Influence of Collateral Requirements on Performance of SMEs Business in Meru County, Kenya

The purpose of this study is to examine the influence of collateral requirements on the performance of small and medium-sized businesses (SMEs) in Meru County, Kenya. A proportional random stratified design was used to select the 234 SMEs that make up the study's sample. Data was gathered from registered business owners and/or employees using questionnaires. Descriptive statistics, frequency tables, and chi-square tests were used to examine the data. The study established that demand of collateral affected performance of SMEs negatively by a proportion of 74%. Additionally, there was a significant relationship between collateral requirements and the performance of SMEs in Meru County. It is proposed in this study that financial institutions should consider accepting non-tangible collateral. However, this should take place after thorough customers’ background checks have been done. The findings are significant for addressing credit and financial concerns, which are critical to the growth and long-term sustainability of the SME sector.