From Policy to Performance: Examining the Role of Government Credit Strategies in SME Development in South Rift, Kenya

Abstract

Abstract Small and Medium-Sized Enterprises (SMEs) play a vital role in Kenya’s economic development, contributing to job creation, innovation, and the country's gross domestic product. However, access to affordable and sustainable credit remains a persistent challenge, limiting their growth and competitiveness. This study, titled “From Policy to Performance: The Effect of Government Credit Access Strategy on SME Performance in Kenya’s South Rift Region,” examined how government-sponsored credit initiatives influence the performance of SMEs within the counties of Baringo, Bomet, Kericho, Laikipia, Nakuru, Narok, and Nyandarua. The study adopted a positivist philosophy and employed a correlational research design using a quantitative approach. The target population comprised 939 SME owners registered and certified by the Kenya Bureau of Standards, from which a sample of 280 respondents was drawn using stratified and simple random sampling techniques. Data were collected using structured questionnaires and analyzed using descriptive and inferential statistics in SPSS. The descriptive results revealed moderate access to government credit facilities, with an overall mean score of 2.77 and a standard deviation of 1.213, suggesting mixed perceptions among SME owners regarding the ease and effectiveness of government-sponsored credit programs. Inferential analysis revealed a positive, statistically significant correlation (r = 0.512, p < 0.05) between government credit access strategies and SME performance, suggesting that improved credit access enhances business growth, profitability, and sustainability. Regression analysis further confirmed that credit access had a significant predictive effect on SME performance, with an unstandardized beta coefficient (β = 0.298, p < 0.05) that explained a considerable portion of performance variability. The study concluded that effective government credit access strategies significantly improve SME performance by alleviating financial constraints and promoting operational efficiency. However, limited awareness, bureaucratic loan processes, and stringent qualification requirements continue to hinder full participation in these credit schemes. The study recommends that the government enhance awareness creation, simplify loan procedures, and tailor credit terms to meet the Specific needs of SMEs. It further advocates integrating financial literacy programs and robust monitoring mechanisms to ensure the sustainability and impact of government credit initiatives. Overall, the findings underscore the crucial link between public financing policies and SME growth, highlighting the need for a cohesive, inclusive credit framework that bridges the gap between policy and performance in Kenya’s SME sector