Moderating Role of Alternative Finance on Firm Characteristics and Efficiency Nexus

Abstract

Purpose: Scholarly endeavors to explore the moderating role of alternative finance on the firm operational characteristics - efficiency nexus has received little attention, despite a burgeoning need for funding, for Small and Medium-size Enterprises (SMEs) who have unique financial needs. To counter this conundrum, this study sought to explore how alternative finance influences the relationship between operational characteristics and efficiency of SMEs in the manufacturing sector in Kenya. Methodology: The study targeted 171 SMEs members of Kenya Association of Manufacturers. The study used data envelopment analysis, multiple regression modeling and moderated multiple regression analysis techniques to measure efficiency, analyze direct relationships and for moderation analysis respectively. To test robustness of the results the study used Partial Least Squares Structural Equation Modeling. Findings: The study found positive relationship between operational characteristics and efficiency of SMEs. Further, alternative finance demonstrated significant moderating role on the relationship between SME operational characteristics and efficiency. Unique Contribution to Theory, Policy and Practice: Based on the findings this study, recommends that Intermediators, Government and SME advocacy organizations corroborate to operate on-line hybrid alternative finance-microfinance institutions to assist SMEs achieve higher efficiencies and accelerate economic growth.