ABSTRACT: Microfinance involves the provision of financial services to low-income individuals and enterprises to start and run their business operations (Robinson 2002). The financial intermediation includes the provision of savings,accepting deposits, credit, insurance services, training on access and use of credit and management skills. Micro finance services are provided mainly by Micro finance institutions, formal lending institutions (such as banks and cooperatives saving societies .Small and medium Enterprises continue to fail from the problems that microfinance institutions claim to offer. A survey by the Kenya National Bureau of Statistics (2016) indicates that 3 out of 5 SMEs fail within their first few months of operation. The study sought to assess the effect of microfinance institutions on the organizational performance of SMEs in Nakuru town. The specific objectives of the study are, to determine the effect of microfinance loans on organizational performance of SMEs in Nakuru town, to determine the effect of training offered by MFIs the on organizational performance of SMEs in Nakuru town, to determine the effect of microfinance saving on the organizational performance of SMEs in Nakuru town, to determine the effect of microfinance insurance on organizational performance of SMEs in Nakuru town and to determine the combined effect of microfinance insurance, saving, loans and training on the organizational performance of SMEs in Nakuru town. The study used descriptive research design since it was easy and it provided high quality data. The target population for the study was 300 registered hotels and restaurants with a sample size of 25 SMEs within Nakuru town. Stratified sampling technique was used where strata included organization offering same products and services. The reliability of research instruments was achieved through Cronbach’s Alpha technique. A multiple regression model was used to establish the relationship between MFIs and organization performance of SMEs. Structured questionnaires were used in collecting primary data. The questionnaires were reviewed, edited and analyzed in order to ensure accuracy of data. The data was analyzed using SPSS software in order to make data entries. From the study findings, all the variables positively correlated with organizational performance. Microloans, insurance and savings were not statistically significant, while training had a statistically significant effect on organizational performance. The study concluded that microloans, insurance and micro savings did not affect organizational performance while training had a significant effect. The study recommended that future researchers do further research on the topic. The research study also recommended the government and policy makers to come up with appropriate policies for the MFIs and business owners.

Key Words: Customer satisfaction, Market share, micro loans, micro insurance, micro-training, microfinance, micro finance institution, organizational performance, Sales, Small and medium enterprises.