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The current global youth population is the largest in history. It is estimated that of the world’s 3billion people under the age of 25, approximately 1.3 billion are between the ages of 15 and 24. This group is faced with imminent poverty. Attempts to alleviate the youth from this poverty level have been carried out in as many places as are the methods. One of the methods has been provision of loans to them, which increases family income, and hence helping the youth to accumulate their own capital and invest in employment generating activities. Micro and small enterprises ( MSEs) sector contributes 20% to the GDP of the Kenyan economy. The vision of micro finance is to promote the growth of micro enterprises. Despite the increase in funding from MFIs, MSEs continue to deteriorate in performance. This brings to question the effectiveness of the role of micro finance in promoting growth in micro enterprises.

The main objective of the study was to establish the contribution of microfinance to the performance of small and medium enterprises operated by the youth in Kiambu County, Kenya.

To achieve this objective, data were collected through questionnaires and an interview schedule using structured questions. The data collected were analyzed using descriptive methods using the excel programme. Results from the descriptive analysis show that the role of microfinance is very significant in improving the performance of youth enterprises. There is evidence in the study that microfinance was of great benefit to the youths operating small and medium enterprises.

Demographic findings on the marital status of the respondents indicated that more than half of the respondents interviewed (56%) were married while (44%) percent were not married (single). None of the respondents was divorced/separated or widowed. A majority (54%) had completed secondary education, 18% said they had completed primary education, 16% were university graduates while 12% said they had completed vocational training. A majority of the respondents (38%) were in the age category of 24 – 29 years and (32%) were in the age category of 18 – 23 years.  These are the categories within the normal completion of either secondary, college or university education who may be looking forward to gainful employment; either self-employment or formal employment.

On business training offered by the microfinance institutions, the youth entrepreneurs indicated that the subsequent business activities they undertake were trained on areas of entrepreneurship attitudes with majority of the youths 36(72%) citing attitudes and values, 32(64%) cited personal skills and 26(52%) cited self-recognition. On entrepreneurship skills 34(68%) cited basic skills, 42(84%) cited costs and finances, 38(76%) cited marketing and 31(62%) cited business planning. This data indicates that the MFIs provided all round training to the youth and there is evidence that the enhancement of entrepreneurship not only increases the benefit of the borrowers but provides advantages to the financial institutions. Investments in entrepreneurship training should therefore be openly acknowledged by financial institutions as an asset to their clients.

Based on the findings of the study, recommendations are provided clearly showing what interventions are necessary to address the challenges mentioned and also to ensure that youths reap maximum benefits from the loans they obtain from microfinance institutions.