Financial Technology And Profitability Of Small And Medium Enterprises In Trans Nzoia County, Kenya
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Date
2025-05
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Kenyatta University
Abstract
SMEs have continued to face various challenges despite its vital role in the economy.
Most African countries depends heavily on SMEs for economic development and
industrialization. The government of Kenya has identified the creation of SMEs as a
strategy of achieving vision 2030. However, Republic of Kenya Baseline Survey (2019)
found out that 65% of SMEs’ fail within the first three years of their operations despite
the provision of interventions. The thriving economy of Trans Nzoia County is
comprised largely of SMEs which are the main income earners in the region. However,
the income generation of these SMEs has been dwindling and consequently, their ability
to spur economic growth in the growing metropolis may be affected. The recent report
from the county government of Trans Nzoia indicates that operating profit margins of
SMEs in the county declined from 11.3% in 2018 to 4.4% in 2022. This trend resulted
directly in unemployment which then heightens social inequities and rate of crime. As
such, this study explored the influence that deployment of financial technology
(FINTECH) had on financial performance of SMEs in Trans Nzoia, County, Kenya.
The study reviewed the Agency Theory, Technology Acceptance Model, Profit
Maximization Theory, and Resource Based View Theory This study adopted and based
its findings on a descriptive research design whose target population constituted of 3610
SMEs registered by ministry of trade, commerce and industry of Trans Nzoia County,
Kenya. By using the Cochran, (1977) criterion, the researcher selected a sample frame
of 347 SME. Stratified sampling technique was applied to group SMEs while purposive
sampling technique was adopted to select respondents. The main research instrument
used was the semi-structured questionnaire and included information for both
dependent and independent variables. The researcher utilized Likert scale to gather
information from questionnaires. Data was analysed using descriptive statistics and
multiple regression analysis, using statistical package for social sciences (SPSS) 24.The
study found a positive and statistically significant effect of digital credit
usage(β=0.385,000), online banking usage(β=1.358,000) and insurtech services
usage(β= 0781,000) on profitability of SMEs in Trans Nzoia County, Kenya. Mobile
payment usage (β=0.177, 0.123) was found to have positive insignificant effect on
profitability. The study recommended that SMEs should continue using mobile payment
systems for their operational advantages, but they should not rely solely on them to
enhance profitability. Practitioners should thus prioritize the adoption and use of online
banking services to streamline their financial operations. The study further suggested
that, insurance technology can play a significant role in managing risks and improving
financial outcomes for SMEs. Additionally, regulations should be established to protect
SMEs from high transaction costs and ensure data protection, thereby encouraging the
adoption of FinTech. Lastly, issuing low-cost licenses to FinTech companies can help
them offer affordable products and services to SMEs, enhancing financial inclusion and
profitability
Description
A Research Project Submitted To The School Of Business, Economics And Tourism In Partial Fulfillment Of The Requirements For The Award Of Degree Of Master In Business Administration (Finance Option) Of Kenyatta University. May, 2025
Supervisor:
1. Nathan Mwenda Mutwiri