Financial Literacy and Financial Performance of Women-Owned Small and Medium Enterprises in Mandera County, Kenya

Abstract

Women-owned SMEs in Kenya suffer from constraints that lower their resilience to risk and prevent from growing and attaining economies of scale. Over 60 percent of women-owned small and medium businesses were estimated to fail in years 2013 and 2020 with negative return assets. The study sought to determine the effects of financial literacy on women-owned financial performance in Mandera County. The specific objectives of the study were to examine the effects of bookkeeping literacy, financial planning literacy, and debt management literacy on the financial performance of SMEs of women-owned SMEs in Mandera County. The theories utilized in the study include; the Financial Literacy and Behavior Theory, the Accounting Theory, the Motivational Theory of Entrepreneurship, and the Knowledge Spillover Theory. The design used was the descriptive design. The target population of the study was the owners and managers of the women-owned SMEs in Mandera County. A sample size of 385 was assessed using qquestionnaires. Quantitative analysis was used to analyze data. Analysis techniques involved descriptive statistics and inferential statistics entailing correlation and multiple linear regression. The study findings established that women-owned SMEs in Mandera County have never prepared any budget in the last five years. Additional study findings established that majority of the women-owned SMEs that prepared budgets, do it annually, while a majority of the women-owned SMEs that prepare budgets, prepare material budgets. Further study findings implied that the female-owned SMEs exhibit to a great extent financial planning literacy. The study established that training on bookkeeping skills influenced to a very great extent the financial performance of female-owned SMEs. The findings also established that access to banking services skills have influenced the financial performance of female-owned SMEs to a very great extent. The study findings also established that the financial performance of the female-owned SMEs in Mandera County was excellent. Additional study findings established that financial literacy significantly impacts financial performance. Study results that showed a favourable connection between financial literacy and financial success, but not a substantial one, concluded. Furthermore, the research results demonstrated that good bookkeeping literacy was linked to both financial well-being and profitability. Results showed that bookkeeping literacy has no meaningful connection to financial success. Policy recommendations are made to the government officials and policy formulators in the county and national governments, mainly the SME regulators to majorly focus on conducting pieces of training on financial literacy to SME entrepreneurs and managers when trying to boost financial performance.