ASSET-BASED FINANCE AND FINANCIAL PERFORMANCE OF SMALL AND MEDIUM SIZE MANUFACTURING ENTERPRISES IN NAIROBI CITY COUNTY, KENYA
Wambia Ochieng Wilson - Postgraduate Student, Department of Accounting and Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
Prof. Ambrose Jagongo - Senior Lecturer, Department of Accounting and Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
Dr. Margaret Kosgei - Senior Lecturer, Department of Accounting and Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
There has been reduced financial performance witnessed within the manufacturing Small and Medium Enterprises sector despite the effort put in place by the government. Financial performance of manufacturing Small and Medium Enterprises in Kenya has reduced in the last five years leading to decline in the sector’s growth. The aim of the research was to establish the effect of asset-based formal finance on financial performance of manufacturing Small and Medium Enterprises in Nairobi City County, Kenya. The study used pecking order. Positivist research philosophy guided the research. Explanatory research design was used with a population of 188 manufacturing Small and Medium Enterprises who registered as new members with Kenya Association of Manufacturers in the year 2021. The sample consisted of 128 managers generated through Yamane sampling formula. Stratified random sampling was adopted to group Small and Medium Enterprises managers in different categories whereas purposive sampling aided the selection of managers. Closed and open-ended questionnaires assisted in data collection. Pilot study was done in Kiambu County with 10% of the sample. Content, internal and external validity were used to determine the instrument’s validity while Cronbach’s alpha aided in reliability analysis with acceptable cut-off value of 0.7. Descriptive, correlational and multiple regression were the techniques used in data analysis. Normality, homoscedasticity and test of direct effects were done. Findings were presented using tables, pie charts and graphs. Findings revealed that asset-based finance had a significant positive effect on the financial performance of manufacturing Small and Medium Enterprises in Nairobi City County. The research concluded that asset based formal finance is vital to boosting financial performance for Nairobi’s manufacturing Small and Medium Enterprises. The study recommended that manufacturing enterprises should consider adopting asset-based finance to enhance their financial performance. Future studies may be done in other geographical locations.