DECLARATION

I hereby declare to the best of my knowledge that this is my original work and has never been presented in any other university for a degree award.

Signed:

Date:

Victor N Okillah BBM/2727/12

This Research Project has been submitted to the School of Business and Management for examination with my approval as the Moi University approved supervisor. Signed Date:

DEDICATION I would like to dedicate this Research Project to my fellow colleagues and workmates who have been very supportive during my time of study. My dedication would be incomplete without the mention of my wife Kathleen Mzungu for her unending support.

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ACKNOWLEDGEMENT

I am indebted to my family members for their indispensible financial and moral support throughout this study. Without them this research would not have been a success. I am must also acknowledge the Moi University Library attendants for their assistance towards finding the right literature material relevant to my study.

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ABSTRACT This study was set to investigate factors influencing the source of funding among small scale traders in Nairobi with reference to Baba Dogo area in Nairobi. The study revolves around the options small scale investors have and what influences their decisions before opting for a given source of finance. The study design was descriptive and purposive sampling was used in obtaining the representative sample. The target population consisted of a sample of small scale traders within Baba Dogo area. The study was conducted through a field survey and data collected through questionnaires, structured interview, documentations, discussions and observations. Data was analyses through descriptive statistics. Banks, building societies, investment trusts and pension funds are just a few of the organizations whose job it is to channel funds to those that require them. Investors big and small need finance to settle simple expenses like the day to day running of business to complex expenses e.g. for mergers or take-over (acquisition). Depending on the choice an investor makes a few basic factors like the amount of money required, how quickly the money is needed, the cheapest available option, the amount of risk involved in the reason for the cash, the length of time of the requirement for finance will have to be considered when scouting for the appropriate source of finance. Like many small-business owners, first reaction to the topic of raising money from friends and family may be but I dont know enough people with money, much less people Id feel comfortable asking money. This initial reaction has stopped a lot of investors from lending within the friends and family circles. Salient findings of the study were that collateral and interest rate (cost of borrowing) influenced the choice of financing but rejects the assertion that government policies influenced small scale traders funding sources since a majority was not aware of government activities in terms of lending terms, products and conditions.

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TABLE OF CONTENTS Page Statement of originality...I Dedication..II Acknowledgement.....III Abstract......IV

CHAPTER ONE: INTRODUCTION 1.0 Introduction...1 1.1Background.....1 1.2 Statement of the problem...3 1.3 Objectives of the study...............................................3 1.4 Research Questions........4 1.5 Significance of the study....4 1.6 Limitations of the study........ .4 1.7 Scope of the study..5

CHAPTER TWO: LITERATURE REVIEW 2.0 Introduction...........7 2.1 Review of Past Studies..........7 2.1.1 Interest Rate....8 2.1.2 Fixed Assets (Collateral)....... 9 2.2 Summary of Gaps to be filled..........10

CHAPTER THREE: RESEARCH METHODOLOGY & DESIGN 3.0 Introduction.....11 3.1 Research Design...11 3.2 Target Population ....12 3.3 Sampling Design..12 3.4 Data Collection Methods & Procedures..13 3.5 Data Analysis Methods14 3.6 Limitations to the study.......14 Conclusion..15

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