Financial Literacy and Performance of Selected Small and Medium Enterprises in Nyeri County, Kenya
Loading...
Date
2023
Authors
Kamau, Anthony Gathee
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta university
Abstract
The unprecedented rate of dynamism of the global business environment prompts organizations to be strategically planned in order to neutralize the forces that threaten their performance. Thus performance of SMEs in Kenya depends on how swiftly the sectors respond to prevailing and emerging challenges that are inherent in a developing economy. Kenyan SMEs, which include agriculture and rural businesses, have contributed greatly to the growth of the economy, mainly in the creation of employment. Yet there have been high failure rates and poor performance levels. Many are faced with the threat of failure within the first few months. Many SMEs perform well after start up, but only a few experiences sustained growth through the full lifecycle and become large firms. The study aimed to determine the effect of financial literacy on SMEs performance in Nyeri County, Kenya. The explicit purposes of the study were: ascertain the effect of borrowing skills, budgeting skills, record keeping skills and saving skills, on SMEs performance in Mathira and Nyeri Town Constituencies, Nyeri County, Kenya. Null hypotheses were tested at 0.05 significance level. Accounting Exchange Theory, Transaction Cost Theory, and Dual Process Theory served as foundations for this study. The study utilized a cross-sectional research design. The target audience was made up of all SMEs registered in Mathira and Nyeri Town Constituencies, Nyeri County, Kenya. The target population of the study was 344 SME proprietors or their managers. Random stratified sampling was used to obtain a sample size of 52. The study utilized questionnaires for collection of primary data and adopted Likert Scale as a measure to ascertain respondent’s attitude towards performance of SMEs in Mathira and Nyeri Constituencies. Descriptive statistics and multiple regression analysis were utilized to analyse the data collected. Data presentation was in form of tables and charts. The study ensured informed consent, voluntary participation, confidentiality besides adhering to all other ethical considerations. Descriptive statistics and multiple linear regression analysis were used to analyse the data. The study results demonstrated that there is a strong positive correlation (r=0.885) between financial literacy and financial performance of SMEs whereby adjusted R-square was 75.4% variation in SMEs performance can be explained by financial literacy. The findings indicated that borrowing skills (β = 0.620, p = 0.000 < 0.05), budgeting skills (β = 0.405, p = 0.006 < 0.05), recording keeping skills (β = 0.355, p = 0.002 < 0.05) were significant thereby rejecting the hypotheses. However, saving skills (β = 0.193, p = 0.226 < 0.05) was found to insignificant thereby supporting hypothesis four. Borrowing had the largest coefficient indicating that it had a significant effect on performance of SMEs in Mathira and Nyeri Constituencies whereas savings was not significant. The study therefore concluded that borrowing skills, budgeting skills and record keeping skills have a positive influence on the performance of SMES. The study recommended an extensive awareness to owners of SMEs on the importance of participating in financial training program provided by various stakeholders such as the national government, the county governments, non-governmental organizations and financial institutions.
Description
A Research Project Submitted to School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of Degree in Master of Business Administration (Finance Option), Kenyatta University
Keywords
Financial Literacy, Small and Medium Enterprises, Nyeri County, Kenya