Julius Ewoi Lokopu, Irene Cherono, Robert Simiyu


Loans are considered to be the basic source of financing Small and Medium Enterprises in developing countries like Kenya. However, the majority of SMEs continues to face challenges in obtaining loan facilities resulting in poor performance and closures. Hence, the study investigated the effect of bank loan financing policies on the performance of SMEs in Turkana County, Kenya. The study was guided by two research questions: In what ways do collateral requirements affect the performance of small and medium sized enterprises in Turkana County, Kenya? And how does financial information affect the performance of small and medium sized enterprises in Turkana County, Kenya? The study was anchored on correlation research design and targeted a population of 2037 licensed SMEs from different sectors in Turkana County. Stratified and simple random sampling techniques were employed to select a sample of 334 SMEs. A questionnaire for SMEs was used as the instrument of data collection that collected data on the independent and dependent variables. The research instrument was tested for validity and reliability before being taken to the field. Analysis of data was done through the quantitative method. Analysis of data to answer the research questions was done by using descriptive statistics; frequencies, percentages, means, and standard deviation. Data analysed was presented in the form of frequencies and percentages, mean, and standard deviation. The research result showed that there existed a significant negative effect of collateral requirements ( and performance of SMEs. However, the second null hypothesis was accepted (p>0.05) because leading to the acceptance that there was no significant effect  of financial information on the performance of SMEs. The study concludes that loan financial policies had a significant effect on the performance of SMEs in Turkana County. The study recommends that financial institutions need to revise their loan financing policies to make them attractive to SMEs as they have been found to be influencing their performance.


JEL: L20; G21


bank loan financing policies; collateral requirement; financial information; interest rate; performance; repayment period; small and medium enterprises

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DOI: http://dx.doi.org/10.46827/ejefr.v7i3.1556


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