Nyaga, Rosemary NjeriKariuki, Grace2025-10-062025-10-062025-01Nyaga, R., & Kariuki, G., (2025). Financial literacy and financial growth of small and micro enterprises in Embu Town, Kenya. International Journal of Current Aspects in Finance, Banking and Accounting, 7(1), 13-29.https://doi.org/10.35942/4z6s9x28https://ir-library.ku.ac.ke/handle/123456789/31557ArticleThe small and medium-sized enterprises (SMEs) located in Embu Town, Kenya, have encountered significant challenges that have hindered their ability to achieve their financial growth objectives. As a result, many SMEs in this region find themselves struggling to realize their full potential and contribute to the local economy as they had initially intended. This study examined how financial literacy influences the financial growth of small and micro enterprises in Embu Town, Kenya. The research was anchored on pecking order theory, modern portfolio theory, behavioral finance theory, and growth theory. A descriptive research design was employed, targeting 126 registered SMEs in Embu Town, with all SME owners participating. A census of 126 respondents formed the study sample. Data collection was conducted through a structured questionnaire, validated using a content validity test involving 12 respondents. Reliability was evaluated through the Cronbach alpha test. The study obtained quantitative data, which was analyzed using descriptive statistics such as means and standard deviations. Diagnostic tests conducted included normality, multicollinearity, and heteroscedasticity assessments. Inferential analyses, such as correlation and multiple regression, were performed. The results were displayed through tables and figures. The study identified a significant positive impact of budgeting skills (β=0.0245, P<0.05), financial planning (β=0.0406, P<0.05), and debt management (β=0.0406, P<0.05) on financial growth. It concludes that efficient budgeting allows business owners to develop a clear understanding of their financial status, facilitating effective tracking of income and expenditures. Financial planning enables SMEs to allocate their resources more efficiently enabling SMEs to prioritize investments in areas that yield the highest returns, thereby optimizing their operational efficiency and proper debt management allows SMEs to meet their operational expenses, pay suppliers on time, and invest in growth opportunities without the constant worry of financial strain. The study suggests that SMEs prioritize hosting frequent workshops on budgeting strategies to equip entrepreneurs with vital financial skills. SMEs should develop tailored financial literacy programs for local entrepreneurs, covering key areas like budgeting, cash flow management, and investment strategies to enhance informed financial decision-making. Providing financial literacy training can also equip entrepreneurs with the knowledge needed to manage debt effectivelyenArticle