  Small and Medium Enterprises (SMEs) access to external finance is an issue of
significant research interest to academicians. Commercial banks consider many
SMEs not to be credit worthy because of their inability to meet some banking
requirements. Hence, the objective of this study was to investigate what
determines lending to SMEs by commercial banks in Kenya. To achieve the study
objectives, a descriptive research design was employed. The study undertook a
census of the 43 commercial banks in Kenya, with full data being obtained for
36 institutions. The study used secondary data from the annual published
reports of commercial banks in Kenya for a period of 5 years from 2010-2014.
The data collected was analyzed through the multiple linear regression using
the Statistical Package for Social Studies version 20.The study established
that bank size and liquidity significantly influences (positively and
negatively, respectively) lending to SMEs by commercial banks in Kenya while
credit risk and interest rates have no significant influence on lending to SMEs
by commercial banks in Kenya. The study recommends that lending to SMEs by
commercial banks in Kenya be enhanced by adopting policies that grow the
commercial banks.
