Financial Literacy on Financial Performance of Small and Medium Enterprises in Kajiado County, Kenya
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Date
2023
Authors
Owuor, Hezborne Okatch
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
SMEs presence, in considering economic growth of any nation, it is a compelling reality that the SMEs sector has never escape thought of almost every nation in finding how crucial the role played by this sector in driving economic development. Faster growing economies have been observed to embrace strategic approaches that aim at improving the performances of the businesses in this sector purposely to achieve higher employment rate and attain growth of their national incomes. Kenya, in particular, the SMEs sector has employed ninety-three percent of the total labour force in its economy. This makes the sector to be vitally important in terms of improving financial stability, especially, if the sector is given timely and appropriate conditions support. The purpose of the study was to examine and determine the efficacy of financial literacy on SMEs in Kajiado town. A descriptive research design was adopted. Specific objectives of the study were to examine budgeting literacy, bookkeeping literacy and savings literacy on financial performance of SMEs in Kajiado county. A business entity may be known to have ascertained growth or declined if its financial performance is known. In determining this, the study focused on business profit and business growth. Using financial literacy theory, transaction cost theory and resource-based theory, the study was evaluated the factors that affect different levels of financial literacy and assessing the impact it had on both the long-life and success of the aforementioned businesses. In doing so, it related the previous studies that had identified the phenomenon in developing markets and makes a case for the continued improvement of financial literacy as a policy tool to achieve economic growth. The target population was 46,100 registered and licensed SMEs as was indicated in the recent published Kajiado County Integrated Development Plan, 2018 -2022. The study used simple random sampling procedure from a sample size of 399 SMEs which were operating businesses in Kajiado county. The study survey employed primary data source to obtain information, where the main study instrument to collect the data was questionnaire comprising of questions each addressing study objectives. Descriptive analysis was adopted to provide statistics in percentages. The collected data was analyzed and presented in the form of tables and charts. In addition, inferential statistics involved Pearson correlations regression analyses were applied.
The study found that financial literacy level is still quite low amongst the SMEs in Kajiado county. The study further found that Budgeting and Bookkeeping were still a major challenge amongst the respondents, and savings had insignificant effect on their financial performance.
Description
A Research Project Submitted to the School of Business in Partial Fulfillment of the Requirement for the Award of the Degree of Master of Business Administration (Finance Option) Of Kenyatta University
Keywords
Financial Literacy, Financial Performance, Small and Medium Enterprises, Kajiado County, Kenya