Insights into the interplay between business financing and micro-enterprise performance.
Authors:   , Onyango Rael Adhiambo 
Published: November 2024

Entrepreneurship occurs world wide, and in emerging economies, millions rely on micro-enterprises to sustain their livelihoods. Defined as organizations with 1 to 9 employees (MSEA Act, 2020), micro-enterprises are vital for poverty alleviation, job creation, and economic growth (Bruton et al., 2013; Gherghina, 2020). However, there is limited understanding of how micro-entrepreneurs' activities are experienced in the face of everyday struggles. Thus, this research investigates micro-entrepreneurs' impediments, responses, enablers and the financial dynamics influencing micro-enterprise performance in Kisumu County, Kenya. Overarching research question being: How does business financing influence the performance of micro-enterprises in Kisumu County, Kenya? This question is explored through four empirical studies using both qualitative and quantitative research methods.Chapter 2 addresses: What are the institutional impediments and facilitators and responses for micro-entrepreneurs? Qualitative methods, including 21 interviews and a focus group discussion with fishmongers from Lake Victoria, illuminated institutional challenges like business financing, market access, regulatory hurdles, and spatial impediments. Despite these obstacles, government support and economies of scale emerge as enablers. Entrepreneurs cope by forming alliances, managing cash flow, and developing entrepreneurial skills (Gichuki et al., 2014; Okpara, 2011). This chapter enriches the understanding of how entrepreneurs adapt to challenging environments (Adom, 2015; Dana et al., 2018). Chapter 3 explores the impact of business financing on micro-enterprise performance and adresses the question; To what extent do different business financing options affect micro-enterprise performance in an emerging economy? Quantitative data from 326 micro-entrepreneurs reveal significant differences in sales growth and housing expenditures based on financing options used. Personal financing, positively correlates with performance, while external and internal financing has limited effects. This underscores the reliance on personal resources in micro-enterprises might be due to limited access to external capital (Casey & O'Toole, 2014; Ferdousi, 2015; Fowowe, 2017). Chapter 4 examines the role of savings group loans for female micro-entrepreneurs, comparing their effects on personal wealth development to other loans or no loans. Data from 318 female micro-entrepreneurs indicate that savings group loans have a limited impact on wealth accumulation. However, the chapter provides valuable insights into gender-specific financial strategies, highlighting the potential of savings groups in contributing to wealth accumulation for female entrepreneurs (Amine & Staub, 2009; Ojong et al., 2021). Chapter 5 shifts focus to mobile money, investigating its role in facilitating micro-entrepreneurship in Kenya. Qualitative interviews with 23 entrepreneurs identify four key conveniences of mobile money: ease of payments, timely updates, savings facilitation, and access to loans and overdraft services. Findings highlight the transformative potential of mobile money in overcoming financial barriers for micro-entrepreneurs (Tengeh & Talom, 2020; Dupas & Robinson, 2013). In conclusion, this dissertation deepens the understanding of how business financing influences micro-enterprise performance in emerging economies like Kenya. It highlights the institutional challenges micro-entrepreneurs face, their adaptive strategies, and the enablers that support their businesses. The study also emphasizes the critical role of personal savings, and explores implications of savings group loans for wealth development. Significant impact of mobile money on micro-entrepreneurs' financial strategies is demonstrated.Thus, this research highlights the importance of customized financial approaches, gender-sensitive strategies, and the incorporation of innovative technologies to strengthen the entrepreneurial ecosystem in emerging economies. Future research should explore the longitudinal effects of financing choices, to assess whether initial impacts on micro-enterprise performance are sustained over time. Additionally, scalability of mobile money nexus with socio-economic impacts of micro-entrepreneurs could be explored.To sum up, we provide valuable insights into the interplay between business finance and micro-enterprise performance, offering practical recommendations for educators, policymakers, and micro-entrepreneurs, contributing to efforts to promote sustainable growth, and gender equality in entrepreneurship, aligning with goals such as the Sustainable Development Goals (SDGs).