Credit and Employment Growth Among Small Enterprises in Kenya

Abstract

Policy makers in Kenya expect micro and small enterprises to provide the bulk of new jobs created in the economy yet these enterprises face significant credit constraints. This study applied regression analysis to establish the link between the credit constraint and employment growth of small enterprises in Kenya. The results failed to confirm any important role for the credit constraint in limiting small firm employment growth. However, the credit constraint variable posted significant results when interacted with other variables such as access to workspace, access to technology and formality status of the enterprise. This was interpreted to mean that the marginal effect of the credit constraint on firm growth mainly depended on access to workspace, access to technology and formality status. This leads to the conclusion that the current emphasis on credit alone and the minimalist paradigm need to be re-evaluated.