Financial Literacy and Access to Credit by Small and Medium Enterprises in Embu County, Kenya
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Date
2025-05
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Publisher
Kenyatta University
Abstract
Access to credit remains one of the most pressing issues facing SMEs in spite of their importance in economic development and job creation. SMEs are deemed too risky to advance credit to by financial institutions hence their access to credit remains a problem globally as well as in our Kenyan context. Access to credit by SMEs is critical for their growth, economic growth, and creation of jobs. The research sought to establish the impact of financial literacy on access to credit by SMEs in Embu County, Kenya by assessing four independent variables namely borrowing, book keeping, investment and budgeting literacy. The study adopted cross sectional survey design, and it’s anchored on credit access, prospect and financial inclusion theories. Target population was 1678 SMEs in Embu County, Kenya. Stratified random sampling was utilized and Yamane’s formula applied to derive a sample size of 181 SMEs. The respondents from each category, were the SME owners/managers who were picked through simple random sampling. A data collection and review guide was employed to collect secondary data while analysis was done using means, percentages and panel data regression. Presentation of data was done using tables and charts. Diagnostic tests were carried out to test the assumptions of the panel regression model. The study found that borrowing literacy had a negative but significant effect on access to credit by SMEs in Embu County, Kenya with a p-value of 0.001, while bookkeeping literacy had a positive and significant effect on access to credit by SMEs with a p-value of 0.003. Further, investment literacy had a positive and significant effect on access to credit by SMEs with a p-value of 0.049 while budgeting literacy had a positive and significant effect on access to credit by SMEs in Embu County, with a p-value of 0.002. The study concluded that bookkeeping literacy, investment literacy and budgeting literacy has significant effect on access to credit by SMEs in Embu County, Kenya.
Description
A Research Proposal Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of Degree in Master of Business Administration (Finance), Kenyatta University, May, 2025
Supervisor;
1.Ambrose Jagongo