Impact of Commercial Banks and Microfinance Institutions on Retail SMEs’ Performance

This paper examines commercial bank and microfinance institution (MFI) financing and its relationship to retail small and medium-sized enterprise (SME) performance in Tharaka South, Kenya, and assesses whether proprietor experience moderated these associations. A quantitative cross-sectional survey targeted 269 proprietors from 922 registered businesses in Marimanti and Nkondi wards; 266 usable questionnaires were analysed. The financing-specific analyses reported positive correlations with performance for commercial bank financing (r = .6771) and MFI financing (r = .6440). The simple models reported unstandardised coefficients of B = 0.560 and B = 0.518, with R² values of .458 and .415, respectively. These directions are consistent with the positive-association hypotheses, although conflicting subgroup counts and model summaries prevent fully verified inferential decisions. The expanded MFI slope was negative, and the interaction coefficients were not separately identified; neither moderation hypothesis can therefore be decided. The contribution is a local examination of two named financing channels and the proposed role of experience, compared with broader credit-constraint and capability studies. The findings concern performance scores among the surveyed businesses. They do not establish causal benefits of borrowing, effects on survival or differences in lender effectiveness. Reconciled analytic samples, scoring rules and model output are needed before firm inferential conclusions can be drawn.