EFFECT OF BUDGETING PRACTICE ON SMES ACCESS TO FINANCIAL CREDIT IN KISUMU CITY CBD

Abstract

Credit availability is a significant component in the development of SMEs in Kenya. However, most SMEs in Kenya lack the expertise to manage their business activities due to a lack of trained staff and entrepreneurial knowledge. Therefore, the study sought to determine the effect of budgeting practice on SMEs access to financial credit in Kisumu city CBD. The study was anchored on the full disclosure theory. The study targeted 390 registered SMEs in Kisumu Town. The study adopted Nassiuma’s (2000) formula to get a sample size of 86. Additionally, the study used simple stratified random sampling and purposive sampling to determine the sample size from each SME. The study collected primary data using structured and unstructured questionnaire. The pilot test was conducted in Kisii town where 9 questionnaires were distributed to 9 finance officers. The content validity of the research instruments was determined by seeking expert’s opinions from research supervisors. Reliability was determined by assess the Cronbach at 0.7. From the findings the Cronbach alpha was above the acceptable threshold of 0.7. The study gathered both quantitative and qualitative data. Data was analyzed using both descriptive and inferential statistics. In descriptive statistics, percentages, frequencies, measures of central tendency (mean), and measures of dispersion were all employed. Inferential statistics was performed using Pearson's correlation coefficient and multiple regressions. The result of analyzed quantitative data was presented in form of tables and charts. The study concluded that there is a strong positive and significant relationship between budgeting practices and access to financial credit by SMEs in Kisumu City CBD. The study recommended that budgeting techniques should be utilized to achieve specific purposes and grand goal of the enterprise.