| dc.description.abstract | Small and Medium Enterprises (SMEs) play an important role in the economies of
developed and developing countries, through creation of new jobs. Access to bank financial
resources seems to be a major constraint to the growth of SMEs in the developing
context. This study thus, aimed at finding out the constraints faced by SMEs in particular
accessing bank financing. The study adopted the adverse selection theory of credit
markets. This study adopted an explanatory and descriptive survey design. The target
population for this study was 8175 registered SMEs in Eldoret central business district. A
sample of 35 SMEs was sampled with 4 respondents randomly selected to raise a sample
of 140 respondents. The response rate was 122 questionnaires. Data were analyzed using
descriptive, 2 , t-test for mean differences and logistic regression. In this study, education
(p-value = 0.004), number of years of business (p-value = 0.013), stage (2) (p-value =
0.025), turnover (p-value = 0.020) contributed significantly to the prediction while gender
(p-value = 0.081), age (p-value = 0.974), business form (p-value = 0.467) and number
of employees (p-value = 0.107) did not. From the findings, through assessment of Exp
(B), when the number of employees is increased by 1 unit, the odds ratio is 2.262 times
as large and therefore businesses are 2 times more times likely to obtain funding. The
odds ratio is 3.537 times as large for males and this means that males are approximately
4 times as likely to obtain funding. However, age, education, business form, number of
years of operation, stage of business and average turnover were found to be insignificant
in obtaining funding. As shown by the study there is a high failure rate for small business
mainly due to lack of access to finance to start-up and expand businesses. Rather than
overemphasizing costly interventions to support small enterprises, the state should focus
on eliminating the barriers created by excessive regulation and the absence of effective
markets. Given that the level of access to finance is low, it is therefore imperative that
management capability and financial management acumen be regarded as key to easy access
for funding by the entrepreneurs themselves, and the parties involved in supporting
and promoting them. Access to information about SMEs should be increased to ensure
that all providers and potential providers of finance have a sufficient knowledge to assess
the risk of SME applications for finance
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