Importance of Microfinance Institutions Lending to SMEs in Nairobi (Coursework Sample)

IMPORTANCE OF MICROFINANCE INSTITUTIONS LENDING TO SMALL AND MEDIUM BUSINESS ENTERPRISES
Small and medium enterprises have a role to play in the economy. However, financial backup is necessary for sustaining their activities. According to CITATION Sam11 \l 1033 (Sam & Awimbo, 2011)who examined the critical role microfinance institutions played in running European economy, lending to micro and small enterprises comprised a separate category of financial services. This aims at supporting employment and market development through targeting owners of small businesses who give job opportunities to poor hired workers in their companies.
In addition, CITATION Leo12 \l 1033 (Leone & Vento, 2012)credit extension from microfinance institutions is important to the overall economy through: i) Performance Analysis and
Ii) Regulatory Systems.
The authors bring out the element of overall satisfactory performance levels in economy analysis. Microfinance institutions advancing loans to medium and small enterprises bring in a positive GDP in the economy. This is seen through good health systems, low rates of unemployment, implementation of sustainable projects and opening up new ventures. All this was seen to boost the United States in comparison to other surrounding economies.
Regarding observing regulatory systems, the authors do relate with the Europe economy where countries have ‘country guarantee specific systems.’ This helps to ensure that credit extension is a legalized way to support small and medium business operations. Credit bureaus in place are to be referred to by microfinance institutions to ensure a reliable working financial scheme to support medium enterprises.
Furthermore, microfinance institutions according to CITATION Chi10 \l 1033 (Chiyah, 2010) provide services to clients which are grouped into four broad categories of financial intermediation, social intermediation, enterprise development and non-financial services. Financial intermediation involves providing financial products and services in terms of credit, savings, insurance and payment systems. Social intermediation to clients entails the capability to build human and social capital in the entire program of providing financial services to enterprises. This suggests that microfinance institutions will provide additional subsidies to medium enterprises.
Microfinance institutions according to the author may require small and medium enterprises to pay a certain amount necessary for enterprise development. This in...