This document summarizes a research study that examined the effect of financial bootstrapping strategies on the sustainability of small and medium enterprises (SMEs) in Kanduyi sub-county, Kenya. The study found that owner financing methods, minimizing accounts receivable, joint utilization of resources, delaying payments, and minimizing capital investment all had a significant positive effect on the financial sustainability of SMEs. The study concluded that entrepreneurs should utilize these bootstrapping strategies as alternative financing sources to reduce costs and improve their financial sustainability.
Forward-‐thinking defined contribution retirement plan sponsors are recognizing the benefits of communicating to employees in a language
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Forward-‐thinking defined contribution retirement plan sponsors are recognizing the benefits of communicating to employees in a language
they can understand: monthly income. Investment solutions focused on income fundamentally improve the participant experience and ultimately deliver better outcomes.
In today’s retirement plan industry, the unaddressed segment of the market is the one–third of private sector workers without
access to retirement benefits and Multiple Employer Plans (MEPs) are the disrupting force that can meet their needs.
Based on Brian Trelstads 5 P's of Impact in 'Making sense of many kinds of Impact' in Harvard Business Review of January 2016, I have defined the 5 characteristics of an ideal inclusive impact investment product.
VLOG https://youtu.be/ZmWxoGa9MMM
What are your thoughts and suggestions?
https://hbr.org/2016/01/making-sense-of-the-many-kinds-of-impact-investing
Introduction to Finance and Financial ManagementSundar B N
This ppt includes Introduction to Finance and Financial Management which covers
Finance – Meaning, Sources of Finance
Financial Management – Meaning, Objectives & Scope
Profit Maximization Vs Wealth maximization
Key Decisions of Financial Management
Functional Areas of Financial Management
Time Value of Money – Meaning & Methods
http://bondsmakeiteasy.org During the 2007 tax season, Doorways to Dreams (D2D) Fund and four Volunteer Income Tax Assistance (“VITA”) sites conducted a U.S. Savings Bond pilot test. From January 22nd to March 31st 2007, D2D and its partners offered Series I U.S. Savings Bonds to 4,841 low and moderate income (“LMI”) tax filers in four cities. This paper presents the results of this pilot, research and policy implications and specific recommendations for action.
HwA’s team of finance assignment experts would be delighted to help students solve finance assignment and finance homework through quality sample solutions.
http://www.helpwithassignment.com/admin/filemanager/downloads/Corporate%20restructuring-%20finance%20sample%20assignment.pdf
Stepping into a role which requires business finance knowledge? Here is a short guide offering advice, tools, and expertise that you will need to equip yourself with to be successful. Check out our Diploma in Business Finance for more.
The allocation of executive compensation resources is being scrutinized by internal and external forces. Regulations, board governance issues, and the lower margins require new thought processes on the various pieces of the compensation puzzle and how they fit together.
BDI Models and its Application to Retirement SavingsAnand Rao
Presented at the Society of Advancement of Behavioral Economics in 2007.
This talk uses the BDI model of reasoning under limited resources used in programming software agents as a paradigm to understand the behavioral barriers behind retirement savings.
Managing balance sheet liquidity & long term funding Dr Rajeev Jain
Managing balance sheet liquidity and long term funding
• Do the company have the right cash management processes?
• The importance of accurately forecast company cash flow with liquidity management
• Looking at your balance sheet frequently: Do the company has sufficient funding sources?
• Ensuring the right balance of credit and non-credit service utilisation for funding process
• Learning about rebuilding the balance sheet and turning their problem into growth
• Establishing long term stability and security of our funding in turn helps protect our liquidity position in the crisis
• Building necessary tools and methods to achieve properly structured balance sheet
• Managing complex situations precisely through flexible values (general direction), values with longer lifespan than goals or objectives and past and present corporate actions
This power-point basically gives the idea of what actually financial communication is. How important financial communication is with respect to public relation. And it also includes gist of constituents of financial communication to help understand better.
Equity financing is one of the sources of funding available to non-bank financial institutions which is quite prevalent in developed financial markets for small or start-up firms. This study empirically determined the effect of the Equity Financing Scheme on a sustainable increase in productivity of agro-allied small businesses in Nigeria. Data for this study were elicited through the use of a questionnaire structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that the equity financing scheme had a positive and significant effect on the sustainable productivity of agro-allied small businesses in South-South Nigeria. The study recommended that efforts should be made to educate the small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
Unlocking the Power of Factoring Finance and Invoice Discounting for SMEs: A ...M1xchange
Small and medium-sized enterprises (SMEs) play a vital role in driving economic growth, innovation, and job creation. However, one of the biggest challenges that SMEs face is securing the financing they need to support their growth and operations. Traditional lending options can be difficult to secure, and SMEs may not have the collateral or credit history required to qualify. This is where factoring finance, invoice discounting, and bill discounting come in as alternative financing options that can provide working capital for SMEs without the need for collateral or a long credit history. In this blog post, we will explore these financing options and how they can benefit SMEs.
In today’s retirement plan industry, the unaddressed segment of the market is the one–third of private sector workers without
access to retirement benefits and Multiple Employer Plans (MEPs) are the disrupting force that can meet their needs.
Based on Brian Trelstads 5 P's of Impact in 'Making sense of many kinds of Impact' in Harvard Business Review of January 2016, I have defined the 5 characteristics of an ideal inclusive impact investment product.
VLOG https://youtu.be/ZmWxoGa9MMM
What are your thoughts and suggestions?
https://hbr.org/2016/01/making-sense-of-the-many-kinds-of-impact-investing
Introduction to Finance and Financial ManagementSundar B N
This ppt includes Introduction to Finance and Financial Management which covers
Finance – Meaning, Sources of Finance
Financial Management – Meaning, Objectives & Scope
Profit Maximization Vs Wealth maximization
Key Decisions of Financial Management
Functional Areas of Financial Management
Time Value of Money – Meaning & Methods
http://bondsmakeiteasy.org During the 2007 tax season, Doorways to Dreams (D2D) Fund and four Volunteer Income Tax Assistance (“VITA”) sites conducted a U.S. Savings Bond pilot test. From January 22nd to March 31st 2007, D2D and its partners offered Series I U.S. Savings Bonds to 4,841 low and moderate income (“LMI”) tax filers in four cities. This paper presents the results of this pilot, research and policy implications and specific recommendations for action.
HwA’s team of finance assignment experts would be delighted to help students solve finance assignment and finance homework through quality sample solutions.
http://www.helpwithassignment.com/admin/filemanager/downloads/Corporate%20restructuring-%20finance%20sample%20assignment.pdf
Stepping into a role which requires business finance knowledge? Here is a short guide offering advice, tools, and expertise that you will need to equip yourself with to be successful. Check out our Diploma in Business Finance for more.
The allocation of executive compensation resources is being scrutinized by internal and external forces. Regulations, board governance issues, and the lower margins require new thought processes on the various pieces of the compensation puzzle and how they fit together.
BDI Models and its Application to Retirement SavingsAnand Rao
Presented at the Society of Advancement of Behavioral Economics in 2007.
This talk uses the BDI model of reasoning under limited resources used in programming software agents as a paradigm to understand the behavioral barriers behind retirement savings.
Managing balance sheet liquidity & long term funding Dr Rajeev Jain
Managing balance sheet liquidity and long term funding
• Do the company have the right cash management processes?
• The importance of accurately forecast company cash flow with liquidity management
• Looking at your balance sheet frequently: Do the company has sufficient funding sources?
• Ensuring the right balance of credit and non-credit service utilisation for funding process
• Learning about rebuilding the balance sheet and turning their problem into growth
• Establishing long term stability and security of our funding in turn helps protect our liquidity position in the crisis
• Building necessary tools and methods to achieve properly structured balance sheet
• Managing complex situations precisely through flexible values (general direction), values with longer lifespan than goals or objectives and past and present corporate actions
This power-point basically gives the idea of what actually financial communication is. How important financial communication is with respect to public relation. And it also includes gist of constituents of financial communication to help understand better.
Equity financing is one of the sources of funding available to non-bank financial institutions which is quite prevalent in developed financial markets for small or start-up firms. This study empirically determined the effect of the Equity Financing Scheme on a sustainable increase in productivity of agro-allied small businesses in Nigeria. Data for this study were elicited through the use of a questionnaire structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that the equity financing scheme had a positive and significant effect on the sustainable productivity of agro-allied small businesses in South-South Nigeria. The study recommended that efforts should be made to educate the small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
Unlocking the Power of Factoring Finance and Invoice Discounting for SMEs: A ...M1xchange
Small and medium-sized enterprises (SMEs) play a vital role in driving economic growth, innovation, and job creation. However, one of the biggest challenges that SMEs face is securing the financing they need to support their growth and operations. Traditional lending options can be difficult to secure, and SMEs may not have the collateral or credit history required to qualify. This is where factoring finance, invoice discounting, and bill discounting come in as alternative financing options that can provide working capital for SMEs without the need for collateral or a long credit history. In this blog post, we will explore these financing options and how they can benefit SMEs.
Funding Sme – The Challenges And Risk Within - Alternative financing sources ...Resurgent India
Securitization of Trade Credit: Trade credit is an important source of financing for MSMEs, as they sell on credit to their large customers and then wait for long periods for payment. If these receivables (trade credit) could be packaged as a securitized asset, which would essentially be a commercial paper with the credit rating of the large firm, it could help MSMEs reduce their investment in working capital and their need for finance significantly. The credit worthiness of a typical MSME would also improve, qualifying it for greater bank funding. Though the securitization process which is similar to factoring, could be more cost-effective than bank funding, factoring, and letters of credit.
Equity investment financing is an innovative way of financing the real sector which has considerable developmental potential. The study empirically determined the effect of Equity investment financing on sustainable increase in productivity among agro-allied small businesses in South-South Nigeria. The instrument of data collection is the research questions structured in a five-point likert scale. The evaluation of the relationship between the dependent and independent variables was performed using the Ordinary Least Square regression technique. The study revealed that equity investment financing has a positive and significant effect on the sustainable productivity of businesses in Nigeria. The study recommended educating small business entrepreneurs on the benefits of equity financing as a viable option towards business growth and expansion and that the government through the various intervention agencies should restructure the long-term loan policies to give access to more growth-oriented agro-allied businesses, to increase their presently low capacity to procure heavy-duty technology to increase productivity and achieve food security in Nigeria. Small business owners should take advantage of the membership of cooperative societies and as well maintain good business relationships with suppliers; this will guarantee a continuous supply of needed materials and uninterrupted operations of the business.
The primary objective of this paper is to determine the relationship between the effects of capital structure and the performance of Microfinance Institutions in Oman. In this research, a questionnaire was used to obtain the results and the qualitative study where the qualitative data was collected through primary date. The target group to answer this questionnaire was from the owners of Microfinance in Oman, and 10 answers were obtained. The results found there is a positive relationship between Capital Structure and Performance of Microfinance. The capital
structure is important in improving the performance of Microfinance and maintaining its proper management. It also leads to improved performance, which results in an increase in profit, the correct management of expenses, and a reduction in losses. Empirical results indicate that effective use and creation of social capital is vital to improving the effects of Microfinance, and Owners of Microfinance should focus more on harmonious social relationships and
deliberately building social capital. Also, provided Microfinance Owners to work on a plan to reduce expenses and increase profitability, as well as recognize the correct management of capital structure. As well as understanding the
structure of capital and the positive impact on the performance of Microfinance.
Effects of micro- finance institutions' services on sustainability of small e...inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
The paper assesses the effectiveness of commercial bank loans as sources of funding Small and Medium Enterprises
(SMEs) in Southeast, Nigeria. A cross-sectional survey method wherein structured questionnaire was used to collect
data was adopted. A sample of 500 respondents was randomly selected from the five industrial hubs in the five states
of Southeast, namely Nnewi, Aba, Enugu, Abakiliki, and Owerri. With the aid of pecking order theory
(POT)/hypothesis of Lending, percentage formula, and SPSS version 20.0 tools, the data generated from the
respondents were analysed. Among others, the results of the analysis reveal that SMEs and commercial banks are
highly indifferent to the loans facilities; strict collateral requirements, high interest rates, and the nature of
requirements for guarantors dissuade SMEs from accessing loans; and government interventions provided palliative
measures but failed to address the problems associated with the loans. Therefore, this paper recommends policy
reforms to reduce interest rate, collateral and guarantor requirements. Further research on how to modernise and
harmonise other external sources of SME funding such as „daily contribution‟ and „Isusu‟ systems is required.
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was used, defining Oil, and Non-Oil Products as independent variables and Gross Domestic Product (GDP) as
dependent variable. From the analysis, Oil, and Non-Oil Products contributes immensely to the Nigeria Gross
Domestic Product (GDP). Contrary, the Oil Product is positively and insignificant on economic growth of Nigeria
(GDP) and the Non-Oil Product has positively and significant on economic growth of Nigeria (GDP). This study
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Effective sources and uses of finance is one of the primary activities for the success of a
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of skills and knowledgeable workers, economic fluctuations and financingcosts at firm level constitutes to het
ride from proper access to formal financing
Managerial oversight rather than inadequate finance has been ascribed as the necessitating fundamental to business failure in less-developed countries. Finance plays a crucial role in the establishment, growth and sustainability of business. However, it is delicate; its inadequacy or excess is as dangerous asineffective management. This paper examines the importance of finance function, the imperativeness of financial strategies and the special role of finance manager in business sustainability. In addition, a reflection is made of the financial management practicesof businesses in African countries, and recommendations made for changes required for their sustainability.
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
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In the Adani-Hindenburg case, what is SEBI investigating.pptxAdani case
Adani SEBI investigation revealed that the latter had sought information from five foreign jurisdictions concerning the holdings of the firm’s foreign portfolio investors (FPIs) in relation to the alleged violations of the MPS Regulations. Nevertheless, the economic interest of the twelve FPIs based in tax haven jurisdictions still needs to be determined. The Adani Group firms classed these FPIs as public shareholders. According to Hindenburg, FPIs were used to get around regulatory standards.
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K3895107
1. American International Journal of Business Management (AIJBM)
ISSN- 2379-106X, www.aijbm.com Volume 3, Issue 8 (August 2020), PP 95-107
*Corresponding Author: Martin Wekesa Mabonga www.aijbm.com 95 | Page
Financial Bootstrapping Strategy and Sustainability of Small and
Medium Enterprises in Kanduyi Sub - County, Kenya
Martin Wekesa Mabonga
Department of Economics, Accounts & Finance, Jomo Kenyatta University of Agriculture & Technology,
P.O. Box 62000-00200, Nairobi, Kenya.
*Corresponding Author: Martin Wekesa Mabonga
ABSTRACT
Introduction: Access to finance is a great challenge for most entrepreneurs due to high cost of finance. This has
led to closure of some small and medium enterprises due to inability to meet both the short-term and long-term
financial obligations. Financial bootstrapping has been advocated for as the best alternative source of finance
since it has low cost of finance as compared to other sources of finance. This study sought to determine the
effect of financial bootstrapping strategy on sustainability of small and medium enterprises in Kanduyi sub-
county.
Methods: A positivism research philosophy was adopted. The study used a descriptive survey research design.
The target population and the sample size was 567 and 234 small and medium enterprises respectively.The data
was analyzed using statistical package of social studies version 25.0. The study results were presented using
both descriptive and inferential statistics.
Results: The results showed that owner financing methods had a significant positive effect on financial
sustainability (β = .890, p = 000, α<0.05). Minimization of accounts receivable had a significant positive effect
on financial sustainability (β = .776, p = 000, α<0.05). Joint utilization had a significant positive effect on
financial sustainability (β = .152, p = 000, α<0.05). Delaying payments had a significant positive effect on
financial sustainability (β = .259, p = 000, α<0.05) while minimization of investment in capital stock had also a
significant positive effect on financial sustainability (β = .043, p = 000, α<0.05).
Conclusion: The study concludes that entrepreneurs use owner financing methods, minimization of accounts
receivable, joint utilization, delay of payments and minimize the capital invested in stock as financial
bootstrapping strategies. These strategies have a significant positive effect on financial sustainability of small
and medium enterprises.
Recommendations: Entrepreneurs should use owner financing methods, minimization of accounts receivable,
joint utilization, delay of payments and minimization of the capital invested in stock as alternative sources of
finance so as to reduce the cost of finance.
Key words: Financial bootstrapping strategies, financial sustainability, small and medium enterprises, Kenya
I. INTRODUCTION
Financial sustainability continues to be the greatest contest for the Small and Medium Enterprises, as
their key prerequisite is to be financially agile in order to achieve their intended objectives, implement policies,
fulfil their mission and serve their stakeholders for a prolonged period of time. It refers to the consistency of
firms in generating the positive outcomes that not only covers cost but also accelerate the firm growth (Gofman,
2017). Contrary to this, SMEs face major problems in securing financial conditions that hinders the realization
of the going concern principle. According to Fatoki (2014), entrepreneurs have realized the importance of
capital as a precursor for achievement of sustainability of their businesses. In developing countries, Winborg
(2009) posits that small enterprises both in the formal and informal sectors have failed to evolve into medium
sized firms. Slightly more than 10% of businesses ceased operations in less than one year, 25% stopped business
between one and two years, while another 20% closed their doors between their third and fifth anniversaries
(Hamel & Sapienza, 2014).
In Nigeria, despite government support through incentive programs, most SMEs still struggle to access
credit or even attain enterprise growth performance (Aremu & Adeyemi, 2011). In Kenya, SME owners have
continually faced many obstacles in regards to access to financial credit. According to ILO (2015), most
financial institutions do not consider SMEs assistable venture or credit work. It is for this reasons that SMEs
suffer due to lack of capital and credit to grow their businesses. Most SMEs close shop within the first five years
of start-up (Marlow, 2009). Besides, the highlighted challenges faced by SMEs around the globe, they must
search for alternative financing strategies to reduce their over reliance on external source of financing as well as
avert business closure.
2. Financial Bootstrapping Strategy And Sustainability Of Small And Medium Enterprises In…
*Corresponding Author: Martin Wekesa Mabonga www.aijbm.com 96 | Page
Bootstrapping is a creative or unconventional funding strategy that can help SMEs overcome the constraints of
access to credit from external sources of finance (Cornwall, Vang & Hartman, 2015; Schinck & Sarkar, 2012).
In financial bootstrapping only resources are required to start and facilitate sustainability and growth of a
business at the lowest possible cost level or even without costs (Schinck & Sarkar, 2012). The sensitivity of
dependence on external funding due to information asymmetry problems between entrepreneurs and financiers
can be mitigated by use of financial bootstrapping. Bootstrap financing is a solution for small companies due to
lack of access to capital markets and difficulties in increasing capital (Neeley & Van Auken, 2010). SMEs can
adopt financial bootstrapping so as to lower costs, reduce risks, manage the business without external finance,
save on time, increase work satisfaction, freedom of action, a desire to learn, trust in relatives and friends and to
gain legitimacy (Winborg, 2009). The bootstrapping methods that can be adopted by entrepreneurs include
delaying payments, minimizing accounts receivable, minimizing investment, private owner financing, sharing of
resources with other businesses and the use of government subsidies (Winborg & Landstrom, 2001).
Delay of payments as a bootstrapping strategy involves negotiating some specific terms with suppliers,
such as extending the average payment period. It is an effective technique to reduce short-term expenditure.
Minimizing accounts receivable relates to a situation where a firm would want its clients to pay as soon as
possible or even before the delivery date of the goods and services, to get cash in hand. Entrepreneurs can
choose customers who pay quicker at the expense of those who do not pay on time. Other strategies for
minimizing accounts receivable are speeding up of invoicing, interest charges on overdue accounts or ceasing
business relations with late payer to be sure that the best interests of the Enterprise are fulfilled (Winborg &
Landstrom, 2001).
Minimizing investment as a financial bootstrapping strategy includes buying used equipment at lower
cost, asking for a considerable discount for cash or even hiring temporary staff. Private owner financing relates
to the use of resources of family and friends, to work with low or no salary, or providing free work, in order to
reduce costs, obtaining loans from family and friends, whenever possible working from home, teleworking, can
be a good strategy to completely eliminate the cost of renting a commercial space as well as the use of personal
credit cards for small amounts. The sharing of resources with other businesses relates to sharing of either to
physical space or to the sharing of a wide variety of goods and equipment, sometimes even sharing human
resources (Neeley & Van Auken, 2012). Raw materials or other materials can be purchased together with other
firms (Partnerships between firms). This results into the minimization of the costs associated with
transportation, storage and even getting volume discounts.
Finally, government subsidies could be assigned to specific business areas, under particular conditions.
In the European Union context, relatively poorer, small country such as Portugal, SMEs use these subsidies
which are either directly provided by the state or from specific European Union programs. It is expected that
delaying payments, minimizing accounts receivable, minimizing investment and private owner financing usually
tend to increase over time, while sharing resources with other businesses and subsidies might decrease if there is
an increase in access to external sources of finance by the Enterprise (Ebben & Johnson, 2005).
Financial bootstrapping is advocated for as the best financing strategy for SMEs because it is easy to
obtain financing convenient, associated with minimum requirements; it doesn’t require the preparation and
presentation of a business plan or collateral (Van Auken, 2004). As much as financial bootstrapping is
advocated for as an alternative financing strategy to avert financial challenges faced by SMEs, Van Auken
(2004) posits that some small firms are characterized with limited viability, easy access to bootstrap financing
turns into a disadvantage when one considers that a firm without a fundamentally sound structure succeeds in
self financing and thus stays in the market for some time, even without fundamental viability. It is on the basis
of this purview that the current study sought to determine the effect of financial bootstrapping strategy on
sustainability of small and medium enterprises in Kanduyi sub-county in Kenya.
1.2 Statement of the problem
Financial sustainability is a precursor for survival and growth of SMEs in all countries around the
world. As much as this is the case, SMEs are grappling with myriad of challenges that have compromised their
going concern principle. Most of the SMEs are considered uncreditworthy by most financial institutions and
hence the need for innovative alternative financing options that can avert failure of SMEs due to the inability to
raise sufficient funds needed for periodic loan amortization. Access to credit has been considered as one of the
main problems SMEs have to deal with in order to survive and keep growing (Mairura, Namusonge & Karanja,
2013). The authors further opine that credit conditions, access to credit and adequate financial and operational
policies is what is needed to address the complex problem of SME financial sustainability which is needed for
the firms to remain afloat and experience growth. Financial bootstrapping methods are advocated for as the best
alternative financing options for SMEs. Therefore the current study sought to determine the effect of financial
bootstrapping strategies on financial sustainability of SMEs in Kanduyi sub-county. The specific objectives
were to determine the effect of owner financing methods on financial sustainability of SMEs; to establish the
3. Financial Bootstrapping Strategy And Sustainability Of Small And Medium Enterprises In…
*Corresponding Author: Martin Wekesa Mabonga www.aijbm.com 97 | Page
effect of minimization of accounts receivable on financial sustainability of SMEs; to ascertain the effect of joint
utilization on financial sustainability of SMEs; to establish the effect of delay of payments on financial
sustainability of SMEs and to examine the effect of minimization of capital invested in stock on financial
sustainability of SMEs. The remainder of this article paper is organized as follows. Section 2 covers review of
past studies and it defines the research hypotheses. Section 3 covers materials and methods. Section 4 covers the
results and discussion while section 5 covers the conclusion and recommendations.
II. LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
Financial bootstrapping is a means of financing a small firm through highly creative acquisition and
use of resources without raising equity from traditional sources or borrowing money from a bank. It is highly
characterized by reliance on any internally generated retained earnings, credit cards, second mortgages and
customer advances among others. Empirically, Ebben (2009) examined bootstrapping and the financial
condition of small firms. The study found that illiquid, highly levered and underperforming firms were more
likely to use certain bootstrapping methods than other firms. The financial bootstrapping methods used by some
firms had been detrimental to firms’ future performance. The resource dependence theory was supported by the
study findings as it raised questions as to why financially constrained firms chose to use certain financial
bootstrapping methods.
Schofield (2015) examined the relationship between bootstrap financing, numbers of employees and
small business success. The study used both the pecking order and enactment theory. The multiple linear
regression analysis results indicated that bootstrap use and number of employees did not significantly predict
business survival. Most of the entrepreneurs considered in the study had used either negotiation of the best
payment terms with suppliers or buying of used equipment over new equipment financial bootstrapping
methods. Vanacker, Manigart, Mueleman and Sels (2011) conducted a longitudinal study on the relationship
between financial bootstrapping and new venture growth. The study found mixed results that there existed no
association between financial bootstrapping and venture growth. But where it existed, financial bootstrapping
methods had a positive relationship with venture growth. New ventures that use more owner funds encourage
customers to pay more quickly, employ more interim personnel, and use more subsidy programs exhibit higher
growth overtime.
In Sweden, Winborg (2009) assessed whether financial bootstrapping methods are used in new
businesses as a question of last resort. The study revealed that new ventures use financial bootstrapping methods
so as to lower costs, when there is lack of capital and when it is fun helping others and getting help from others.
Fatoki (2013) examined the financial bootstrapping methods used by immigrant entrepreneurs in South Africa.
The main data collection instrument was questionnaire which was self administered by the researcher. The study
found that owner resources, management of accounts receivable, sharing resources, delaying payment and
minimizing investment in capital stock were the five main financial bootstrapping methods used by immigrants.
Fatoki (2014) examined the financial bootstrapping methods employed by new Micro Enterprises in retail sector
in South Africa. Descriptive statistics and factor analysis were used for data analysis. The financial
bootstrapping methods used by new Micro Enterprises in retail sector in South Africa are owner’s resources,
accounts receivable management, sharing resources and delaying payments. Alvarado and Mora-Esquivel
(2020) conducted an exploratory study on financial bootstrapping among small businesses in Costa Rica. A
sample of 161 Costa Rican SMEs for 2017 were considered in the study. The study found that Costa Rican
entrepreneurs used financial bootstrapping techniques related to financial issues, a group of customer related,
resource mobilization techniques and techniques related to borrowing and sharing of resources and other assets
with other organizations.
Hasti, Kambiz and Amir (2017) examined the methods of bootstrap financing in IT-based startups in
Iran. The author carried out semi structured interviews with the experts highly experienced in the IT industry
and involved in start-up financing. Financial bootstrapping methods by IT-based startups are deferred
payments, stopping receivable accounts, minimizing capital expenditure and using shared resources. Literature
reviewed led to the development of the following hypothesis statements:
H01: Owner financing strategies has no significant effect on financial sustainability of small and medium
enterprises.
H02: Minimization of accounts receivable has no significant effect on financial sustainability of small and
medium enterprises.
H03: Joint utilization has no significant effect on financial sustainability of small and medium enterprises.
H04: Delay of payments has no significant effect on financial sustainability of small and medium enterprises.
H05: Minimization of capital invested in stock has no significant effect on financial sustainability of small and
medium enterprises.
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III. MATERIALS & METHODS
Research philosophy is a belief about the way in which data about a phenomenon should be gathered,
analyzed and used (Cooper & Schindler, 2011). A positivism research philosophy was adopted based on the
principles underlying this philosophy. For example, the philosophy depends on quantifiable observations that
lead themselves to statistical analysis (Kothari, 2004). With regard to the progression of this study, it was guided
by the hypotheses in attempt to show the association between independent variable and dependent variable. All
these attributes of the study apply for the positivism research philosophy hence its choice as the ideal research
philosophy. The study adopted a descriptive survey research design. Target population is the total collection of
elements about which inferences are made and refers to all possible cases which are of interest for a study
(Sekaran & Bougie, 2016). In this study, a target population of 567 small and medium enterprises was
considered in this study.
According to Bell, Bryman, and Harley (2018), a sample size is a small proportion of an entire
population or a selection from the population.The sample size for this research was obtained using Slovins
(2012) sample size determination formula. The formula is , where n = required sample size, N =
Population and e2
= error limit (0.01 for samples between 100 and 1000).
= SMEs in Kanduyi sub-county. The study employed simple random
sampling techniques to select the respondents from the sampling frame. The main source of data was primary
data which was collected using 5 point likert scale questionnaires (1- strongly disagree, 2- disagree, 3-
undecided, 4-agree, 5-strongly agree). Factor analysis was used to test for validity and the cronbachs’ alpha co-
efficient was used to test for reliability of the research instrument. Data was analyzed using SPSS version 25.0.
The study findings were presented using both descriptive statistics such as mean and standard deviation and
inferential statistical metrics such as Karl Pearson product moment correlation and simple linear regression
analysis. The regression model was as follows:
Where; y represents financial sustainability, X1 represents owner financing methods, X2 represents
minimization of accounts receivable, X3 represents joint utilization, X4 represents delay of payments and X5
represents minimization of capital invested in stock, e represents error term, β0 is the intercept, β1, β2, β3, β4 & β5
represents the coefficients of X1, X2, X3, X4 and X5 respectively.
IV. RESULTS & DISCUSSION
Background information of the respondent serves a great purpose in giving a grim light as far as
the sample population and the research topic is concerned. In regards to the type of the SME, majority of the
respondents 88(47.3%) were in the retail sector, 49(26.3%) service industry, 20(10.8%) wholesalers and 29
(15.6%) were in the production or manufacturing sector. The number of years the business has been in operation
is important as it helps explain the respondent’s knowledge on financial sustainability and financial
bootstrapping strategies employed by the business entity. In this study, 84(45.2%) of the total respondents
businesses had been in existence between 1 and 5 years, 82(44.1%) over 5 years and 20(10.8%) less than a year
as summarized in Table 1:
Table 1: Background information of the SMEs
n=186 Frequency Percent
SME type Retail 88 47.3
Service 49 26.3
Wholesale 20 10.8
Other (specify) 29 15.6
Years the business has been in operation < 1 year 20 10.8
1 – 5 84 45.2
> 5years 82 44.1
The study also sought to find out the financial bootstrapping methods used by the entrepreneurs. Owner
financing methods, minimization of accounts receivable, joint utilization, delaying payments and minimization
of capital invested in stock were considered in this study. On owner financing methods, the study sought to find
out whether SMEs had adopted owner financing methods. Owner financing methods were operationalized using
withholding of manager’s salary for shorter or longer periods, obtaining of loans from relatives or friends,
employing of relatives or friends at non-market salary and running of the business completely in the home as
presented in Table 2. On whether manager’s salary is withheld for shorter or longer periods, 20(10.8%) strongly
disagreed, 29(15.6%) disagreed, 29(15.6%) were undecided, 88(47.3%) agreed while 20(10.8%) strongly
agreed. The item realized a mean of 3.3172 and a standard deviation of 1.18158. Of the total respondents,
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53(28.5%) strongly disagreed that they obtain loans from relatives or friends, 20(10.8%) disagreed, 29(15.6%)
were undecided, 51(27.4%) agreed while 33(17.7%) strongly agreed. The itemized mean was 2.9516 and a
variation in responses of 1.49696. In determining whether they employ relatives or friends at non-market salary,
29(15.6%) strongly disagreed, 29(15.6%) disagreed, 33(17.7%) were undecided, 55(29.6%) agreed while 40
(21.5%) strongly agreed. The item realized a mean of 3.1398 and a variation in responses of 1.34439. This
implies that majority of the SMEs either employs relatives or friends at non-market salary.
Table 2: Owner financing methods
n=186 S.D D N A S.A Mean Std. dev.
Withholding managers salary for
shorter or longer periods
F 20 29 29 88 20 3.3172 1.18158
% 10.8 15.6 15.6 47.3 10.8
Obtain loans from relatives or friends F 53 20 29 51 33 2.9516 1.49696
% 28.5 10.8 15.6 27.4 17.7
Employ relative and/or friends at non –
market salary
F 29 29 33 55 40 3.1398 1.34439
% 15.6 15.6 17.7 29.6 21.5
Run the business completely in the
home
F 29 22 20 20 95 3.6989 1.55466
% 15.6 11.8 10.8 10.8 51.1
Composite value 3.2769 1.39440
The results from the study revealed that, of the total respondents 29(15.6%) strongly disagreed that
they run the business completely in the home, 22(11.8%) disagreed, 20(10.8%) were undecided, 20(10.8%)
agreed while 95(51.1%) strongly agreed that they ran the business completely in the home. The item recorded a
composite mean of 3.2769 and a standard deviation of 1.39440. The second financial bootstrapping strategy was
minimization of accounts receivable and in this study it was operationalized using charging of interest on
overdue payment from customers, use of routines in order to speed up invoicing, offering customers discounts if
paying cash, choosing customers deliberately who pay quickly and ceasing of business relations with customers
who frequently pay late. The study results revealed that 33 (17.7%) of the respondents strongly disagreed that
there is use of interest on overdue payment from customers, 22(11.8%) disagreed, 33(17.7%) were undecided,
58 (31.2%) agreed while 40(21.5%) strongly agreed. The item had a mean of 3.2688 and a standard deviation of
1.39218. This implies that most of the SMEs use interest on overdue payment from customers as shown in Table
3. In a bid to establish whether the SMEs use routines in order to speed up invoicing, 33(17.7%) strong
disagreed, 22(11.8%) disagreed, 20(10.8%) were undecided, 91(48.9%) agreed while 20(10.8%) strongly
agreed. The mean value was 3.2312 and the standard deviation was 1.30500. This implies that majority of the
respondents use routines in order to speed up invoicing as shown in Table 3:
Table 3: Minimization of accounts receivables
n=186 S.D D N A S.A Mean Std. dev.
Use interest on overdue payment from
customers
F 33 22 33 58 40 3.2688 1.39218
% 17.7 11.8 17.7 31.2 21.5
Use routines in order to speed up
invoicing
F 33 22 20 91 20 3.2312 1.30500
% 17.7 11.8 10.8 48.9 10.8
Offer customers discounts if paying cash F 22 20 29 29 86 3.7366 1.43337
% 11.8 10.8 15.6 15.6 46.2
Deliberately choose customers who pay
quickly
F 29 22 29 86 20 3.2473 1.25768
% 15.6 11.8 15.6 46.2 10.8
Cease business relations with customers
who frequently pay late
F 33 29 62 40 22 2.9409 1.24846
% 17.7 15.6 33.3 21.5 11.8
Composite value 3.2850 1.32734
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In relation to whether customers are offered discounts if paying cash, 22(11.8%) strongly disagreed,
20(10.8%) disagreed, 29(15.6%) were undecided, 29(15.6%) agreed while 86(46.2%) strong agreed. The
itemized mean of the item was 3.7366 and the variation in responses was 1.43337.From the findings, 29(15.6%)
strongly disagreed that they deliberately choose customers who pay quickly, 22(11.8%) disagreed, 29(15.6%)
were undecided, 86(46.2%) agreed while 20 (10.8%) strongly agreed. Mean realized was 3.2473 while the
standard deviation was 1.25768. This implies that majority of the respondents deliberately choose customers
who pay quickly but the variation in responses was 1.25768. The respondents were asked whether they cease
business relations with customers who frequently pay late, 33(17.7%) strongly disagreed, 29(15.6%) disagreed,
62(33.3%) were undecided, 40(21.5%) agreed while 22(11.8%) strongly agreed. The itemized mean was 2.9409
and the variation in responses was 1.24846. Overall, the mean of minimization of accounts receivable was
3.2850 and the standard deviation was 1.32734. This study concurs with the findings of Fatoki (2013) in South
Africa that entrpreneurs are using minimization of accounts receivable as a financial bootstrapping strategy.
Joint utilization was another financial bootstrapping method of interest in the study. It was operationalized using
sharing of equipment with other businesses, sharing of premises with others and borrowing of equipment from
other businesses for shorter periods. Of the total respondents, 22(11.8%) strongly disagreed that they share
equipment with other businesses, 29(15.6%) disagreed, 33(17.7%) were undecided, 20(10.8%) agreed while
82(44.1%) strongly agreed. The item had a mean of 3.5968 and a standard deviation of 1.46814 as shown in
Table 4:
Table 4: Joint utilization
n=186 S.D D N A S.A Mean Std. dev.
Share equipment with other businesses F 22 29 33 20 82 3.5968 1.46814
% 11.8 15.6 17.7 10.8 44.1
Share premises with others F 33 22 33 40 58 3.3656 1.47252
% 17.7 11.8 17.7 21.5 31.2
Borrow equipment from other businesses
for shorter periods
F 20 62 29 20 55 3.1505 1.42901
% 10.8 33.3 15.6 10.8 29.6
Composite value 3.3710 1.45656
In regards to whether the SMEs share premises with others, 33(17.7%) strongly disagreed, 22(11.8%)
disagreed, 33(17.7%) were undecided, 40(21.5%) agreed and 58(31.2%) strongly agreed. The item had a mean
of 3.3656 and the standard deviation was 1.47252. The study also sought to find out that 20(10.8%) of the total
respondents strongly disagreed that they borrow equipment from other businesses for shorter periods, 62(33.3%)
disagreed, 29(15.6%) were neutral, 20(10.8%) agreed while 55(29.6%) strongly agreed. The mean of the item
was 3.1505 while the standard deviation was 1.42901. The overall mean of the item was 3.3710 while the
standard deviation was 1.45656. Delaying of payments was also considered in this study. It was operationalized
using delaying payment to suppliers deliberately, leasing of equipment instead of buying, buying used
equipment instead of new and hiring of temporary personnel instead of employing permanent as shown in Table
5:
In regards to whether the SMEs deliberately delay payment to suppliers, 29(15.6%) strongly disagreed,
22(11.8%) disagreed, 29(15.6%) were undecided, 20(10.8%) agreed while 86(46.2%) strongly agreed. The item
recorded a mean of 3.6022 and a standard deviation of 1.53263. In relation to whether the equipment is leased
instead of being bought, 20(10.8%) strongly disagreed, 20(10.8%) disagreed, 29(15.6%) were neutral,
29(15.6%) agreed while 88(47.3%) strongly agreed. The itemized mean value was 3.7796 and the standard
deviation is 1.41031.This meant that most of the SMEs lease equipment instead of buying it.
Table 5: Delay of payments
n=186 S.D D N A S.A Mean Std. dev.
Deliberately delay payment to suppliers F 29 22 29 20 86 3.6022 1.53263
% 15.6 11.8 15.6 10.8 46.2
Lease equipment instead of buying F 20 20 29 29 88 3.7796 1.41031
% 10.8 10.8 15.6 15.6 47.3
Buy used equipment instead of new F 33 20 29 84 20 3.2043 1.29079
% 17.7 10.8 15.6 45.2 10.8
Hire temporary personnel instead of
employing permanent
F 66 20 29 29 42 2.7903 1.59869
% 35.5 10.8 15.6 15.6 22.6
Composite value 3.3441 1.45811
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In a bid to establish if the respondents buy used equipment instead of new, 33(17.7%) strongly
disagreed, 20(10.8%) disagreed, 29(15.6%) were neutral, 84 (45.2%) agreed while 20(10.8%) strongly agreed.
The mean of the item was 3.2043 while the standard deviation was 1.29079. This implies that most of the
respondents buy used equipment instead of new. The study results are intandem with the findings of Karlsson
and Wallen (2011) in Sweden that most entreprenuers are buying used equipment instead of new. Finally,
66(35.5%) of the respondents strongly disagreed that temporary personnel are hired instead of employing
permanent, 20(10.8%) disagreed, 29(15.6%) were undecided, 29(15.6%) agreed while 42(22.6%) strongly
agreed. The item had a mean of 2.7903 and a standard deviation of 1.59869. The composite mean and standard
deviation was 3.3441 and 1.45811 respectively. In a bid to establish whether the respondents’ minimized capital
invested in stock, a set of operational measures for the construct were established. These measures were whether
best conditions possible are sought with suppliers, purchases are coordinated with other busineses and use of
routines in order to minimize capital invested in stock. The results were presented in Table 6:
Table 6: Minimization of capital invested in stock
n=186 S.D D N A S.A Mean Std. dev.
Seek out best conditions possible with
suppliers
F 20 22 33 20 91 3.7527 1.43437
% 10.8 11.8 17.7 10.8 48.9
Coordinate purchases with other businesses F 22 29 20 95 20 3.3333 1.21106
% 11.8 15.6 10.8 51.1 10.8
Use routines in order to minimize capital
invested in stock
F 62 20 29 53 22 2.7473 1.46513
% 33.33 10.8 15.6 28.5 11.8
Composite value 3.2778 1.37019
In determining whether the respondents seek out best conditions possible with suppliers, 20(10.8%)
strong disagreed, 22(11.8%) disagreed, 33(17.7%) were undecided, 20(10.8%) agreed while 91 (48.9%). The
mean of the item realized was 3.7527 and the standard deviation was 1.43437. In regards to whether SMEs
coordinate purchases with other businesses, 22(11.8%) strongly disagreed, 29(15.6%) disagreed, 20(10.8%)
were undecided, 95(51.1%) agreed while 20(10.8%) strongly agreed. The mean of the item was 3.3333 while
the standard deviation was 1.21106. Of the total respondents, 62(33.33%) strongly disagreed that they use
routines in order to minimize capital invested in stock, 20 (10.8%) disagreed, 29(15.6%) were neutral,
53(28.5%) agreed while 22(11.8%) strongly agreed. The mean realized was 2.7473 while the standard deviation
was 1.46513. In summary, the mean of the item was 3.2778 while the standard deviation was 1.37019.
The study also sought to find out whether the enterprises were financially sustainable. The operational
measures were as follows: Sufficient funds to meet all its financial obligations, ability to raise enough revenues
to remit taxes to the government and whether the businesses break even. In regards to whether the SMEs have
sufficient funds to meet all its financial obligations, 95(51.1%) strongly disagreed, 20(10.8%) disagreed,
29(15.6%) were neutral, 22(11.8%) agreed while 20(10.8%) strongly agreed. The item had a mean of 3.3817
while the standard deviation of 1.17611. This implies that most of the SMEs do not generate sufficient
cashflows that meets all its financial obligations as shown in Table 7:
Table 7: Financial sustainability
n=186
S.D D N A S.A Mean Std. dev.
Sufficient funds to meet all its financial
obligations
F 95 20 29 22 20 3.3817 1.17611
% 51.1 10.8 15.6 11.8 10.8
Ability to raise enough revenues to remit
taxes to the government
F 20 71 33 29 33 3.3011 1.23713
% 10.8 38.2 17.7 15.6 17.7
The business break evens F 33 51 29 33 40 3.1720 1.41516
% 17.7 27.4 15.6 17.7 21.5
Composite value 3.2849 1.27613
In regards to ability to raise enough revenues to remit taxes to the government, 20(10.8%) strongly
disagreed, 71(38.2%) disagreed, 33(17.7) were neutral, 29 (15.6%) agreed while 33 (17.7%) strongly agreed.
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The itemized mean was 3.3011 while the standard deviation was 1.23713. In a bid to establish whether the
enterprises breakevens, 33 (17.7%) strongly disagreed, 51(27.4%) disagreed, 29(15.6%) were neutral,
33(17.7%) agreed while 40(21.5%) strongly agreed. The item realized a mean of 3.1720 and a standard
deviation of 1.41516. Financial sustainability construct had a mean of 3.2849 while the standard deviation was
1.27613.
Correlation results
Correlation analysis was conducted to establish whether there was any significant relation between
dependent and independent variables under study. This is because correlation is a powerful tool to measure
presence of a relationship between two or more variables. It tries to establish whether there is positive or
negative relationship between variables. It uses statistical correlation coefficient to determine the strength of this
relationship which was then tested for significance at 5% as shown in Table 8:
Table 8: Correlation Matrix for financial bootstrapping strategy and sustainability
n=186 Sustain Owner Minimize Joint Delaying Capital
Sustain Pearson
Correlation
1
Sig. (2-tailed)
Owner Pearson
Correlation
.609**
1
Sig. (2-tailed) .000
Minimize Pearson
Correlation
.457**
.212**
1
Sig. (2-tailed) .000 .004
Joint Pearson
Correlation
.630**
.149*
.420**
1
Sig. (2-tailed) .049 .051 .000
Delaying Pearson
Correlation
.774*
.370**
.256**
.630**
1
Sig. (2-tailed) .018 .000 .000 .000
Capital Pearson
Correlation
.590*
.685*
.961**
.643*
.795
Sig. (2-tailed) .040 .030 .004 .149 .019 1
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
There was a strong significant positive relationship between owner financing methods and financial
sustainability (r=.609**
, p < 0.01). Minimization of accounts receivable had a weak non-significant relationship
with financial sustainability (r=.457**
, p > 0.01). There was a strong non-significant correlation between joint
utilization and financial sustainability (r=.630**
, p > 0.01). Delaying payments had a strong significant positive
relationship with financial sustainability (r=.774*
, p < 0.05). In regards to the minimization of capital invested in
stock, the item had a fairly strong significant relationship with financial sustainability(r=.590*
, p < 0.05).
Regression results
Multiple regression analysis is a powerful technique used for predicting the unknown value of a
variable from the known value of two or more variables also called the predictors. It was adopted to predict
financial sustainability from owner financing methods, minimization of accounts receivable, joint utilization,
delaying of payments and minimization of invesment in capital stock. The following regression asumptions
were tested in the study. Linearity of residuals, normality of residuals, multicollinearity, autocorrelation of
residuals and homoscedasticity. Scatter plot was used to test linearity of residuals. ZRESID values were
recorded on the vertical axis and ZPRED plotted on the horizontal axis. Lind, Marchal, and Wathen (2012)
opine that if the scatter plot follows a linear pattern which has not a curvilinear pattern then it implies that
linearity assumption is upheld. In this study the residual points followed a linear pattern which is not a
curvilinear pattern as shown in Figure 1: This implies that the linearity of residual assumption was upheld.
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Figure 1: Linearity of residuals
Normality of residuals implies that residuals are normally distributed. The assumption was tested using
the Kolmogorov – smirnov and Shapiro - wilk test. Kolmogorov – smirnov is suitable for large samples while
Shapiro - wilk test is used for small samples. A p - value greater than 0.05 means that the residuals are normally
distributed. In this study, the Shapiro - wilk test had a p value of .637 which implies that the residuals were
normally distributed as shown in Table 9:
Table 9: Tests of Normality of residuals
Kolmogorov-Smirnova
Shapiro-Wilk
Statistic Df Sig. Statistic Df Sig.
Sustain .277 186 .519 .844 186 .637
a. Lilliefors Significance Correction
The study also tested whether the residuals are autocorrelated. Durbin-Watson's d test was used to test
this assumption. Durbin-Watson's d test, tests the null hypothesis that the residuals are not linearly auto
correlated. As a rule of thumb values of 1.5 < d < 2.5 show that there is no auto-correlation in the data (Lind,
Marchal, & Wathen, 2012). In this study the value of Durbin Watson was 1.589 implying that there was no
autocorrelation of residuals as shown in Table 10.
Table 10:Autocorrelation of residuals
Model R R Square Adjusted R
Square
Std. Error of the Estimate Durbin-
Watson
1 .912a
.831 .826 .70765 1.589
a. Predictors: (Constant), minimiz, minimize, owner, joint, delaying
b. Dependent Variable: Financial sustainability
Multicollinearity was also tested and it implies that there is no perfect linear relationship between
explanatory variables. This can be verified using either variance inflation factor or tolerance. A tolerance of
below 0.10 or a VIF greater than 10 indicates serious multicollinearity problems. Tolerance below 0.2 indicates
a potential problem. When tolerance is close to 1 it implies that there is little multicollinearity. If tolerance is
close to 0, it indicates that multicollinearity may be a threat (Williams, 2015). A VIF greater than 10 is
considered unsatisfactory hence the independent variable should be removed from the analysis (Lind, Marchal,
& Wathen, 2012). The variance inflation factors were below 10 which indicate no multicollinearity as shown in
the Table 11:
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Table 11: Test of Multicollinearity
Model Unstandardized
Coefficients
Standardized
Coefficients
T Sig. Collinearity Statistics
β Std.
Error
β Tolerance VIF
1 (Constant) 8.572 1.084 7.911 .000
owner -.590 .023 -.890 -25.331 .000 .762 1.313
minimize .434 .020 .776 21.728 .000 .736 1.358
joint -.141 .040 -.152 -3.549 .000 .513 1.950
delaying .297 .049 .259 6.053 .000 .512 1.953
minimiz -.068 .049 -.043 -1.392 .166 .963 1.039
a. Dependent Variable: Financial sustainability
Homoscedasticity was also tested and it implies that the variation in the residuals is the same for both
large and small values of the predicted value of the dependent variable (Kothari, 2004). A scatter plot of
residuals was drawn. ZRESID values were plotted on the vertical axis, and ZPRED were plotted on the
horizontal axis. Lind, Marchal and Wathen (2012) opine that the homoscedasticity assumption is met when the
residuals do not fan out in a triangular fashion. In this study the residuals are not in a triangular fashion which
implies that the homoscedasticity assumption was upheld as shown in Figure 2:
Fig 2: Test of homoscedasticity
ANOVA results
The F-ratio was 176.907 at 5 degree of freedom which is the variable factor. This represented the effect
size of the regression model and the model is significant at 95% confidence level (p=.000b
) indicating that
financial sustainability can be predicted from the aforementioned independent variables as shown in Table 12.
Table 12: Analysis of variance
ANOVAa
1 Regression 442.943 5 88.589 176.907 .000b
Residual 90.137 180 .501
Total 533.081 185
a. Dependent Variable: sustain
b. Predictors: (Constant), capital, minimize, owner, joint, delaying
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Model summary
The value of adjusted R-square is 0.826 which implies that the model explains 82.6% of financial
sustainability from the predictor variables (i.e. owner financing methods, minimization of accounts receivable,
joint utilization, delaying of payments and minimization of invesment in capital stock) as shown in Table 13:
Table 13: Model summary
Model Summary
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .912a
.831 .826 .70765
a. Predictors: (Constant), capital, minimize, owner, joint, delaying
Regression co-efficient analysis
Coefficient analysis from multiple regression analysis is as shown below:
Table 14: Regression coefficients
Coefficientsa
Unstandardized Coefficients Standardized
Coefficients
t Sig.
β Std. Error β
1 (Constant) 8.572 1.084 7.911 .000
Owner .590 .023 .890 25.331 .000
Minimize .434 .020 .776 21.728 .000
Joint .141 .040 .152 3.549 .000
Delaying .297 .049 .259 6.053 .000
Capital .068 .049 .043 1.392 .000
a. Dependent Variable: sustainability
The multiple linear regression model was outlined as follows:
Financial sustainability = (8.572) + .890X1+.776 X2 + .152X3 + .259X4 +.043X5 + 1.084
The results of Table 14 revealed that a unit increase in owner financing methods caused a .890 increase
in financial sustainability of SMEs. Hypothesis 1 (H01) predicted that ownership financing methods has no
significant effect on financial sustainability. Thus we fail to accept the null hypothesis and conclude that owner
financing methods has a significant effect on financial sustainability at p < 0.05. The study concurs with the
finding of Schofield (2015) that owner resources have a significant effect on financial sustainability. The study
also found that a unit increase in minimimization of accounts receivable caused a .776 increase in financial
stability of the SMEs. Hypothesis 2 (H02) predicted that minimization of accounts receivable had no significant
effect on financial sustainability. Thus we fail to accept the null hypothesis and conclude that minimization of
accounts receivable has a significant effect on financial sustainability at p < 0.05. Study results are similar to the
findings of Hasti, Kambiz and Amir (2017) that minimization of accounts receivable has a significant effect on
financial sustainability. In regards to joint utilization, the study results revealed that a unit increase in joint
utilization caused a .152 increase in financial sustainability. Hypothesis 3 (H03) predicted that joint utilization
has no significant effect on financial sustainability. Thus we fail to accept the null hypothesis and conclude that
joint utilization has a significant effect on financial sustainability at p < 0.05. The study results resembles the
findings of Fatoki (2013) that joint utilization has a significant effect on financial sustainability
In regards to delaying of payments, the study found that a unit increase in delay of payments caused a
.259 increase in financial sustainability. Hypothesis 4 (H04) predicted that delay of payments has no significant
effect on financial sustainability. Thus we fail to accept the null hypothesis and conclude that delay of payments
has a significant effect on financial sustainability at p < 0.05. The study agrees with the finding of Fatoki (2014)
that delay of payments has a significant effect on financial sustainability. Finally, a unit increase in
minimization of investment in capital stock caused a .043 increase in financial sustainability. Hypothesis 5 (H05)
predicted that minimization of investment in capital stock has a significant effect on financial sustainability. The
results in Table 14 indicate that minimization of investment in capital stock has a significant effect on financial
sustainability (p < 0.05) implying that we fail to accept the null hypothesis and conclude that minimization of
investment in capital stock has a significant effect on financial sustainability at p < 0.05. The study results were
intandem with the finding of Hasti, Kambiz and Amir (2017) that minimization of investment in capital stock
has a significant effect on financial sustainability.
12. Financial Bootstrapping Strategy And Sustainability Of Small And Medium Enterprises In…
*Corresponding Author: Martin Wekesa Mabonga www.aijbm.com 106 | Page
V. CONCLUSION AND RECOMMENDATIONS
The study concludes that entrepreneurs use owner financing methods, minimization of accounts
receivable, joint utilization, delay of payments and minimize the capital invested in stock as financial
bootstrapping strategies. These strategies have a significant positive effect on SMEs financial sustainability. The
owner financing methods used by entrepreneurs are withholding of manager’s salary for shorter or longer
periods, obtaining loans from relatives or friends, employing of relatives or friends at non-market salary and
running of the business completely at home. Entrepreneurs minimize accounts receivable by imposing interest
on overdue payment from customers. They also use routines in order to speed up invoicing, when customers pay
cash they are offered discounts, customers who pay quickly are chosen deliberately while others cease business
relations with customers who frequently pay late. Entrepreneurs have also opted for sharing of equipment with
other businesses, sharing of premises with others and borrowing of equipment from other businesses for shorter
periods. Payments are also delayed so as to remain afloat. This is where payments are deliberately delayed to
suppliers, equipment is leased instead of buying, used equipment is bought instead of new and personnel are
hired temporary instead of employing permanent. Investment in capital stock is minimized using seeking of best
conditions possible with suppliers, coordination of purchases with other busineses and use of routines in order to
minimize capital invested in stock. The study recommends that entrepreneurs should use owner financing
methods, minimization of accounts receivable, joint utilization, delay of payments and minimization of the
capital invested in stock as alternative sources of finance so as to reduce the cost of finance.
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*Corresponding Author: Martin Wekesa Mabonga
Department of Economics, Accounts & Finance, Jomo Kenyatta University of Agriculture &
Technology, P.O. Box 62000-00200, Nairobi, Kenya.