Institutional Impediments To Access To Credit By Micro And Small Scale Enterprises In Kenya

female-owned and informal entrepreneurs are more inclined to borrow, they request for smaller amounts and enjoy lower success rates. Older and more educated entrepreneurs seek for and receive more credit than the younger and less educated. Spatial and size differences abound in the inclination to seek out credit and in the success rates. Urban-located and larger enterprises have higher success rates and receive more credit than others. The gap between credit demand and supply is phenomenal. Amounts received partly depend on the source from which credit is sought. Choices of credit sources depend on formality status, gender, location, activity type and networking. Trade credit faces contract enforcement problems while existing regulation undermines financial layering. Greater access to credit by female entrepreneurs can result from improvements in their rights over property and general empowerment. Facilitation of joint liabilities, networking and expansion of micro-finance institutions that focus on women entrepreneurs would also assist. The bias against rural enterprises can be redressed by improving rural infrastructure to open-up rural Kenya for more profitable commerce and creation of scale economies in service provision. Further increases in access to credit can result from expansion of educational opportunities including promotion of self-financing adult literacy classes in trading centres. Financial regulations should permit use of collateral substitutes, create exceptions to minimum capital requirements, reduce entry and exit costs to encourage competition and allow micro-finance institutions to mobilise savings by receiving deposits. Cost effective dispute resolution mechanisms for small claims, teaching of relational ethics and progressive norms as standard components of business training curricula would encourage trade credit. Mainstreaming informal enterprises through reduction of registration costs would also increase access to credit. Furthermore, studies to explore the circumstances under which sustainable financial layering would thrive and determination of enterprise survival would generate useful information for the development of more effective policy interventions.