Credit Access and Financial Performance of Micro, Small, and Medium Enterprises in Dagoretti North Sub County, Kenya

Abstract

The micro, small, and medium enterprises play a significant role in contributing towards the economic development of many countries of the world. It is the leading sector in the creation of job opportunities for millions of young people in the developing countries across the globe, and in Kenya in particular. Despite this significant contribution of this sector towards economic development, the sector faces a myriad of challenges when it comes to access to credit, financial transactions, and financial literacy influencing their performance (World Bank, 2025). The study's purpose was to assess the influence of access to credit on the financial performance of MSMEs in Dagoretti North Sub-County. The research was anchored on the Theory of Financial Inclusion, advanced by Morduch, Quantitative research methods were employed, while correlational research design was used. The target population was 5,112 licensed and registered MSMEs in Dagoretti North Sub-County, Nairobi City County. Based on Yamane’s formula, the sample size of 371 MSME owners/managers was selected. Stratified random sampling and purposive techniques were used to select the sample size. The data was collected using questionnaires with close-ended questions. A pilot study was conducted to establish the validity and reliability of the questionnaire. The quantitative data was analyzed using SPSS. The Pearson correlation test was used to determine the existence of relationships, while regression analysis was used to determine the extent to which the study variables relate with each other. Results revealed a positive and significant relationship between financial performance and credit access (r = .35, p < .01). Overall, the study showed that MSMEs in Dagoretti North benefit a lot from financial inclusion. The study underscored the importance of strengthening initiatives that support financial literacy, access to credit, and transaction convenience, as this has been shown to make MSME businesses thrive.