This study sought to examine the effect of micro-finance on financial performance of small and medium enterprises in Kwale County, Kenya. The study adopted a descriptive research design and had a target population of 813 Small and Micro Enterprises managers in Kwale County, Kenya. The study sample was obtained using Yamane’s sampling formula hence 274 SME managers were engaged in this study. Research data was collected using primary and secondary tools. Primary research instruments were tested for validity and reliability before analysis and presentation of findings. Data was analysed using descriptive and inferential statistics using SPSS and presented in tables and graphs. Study findings established a strong positive relationship between micro-credit, micro-training, micro-insurance and micro-savings and financial performance of Small and Medium enterprises in Kwale County, Kenya. It was therefore concluded that; microfinance positively influences the financial performance of small and medium enterprises in Kwale County, Kenya. The study recommended for training of SME managers on the various loans offered by microfinance so that they can choose wisely based on the need and ability to repay to discourage loan defaults.
Key words: Micro-finance, Small and medium enterprises, financial performance.