Micro Finance Institutions and its Contribution on the Growth of Small and Medium Size Businesses in Bambili-Bambui Area

This study examines the contribution of micro finance institution on the growth of small and medium size businesses in Bambili-Bambui area. The quantitative and descriptive research design was used for this study with a sample size of 100 respondents. The simple random sampling technique was adopted for this study. A four Likert scale questionnaire was adopted as instrument used for data collection in this study (Primary source of data) among the sampled SMBs in Bambili and Bambui area. The data collected was coded and analyzed using Statistical Package of Social Science (SPSS) version 20 using descriptive and inferential statistics. Result from the first component “Microloan†data analysis on the aggregate score indicate that 307(62.3%) of the respondent agreed on all the indicators of the Microloan. The sample correlation coefficient(R) was 0.647a indicating that 51.9% of the variation in the growth of SMBs was accounted by the contribution of microloan from MFIs. Also, the F calculated was (36.992) with p = 0.000 indicating a significant effect of microloan on the growth of SMBs Hence, H01 upheld by concluding that microloan significantly affects the growth of SMBs. Also, the second component “Business training and education†, the aggregate score of 332(66.4%) agreed to the important of all the variables with a sample correction coefficient (R) of 0.714 indicating that 56.3 % of the variation in growth of SMBs is accounted for by business training and education provided by MFI and the F calculated was (34.471) with p = 0.000 showing a significant effect of business training and education on the growth of SMBs. Hence, H02 upheld, by concluding that there was a significant effect of business training and education on the growth of SMBs. Lastly, the third component “saving account†, the aggregate score of 350(70.0%) of the responses agreed to all the variables with a sample correction coefficient (R) of 0.742 indicating that 55.1 % of the variation in growth of SMBs was accounted for by saving account provided by MFI and the F calculated was (34.324) with p = 0.000 indicating a significant effect of saving account on the growth of SMBs. Hence, H03 upheld by concluding that there existed a significant effect of saving account on growth of SMBs. Results from the Pearson Correlation Matrix on all the indicators under study reveals that there is a strong positive correlation between microloan and growth of SMBs with a value 0.451*at 0.05level of significant. Again it shows that there is a positively moderate correlation between training and education with a value 0.310** at 0.01 level of significant. And lastly, the result shows that there is a weak correlation between saving account and growth with a value of 0.171 but there exists a positively strong correlation between saving account and business training and education with a value of 0.759** at 0.01 level of significant. The researcher recommends in view of the result obtained from data analysis that microloan should be client-oriented and not product- oriented. Proper and extensive monitoring activities should be provided for members who are granted loans. Microfinance institution can research into very profitable business lines and offer loan to members who have the capacity to exploit such business lines and lastly business and financial training should be provided by microfinance institutions on a regular basis and in most cases should be tailored toward the training needs of their members. Lastly the researcher suggested that since the examined microloan, business training and education and saving account revealed a positive and significant effect on the growth of small and medium businesses, further research should be conducted to determine the effect of other factors, such as access to market, infrastructures and technology in influencing the growth of small and medium size businesses.