The Effects Of Microfinance Institutions Financing On The Growth Of Agri-Business In Kiambu County

A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Master in Business Administration (MBA)The main objective of this study was to determine the effect of MFIs on the growth of Agribusiness in Kiambu County. The study was guided by the following research objectives: To determine the effect of MFIs on the growth of Agribusiness capital, to examine the financial challenges affecting agribusiness and to investigate ways of how MFIs can improve their financial assistance towards Agribusiness growth. This research adopted a descriptive research design and the research population consisted of 16,000 registered Kiambu Agribusinesses. In this study, the sampling frame constituted of Agribusiness entrepreneurs and the information was obtained from the Kiambu County Authorities. The sampling techniques included the purposive sampling and out of the total population of 16,000 Agribusinesses the sample size was 390. However only 233 responded resulting into a 60% response rate. In this study, the descriptive statistics such as percentages and frequency distribution were used to analyze the demographic profile of the participants. In order to describe the data, the study used means of each variable. The study established that savings remains the most important source of finance throughout the business cycle. The MFIs play a smaller role in economic empowerment of Agribusinesses in Kiambu County, as most of the respondents, depended on village loans; self-help groups (SHG) and from family members in generating their business startup capital. SHGs can also promote savings and yield moderate economic benefits that reduce the dependence on moneylenders. 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. MFIs play a small role on the growth of human capital. From the findings, MFIs also play a small role in making the labor force to be more productive. A small proportion of the respondents agreed that there were a number of MFIs offering business training to small and medium scale entrepreneurs in Kiambu County. It was also found that MFIs do not play any significant role in offering training in business skills. Any government interested in the development of their economy should be involved in the provision of good regulations for business growth. Making credit available to Agribusiness and at an affordable rate is a means to empower them. MFIs should deal with trust worthy Self Help Groups. MFIs should increase the grace period of loan repayment among Agribusinesses. MFIs should collaborate with other MFIs in assisting Agribusiness and sensitization of SME business management in giving clients information about new loans, saving procedures and any other new products from the MFIs. The study concluded that savings remains an important source of finance throughout the business cycle. The MFIs play a smaller role in economic empowerment of Agribusinesses in Kiambu County and access to finance has been identified as a key element for small scale enterprises to succeed in their drive to build productive capacity. It was also concluded that MFIs should increase the grace period of loan repayment among Agribusinesses. The study revealed that Limited Access to Finance remains the main challenge facing аgribusiness. The study recommends that MFIs should come up with innovative ways to finance Agribusinesses for successful growth. In addition the government should be involved in business growth. MFIs should assist Agribusinesses in marketing of their business products and making credit available to Agribusinesses at an affordable rate. The county government of kiambu should look for a way of making borrowing much easier for the agribusinesses. Therefore, small scale entrepreneurs should be made aware of any financial assistance as well as challenges in their business environment. While this study is on Kiambu County, it is recommended that similar studies should be done be done on other counties with the same level of development. Other studies should also be conducted on the formal and informal institution’s lending policies and access to credit by small scale enterprises in Kiambu County.