Abstract:
Policy makers and scholars acknowledge the significance of small and medium enterprises in stirring the
economic growth and development in developing and developed economies. In spite of the generally fast pace
by which access to financial services for small and medium enterprises is being established, significant segments
of the small and medium enterprises sector do not yet benefit from the expansion. This study therefore
investigated the effect of financial statement lending on access to financial services by small and medium
enterprises in Kenya. The study further sought to establish the moderating effect of the credit information
sharing on the relationship between financial statement lending and access to financial services by small and
medium enterprises in Kenya. The study was based on Financial Intermediation Theory and information
asymmetry theory. The target population comprised 4,253 small and medium enterprises in Kenya. A sample
size of 366 SMEs was target by the study. The study adopted multistage sampling technique to obtain the SMEs
respondents. Primary data was utilized and was acquired through semi-structured questionnaires. Data was
analysed using descriptive and inferential statistics. Heckman two step selection model was applied in regression
analysis. The findings of regression analysis show that financial statement lending had a positive and significant effect on access to financial services among SMEs in Kenya. The results established that credit information
sharing had insignificant moderating effect on the relationship between financial statement lending and access to
financial services among the SMEs in Kenya. The study concluded that financial statements play a critical role in
ensuring small and medium enterprises access financial services. Lenders can determine the financial position of
the business by analysing their cashflow in order to be able to advance the credit that the business is able to pay
based on their financial statement.
