How do Small Firms in Developing Countries Raise Capital? Evidence from a Large-Scale Survey of Kenyan Micro and Small-Scale Enterprises

Christopher J. Green, Peter Kimuyu, Ronny Manos and Victor Murinde

A chapter in Issues in Corporate Governance and Finance, 2007, pp 379-404 from Emerald Group Publishing Limited

Abstract: We utilize a unique comprehensive dataset, drawn from the 1999 baseline survey of some 2000 micro and small-scale enterprises (MSEs) in Kenya. We analyze the financing behavior of these enterprises within the framework of a heterodox model of debt-equity and gearing decisions. We also study determinants of the success rate of loan applications. Our results emphasize three major findings. First, MSEs in Kenya obtain debt from a wide variety of sources. Second, debt-equity and gearing decisions by MSEs and their success rates in loan applications can all be understood by relatively simple models which include a mixture of conventional and heterodox variables. Third, and in particular, measures of the tangibility of the owner's assets, and the owner's education and training have a significant positive impact on the probability of borrowing and of the gearing level. These findings have important policy implications for policy makers and entrepreneurs of MSEs in Kenya.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afeczz:s1569-3732(07)12015-6

DOI: 10.1016/S1569-3732(07)12015-6

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