An assessment of financial saving patterns towards capital accumulation by micro and small enterprises in Nunguni, Makueni market, Kenya
Mutisya, Stephen Ndolo
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The purpose of the study was to provide empirical knowledge and understanding of Kenyan rural Micro and Small Entrepreneurs (MSEs) sources of income, the saving patterns they adopt and the effectiveness of such patterns in capital accumulation .It also sought to determine the capacity of entrepreneurs to save and how they used such accumulated savings. The study used descriptive research design. Data was collected through administration of a structured questionnaire by the researcher .From the study it was found out that entrepreneurs had multiple income sources. The study focused on business income only. To save their business income, they adopted several saving patterns. The most adopted pattern was the Rotating Savings and Credit Association (ROSCAs) while the least adopted was Saving and Credit Co-operative Society (SACCO).The adopted patterns accumulated capital for either short ,medium or long term. The entrepreneurs contributed money to the patterns on a regular basis. The entrepreneurs in all sectors adopted similar patterns with 74.9% adopting informal patterns. The effectiveness of the patterns in capital accumulation varied according to criteria used to access effectiveness. In terms of accessibility ,informal patterns were found to be effective. On the other hand they were ineffective in terms of security of savings and term of savings. The entrepreneurs were found to be able to save varying amounts ranging from Kshs 20 to over Kshs 1000 daily. Only 2.6% of them were found not able to save anything. They used their savings to finance needs facing them. These consisted of emergencies, lifecycle needs and long term investments .More than half(62.8%) of them saved for long term needs especially re-investments and to start new enterprises .The entrepreneurs had a significant capacity to save their business income .This was demonstrated by the many ingenious ways they used to save and the amount they committed to saving. Due, to other expenditure needs facing the entrepreneurs , the amount of savings committed to re-investment and establishing new enterprises were low and therefore would have low impact to growth of enterprises ,job creation and poverty reduction .Since the entrepreneurs adopted many informal patterns ,they should be improved and formal patterns introduced in the market. Given the risks inherent in the informal sector saving patterns, regulations should be enacted to govern providers and promoters of formal saving patterns to the MSE sector. There is need for further research on the impact of re-invested savings and the viability and cost of saving mobilization .A replica Study in markets in other regions in Kenya and a study with larger sample is also necessary.