Although female-owned and informal entrepreneurs are more inclined to borrow,
they request for smaller amounts and enjoy lower success rates. Older and more
educated entrepreneurs seek for and receive more credit than the younger and less
educated. Spatial and size differences abound in the inclination to seek out credit and
in the success rates. Urban-located and larger enterprises have higher success rates
and receive more credit than others. The gap between credit demand and supply is
phenomenal. Amounts received partly depend on the source from which credit is
sought. Choices of credit sources depend on formality status, gender, location, activity
type and networking. Trade credit faces contract enforcement problems while existing
regulation undermines financial layering.
Greater access to credit by female entrepreneurs can result from improvements in
their rights over property and general empowerment. Facilitation of joint liabilities,
networking and expansion of micro-finance institutions that focus on women
entrepreneurs would also assist. The bias against rural enterprises can be redressed
by improving rural infrastructure to open-up rural Kenya for more profitable commerce
and creation of scale economies in service provision. Further increases in access to
credit can result from expansion of educational opportunities including promotion of
self-financing adult literacy classes in trading centres. Financial regulations should
permit use of collateral substitutes, create exceptions to minimum capital requirements,
reduce entry and exit costs to encourage competition and allow micro-finance
institutions to mobilise savings by receiving deposits. Cost effective dispute resolution
mechanisms for small claims, teaching of relational ethics and progressive norms as
standard components of business training curricula would encourage trade credit.
Mainstreaming informal enterprises through reduction of registration costs would
also increase access to credit. Furthermore, studies to explore the circumstances
under which sustainable financial layering would thrive and determination of enterprise
survival would generate useful information for the development of more effective
policy interventions.