Volume 4, Number 1

One of the most essential and leading factors constraining small-scale enterprises (SSEs) growth in developing countries such as Kenya is limited access to financial and credit. The sources of such constraints are that on one hand, these enterprises could not fulfil the bank’s lending requirements, and on the other, the banking sector considers these enterprises as involving high credit risk. The aim of this research was to identify the factors that influence loan repayment by SSEs in developing countries with a case study of a certain informal outfit in Kenya. Primarily, data was collected from 50 randomly selected respondents by using questionnaires. Descriptive statistics including mean, frequency and percentages were used to describe the business characteristics of the borrowers. A regression model was employed to analyse the factors of loan repayment. The results of this study indicated that even though many factors can lead to loan defaults, some of the factors were regarded to be of higher impact. The study found out that business related factors had a higher impact on loan default while borrower (individual) related factors had the least impact on loan default. Specifically, increase in input price and high interest rate were the leading factors that lead to loan default while death of spouse had the least impact.

Keywords: Small-Scale Enterprises (SSEs); Loan Default; Loan Repayment; Non-performing Loans; Kariobangi Light Industries