Service Quality and the Performance of Women Enterprise Fund in Kisumu County, Kenya

SERVICE QUALITY AND THE PERFORMANCE OF WOMEN

ENTERPRISE FUND IN KISUMU COUNTY, KENYA

SWAGI KHAUYA PAULINE

D53/OL/KKA/26073/2015

A RESEARCH PROJECT SUBMITTED TO THE SCHOOL OF BUSINESS IN

PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF A

MASTER OF BUSINESS ADMINISTRATION (STRATEGIC MANAGEMENT)

DEGREE,

KENYATTA UNIVERSITY

NOVEMBER, 2020 i

DEDICATION

I dedicate this research project to my son Alvan Murimi, my sister Martha Swagi and as well as my friends and work colleagues for their encouragement and support throughout the entire period.

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ACKNOWLEDGEMENT

I would like to express my sincere gratitude to my supervisor, Dr Elishiba Murigi whose advice, immense support, constructive criticisms and guidance has enabled me to reach this stage.

I am grateful to Nelson Ondiek and the staff of Women Enterprise Fund Kisumu who provided great insights into this work. I also wish to acknowledge and express my deepest appreciation to those who have assisted and guided me in the completion of this research project but are not mentioned here.

TABLE OF CONTENTS

DECLARATION...... ii DEDICATION...... iii ACKNOWLEDGEMENT ...... iv TABLE OF CONTENTS ...... v LIST OF TABLES ...... viii LIST OF FIGURES ...... ix OPERATIONAL DEFINITION OF TERMS ...... x ABBREVIATIONS AND ACRONYMS ...... xii ABSTRACT ...... xiii CHAPTER ONE: INTRODUCTION ...... 1 1.1 Background of the Study ...... 1 1.1.2. Performance Women Enterprise Fund ...... 5 1.1.2. Service Quality...... 7 1.2. Statement of the Problem ...... 8 1.3. Objectives of the Study ...... 9 1.3.1. General Objectives of the study ...... 9 1.3.2. Specific Objectives of the study ...... 9 1.4. Research Hypotheses ...... 10 1.5. Significance of the Study ...... 10 1.6. Scope of the Study ...... 11 1.7. Limitations of the Study...... 11 1.8. Organization of the Study ...... 11 CHAPTER TWO LITERATURE REVIEW ...... 12 2.1. Introduction ...... 12 2.2. Theoretical Review...... 12 2.2.1. Expectation confirmation Theory ...... 12 2.2.2. Models of Service Quality and Performance ...... 13 2.3. Empirical Review...... 16 2.3.1. Performance of Women Enterprise Fund ...... 16 2.4. Summary of empirical literature ...... 20 2.5. Conceptual Framework ...... 22

CHAPTER THREE: RESEARCH METHODOLOGY ...... 23 3.1. Introduction ...... 23 3.2. Research Design...... 23 3.2.1. Empirical Model ...... 23 3.2.2. Target Population ...... 24 3.3. Sampling Design ...... 25 3.3.3. Sampling Frame ...... 25 3.4. Data Collection Instruments ...... 26 3.4.1. Pilot Testing...... 27 3.4.2. Validity...... 27 3.4.3. Reliability ...... 27 3.4. Data Collection Procedure ...... 28 3.5. Data Analysis and Presentation ...... 28 3.6. Hypothesis testing ...... 29 3.6.1. Decision Criteria ...... 30 3.6.2. The test static ...... 30 3.6.3. Decision making ...... 31 3.7. Ethical Considerations ...... 31 CHAPTER FOUR: DATA ANALYSIS ...... 32 4.1. Introduction ...... 32 4.1.1. Reliability Test ...... 32 4.2. Demographic Information ...... 33 4.2.1. Gender and age...... 33 4.2.2. Position in the Group by Gender ...... 34 4.2.3. Level of Education ...... 34 4.2.4. Amount of Most Recent Loan Serviced or In Service ...... 35 4.3. Perceptions of Service Quality: SERVPERF ...... 36 4.4. Regression Model ...... 40 4.5. Correlation Matrix ...... 41 4.6. Regression test ...... 41 4.7. Test of Significance ...... 44 4.8. Test of hypothesis ...... 45 CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION ...... 47

5.1. Introduction ...... 47 5.2. Summary of the Findings ...... 47 5.3. Conclusion ...... 49 5.4. Recommendations ...... 51 5.5. Suggestions for Future Research ...... 51 REFERENCES ...... 53 APPENDICES ...... 58 APPENDIX I: Introduction letter ...... 58 APPENDIX II: Questionnaire...... 59 APPENDIX III: Sampling Frame ...... 63 APPENDIX IV: Research Program ...... 87 APPENDIX V: Budget ...... 88 APPENDIX VI: Map of Kisumu County ...... 91

vii

LIST OF TABLES

Table 2.4.1 Summary of empirical literature(source own) ...... 21

Table 3.3.1 Sampling Frame ...... 25

Table 4.1.1 Cronbach’s Alpha Reliability Findings ...... 33

Table 4.3.1 Reliability...... 36

Table 4.3.2 Responsiveness ...... 37

Table 4.3.3 Empathy ...... 38

Table 4.3.4 Assurance ...... 39

Table 4.4.1 Regression Model Summary ...... 40

Table 4.5.1 Correlations between Performance and Service quality dimensions ...... 41

Table 4.6.1 Regression Test ...... 42

Table 4.7.1 Chi-Square Test for the Relationship between the Variables ...... 44

viii

LIST OF FIGURES

Figure 2.5.1 Conceptual Framework ...... 22

Figure 4.2.1 Age bracket and gender of respondents...... 34

Figure 4.2.2 Level of education by position in group and gender...... 35

Figure 5.6.1 Map of study area-Kisumu (Source Google maps) ...... 91

OPERATIONAL DEFINITION OF TERMS

Access to credit: It is the extent to which women can obtain their financial capital

requirements for start-up or expansion of their enterprises.

Assurance: It is the knowledge, attitude and abilities of employees of an

organization that inspires confidence by customers in the

capabilities of an organization to meet their requirements.

Communication It is how an organization passes key messages to its customers.

Complaint Handling: It is a response or resolution of made by an organization to

mitigate an expression of dissatisfaction towards it by a customer.

Empathy It is how an institution shows understanding towards its

customers.

Enterprise It involves the aspect of starting, growing and maturing of an

Development: enterprise

Enterprise Success: It refers to the performance of the enterprises in terms of sales

volumes, profit levels, market share, and customer and employee

satisfaction.

Financial Institution: A company/organization that provides credit and business support

services to entrepreneurs, this includes banks, insurance

companies, micro-finance institutions and government credit

funds.

Performance: It is the measure of how customers perceive a financial

intermediary as meeting their expectations of service.

Reliability: It is the measure of how timely, consistently and conveniently a

service is availed to a customer

Responsiveness: It is how an organization is willing to offer prompt assistance to

their customers and address their concerns.

Service Quality: It is an attitudinal measure how well customers' expectations of a

service have been met.

Tangibles: It is how the physical facilities, equipment and staff appear to a

customer seeking a service

Women Entrepreneur: Refers to a female individual owning and operating a business

Women-operated Refers to businesses whose owners/proprietors are women.

Enterprises:

ABBREVIATIONS AND ACRONYMS

ASK Agricultural Society of Kenya

CBK Central Bank of Kenya

CWES Constituency Women Enterprise Scheme

FSD Kenya Financial Sector Deepening Kenya

GDP Gross Domestic Program

GOK Government of Kenya

ICT Information Communication Technology

ICTAK Information Communication Technology Association of Kenya

IFC International Finance Corporation

ILO International Labour Organization

OECD Organization for Economic Cooperation and Development

M&E Monitoring and Evaluation

MSMEs Micro, Small and Medium sized Enterprises

WEF Women Enterprise Fund

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ABSTRACT

Access to finance by women is very fundamental in ensuring they create sustainable enterprises and meaningfully contribute to economic growth of the country. This study aimed to assess the effect of service quality on the performance of the Women Enterprise Fund, in Kisumu County, one of the programs implemented by the government of Kenya to empower women economically through enabling their access to affordable credit. The objectives of the study were to assess the effects of four variables of service quality, namely; reliability, responsiveness, empathy and assurance on the performance of Women Enterprise Fund in Kisumu. The study used descriptive survey research design while the target population of the study comprised of women groups and women entrepreneurs funded by the Women Enterprise Fund. The study adopted the balance score card, SERVQUAL and SERVPERF as theoretical guides in the measurement of the variables. Random sampling technique was adopted to select a sample size of the study from a population list of 919 women groups. Further, a semi-structured questionnaire was used to collect data which was analysed using both descriptive and inferential statistics. The findings were presented on frequency distribution tables. The SERVPERF model is an important tool in understanding the applicability of service quality in the financial services industry and this includes government affirmative action funds like Women Enterprise Fund. Women Enterprise Fund needs to pay attention to all the four service quality management practices in its strategic outlook since this study has revealed that each had a significant association to the perception of service quality and a positive influence on performance. The study shows that all the service quality variables had significant correlation with the dependent variable of performance and any positive increase in each, improved performance . It is thus concluded that Women Enterprise Fund should seek to employ service quality strategies similar to those in commercial banks in order to ensure effective service delivery to their customers. This study utilizes a tool for the measurement of service quality and assesses the relationship between perceived service quality and how it influences WEF customer’s performance. From this and various other studies, SERVPERF appears to be a consistent and reliable scale to measure financial intermediary service quality, and has a useful diagnostic role to play in assessing and monitoring service quality in these institutions whether in the public or private sector.

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CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

According to Robb and Coleman (2009), finance is a fundamental ingredient which enables businesses to start, expand and remain viable. Women entrepreneurs who can access financing opportunities without discrimination have the capacity to venture into the male dominated sectors of the economy. Moreover, the International Labour Organization (2016) pointed out that entrepreneurship for women ought to be promoted through the formulation of a comprehensive policy framework that protects, fosters and regulates their business development from the start.

The ILO further posits that social inclusion policies that aim improve women’s access to markets, resources and enhancing of social protection are vital since entrepreneurs and specifically women have faced many constraints in accessing finance. There has been a significant decline of 15 to

30% on women’s access to markets, financial resources and strengthening of social protection and inclusion.

Globally, women entrepreneurs are vital contributors to enterprise development, employment and economic growth, owning 25% to 33% of business enterprises (Kiraka, Kobia & Katwalo, 2013 and their participation in entrepreneurship is critical to the economic growth of nations

(Richardson, Howarth and Finnegan, 2004). The World Economic Forum's Global Gender Gap

Report also showcases that there is a strong link between increased gender equality and a country's affluence and economic competitiveness (Haussmann, Tyson & Sahidi, 2010).

According to Carter, Anderson and Shore (2003), women business owners in the UK contribute

£50-70 billion in gross value added to the economy each year, in the US, women owned enterprises were the fastest growing between 1997-2017 with a rate of 114%, accounting for 39% of all firms and generating $1.7 trillion into the economy(American Express OPEN, 2017).

However, women are still under-represented among the population of entrepreneurs globally and they face challenges that include access to capital, discouraging socio-cultural attitudes, lack of business networks and potential access to markets as well as governments lacking specific policies and legislations that work towards creation of an enabling environment for female entrepreneurship (OECD 2012). They also do not operate in high income-capital intensive businesses due to such constraints. For example, in the US, the highest revenue generating industries which are Management Consulting(average annual income of $3.5million), Wholesale

Trading($1.78million), Mining($954,600) and Manufacturing($898,400) have only 0.02%, 1.4%,

0.2% and 1.2% of women owning businesses within them.

In Africa, the state of women owned enterprises varies with South African women owning 40% of all enterprises though 80% of these are in the informal sector and they account for 30% of formal businesses (Department of Trade and Industry Republic of South Africa, 2011). In Ghana, Uganda and Nigeria women owned enterprises make up 46.4%, 33.8% and 17.8% of all enterprises respectively (Mastercard Index of Women Enterpreneurs, 2018).

Women owned enterprises account for over 48% of all MSMEs in Kenya (ILO, 2008) and they make a great contribution to the Kenyan economy, accounting for 20% of Kenya’s GDP. Ocholah,

Okelo, Ojwang, Aila and Ojera, (2013) found that women entrepreneurs not only enhance the

standards of living in the family and household but they also lead to wealth creation at the national level.

The access to finance through formal institutions by women stands at only 4 % of implying that there is a gap in their effectiveness according to Olawale and Garwe, 2010. Their study on factors affecting growth of small and medium enterprises found that inadequate management experience is also a key cause of small business failure. This scenario was used to explain why one out of three new businesses does not survive beyond six months. It also appears that little or no entrepreneurial training, to a large extent, contributes to poor performance of many women-owned and operated enterprises. This is due to the fact that proper book keeping is vital for the growth of

SMEs and micro-enterprises (Mutua, 2015). Muli (2016) had a related observation that low levels of education would motivate women to start enterprises, but they also negatively affect the running of the said enterprises.

Access to adequate credit has been found to have positive impact on business performance in

Kenya by numerous studies (Kibas, 2001; Kuzilwa 2005; Carter, Anderson & Shaw, 2003) as well as the Kenyan Government (GOK, 2005) especially in the case for women entrepreneurs. Several barriers to access identified by the government include the lack of tangible security , an inappropriate legal and regulatory framework that does not seek innovative ways to create lending opportunities for MSMEs and poor, and insufficient capacity of formal lending institutions to deliver and customize financial services to MSMEs

According to Fletschner (2006), women’s access to financial resources has often been limited by biased lending practices emerging from financial institutions that consider women entrepreneurs as smaller, less experienced and less attractive clients. Some financial institutions have insufficient 3

knowledge in developing and offering products that are tailored to women’s preferences and constraints.

As result of limited access to financing women entrepreneurs venture into group formation to pool their resources together for borrowing to invest in business. Armendariz & Labie (2011) found that within a group, the lending mechanism is anchored by considerations such as joint/group liability, character based credit appraisal, group monitoring, progressive lending, controlled weekly repayments and obligatory savings policy. Mkpado & Arene(2007) posited the same considerations highlighting that the lack of asset collateral by rural based women entrepreneurs enforces the issue of trust based lending and repayment. This trust based dependence on all group members to ensure good loan repayments and collective collateral in the form of mandatory savings is the basis of joint liability.

According to Conning (2005), the emergence of innovative joint liability lending models in microfinance is celebrated as an innovative form of enabling previously un-bankable or marginalized borrowers elevate themselves through the use of ‘social collateral’ instead of physical asset based collateral that excludes them from access to more formal financial system.

In the 2019 FinAccess Household Survey (Central Bank of Kenya, Kenya National Bureau of

Statistics and Financial Sector Deepening, 2019) report access to funding through informal groups still remains considerably high at 30.1 % in the overall access strand for both genders and 70% of respondents had used such groups at least once as a source of financial services. Women are the majority users of this sector at 37.4% as compared to using banks at 33.7% even though there has been some improvement by women in formal banking (30.6% in 2016 versus 33.7% in 2019.

The Kenyan Government recognises that the socio-economic empowerment of women is a critical strategy to combat poverty, hunger, disease and to stimulate sustainable development it also notes that inequalities adversely affect women and thus promotion of entrepreneurship could alleviate some of these inequalities and challenges, (GOK, 2005, 2012). High interest rates on bank loans, lack of collateral, low financial literacy, high access/transport costs to nearest banks and microfinance institutions are the main challenges in access to credit acknowledged by and sought to address through the establishment of Women Enterprise Fund (WEF, 2017) that would focus on lending to women entrepreneurs mainly through the joint liability structures offered by women groups/chammas.

1.1.2. Performance Women Enterprise Fund

Women Enterprise Fund is a semi-autonomous government agency that works with women in

Kenya in order to reduce marginalization which stems from inequality. It was established in 2006 through legal notice no.147 under the WEF Regulations of the repealed Government Financial

Management Act, 2004. The Government Financial Management Act, 2012 establishes the Fund as a National Fund (WEF, 2017a). The Fund is a Vision 2030 flagship project under the social pillar that seeks to promote entrepreneurship by women in order to enable the achievement of the

United Nations’ sustainable goals for development. The main measure of performance for Women

Enterprise Fund is on enabling women entrepreneurs access affordable credit in order to support their enterprises.

The fund is provided by the government to women groups through the Constituency Women

Enterprise Scheme, with an administrative cost of 5% of the loan amount which is cut-off before disbursement and to individual women through financial intermediaries such as SACCOs at a low 5

interest rate of 8% p.a (WEF, 2017a). This rate is quiet affordable to most women entrepreneurs unlike commercial banks whose lending rate stand at a weighted average of 13.71% (CBK, n.d) which is still higher for many women entrepreneurs to afford.

According to the WEF Service Charter (n.d), in the Constituency Women Enterprise Scheme

(CWES) channel, women in formally registered women/self-help groups are trained by the WEF constituency officer on basic financial management after which they apply for the loans which are received after 1 month. The loans to groups are given on graduation levels in five cycles: 1, 2, 3,

4, and 5 of Kshs.100000, Kshs.200000, Kshs.350000, Kshs.500000 and Kshs.750,000 respectively. As at 30th June 2019, 99,092 women groups had been funded through CWES a total of Ksh 13,927,871,530 (WEF, 2019).

WEF has offered LPO financing to 109 women, youth and Persons with Disability with tenders worth Kshs. 64.869 Million (WEF 2019). The Fund has also supported 2,533 women entrepreneurs to exhibit their goods in ASK Shows, regional trade fairs and exhibitions and other organized forums across the country. The Fund in partnership with Kenya Bureau of Standards (KEBs) has supported women in certification of their products, through training. Currently, 13 products are undergoing the certification process, and 5 have been certified. (WEF, 2017b)

The Fund has also implemented a robust ICT infrastructure that supports and enhances efficiency and effectiveness in service delivery through the use of MPesa for loan repayments, a robust internal system and techno-savvy modes of communication evident by the recognition through the

ICT Association of Kenya (ICTAK) Award 2014 “Best use of ICT (State Corporation Category)”.

According to the WEF Strategic plan 2013-2017(WEF ,2017), the key strategic issues by the institution were: access to credit by women entrepreneurs, offering them support services and strengthening WEF itself as an institution. The main indicators of performance are the disbursement of loans to beneficiaries through CWES and Financial Intermediaries (loan portfolio and number of beneficiaries) and repayment of the loans by the women entrepreneurs. According to the current draft Women Enterprise Fund Strategic Plan 2019-2024 (WEF, n.d), WEF had planned to disburse Ksh 11 billion by June 2018 up from Ksh 2.6 Billion in 2012 but they were able to disburse 10.65 billion indicating a slight variance. The target for the same period of time in terms of beneficiaries of the fund was 1,391,928 and the achievement made was 1,370,952. In the current CWES loan status report as at 29th February 2020, they had disbursed Ksh.15.86 billion with very significant uptake in 2018/2019 of Ksh 3.1 billion to 151,146 additional beneficiaries, it is also stated that the fund did not have a strategic plan and no explanation is given for this upward trend(WEF, n.d). The current global repayment rate (30th February 2020, WEF 2020) stands at 97%, and the loan balance was Ksh 3,130,128,292 (WEF, 2020)

1.1.2. Service Quality

The definition of service quality is relatively amorphous and there has never been theoretical consensus on it. For purposes of this study, service quality is an attitudinal measure how well customers' expectations of a service have been met by a financial institution.

Service quality is an important management strategy that gives a competitive to a firm. Conceptual models of service quality enable management to identify quality issues and thus it enables them to plan for and implement the programs of quality improvement.

Bloemer and de Ruyter (1998) postulate in their investigation of bank loyalty that there is an indirect effect of service quality on loyalty with other key factors in this trifecta being mental image and customer satisfaction. Conversely, Wang, Lo and Hui (2003) state that service quality directly impacts a bank’s reputation (or financial institution) that influences if customers repeat purchases or become loyal.

This study shall focus on the SERVQUAL and SERVPERF models of service quality while using the Balanced Score card model as a measure of performance. The conceptual framework examine the service quality dimensions of reliability, responsiveness, empathy and assurance, and how they interact with efficiency, accessibility and rate of repayment as measures of performance in WEF

1.2. Statement of the Problem

It should be noted that only 33.7% of Kenyan women have access to finance from traditional banks as compared to men who access up to 48.2% from the same institutions (FSD, 2019). The government and other non-state actors provide financial support and training to women in groups but women still struggle on their own to access finance or credit from formal financial institutions as compared to men (FSD 2016, FSD 2019).

This posits that access to credit by women is still a challenge to date despite the existence of affirmative action funds like Women Enterprise Fund whose sole mandate is that. Several studies have been done on WEF and factors affecting its impact on women entrepreneurs in Kenya. This include a study done by Mogaka (2010) on the influence of monitoring and evaluation on the performance of WEF funded projects in Kisii. Ngugi(2011) studied the role of communication on the disbursement of WEF in Kikuyu while Njoroge and Jagongo (2016) examined the impact of

training by WEF on women owned enterprises. Wathe(2011) and Kipkorir(2016) both looked at the factors affecting the access of WEF by women enterpreneurs in Kitui and Kisii respectively while Kiraka, Kobia and Katwalo(2013) presented an indepth report on the impact of WEF in the

MSME growth in Kenya from both the beneficiary and institutional perspectives. Ogundo(2011) looked at the strategic responses WEF adopted in the economic macro-environment while

Odira(2017) focused on the WEF organizational factors that affected women’s access to their credit facilities. While acknowledging the role of these studies on the performance of WEF as an institution whose mandate is focused on women entrepreneur's access to credit, no study has been done on the perceptions of service quality by these women entrepreneurs and how it affects the performance of Women Enterprise Fund in Kisumu County.

1.3. Objectives of the Study

1.3.1. General Objectives of the study

This study sought to establish the effect of service quality on the performance of WEF in Kisumu county.

1.3.2. Specific Objectives of the study

1. To evaluate the effect of reliability on the performance of women enterprise fund in

Kisumu county.

2. To determine the effect of responsiveness on the performance of women enterprise fund in

Kisumu county.

3. To establish the effect of empathy on the performance of women enterprise fund in Kisumu

county.

4. To determine the effect of assurance on the performance of women enterprise fund in

Kisumu county.

1.4. Research Hypotheses

The following null hypotheses are thus postulated:

H1 Reliability has no statistically significant effect on the performance of women enterprise fund in Kisumu county.

H2 Responsiveness has no statistically significant effect on the performance of women enterprise fund in Kisumu county.

H3 Empathy has no statistically significant effect on the performance of women enterprise fund in

Kisumu county.

H4 Assurance has no statistically significant effect on performance of women enterprise fund in

Kisumu county.

1.5. Significance of the Study

The findings of the study will be of great importance to the government in coming up with policies towards enhancing financial access to empower women through entrepreneurship. Further, the study anticipates that government agencies like Women Enterprise Fund and other Affirmative

Action Funds, financial institutions and non-governmental organizations involved in training and financing women and women groups to venture into business will greatly benefit from the findings of this study. Business enterprises, especially those owned and operated by women will find the findings of the study useful as they will be able to identify ways to make informed choices on how

to access credit with an understanding of the importance of service quality. The findings will also of be useful to other scholars interested in women entrepreneurship and access to finance as part of literature for their further studies.

1.6. Scope of the Study

This study targeted women groups funded by the Women Enterprise Fund in the seven constituencies of Kisumu County to establish the effect of the four stated independent variables of service quality, reliability, assurance, responsiveness and empathy on the performance of the fund.

The groups targeted were those who had received more than one loan from Women Enterprise

Fund and thus had an established relationship with the fund which would further determine their perception of performance as a measure of their interaction with WEF as an accessible credit source.

1.7. Limitations of the Study

The participants were busy and may take more time to fill the questionnaire. The participants were also afraid that the study was investigating the progress of their enterprises. All these challenges were overcame using the research permit, signed and stamped introduction letter and assurance that the information gathered was confidential and only used for the intended study.

1.8. Organization of the Study

The study is organized into five chapters.

Chapter one presents the background to the study, statement of the problem, objectives, research hypotheses, scope and limitations of the study. Chapter two deals with literature review covering 11

the theoretical review, empirical review, summary of literature and research gaps and the conceptual framework.

Chapter three focuses on the research methodology of this study. It contains the research design, empirical model, and target population, sampling design, data collection instruments, data collection procedures and data analysis and presentation. Chapter four deals with research findings, analysis of responses, descriptive statistics and inferential analysis while chapter five focuses on the summary, conclusions, recommendations and suggestions for further study.

CHAPTER TWO LITERATURE REVIEW

2.1. Introduction

According to Bacharach (1989) a theory can be postulated to be a system of constructs and variables. These constructs are assumed to be related to each other by propositions and the variables are assumed to related to each other by hypotheses. Gilbert (2008), on the other hand, defines a theory as a concept that highlights and explains something that one would otherwise not see, or would find puzzling as well predictions about the said thing. The theoretical framework of this study will comprise of the Gap theory which is thus modelled into SERVQUAL, and

SERVPERF scales. The study also examines the Balanced Scorecard method of performance .

2.2.Theoretical Review.

2.2.1. Expectation confirmation Theory

Expectation confirmation theory (alternatively ECT or expectation disconfirmation theory) is a cognitive theory which seeks to explain post-purchase or post-adoption satisfaction as a function of expectations, perceived performance, and disconfirmation of beliefs postulated by 12

Oliver(1980). This theory posits that expectations, coupled with perceived performance, lead to post-purchase satisfaction. This effect is mediated through positive or negative disconfirmation between expectations and performance. If a product outperforms expectations (positive disconfirmation) post-purchase satisfaction will result. If a product falls short of expectations

(negative disconfirmation) the consumer is likely to be dissatisfied. The four main constructs in the model are: expectations, performance, disconfirmation, and satisfaction. Expectations reflect anticipated behavior and serve as the comparison standard of what consumers use to evaluate performance and form a judgement. Disconfirmation is hypothesized to affect satisfaction, with positive disconfirmation leading to satisfaction and negative disconfirmation leading to dissatisfaction.

2.2.2. Models of Service Quality and Performance

SERVQUAL Model.

The SERVQUAL model was postulated by Parasuraman, Zeithaml and Berry(1985) that there are five is popular approach for measuring service quality to match customers' expectations before a service encounter and their perceptions of the actual service provided (Parasuraman, Zeithaml &

Berry, 1988) and the definition of service quality is ‘a global judgement, or attitude relating to the superiority of the service.’ The SERVQUAL approach examines the variance in expected and experienced service quality that is a precedent to satisfaction, thus it is a gap model that informs management on areas of intervention in service quality. Service quality is defined by Lewis &

Mitchell (1990) as the difference between customer expectations of service and perceived service.

If expectations are greater than performance, then perceived quality is less than satisfactory and hence customer dissatisfaction occurs. Additionally, the SERVQUAL model hypothesizes that

service quality should be measured for comparison before and after changes for the positioning of quality related problems and to establish standards for service delivery. Edvardsen, Tomasson &

Ovretveit (1994) posited that the starting point in developing quality in service delivery is analysis and measurement.

According to Van Iwaarden, Van der Wiele, Ball & Millen (2003), the SERVQUAL model has been used to measure consumers’ perceptions of service quality based on five dimensions of tangibles, reliability, responsiveness, assurance and empathy. If a firm has adequate information on the expectation and the perceptions of service received, it can have an in depth understanding both policy wise and operationally on how to satisfy its customers. Lack of such information often renders customer surveys wanting. In this study, the SERVQUAL model was used to guide this study but to form comparative outlook with the SERVPERF model.

SERVPERF model

SERVPERF was a critique of the SERVQUAL model that was postulated by Cronin and

Taylor(1994) with the argument SERVQUAL was based on disconfirmation-based measures unlike their theory which was performance based and thus had more conceptual support.

Cronin and Taylor(1994), postulated that disconfirmation based measures are linked to customer satisfaction which is an end of state/process measure rather than a measure of service quality. This distinction is key since their model is focused on performance and therefore, service quality is a long-term attitude that reflects a customer’s evaluation of a service encounter at a specific point in time.

The practicality of SERVPERF was by Jain & Gupta (2004) in their study of service quality in fast food restaurants in India. They concluded that the SERVPERF scale was a more convergent and discriminant explanation of the service quality construct, it had a greater and frugal explanatory power as data collection instrument but conversely, SERVQUAL was greater in offering diagnostic power for managerial intervention.

In their analysis of SERVPERF and SERVPERF-M(with 15 point data set), Fogarty, Catts and

Forlin,(2000) concluded that tangibles and reliability were highly discriminant but responsiveness, assurance and empathy could not be separated in the industry they studied and asserted the need for confirmatory factor analysis but also noting that this is dependent on the industry being studied.

They introduce a new argument that these dimensions should be considered as a continuum rather than distinct dimensions starting off with Empathy and Assurance and ending with Tangibles as the hardest area to achieve success. Structurally, WEF being an affirmative action fund is significantly different from traditional banks and financial intermediaries who possess banking halls and buildings, branding and their sales and marketing teams. It has, instead, constituency based offices with the structures of a government department and it mainly markets itself through local barazas and referrals from other government agencies and departments. In this study, focus therefore shall be on the four dimensions of Empathy, Assurance, Reliability and Responsiveness in the performance of WEF while excluding the Tangibles dimension.

Balanced Score Card

The balanced score card was put forward by Kaplan & Norton (1992) to study performance measurement in companies whose intangible assets play a central role in value creation. They assumed that if companies were to develop the management of their intangible assets, they had to

integrate the measurement of these intangible assets into their management systems. This implies that a management system has to have four different perspectives namely; financial, customer perspective, internal business processes and learning and growth.

In this study, the balanced score card method shall be utilized to understand WEF's performance in line with their objectives on increased uptake of their loans by women entrepreneurs , while understanding the perceptions.

2.3.Empirical Review

This section reviews the relevant literature on the dependent variable of the performance of

Women Enterprise Fund with a view to establish the research gaps and justify the undertaking of the study by the researcher.

2.3.1. Performance of Women Enterprise Fund

Mogaka(2010) in his study on the influence of monitoring and evaluation on the performance of

WEF funded projects in Kisii postulated that the lack of an M& E framework and minimal inspection of women groups by the implementing ministry affected the income outcomes of the groups negatively and thus recommended a participatory M& E approach so as to enhance performance as well as increased capacity building of the women entrepreneurs. What however is lacking in his research is whether WEF officers are knowledgeable in M&E so as to ensure they have a standardized M&E framework and be able to comprehensively and thus ensure income outcomes are not negatively affected.

In his study of the role of communication in the disbursement of WEF in Kikuyu constituency,

Ngugi(2011) realized that communication gaps between the Fund, its implementing agencies(in terms of the service engaged community development assistants) and its clients led to ignorance on the purpose of this financial intervention that in turn affected the performance of the fund in terms of client expectations of repayment, loan management and the lack of capacity to make informed investment decisions. There is a gap in this study however, in terms of what strategies of communication are employed/can be by WEF in ensuring that open communication channels are fostered between itself and its customers and how this affects its performance in terms of access and repayment.

Wathe(2011) examined the factors influencing access to credit from WEF by rural women in Kitui

County and noted that impediments to borrowing such as complicated loan application processes, lack of knowledge on suitable sources of finance as well as a lack of business skills negatively impacted accessibility to the fund. There was a positive influence of access to credit and financing on livelihoods of rural women. This study however did not outline, what specific strategies by

WEF as an office could be utilized to address the barriers women entrepreneurs were facing. It is important to note that, removal of any impediments to credit access by women entrepreneurs is the key objective of WEF.

Ogundo (2012) studied the Strategic Responses adopted by WEF to changes in the Macro-

Environment and highlighted that the organization had strategic responses to internal and external shocks that enabled its effective adaptation which included: ICT upgrades, a functional M&E framework, capacity building and the development of new innovative products but he recommended a restructured human resource policy that would cater to staff needs especially for

the first contact officers. This study had a gap in identifying how the impact of macro- environmental changes in WEF cascade to the beneficiaries/women entrepreneurs. This is because some of the suggested responses would have an impact on how entrepreneurs would access or repay their loans, for example, ICT tools are not accessible to most rural entrepreneurs and the specific interventions have not been identified.

Kiraka, Kobia and Katwalo(2013) in their research report on the MSME growth and innovation with a focus on WEF detailed the impact this fund had on women owned enterprises in Kenya.

There was significant growth in women owned enterprises but it could not be fully attributed to

WEF as a variety of factors including the marital status and the type of business venture undertaken. Complimentary services were generally not available to the women entrepreneurs and this in turn affected their capacity to innovate even with increased loan amounts in each cycle.

Structurally, WEF’s performance was negatively affected by its staff shortages, limited fieldwork facilitation and its multi-layered institutional structure that was attached to the parent ministry. It also had a lack of unique product branding that would be vital in its increased visibility. A research gap identified is how institutional changes in WEF affect its competitiveness because the number of entrepreneurs accessing the fund was still minimal as per this study and the causative factors were unknown.

Njoroge & Jagongo(2016), on their study of the impact of financial management, entrepreneurial and human resource training by WEF to women owned enterprises had a significant influence on their performance and there was therefore a standard curriculum was vital especially for new entrants into the fund’s scheme. Trainings are therefore a key success factor in the growth and performance of women owned enterprises. A gap identified here is whether the training pedagogy

was based on the needs of the entrepreneurs and could it be customised to align to their unique needs since financial literacy and entrepreneurship are highly individualized and subject to other factors like economic industry, geography and size of enterprise.

In the study of the factors affecting the access to WEF by women entrepreneurs in, Kipkorir(2016) inferred that awareness levels on the availability of the fund was low and disjointed, socio-cultural factors such as religion and lack of adequate entrepreneurial training had a negative effect on access while the lending procedures especially the interest rates and no demand for collateral were motivating factors for uptake. However, this study did not identify the institutional structures that

WEF could utilize to identify and eliminate such barriers because these are the same factors that the government identified during the creation of the fund.

Odira(2017) in her study of the influence of WEF organizational factors namely personnel, business development service and credit availability on the uptake of WEF credit, noted that of the factors, business development services were not availed to most of the entrepreneurs. She noted that even though there were no follow ups to the training offered by the WEF personnel to the women entrepreneurs, it was a key component in informing the uptake of loans and how informed and knowledgeable trainer was, is vital in this instance. This study had identified the importance of service quality components on the performance of WEF such as components of assurance but had not gone in depth to look at other key service quality management practices. This examination of how service quality management practices affect performance require further exploration on how they impact the women entrepreneurs.

2.4.Summary of empirical literature

Author(s) Focus of Study Key Findings Knowledge Focus of current Gaps Study

Mogaka(2010) How monitoring and M&E done for Influence of the This study focuses on evaluation methods performance in perceived the influence of influence the terms of income. knowledge by assurance on the performance of WEF WEF officers. performance of WEF funded enterprises in Kisii Central District

Ngugi(2011) Role of communication Linear-Vertical Influence of This study focuses on in the disbursement of communication perceived the influence of Kenya WEF: A case between the fund, responsive empathy and study of Kikuyu officers and clients communication responsiveness on the Constituency Women affected on access to Performance of WEF. Enterprise Scheme performance in credit. repayment.

Wathe(2011) Factors that influencing Joint liability Specific This study focuses on access to WEF credit within groups management the influence of service from by rural women in through co- strategies by quality on the Kitui County guarantee not WEF to achieve Performance of WEF. familial assets their key objective on increasing access to credit by women entrepreneurs.

Ogundo(2012) The strategic responses Strategies Specific This study focuses on adopted by WEF to employed to management the influence of service macro-environmental increase efficiency strategies by quality the performance changes include: ICT WEF to achieve of WEF. upgrades, their key Restructuring and objective on Outsourcing of increasing access to credit

non-essential by women services. entrepreneurs

Kiraka, Kobia Micro, Small and Institutional How This study focuses of & Medium Enterprise challenges institutional the influence of service Katwalo(2013) Growth and Innovation negatively affected factors that quality on the in Kenya: A case study the performance of affect the uptake performance of WEF. of WEF WEF. of WEF loans by MSMEs can be addressed.

Njoroge & The Effect of WEF Training in product Influence of This study focuses on Jagongo Management Training marketing was vital perceived the influence of (2016) on the Performance of for success of responsive responsiveness and Women Enterprises in Women Enterprises communication empathy on the Embu on access to performance WEF. credit.

Kipkorir(2016) Factors influencing Information, Socio- How WEF This study focuses on accessibility of Women culural influences, institutional the influence of service Enterprise Fund in training and factors affect quality on performance Nyaribari Masaba lending procedures the reduction of WEF loans. constituency, Kisii affected access and barriers to County, Kenya. uptake of WEF accessible loans. financing for women entrepreneurs.

Odira (2017) Organizational Factors Technical Impact of This study focuses on influencing uptake of personnel, business service quality the influence of service WEF Credit in Kitui development management quality on the Central Sub-County training and WEF practises by performance of WEF credit access WEF on their influence the funded women- uptake of WEF owned loans enterprises.

Table 2.4.1 Summary of empirical literature(source own)

2.5. Conceptual Framework

The conceptual framework showcases the relationship between the independent and dependent variables thus presenting the hypotheses to be tested.

Independent Variables Dependant Variable

Reliability H1 • Timeliness • Accuracy • Problem solving

Responsiveness • Request- H2 handling • Helpfulness Performance of Has no statistically significant effect WEF

Access to credit Empathy • Understanding • Convenience H3 • Attention

Assurance • Trust • Knowledgeable staff. • Customer Safety • Staff politeness H4

Figure 2.5.1 Conceptual Framework

CHAPTER THREE: RESEARCH METHODOLOGY

3.1. Introduction

This chapter presents the research design, empirical model, target population, sampling design and sample size, data collection instruments, pilot study, validity and reliability and data collection procedures, data analysis and presentation.

3.2.Research Design

According to Orodho and Kombo (2002), research design an outline that is used to generate answers to research problems. This study adopted a descriptive research designs which according to Kothari (2004), allows for the description, recording, analysis and reporting of conditions as they exist. The choice of the descriptive survey research design is motivated by its appropriateness in ensuring the collection a large amount of data by the research instrument as well as ensuring data reliability. This research outline was further preferred because it permits the collection of data through the administration of questionnaires to a sample and the study further adopted quantitative and qualitative approaches by utilizing a semi structured questionnaire.

3.2.1. Empirical Model

This study used a multiple regression model to test the research hypotheses: reliability, responsiveness, empathy and assurance and the Performance of Women Enterprise Fund in

Kisumu County.

Ƹ Y= β0 + β1X1+ β2X2 + β3X3 + β4X4 +

Where,

Y = Performance (dependent variable)

X1 = Reliability

X2 = Reassurance

X3 = Empathy

X4 = Assurance

Ƹ= error term (residual value)

β0 =Y intercept, β1X1, β2X2, β3X3, β4X4 are the net changes in Y

The use of the multivariate regression model is justified because it assumes that the relationship between the independent and dependent variables is linear, the variables follow a normal distribution and that all the error terms along the regression are equal (Creswell, 2009).

3.2.2. Target Population

Population is the total number of subjects or total environment that makes up the universe of interest to the researcher, (Kothari, 2004) The study was conducted in Kisumu County which has

7 constituencies (Kisumu Central, Kisumu East, Kisumu West, Muhoroni, Seme, Nyakach and

Nyando) and where the researcher is based. Due to the description of service quality as an attitude, the study focused on groups that have had more than one interaction with WEF by receiving more than one cycle of loaning. A total of 919 groups have received more than one loan from WEF in

Kisumu County (WEF 2019). A list of these groups was obtained from the WEF regional office in

Kisumu.

3.3.Sampling Design

In order to ensure that each member of the target population, in this case WEF beneficiary groups, have an equal and independent chance of being included in the sample size, this study adopted the random sampling technique that is recommended by Creswell (2009). Selection of a systematic or probabilistic sample, in which each member of the population has an equal probability of being selected is most appropriate for this kind of descriptive survey design. The research used an online randomizer to select the subjects from the population.

3.3.3. Sampling Frame

Target Description Target Population=N Sample size =n

2nd cycle and above groups 919* 278

Total 919 278

Table 3.3.3.1 Sampling Frame

According to Kothari (2004), sample size is the number of items to be selected from the universe or population to constitute a sample for study or research. Determining the sample size for a study is necessary because the size of the population usually makes it impractical and uneconomical to involve all members in a research project. The minimum sample size for this study will be

25 n=N/ [1+N (α) ²] calculated to increase precision, confidence and variability. The sample size was determined using the mathematical approach by Miller and Brewer (2003)

Where, n is the Sample size, N is the Sampling frame (919), α is the Error margin (0.05) and 1 is the Constant

n=919/ [1+919(0.05) ²]

n=278

3.4. Data Collection Instruments

The researcher used a semi-structured questionnaire derived from background of the study, purpose of the study; the objectives guiding the study, literature reviewed and study design in order to achieve its objectives. Questionnaires are research instruments used to collect information geared towards addressing specific objectives (Orodho & Kombo., 2002). The data collection instrument was checked and cross checked with the advice of the supervisor and perfected after piloting to ensure its reliability and validity. Thus, some questionnaires items were scaled on a five point Likert scale(weighted) whereby 1-strongly disagree, 2-disagree, 3-neutral, 4-agree and 5- strongly agree while the other items had open ended questions. The questionnaires were administered on a drop and pick later basis to allow participants enough time to completely fill them.

3.4.1. Pilot Testing.

The research instruments were discussed with the supervisors for constructive criticisms to offer useful suggestions for improving some of the items. The final stage of refinement of the instruments will be to conduct a pilot study in order to enhance their validity and reliability.

3.4.2. Validity.

Validity is the degree to which an instrument measures what is supposed to measure (Kothari,

2004). The face validity of the research instruments were ensured through expert judgment, systematically reviewing literature, background to the study and research objectives. Comments and suggestions made by the pre-test respondents were incorporated in order to address some insufficiencies or ambiguities in the questionnaire.

3.4.3. Reliability

Mugenda and Mugenda, (2003) defines reliability as a measure to which a research instrument yields consistent results or data after repeated trials. The instruments were pre-tested to identify the most likely source of random errors and hence respond to them before the actual study.

Cronbach alpha coefficients were used to test the internal consistency estimate of reliability of the test scores with a threshold of 0.7 (α > 0.7). The Cronbach alpha coefficients were calculated with the help of Statistical Package for Social Sciences (SPSS). The higher the score, the more reliable the alpha scores for acceptability of reliability coefficients (Creswell, 2009). A correlation coefficient greater or equal to 0.7 will be accepted.

3.4. Data Collection Procedure

According to Orodho and Kombo (2002), data collection is the process of gathering specific information aimed at proving or refuting some facts. In this study, the participants were pre- contacted for briefing about the intention and purpose of the study. Relevant permissions were sought from relevant authorities before the administration of questionnaires. The researcher visited the sampled participants to administer questionnaires on a drop and pick later basis. The researcher provided clarification to any participant who may need more information regarding the questionnaire items. The participants were allowed to stay with the questionnaire for 5 days to completely answer the questions as required. After 5 days, a follow up was done to collect the questionnaires for data analysis.

3.5. Data Analysis and Presentation

Data analysis refers to examining what has been collected in a survey or experiment and marking deductions and inferences (Orodho & Kombo 2002). The collected data was edited, collated to eliminate errors and coded for analysis using the Statistical Package for Social Sciences (SPSS version 23) tool. The data was analysed both quantitatively and qualitatively. In analysing the quantitative data from the closed ended questions in the questionnaires, the study used descriptive and inferential statistics (Kothari, 2004).

Qualitative data was analysed on an on-going and cyclical process throughout the data collection.

After data collection, data reduction was done in order to identify and focus on what is meaningful by grouping data into patterns and themes observed. Qualitative data was analysed based on

content and thematic analysis by developing a thematic framework from the key issues, concepts and themes observed. Frequency distribution tables were used to present the study findings.

3.6. Hypothesis testing

The objective of hypothesis testing is to determine the probability or likelihood of a statistical measure to be true. The first step in hypothesis testing according to Jackson (2009)is stating the hypotheses by setting up both null and alternative hypotheses. In this case, the null hypotheses of this study are as follows:

H1 Reliability has no statistically significant effect on the performance of women

enterprise fund in Kisumu county

H2 Responsiveness has no statistically significant effect on the performance of women