is one of the key elements, of youth credits access. Due to this as well as a verifiable credit history, most are therefore unable to access credit.The situation has led to the advent of micro credit to youth, where minimal collateral is required as a basis for granting loans. The concept is considered an innovation of Grameen Bank in Bangladesh. In that country it has largely helped the sector to grow by accessing the credit with minimal security requirements. In Kenya, the concept is also developing and should be strengthened by encouraging the growth of

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the MFI’s who finances youth and SME’s without collateral requirements like uwezo funds.

2.2.4 The number of lending institutions.

The number of lending institutions and their network of branches is a challenge to the accessibility of loans among the youth a wide branch network enables a financial institution to have lower cost of funds. The cost of funds being the amount paid by the banks for its liabilities, including the loans it borrows from other financial institutions. Banks take loans from other financial institutions in order to lend to the customers where their deposit base is insufficient to cover the amount lent. But a wide branch network bring with it , significant operating expenses in the forms staff costs and structures, Business Daily, may 18, 2009.The few available lending institutions are unable to channel the credit services widely due to the costs involved. To avoid this Central Bank has embarked on an effort that could see commercial banks allowed to use agents, a model that is popularly known as branchless banking. It is estimated that the cost of putting up a small branch is between kshs7m-20m, which equivalent to recruiting 50 agents, each of which can serve tens of thousands of young entrepreneurs. This way the banks can capture billions of shillings worth of transactions that are in the informal sector, as well as disburse more loans which they are currently unable to.

2.3 Research gaps to be filled by the study.

There is evidence from the review of both the theoretical and the analytical literature that research gaps exist. Past researchers have concentrated on factors affecting accessibility of credit among the

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youth, in the traditional financial transactions. However modern trends in the financial transactions have brought about different ways in operations by youth. An example is the mobile telephone money transactions by the unbanked traders. The study will therefore Endeavour to why they are unable to only access normal banking services but credit services offered by the financial institutions

CHAPTER 3

3.0 RESEARCH DESIGN AND METHODOLOGY.

3.1 Introduction.

The area of interest in this chapter will include; design of the study, target population, sampling design and procedures, and also how the research finding will be presented.

3.2 Research Design.

The researcher will use descriptive research, in aim to achieve the objective

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of the study. The research method is defined as a process of collecting data in order to answer research questions concerning the current status of the subject of the study. This method determines and reports the way things are. It attempts to such things as possible behaviors, attitudes, values and characteristics, which is why it should be the choice of the researcher since it will describe the small and micro enterprises as they are within the Thika and Isiolo Towns and also the factors that prevent them from accessing the credit facilities. Questionnaires will be used to select samples for observation and analysis, in order to estimate and interpret the actual population characteristics.Both qualitative and quantitative data will be obtained which requires statistical techniques to analyze and present the results.

3.3 Target population.

The target population in this study will refer to all the entrepreneurs within Thika and Isiolo Towns respectively. For the purpose of this study a sample number of youth in this area will be studied. Due to financial and time constraints the researcher will collect data from few entrepreneurs in the study. Therefore, a randomly selected sample size of 50 young entrepreneurs will be selected from across these two towns to maintain objectivity. The young entrepreneurs will be representative enough of the study population to form the subject of the study.

3.4 Sampling Design and Procedures.

Due to the fact that young entrepreneurs are widely distributed virtually in all sections of these two towns and offering different products and services, simple random sampling will be used to find more appropriation in obtaining the data compared to other methods. In this a number will be given to every

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member of interviewees because some questionnaires will be administered orally to less literate traders. The questionnaires will containe both open ended and closed ended type of questions. In the closed ended type of questions, all possible alternatives from which respondents will select the answer that best described the situation will be provided. The open ended type will give the respondents the choice to respond in their own words.Both methods will be to be advantageous. For closed ended questions they will be easier to analyze since they are in an immediate usable form, economical and easier to administer. Open ended question also will give the respondent freedom to respond giving greater depth of response; it will give insight to the feelings of the response among other advantages. Therefore the researcher will find these instruments to be very appropriate for the study.

3.5 Data collection instruments and procedures.

The researcher will use interview schedule to obtain data from the respondents. The method is preferred because the face to face encounter encouraged the respondents to be more co-operative in providing the information. Among other advantages included ability to obtain in-depth data than with the use of other methods, clarify and elaborate the purpose of research among others.In combination with this method questionnaires will be also used. The questionnaires will contain a list of simple, structured questions, chosen after considerable testing for the purpose of obtaining reliable information from the respondents. There is a need for using a combination of

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questionnaires and finally the data is to be presented in bar graphs and pie charts.

3.6 Data Analysis Procedure and Presentation.

Statistical data analysis techniques such as Ms. Excel and SPSS will be used in the analysis of the information that will be obtained. Farther, both qualitative and quantitative data analysis techniques will be used in order to help the researcher to bring out the information clearly. This analysis will enable patterns and relationship to be formed which are not apparent in the raw data. A sampling frame of fifty young people is to be obtained from the list of the registered young entrepreneurs from the local authorities. The entrepreneurs will be allocated numbers. The numbers will be then placed in container and is to be picked at random; the subjects responding to numbers to be picked will be included in the sample. The subjects will then be interviewed.

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Appendices4.0 APPENDIX

4.1 Questionnaire:

The purpose of this Questionnaire is to seek answers to factors affecting accessibility to credit facilities among the Small and Micro Enterprises within the Thika and Isiolo Towns.NB: Confidentiality on the information which the respondents will provide is guaranteed, and will be used for academic purposes only.Section A (optional) Bio Data.1. Name of the business person………………………………………………………….2. Name of the Business…………………………………………………………………3. Physical address………………………………………………………………………4. Age of the business person (yrs.) (tick appropriately.)Between 20-25Between 26-30Between 31-35Between 36-40.Over 40yrs.5. Sex Male.Female.

6. Highest level of Education.Below standard Eight.Primary School level (KCPE)Secondary School level (KCSE).College and University level.

SECTION B (Please answer all questions.)7. How much was your startup capital?Below 50,000.51,000-100,000

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101,000-150,000151,000-200,000201,000-250,000Above 250,000 8a, Among the following which was the source of your startup capital?Personal savingsFamily membersBank loansOther

8b, the table below contains the various types of financial institutions. What is your view of the interest rates charged by each. (Please tick appropriately.)

Institutions High Medium lowBanks Sacco’s MFI’s Informal Lenders 9. If you were to expand your business today which would be your preferred source of finance?Bank loansMFI’sSACCOSFamily Members.Personal Savings.

10. a. what professional training in business do you have?AccountingManagementBook keepingEntrepreneurshipNoneOther10. b. If any how has the above training helped in seeking a

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loan?...................................................................................................................................................................................................................................................................................................................................................................................................................................11. How often do you read newspapers and other financial publications?RarelyOftenVery often.

12. A Do you have a fear for borrowing loans?YesNob. If the answer for the above question is ‘yes’ do you think your lack of understanding of the loan process is the reason. Please explain………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………13.a Do you think your level of education would affect your loan application request?YesNob. If yes explain how?14. which of the following assets do you have title of ownership?LandHouseVehicleNoneOther15. Has your application ever been rejected for lack of collateral?YesNo

16. Do you think lack of collateral is a major factor that can prevent you from

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accessing a loan?YesNoExplain……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………17. How many financial institutions offering credit facilities do you know?FewManyVery many18. Do you think licensing more financial institutions would increase borrowing?YesNo19. How do you rate the ratio of the number of lending institutions to the number of borrowers?Very lowLowHighVery high

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institution: mount kenya university

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