Impact of Non Banking Source of Finance on Profitability for Small and Medium Enterprise in Kenya
Introduction
The growth of the Small and Medium Enterprises are due to the influences of the competition in the domain of the local markets. The actions of the entrepreneurs in the issues of growth and expansion are divided into two opposing views. Many of the entrepreneurs are challenged in the different situations and the others are in the state of anxiety that definitely creates an impact on their businesses.
Background of the Study and Problem Statement
The small and medium sized enterprises clearly played an important role in the economies of their country. The SMEs are considered as one of the important sectors that drive in the economic growth. Therefore, many policy makers and economists set strong foundations of efficient network of the SMEs in their aim for the industrialization. The entrepreneurs and their behavior in managing their respective firms are expected to be resilient in providing the answers against the impact of the global economic uncertainties.
Based on the background of the study, there are two problems identified.
· What are the sources of fund of SMEs aside from the banks?
· What is the impact of these sources in the profitability of the businesses?
Research Aims and Objectives
The aim of the study is to investigate the impact of non banking sources in the profitability of small and medium enterprises in Kenya. In order to administer the investigation of the study; there are objectives wherein the researcher/s can be focused on. First is to recognize the sources of funds of SMEs in Kenya. Second is to determine the entrepreneurial behaviors in the decision making, planning, and the control of the SMEs. Third is to determine the impact of these sources in the growth of SME in the country. And fourth is to give recommendations in order to strengthen the SMEs in Kenya.
Research Questions
There are questions that can help the study to gather the necessary information.
Literature Review
Through the different undesirable situations, the strategic alliances can be established in the growth of SME. The cooperative behavior of the entrepreneurs is the result of their cultural behavior in making their business profitable. The SME alliance is based strategically through the different forms of information whether positive or negative. In fact, the goals and purposes of the alliance among the entrepreneurs varied in differently but its structure is the agreement to establish a strong relationship between cooperating firms. The relationship founded in the SME plays an important role in the domestic business and even across the international borders. The alliance of the SME and the relationship between the entrepreneurs emphasizes the involvement of the leaders in the overall decision making and creating a strong industry (Weaver, Dickson, and Davies, 1996; Pistrui, 2002). In another deep sense, there are several studies that also recognize the relationship and the behavior of the entrepreneurs among their workers. The effectiveness of the entrepreneurs’ behavior can be assessed in two factors which are – first through the growing number of the employees or the continuous expansion of the business and both are because of the performance of the business throughout the years. In accordance to this fact, the age of the business within the industry, formal educations of the entrepreneurs and experiences, previous applied strategies, and environmental participation of the entrepreneurs are the other significant factors that may appear in the present behavior of the entrepreneur (Khalid, Farooq, and Raza, 2009).
Methodology
The applied method in the study is the comparative case study method. Through the use of the past literatures, the study can identify the information gaps which lies in the context small and medium size business. The past case studies discussed different variables that play essential roles in the decision making or planning strategies of the entrepreneurs.
References:
Khalid, G., Farooq, S., & Raza, S., (2009) Empirical Study of Employment Growth Rate in Small and Medium Enterprises, Journal of Managerial Sciences 2(2) [Online] Available at: http://www.qurtuba.edu.pk/jms/default_files/JMS/2_2/09_gulfam_khalid.pdf [Accessed 24 January 2011]
Pistrui, D., (2002) Growth Intentions and Expansion Plans of New Entrepreneurs in Transforming Economies: An Investigation into Family Dynamics, Entrepreneurship and Enterprise Development. [Online] Available at: http://www.ecap.uab.es/secretaria/tesi/dp1de1.pdf [Accessed 24 January 2011].
Weaver, KM., Dickson, PH., & Davies, L., (1996) Entrepreneurial Orientation, Cooperation Behavior, and Perceived Outcomes among Small to Medium Sized Enterprises: An Exploratory Study of Norwegian Firms. [Online] Available at: http://www.sbaer.uca.edu/research/usasbe/1996/pdf/22.pdf [Accessed 24 January 2011].
Credit:ivythesis.typepad.com
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