The Role of Commercial Banks' Services on the Development of Small Medium Enterprises

Abstract

"The main objective of this study was to determine the effect of Commercial banks on the growth of SMEs in Kakamega County. The study was guided by the following research objectives: To determine the effect of Commercial banks on the growth of SMEs capital, to examine the effect of commercial banks on the growth of SMEs human resource and to investigate ways of how Commercial banks can improve their financial assistance towards SMEs growth. This research adopted a descriptive research design. A descriptive research design is a scientific method which involves observing and describing the behavior of a subject without influencing it in any way. The research population consisted of 200 registered Kakamega SMEs. The sampling techniques included the purposive sampling method in the determination of SMEs to be included in the study. Using a confidence level of 95% and a total population of 200 SMEs the sample size was 1240. The data collection techniques that were employed for the research include the use of structured questionnaires. The respondents were requested for their time prior to sending the actual questionnaire. The study established that savings remains the most important source of finance throughout the business cycle. Access to finance has been identified as a key element for small scale enterprises to succeed in their drive to build productive capacity, to compete, to create jobs and to contribute to poverty alleviation in the county. Without finance, small scale enterprises cannot grow or compete in the turbulent business environment. The study concludes that commercial banks have a small impact on the growth of SMEs as savings remains the most important source of finance throughout the business cycle. Commercial banks plays a small role on the growth of human capital. The Kenyan government has failed to safe guard the property of the SMEs. The study recommends that Commercial banks should come up with innovative ways to finance SMEs for successful growth. Commercial banks should play a critical role on the growth of human capital. The government should be involved in business growth. Commercial banks should assist SMEs in marketing of the business products, making credit available to SMEs at an affordable rate."