Influence of Interest Rates on Performance of SMEs Business in Meru County

Purpose: This study sought to examine interest rates’ influence on the performance of Small and medium sized enterprises in Meru County, Kenya. It sought to understand how cost of borrowing affect operations, and overall growth of SMEs in Meru. Methodology: It adopted a descriptive research design. Proportionate random stratified design was used to identify a sample of 234 SMEs. Questionnaires were used to collect data, which was analyzed and presented using descriptive statistics like frequency tables and graphs. Chi-square tests were conducted to test for any relationship between independent variables and the performance of SMEs in the county. Findings: The majority of the respondents (75%) agreed that the interest rates charged on business loans by the financial institutions were too high, hence affecting the performance of SMEs negatively. Unique Contribution to Theory, Practice and Policy: The study recommends policymakers and stakeholders should prioritize strategies that enhance financial inclusion and provide supportive environments for SMEs to thrive. The findings of the study will assist financial institutions in reviewing their interest policies towards increasing credit uptake while also contributing to the existing corpus of information on lending.