International Journal of Innovative Research and Development

Abstract

The world over, economies are rediscovering entrepreneurship and its tool, innovation as a major source of strategic competitiveness (OECD, 2002). This is marked through the increasing involvement and the importance of Small and Micro Enterprises (SMEs) as vital players in their economies in the source of new employment and productive investment as well as a basis for growth and poverty reduction. Despite the economic potential of SMEs, they face several constraints all of which limit their potential to invest, innovate and improve productivity.  There has been a low uptake of equity financing by SMEs according to Strategic Business Advisors (2008) financial deepening report. This research identified challenges facing uptake of equity financing by small and micro enterprises in Kenya with a focus on Nairobi County. The analyzed factors influencing uptake of equity financing were access to markets, transaction costs, legal and regulatory framework and access to information. Respondents were be picked by simple random. Data was collected using questionnaires. The data collected was evaluated, and analysed using statistical tools and content analysis so as to select the most accurate and quality information. The study found out that there was a positive significant relationship between the access to markets and uptake of equity finance of SMEs in Nairobi. The relationship between the transaction cost and uptake of equity finance was also found to be significant and positive. In addition, the results of the study showed that there was a significant relationship between regulatory framework and uptake of equity finance. The result further indicated that there is a significant relationship between information access and uptake of equity finance. 

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