ACCESS TO CREDIT, BUSINESS DEVELOPMENT SERVICES AND PERFORMANCE OF MICRO AND SMALL ENTERPRISES IN KENYA
Abstract
Purpose: To investigate the causal impact of credit access and Business Development Services (BDS) on Micro and Small Enterprise (MSE) performance in Kenya, and to examine the determinants of BDS uptake and complementarities between the two interventions.
Statement of the Problem: MSEs are central to Kenya's economic development yet remain constrained by limited credit access, low BDS uptake, regulatory bottlenecks, and weak market linkages challenges worsened by the COVID-19 pandemic. Despite evidence that credit and BDS independently enhance performance, no study has jointly examined their causal impact and complementarities locally.
Methodology: The study drew on the FinAccess Survey and the 2016 MSE Study. Propensity Score Matching assessed the treatment effect of credit access; multiple regression examined BDS contributions to enterprise outcomes; and binary logistic regression identified drivers of BDS utilization.
Findings: Only 31% of MSEs accessed credit and a mere 10% utilized BDS. Credit access improved enterprise performance by 32.6%, while 93.4% of BDS users reported positive outcomes, particularly in marketing, training, and business planning. Strong complementarities were evident: 67% of BDS users had credit access versus only 11% of non-users.
Conclusion: Credit and BDS are significant, mutually reinforcing drivers of MSE performance, yet most enterprises especially micro, rural, and female-owned remain excluded from both.
Recommendations: Interventions should prioritize collateral-free financing models, integrated credit-BDS programs, and targeted support for underserved enterprises.
Key words: Access to Credit, Business Development Services, Micro and Small Enterprises
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