Influence of Alternative Financing on the Relationship between Managerial Competency and Efficiency of Small and Medium Enterprises in Kenya

Abstract

Worldwide, Small and medium-size enterprises (SMEs) exhibit inimitable financial needs. While SMEs remain fundamental to economic growth, their mortality rate in Kenya approaches 90% by the second year, mainly owing to lack of credit. However, scholarly endeavors exploring the impact of alternative finance (AF) on managerial competency - efficiency nexus for manufacturing SMEs have received little attention in Kenya. To resolve this conundrum, a thorough study to investigate how AF impacts managerial competency - efficiency nexus is necessary. The study used a cross-sectional research design, employing both qualitative and quantitative research approaches. The target population was 171 SMEs registered with Kenya Association of Manufacturers. The accessible population was 136 SMEs owners/managers. A semi-structured questionnaire was used to collect primary and secondary data. Data envelopment analysis was used to measure efficiency, multiple regression modeling used to analyze the direct relationships while hierarchical moderated multiple regression analysis employed to test moderation. Partial Least Squares Structural Equation Modeling was used to test robustness of our results. The findings of this study demonstrate that managerial competency positively influences efficiency (? = 0.150, t-value =10.246, P<0.05), and that alternative finance does moderate managerial competency relationships with efficiency (R-Square change of 21.7%). We suggest trainings for manufacturing SME owners/managers in Kenya on the pivotal role of alternative finance to facilitate SMEs achieve higher efficiencies and accelerate economic growth.

Authors & affiliations

Jackson Njau Waweru
Affiliation not supplied

Kennedy M Waweru
Affiliation not supplied

Kenneth L Wanjau
Affiliation not supplied

Josphat K Kinyanjui
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

DOI: 10.5539/ijbm.v8n14p36

Adenkule, A., Adegbite, D. A., & Fakayode S. B. (2012). Rural financial services and poverty alleviation: The roles of the Nigerian agricultural cooperative and rural development bank (NACRBD) Nigerian Journal of Agriculture and Environment 8(1), 1-9.

Aghion, P., & Howitt, P. (1998). Endogenous Growth Theory. Cambridge MA: MIT Press. https://mitpress.mit.edu/books/endogenous-growth-theory.

Aiken L. S. and West S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park, CA: Sage.

DOI: 10.2139/ssrn.2029082

DOI: 10.1007/s11187-006-9002-5

DOI: 10.4314/kjbm.v2i1.44408

DOI: 10.1007/s11135-006-9018-6

Briozzo, A., & Vigier, H. (2009). A demand-side approach to SMEs' capital structure: evidence from Argentina. Journal of Business and Entrepreneurship, 37(21), 30-56. https://www.questia.com/.../journal/.../a-demand-side-approach-to.

DOI: 10.1002/smj.190

Bula, H. O. (2012). Evolution and theories of entrepreneurship: A critical review on the Kenya perspective. Journal of International Business and Commerce, 1(11), 81-96. https://books.google.co.ke/books?isbn=1784713260.

DOI: 10.1016/S0166-4972(01)00050-5

Coelli, J. T., Rao, P. D. S., O’Donnell, J. C. & Battese, E. G. (2005). An Introduction to Efficiency and Productivity Analysis, (2nd Ed.). NY: Business Media, Inc. https://www.springer.com/it/book/9780387242651.

Erick, K. K. The relationship between alternative sources of finance and financial performance of small and medium enterprises in Nairobi county. University of Nairobi. 2014. erepository.uonbi.ac.ke. Accessed on June 22, 2018.

European Integration Studies - EIS (2005). The Economic Role of SMEs in World Economy, Especially in Europe), 1 (4) 312, www.ceeol.com.

Forkuoh, S. K., Li, Y., Affum-Osei E, Quaye I. (2015). Informal financial services, a panacea for SMEs financing? A case study of SMEs in the Ashanti region of Ghana. American Journal of Industrial and Business DOI: 10.4236/ajibm.2015.512075. https://file.scirp.org/pdf/AJIBM_2015122111484639.pdf.

DOI: 10.1016/0378-4266(93)90031-8

DOI: 10.1093/rfs/hhn096

Industry Canada, (2003) Management Competencies and SME Performance Criteria: A Pilot Study. http://strategis.ic.gc.ca/epic/internet/insbrp-rppe.nsf/en/rd00850e .html. Small business policy branch.

Juma, F. (2017). Kenya’s SME sector chocked to death by tough political and economic environment. Soko Directory. https://sokodirectory.com/2017/09/kenyas-sme-sector. Downloaded 12.06.2018.

Karanja, K., Memba, S. F. & Gakure, W. R. (2012). Venture capital: It’s impact on growth of small and medium enterprises in Kenya. International Journal of Business and Social Science, 3(6).32-36. www.ijbssnet.com/journals/Vol_3_No_6_Special...2012/5.pdf.

Kenya Association of Manufacturers (2014). Kenya Manufacturers and Exporters Directory (4th Ed.). Nairobi: www.kam.co.ke, manufacturersandexportersdirectory.co.ke.

Kenya National Bureau of Statistics (KNBS) (2017). The 2016 National, Micro, Small and Medium Establishments (MSME) Survey. Downloaded 21.05.2018.

Kihimbo B. W., Ayako B. A., Omoka, K. W., & Otuya W. L. (2012). Financing of small and medium enterprises in Kenya: a study of selected SMEs in Kakamega municipality. International Journal of Current Research, 4(04), 303-309. https://scholar.google. com/scholar.

DOI: 10.1287/orsc.2.1.71

Mburiah, B. W., Wanjau, K., Kinyanjui J. K. (2016). Quality management and entrepreneurial orientation on performance of food processing firms in Kenya. Asian Academic Research Journal, 3(9), 779-791. https://ideas.repec.org/a/hur/ijarbs/v5y2015i9p14-34.html.

Mirie M., (2014). The Influence of Members’ Income and Conduct of SACCOs in the Relationship between Characteristics and Efficiency of SACCOs in Kenya, UON. https://profiles.uonbi.ac.ke/.../influence-members’-income-and-co.

DOI: 10.2139/ssrn.2023409

Prusa, J. (2012). The most efficient Czech SME sectors: An application of robust Data Envelopment Analysis (DEA). Journal of Economics and Finance, 622012 (1). journal.fsv.cuni.cz/storage/1241_44-65_prusa.

DOI: 10.1257/jep.8.1.3

Schumpeter, J. A. (1934). The Theory of Economic Development. Cambridge, M A: Harvard University Press. www.hup.harvard.edu/catalog.php?isbn=9780674879904.

Schumpeter, J. A. (1994) [1942]. Capitalism, Socialism and Democracy. London: Routledge. pp.82–83. ISBN978-0-415-10762-4. https://en.wikipedia.org/wiki/Creative_ destruction.

DOI: 10.1093/biomet/52.3-4.591

DOI: 10.1023/A:1018981212364

DOI: 10.1108/14601061311292878

World Bank Group – IBRD & IDA). (2017). (17th Ed.). http://documents.worldbank. org/curated/en/ 140071512 474376644/Kenya-economic-update-Poised-to-bounce-back. Download on 21.04.2018.

Zarook, T., Rahman M. M., Khanam, R., (2013). Management skills and accessing to finance: Evidence from Libya’s SMEs. International Journal of Business and Social Science 4(7), 106-115. https://www.scirp.org/journal/PaperInformation.