THE IMPACT OF SELECTED FACTORS ON PROFITABILITY OF SMEs IN KENYA: A CASE STUDY OF KIKUYU TOWN, KIAMBU COUNTY

Karanja, A Wanjiru

School of Business

Presbyterian University of East Africa

Samwel N. Oresi

School of Business

Presbyterian University of East Africa

Solomon Muriiki

School of Business

Presbyterian University of East Africa

CITATION: Karanja, A., Wanjiru, Samwel, N., Oresi. Muriiki, S. (2022) The Impact Of Selected Factors On Profitability Of Smes In Kenya: A Case Study Of Kikuyu Town, Kiambu County. International Journal of Arts and Entrepreneurship. Vol. 11(6) pp 1-12.

ABSTRACT

Economic hardship witnessed around the world has contributed greatly for high unemployment rate. Many people have resorted to self-employment which has seen significant increase in the number of small and mediums enterprises (SMEs). SMEs contribute to about 60% of the total employment in the world, and their contribution to national income (GDP) is estimated to be 40% in emerging economies. In Kenya, SMEs form 98% of the entire business, and it creates jobs amounting to 30% every year. The sector contributes significantly towards economic growth and development as it comprises about 20% of the country’s gross domestic product (GDP) and contributes nearly 50% of the employment opportunities. However, SMEs face numerous challenges that limit their growth into large firms, and many cannot go beyond the first three years of their operations. SMEs are crucial to a country’s economy; there is a need to investigate some of the factors that affect the profitability of SMEs in the country to find a solution on how to improve the sector. The objectives of this research included establishing the effects of government policy and finance on SME profitability. A descriptive research design was employed to collect data from the target population. Both primary and secondary data are used in this study. The response rate was 96% (96 questionnaires) with the data collected and. The significant finding was that government policy affects a majority of the respondents such that: 17% are affected to a moderate extent, with 28% affected to a great extent and 45% affected to a very great extent. Only 10% are affected to a small degree. Access to finance also affects SMEs 7% of the respondent to a great extent and a great effect of 49%. 24% of the respondents, on the other hand, reported being affected to a moderate extent. 15% are affected to a small extent; however, 5% said no extent. The County Government of Kiambu, the National Government, and SMEs should collaborate to organize training and seminars to bridge the SMEs' training needs.

KEY WORDS: GOVERNMENT POLICY, FINANCING AND PROFITABILITY OF SMES

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