The Effect of Project Appraisal on the Sustainability of Small Enterprises; a Survey of Small Enterprises in Langas Estate, Eldoret Town-Kenya

Project appraisal analyzes whether a project is worthy in the light of its costs in terms of resource commitments and the projects’ expected benefits. Appraisal is a key element in the decision to assist in deciding as to whether or not to proceed with a project. This study examined the effects of project appraisal on the sustainability of small enterprises in Eldoret Town. The study was based on the Agency Theory with the population consisting of over 400 respondents from Langas Estate. Stratified and simple random technique was used to select a sample of one hundred and twenty nine (129) respondents. Primary data was collected using structured questionnaires. Data was analyzed using descriptive statistics and a regression analysis was done on the variables. Findings were presented in frequency tables and percentages. The multiple regressions between variables showed that there was an inverse relationship between sustainability of small enterprises and project appraisal. Project appraisal had a P value greater than 0.05 level of significance (P>0.05). Results on hypothesis testing also revealed that, there was no significant relationship between project appraisal and sustainability since the P value was (0.338) and was greater than 0.05, (P>0.05). The study concluded that project appraisal by microfinance institutions was not satisfactory. The projects were locked out of financing options simply because they were not convincing in terms of their profitability. Entrepreneurs were therefore denied the chance to expand and grow their businesses. Finally because entrepreneurs are risk takers they should not fear possibilities of projects crumbling but be ready always to invest in any business idea after their project appraisal.