SECTION A

QUESTION ONE

The passage of capping of interest rates bill into law has generated a lot of debates among various policy makers and other practitioners in Kenya. The law requires that all commercial banks in Kenya should not charge interest rate above 4% of central bank rate (CBR). This move has send shockwaves to the financial sector and financial institutions are cautiously lending to SMEs.

Required:

Critically assess the impact of interest rate capping on the growth of small businesses in Kenya. (10 marks)

Explain four reasons as to why small business in Kenya need finances.(10 marks)

Owing to the reluctance by the financial institutions to lend to SMEs due to inherent financial risks, many small businesses in Kenya have been left with no option but to explore the internal sources of finance. Briefly discuss five internal sources of finance. (10 marks)

SECTION B.

QUESTION ONE

Uwezo Fund is a flagship programme for vision 2030 aimed at enabling women, youth and persons with disability access finances to promote businesses and enterprises at the constituency level, thereby enhancing economic growth towards the realization of the same and the Millennium Development Goals (MDGs).

Required:

Discuss the impact of this fund on financing small businesses in Kenya.(5 marks)

According to reports from ministry of planning & devolution, the uptake of this fund in several regions of the country still remains low. Explain the reasons behind these challenges. (5 marks)

(Total: 10 marks)

QUESTION TWO

Banks and Micro Finance Institutions are important institutions that deal with money globally and have witnessed tremendous growth despite global financial crises experienced in the year 2008. Financial Institutions have been instrumental in financing small businesses in Kenya.

Required:

Discuss any five functions of commercial banks in Kenya.(3 marks)

Highlight any five types of banks that that finance small businesses in Kenya. (4 marks)

Describe the role of non-bank financial institutions in supporting SMEs in Kenya. (3 marks)