Since thirties access to debt capital has been considered as one of the main challenges facing the growth of Small businesses in the world. Empirical studies in developed countries focused on access to debt capital without considering the cost of that debt, due to the fact that the cost of debt is cheaper in developed countries. However, this is not the case in the developing economies such as Kenya due to lack of financial transparency, high interest rate, high risk, and poor financial reporting. This study endeavored to investigate the hindrance of small businesses to access debt capital in Nairobi, Kenya. In addition, the study used loan-pricing theory (LPT) to clarify the theoretical explanation of factors that hinder Kenyan SMEs to access debt capital. Factors that this study investigated are: cost of debt (CD), faith prohibition (FP), and long process (LP). The study applied regression and correlation to analyze the collected data using SPSS. The analysis revealed significant relationship between cost of debt and access to debt capital. There was also significant relationship between long process and access to debt capital. But the relationship between faith prohibition and access to debt capital was insignificant. The study concluded that the government should facilitate cheap finances for small businesses to enable them access to debt capital and improve their performance. Developing online loan facilities should reduce the long process and sizeable paper work of accessing debt capital. The government should connect the grid to small businesses and encourage virtual lenders to lend out a sizable portion of their credits.
| Published in | International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 4) |
| DOI | 10.11648/j.ijafrm.20220704.13 |
| Page(s) | 157-163 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2022. Published by Science Publishing Group |
Cost of Debt, Access to Debt Capital, Long Process, Kenyan SMEs
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APA Style
Abdikadir Noor Fidow. (2022). Deterrents of Access to Debt Capital for Small and Medium Enterprises in Nairobi. International Journal of Accounting, Finance and Risk Management, 7(4), 157-163. https://doi.org/10.11648/j.ijafrm.20220704.13
ACS Style
Abdikadir Noor Fidow. Deterrents of Access to Debt Capital for Small and Medium Enterprises in Nairobi. Int. J. Account. Finance Risk Manag. 2022, 7(4), 157-163. doi: 10.11648/j.ijafrm.20220704.13
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Download@article{10.11648/j.ijafrm.20220704.13,
author = {Abdikadir Noor Fidow},
title = {Deterrents of Access to Debt Capital for Small and Medium Enterprises in Nairobi},
journal = {International Journal of Accounting, Finance and Risk Management},
volume = {7},
number = {4},
pages = {157-163},
doi = {10.11648/j.ijafrm.20220704.13},
url = {https://doi.org/10.11648/j.ijafrm.20220704.13},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220704.13},
abstract = {Since thirties access to debt capital has been considered as one of the main challenges facing the growth of Small businesses in the world. Empirical studies in developed countries focused on access to debt capital without considering the cost of that debt, due to the fact that the cost of debt is cheaper in developed countries. However, this is not the case in the developing economies such as Kenya due to lack of financial transparency, high interest rate, high risk, and poor financial reporting. This study endeavored to investigate the hindrance of small businesses to access debt capital in Nairobi, Kenya. In addition, the study used loan-pricing theory (LPT) to clarify the theoretical explanation of factors that hinder Kenyan SMEs to access debt capital. Factors that this study investigated are: cost of debt (CD), faith prohibition (FP), and long process (LP). The study applied regression and correlation to analyze the collected data using SPSS. The analysis revealed significant relationship between cost of debt and access to debt capital. There was also significant relationship between long process and access to debt capital. But the relationship between faith prohibition and access to debt capital was insignificant. The study concluded that the government should facilitate cheap finances for small businesses to enable them access to debt capital and improve their performance. Developing online loan facilities should reduce the long process and sizeable paper work of accessing debt capital. The government should connect the grid to small businesses and encourage virtual lenders to lend out a sizable portion of their credits.},
year = {2022}
}
TY - JOUR T1 - Deterrents of Access to Debt Capital for Small and Medium Enterprises in Nairobi AU - Abdikadir Noor Fidow Y1 - 2022/12/15 PY - 2022 N1 - https://doi.org/10.11648/j.ijafrm.20220704.13 DO - 10.11648/j.ijafrm.20220704.13 T2 - International Journal of Accounting, Finance and Risk Management JF - International Journal of Accounting, Finance and Risk Management JO - International Journal of Accounting, Finance and Risk Management SP - 157 EP - 163 PB - Science Publishing Group SN - 2578-9376 UR - https://doi.org/10.11648/j.ijafrm.20220704.13 AB - Since thirties access to debt capital has been considered as one of the main challenges facing the growth of Small businesses in the world. Empirical studies in developed countries focused on access to debt capital without considering the cost of that debt, due to the fact that the cost of debt is cheaper in developed countries. However, this is not the case in the developing economies such as Kenya due to lack of financial transparency, high interest rate, high risk, and poor financial reporting. This study endeavored to investigate the hindrance of small businesses to access debt capital in Nairobi, Kenya. In addition, the study used loan-pricing theory (LPT) to clarify the theoretical explanation of factors that hinder Kenyan SMEs to access debt capital. Factors that this study investigated are: cost of debt (CD), faith prohibition (FP), and long process (LP). The study applied regression and correlation to analyze the collected data using SPSS. The analysis revealed significant relationship between cost of debt and access to debt capital. There was also significant relationship between long process and access to debt capital. But the relationship between faith prohibition and access to debt capital was insignificant. The study concluded that the government should facilitate cheap finances for small businesses to enable them access to debt capital and improve their performance. Developing online loan facilities should reduce the long process and sizeable paper work of accessing debt capital. The government should connect the grid to small businesses and encourage virtual lenders to lend out a sizable portion of their credits. VL - 7 IS - 4 ER -
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