Entrepreneurial Finance and Performance of Small and Medium Sized Enterprises in Kiambu County, Kenya

Small and Medium Enterprises have contributed greatly to the Kenyan economy. They account for over 90% of all businesses in the country and provide employment opportunities to the majority of the population. Access to finance is a critical determinant to the success and growth of small and medium enterprises. The objective of this study is to assess the effect of access to entrepreneurial finance on the growth of Small and Medium sized Enterprises in Kiambu, Kenya. The target population is the 889 registered Small and Medium sized Enterprises in Kiambu County. The theories looked at in this study are Compensatory Theory of Profits, Traditional Theory of Capital Structures, Pecking Order Theory and Liquidity Preference Theory. The research used the descriptive design and concentrated on registered SMEs in Kiambu County due to their concentration thus a good representation. The target population for this study constitutes of the 889 SMEs in Kiambu County as registered in the Kiambu Business Directory. Using the Yamane sample size formula, a sample size of 276 businesses were selected to represent the target population. Thus, 276 questionnaires were administered out of which 214 were dully filled and returned representing a response rate of 77.5 percent. Data was analyzed using SPSS version 23. It involved both descriptive and inferential statistics and it was presented using pie charts, tables, graphs, and figures. From the analysis results, the correlation between angel financing and performance of SMEs was positive and statistically significant (0.544, 0.000<0.05). The coefficient of angel financing was positive (0.188) and statistically significant (0.001<0.05). The outcomes of correlation between venture capital and performance of SMEs was also positive and significant (0.535, 0.000<0.05). The coefficient of venture capital was positive (0.218) and statistically significant (0.000<0.05). The study concluded that angel financing positively and significantly affects the performance of SMEs. Venture capital is a positive and significant determinant of the performance of SMEs. Own funding by the SMEs also contributes positively and significantly to the performance of SMEs. The study recommended that before the inception of SMEs, the founders ought to look for adequate capital necessary for efficient running of the operations of the enterprise as well as a capital that enables the purchase of adequate stock. This can be done through conjunction between venture capitalist, SMEs through Micro and Small Enterprises Authority and the ministry of Cooperatives and Micro and Small Enterprise to develop a funding framework for SMEs anchored on venture capital and angel financing.