Effects of Green Financing on Credit Portfolio of Micro, Small and Medium Enterprises in Kisumu Central Business District

Abstract

This study examined the effects of green financing on the credit portfolio of Micro, Small, and Medium Enterprises (MSMEs) in Kisumu Central Business District, Kenya. Anchored on Stakeholder Theory, the Resource-Based View, and Signaling Theory, the study adopted a correlational research design targeting 520 MSME owners and financial experts, from which a sample of 102 respondents was selected using simple random sampling. Data were collected using structured questionnaires and analyzed via SPSS (Version 30) using descriptive statistics along with simple and multiple linear regression analyses. Simple linear regressions showed that accessibility (β = 0.577, p < .001), regulatory and policy framework (β = 0.640, p < .001), and uptake of green financing (β = 0.622, p < .001) each had positive, statistically significant effects on MSME credit portfolios. The multiple regression model accounted for 66.2 of the variation in the credit portfolio (Adjusted R2 = 0.651). Within the combined model, accessibility (β = 0.495, p < .001), uptake (β = 0.285, p < .001), and regulatory and policy framework (beta = 0.188, p = .011) all remained significant positive contributors. The study concludes that enhancing green financing accessibility, regulatory support, and uptake significantly improves MSME credit portfolios. It recommends that financial institutions expand green product awareness, policymakers establish supportive regulatory incentives, and development partners offer technical assistance alongside affordable green financing programs to foster sustainable enterprise growth