Financial Literacy and Growth of Medium Enterprises in Kisumu County, Kenya
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Date
2024-11
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Kenyatta University
Abstract
Medium-sized enterprises (MEs) play a crucial role in driving economic growth and employment in Kenya and globally. However, many MEs face stagnation and slow growth due to inadequate financial management skills among owners and managers. This study investigated the effect of financial literacy on the growth of medium-sized enterprises in Kisumu County, focusing on investment literacy, working capital management literacy, accounting knowledge, and financial analysis skills. The study was guided by Dual Process Theory, Knowledge Spillover Theory, Financial Literacy and Behaviour Theory, and Greiner’s Stages of Growth Model. A descriptive research design was employed, and structured questionnaires were administered to medium enterprise managers. Data were analyzed using descriptive and correlation techniques, while ethical standards set by Kenyatta University were observed. The findings indicate that financial literacy significantly influences the growth of medium enterprises. Specifically, working capital management literacy, accounting knowledge, and financial analysis skills demonstrated positive effects on enterprise growth, while investment literacy showed no significant effect. Based on these findings, the study is recommending that managers are prioritizing strengthening working capital management literacy, accounting knowledge, and financial analysis skills. Additionally, policymakers are designing practical digital investment training programs that focus on risk assessment and cost-benefit analysis to support MEs growth. Future research is exploring additional key factors influencing the growth of medium enterprises and investigating why investment literacy is ineffective and exhibits no significant effect. It also recommends the inclusion of comparative studies across different counties and sectors to identify contextual variations affecting enterprise growth in Kenya.
Description
A Research Proposal Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Award of the Degree of Master of Business Administration (Finance Option) of Kenyatta University, November 2024.
Supervisor
1. Caroline Kimutai