ABSTRACT

This research study aimed to examine the effects of the covid-19 pandemic on the growth of small and medium enterprises (SMEs) in Eldoret town-Uasin Gishu County.  It was guided by the following research questions: How has covid-19 affected accessibility to loan financing by SMEs in Kenya? How has Covid-19 affected the supply of raw materials to the SMEs in Kenya? How has Covid-s19 affected employment in SMEs in Kenya? and How has Covid-19 affected market access by SMEs in Kenya? In conducting the study, the researcher adopted a descriptive survey design. The population in this study was mainly from the management and those involved in the day-to-day operation of the SMEs in Eldoret town. SMEs were defined based on employment size; those formally registered and had been in operation at least six months before conducting the study in the private sector. The Researcher employed a multistage sampling technique. Systematic sampling was done based on the size of SMEs; a sample of 100 SMEs was collected. From the 100 SMEs, a Simple random sampling procedure was used to arrive at a sample of 50 SMEs. The SMEs were chosen based on the size which would be determined by the employees in the business. A purposive sampling procedure was used to select the business owners or managers. The actual sample of the study added up to 50 SMEs. The researcher used both closed and open-ended questionnaires. Frequency tables, graphs, and pie charts were used for data presentation. SPSS v.21 was used to conduct ordinal regression and Spearman Ranks Correlation analysis.  The study findings showed that Covid-19 Pandemic has affected the growth of SMEs in Eldoret town since it has negatively affected the ability of SMEs to access loans, disrupted supply to the SMEs, reduced labour/employment in SMEs, and reduced market accessibility by SMEs. Further, the regression analysis revealed that all the variables were positive predictors of growth of SMEs except for access to supply. Finally, both labour and market access had a statistically insignificant positive correlation with growth of SMEs. The study also established that there is a statistically significant negative correlation between access to finance and growth of SMEs. Based on the study, the following recommendations were made; Future researchers can conduct a similar study but incorporate intervening variables like the Government and other international practices that affect the growth of SMEs.

Key Words:small and medium enterprises, pandemic, performance, growth

TABLE OF CONTENTS

DECLARATION.. 3

Declaration by Student3

DEDICATION.. 4

ABSTRACT.. 5

ACKNOWLEDGEMENT.. 6

ACRONYMS. 7

OPERATIONAL DEFINITION OF TERMS. 8

LIST OF TABLES. 12

LIST OF FIGURES. 13

CHAPTER ONE.. 14

INTRODUCTION TO THE STUDY.. 14

1.0 Introduction. 14

1.1 Background to the problem.. 14

1.2 Statement of the problem.. 20

1.3 Research Questions. 21

1.4 Significance of the Study. 21

1.5 Scope and Delimitations of the Study. 22

1.6 Theoretical Framework. 23

1.6.1 Structural Inertia Theory. 23

1.7 Conceptual Framework. 24

Figure 1.1: Conceptual Framework. 24

CHAPTER TWO.. 25

LITERATURE REVIEW... 25

2.1 Review of Theories. 25

2.1.1 Real Options Theory. 25

2.1.2 Structural Inertia Theory. 27

2.1.3 Resource Dependence Theory (RDT)29

2.2 Criticism of the Theories. 31

2.2.1 Real Options Theory. 31

2.2.2. Structural Inertia Theory. 31

2.2.3 Resource Dependence Theory (RDT)31

2.3 Critical Review of Empirical Studies. 32

2.3.1 Access to Loan Financing and Growth of SMEs. 32

2.3.2 Supply and Growth of SMEs. 36

2.3.3 Labour/Employment and Growth of SMEs. 38

2.3.4 Market Access and Growth of SMEs. 39

2.3.5 Knowledge Gap. 42

CHAPTER THREE.. 43

RESEARCH METHODOLOGY.. 43

3.1 Introduction. 43

3.2 Research Design. 43

3.3 Target Population. 43

3.4 Description of Sampling and Sampling Procedures. 44

3.5 Validity and Reliability of Data Collection Instruments. 44

3.5.1 Questionnaire. 45

3.6 Description of Data Collection Procedures. 45

3.7 Description of Data Analysis Procedures. 45

3.7.1 Analytical Model46

3.8 Ethical Consideration. 46

CHAPTER FOUR.. 48

4.0 PRESENTATION, DISCUSSION AND INTERPRETATION OF FINDINGS. 48

4.1 presentation of findings. 48

4.1.1 Response Rate. 48

Figure 4.1: Response Rate. 49

4.1.2 Demographic Characteristic of the Respondents. 49

4.1.2.1 Gender of the Respondents. 49

Figure 4.2: Gender composition of the Respondents. 50

4.1.2.2 Distribution of respondents by Years of experience. 50

Table 4.1: Respondents’ years of experience. 51

4.1.2.3 Distribution of Respondents by Highest Education Level51

Figure 4.3: Distribution of Respondents by Education Level.52

4.1.3 Presentation of the Findings, Interpretation of the Findings According to Research Questions  52

4.1.3.1 Impact of access to Loan Financing on the Growth of Small and Medium Enterprises  52

Table 4.2: Impact of Access to loan Finance on Growth of SMEs. 53

4.1.3.2 Impact of Supply on the Growth of SMEs. 53

Table 4.3: Impact of Supply on the Growth of SMEs. 54

4.1.3.3 Labour and Growth of SMEs. 55

Table 4.4: Impact of Labour on the Growth of SMEs. 55

4.1.3.4 Market Access and Growth of SMEs. 56

Table 4.5: Impact of Market Access and Growth of SMEs. 56

4.1.4 Relationship between Covid-19 Pandemic and Growth of SMEs in Eldoret-Uasin Gishu  57

Table 4.6: Relationship between Covid-19 pandemic and Growth of SMEs. 57

4.2 Ordinal Regression. 57

4.2.1 Nagelkerke. 57

4.2.2 Test of Parallel Lines. 58

4.2.3 Parameter Estimates. 59

Table 4.7 Ordinal Regression. 59

4.3 Spearman Rank Correlation. 60

Table 4.8 Non-Parametric Test60

CHAPTER FIVE.. 62

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS. 62

5.1 summary of the Study. 62

5.2 Conclusion. 64

5.3 Recommendations for the Study. 65

REFERENCES. 68

APPENDICES. 75

APPENDIX I: RESEARCH QUESTIONNAIRE.. 75

APPENDIX II: INTRODUCTORY LETTER.. 79