Record Keeping and Growth of Micro and Small Enterprises: An Empirical Study of MSES in Selected Urban Centres in Kenya

Abstract

Despite the effort made by the government of Kenya to support the growth of MSE sector by creating enabling environment through appropriate legal and regulatory procedures, and in spite the fact that banks have recently made micro-credit accessible to MSEs (MESPT, 2011), there is no indication that the sector is growing. Research has shown that sixty percent (60%) of MSEs fail within few months of their operation (Bowen, 2009). Studies also confirmed that poor or lack of proper recordkeeping in small enterprises lead to their collapse (Germaain 2010). This study therefore sought to investigate the extent to which the owners or managers of Micro and Small Enterprises kept records in their businesses. Descriptive reach design was used to achieve the following specific objectives: To establish the types of records the MSEs keep; the challenges they face in recordkeeping and the extent to which recordkeeping support operations and growth of the MSEs. The target population of the study was the owners or managers of MSEs in Thika municipality in Kenya. The study used multi stage sampling including purposive sampling of MSEs which had been in operations for a minimum of 5years, along the main streets in the Central Business District, and random sampling of 10% of the 862 MSEs. Questionnaires were used to collect both qualitative and quantitative data through personal interviews of the respondents while document analysis was used to gather quantitative data. The all the collected data was analyzed using descriptive statistics with the aid of SPSS. The study found out that the MSEs kept sketchy incomplete records, largely unprofessionally done, with non-conceivable contents and patterns. The accounting record was poorly done because of lack of accounting knowledge and for the fear of the cost of hiring professional accountants. It was also revealed that there was inefficient use of accounting information to support financial performance measurement by MSEs. This made it difficult for the entrepreneurs to make informed financial and economic decisions for their businesses. The study however established that the owners and managers of MSEs were highly willing to learn more about book keeping and accounting but the forums for such trainings were lacking.