International Journal of Economics, Commerce and Management FINANCIAL LITERACY AND THE GROWTH OF SMALL ENTERPRISES IN KENYA: A CASE OF KAKAMEGA CENTRAL SUB-COUNTY, KENYA (original) (raw)
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The desire by governments all over the world to improve the standard of living of their citizens has led to growth in the number of small and medium enterprises (SMEs). In Kenya, economic growth forms one of the pillars to attaining vision 2030 whose aim is to enhance the quality of living standards of Kenyans. However, the success of the SMEs is dependent upon a number of factors. A key ingredient in ensuring sound performance of SMEs is the level of financial literacy of the business people. The study aimed at assessing the influence of financial literacy on performance of small and medium enterprises. The objectives of the study were to evaluate the influence of budgeting skills, record keeping skills, credit management skills and tax compliance skills on performance of small and medium enterprises. The target population of the study was 3,916 consisting of the SMEs business community in Butere sub county, Kakamega County, Kenya. A sample of 390 was used in the study. The study employed a descriptive research design. Stratified random sampling was used in identifying the respondents. Data was collected using structured questionnaire. Regression equation was used to analyze the collected data. The study found out that financial literacy has a significant impact on the performance of SMEs. The study recommends that the government and non-governmental organizations should facilitate training of business people in the sector of SMEs so as to equip them with the necessary financial literacy skills in order to spur economic growth.
Effect of Financial Literacy and Performance SMEs. Evidence from Kenya
The main purpose was to determine the relationship between financial literacy and performance of small and medium enterprises in Uasin Gishu County. The study was informed by the theory of planned behavior. The study comprised of 1053 registered SMEs owners in Uasin Gishu County. Cluster and random sampling techniques were used to select a sample size of 290 SMEs. Data was collected using structured questionnaires. Test-retest technique was employed to test the reliability of the data collection instruments. Descriptive statistics was used to analyze the data, and data was presented in the form of frequencies, tables, percentages, means and standard deviation. Inferential statistics and Pearson correlation were used to analyze data. The findings are indicative of a significant effect of borrowing financial literacy and budgeting financial literacy on SME performance. It is recommended that SME owners enhance the training on the calculation of interest rate and need to have budget expertise since they dictate whether the budget would be implemented as prepared or not. Finally, there is a need for employees to have the necessary reporting and analyzing skills.
Kenya is an entrepreneurial nation and the SME sector is one of the key drivers of country’s economy. Most Kenyans whether educated or not wish to be entrepreneurs by engaging in different businesses. Small and Medium Enterprises play an important role in economic development. Small and Medium Enterprises’ performance is affected by financial constraints and financial illiteracy. The purpose of this study was to determine whether there is a relationship between financial literacy and performance of these enterprises in Ongata Rongai, Kajiado County, Kenya. The objectives of the study included to determine the effect of budgeting, cash-flow management, investment practices, and savings culture towards the financial performance of SMEs in Ongata Rongai. The study involved a target population of 288 members of matatu Sacco’s which ply the Ongata Rongai Route. The research study utilized descriptive research design where purposive sampling technique was used. The researcher used questionnaires to collect data. Data was analyzed through SPSS. The study used descriptive and multiple regression analysis. The overall results showed that the study variables had a significant relationship with the performance of SMEs businesses. The study recommended that research should be done on factors leading to appreciation of financial education in SMEs performance.
Texila International Journal of Management, 2019
This study sought to evaluate the Effects of Financial Literacy on the financial Performance of small-scale Enterprises. Financial. The findings of this study would benefit the government and other stakeholders in knowing whether the gains of the financial literacy training can outweigh the costs of undertaking the training. This study adopted a descriptive survey design. The target population for this study is all the small-scale enterprises at the makola market which was 6034 traders. The target sample was 100 and since this is a descriptive study, Simple random sampling is more appropriate as it gives all items in a population an equal chance of being selected. Primary data was gathered by use of structured questionnaires which was both open and close-ended questions. Data gathered from the questionnaires was analyzed quantitatively using statistical package for social sciences (SPSS) computer software. SPSS generated both descriptive and inferential statistics. Descriptive statistics including the mean and standard deviation was used to capture the characteristics of the variables under study. Inferential statistics was used to analyze the relationship of the independent variable and the dependent variables. The study established that there was positive correlation between the dependent variable (financial performance) and the Independent Variables (financial literacy). Financial literacy also affected the savings and behavior of small-scale enterprise owners at makola market while savings behavior and attitude do not have effect on financial performance which means that the performance of traders at makola market is not determined by their savings behavior.
Research Journal of Finance and Accounting, 2014
The SMEs form a great percentage of all enterprises in the world. The global economy is heavily dependent on the success of Small Medium Entrepreneurship (SME) which creates employment, poverty alleviation and balanced developments which brings about economic growth in rural and urban setups. The government of Kenya is determined to raise the middle class status of the nation by the year 2030 through the participation of SMEs. This initiative has received the support of the banking sector, particularly Equity Bank. These enterprises allow the marginalized groups to diversify their levels of income. Equity bank has established financial literacy programs to provide the SMEs with financial skills necessary to create efficiency and effectiveness in entrepreneurship. Despite all these, the SMEs in Kenya face challenges that hinder them from attaining economies of scale. They lack training and management capacity to manage the business resources effectively. Financial literacy therefore is regarded as one of the strategies used by bankers to provide knowledge and skills needed to change attitude and attract more potential users of agent banking. The purpose of this paper was to investigate the influence of financial literacy on SMEs loan repayment. The specific objectives of this study is to establish the impact of book keeping skills, credit management and budgeting skills influence loan repayment by the beneficiaries. The study was conducted among the beneficiaries of Equity Group Foundation Training Program (EGFTP) on SMEs in Ngara, Nairobi County. A sample of 30 SMEs was selected for the study using stratified random sampling technique. The study used a descriptive survey research to investigate the factors influencing loan repayment among the beneficiaries. The researcher used self administered structured questionnaires to collect primary data from a sample of selected beneficiaries. The collected data was coded and entered in computer software for analysis. Both descriptive and inferential statistics were used for data analysis. The study concludes that book keeping, credit management and budgeting skills significantly influenced the ability of SMEs to repay loans. The study recommends that the SMEs should enroll in financial related programs to enhance their capacities. The government and other industry players should emphasize on the importance of financial skills in to day running of their business. There is need also to initiate more financial literacy programs to reach to many SMEs for proper credit management skills hence improvement of loans repayment.
Financial literacy among small and medium enterprises in Zimbabwe
The Southern African Journal of Entrepreneurship and Small Business Management, 2019
Global concerns about financial literacy have heightened following the 2007/8 global financial crisis where it became apparent that lack of financial literacy was one of factors that contributed to the detrimental financial decisions taken. There is global recognition that poor financial decisions have a harmful overspill impact on financial and economic stability. In light of the importance of financial literacy in all economies, this study was conducted to ascertain the level of financial literacy among Small and Medium Enterprises (SMEs) in Zimbabwe that are key contributors to economic growth. The study was motivated by the need to develop a comprehensive financial literacy strategy which, if implemented, would enable business players to operate in the current financial landscape characterised by an influx of complex financial products. This research sought to relate financial literacy to financial product awareness and utilization and describe the financial behaviour of SMEs and their patterns of debt management. While governments across the world have expressed concern about the financial literacy levels of different population cohorts and have launched financial education programmes, Zimbabwe is lagging behind. Despite numerous initiatives by the government to support SMEs, business growth remains subdued, the sector remains financially excluded and many businesses fail within the first five years of operation. Research indicates that business failure is a result of poor financial management, hence it became necessary to establish the level of financial literacy of SMEs so that a comprehensive financial literacy strategy could be developed to address the phenomenon. A quantitative cross sectional research design was employed, with data collected by means of a questionnaire administered to a sample of 384 SMEs in Harare and Bindura district. The study"s findings revealed that financial knowledge was low, notably among the young and aged, those who are single, separated or divorced and, surprisingly, those with more business experience. Significant differences were noted across age groups, business sectors and years of experience in business. Although SMES exhibited positive and somewhat positive financial behaviour, a correlation analysis between financial literacy and financial behaviour revealed a weak positive relationship, calling for the need to seek strategies to address financial literacy. The study also established that SMEs are not aware of many financial products, nor do they utilize them. An association between financial knowledge and financial product awareness was noted, with those with high financial knowledge being aware of many financial products. However, no association was noted between financial knowledge levels and financial product viii utilization. Regarding debt behaviour, the research established that SMEs were not comfortable with their debt positions but because they were aware of the consequences of default, they made sure they met their financial obligations on time. In times of financial distress, friends and relatives were the main sources of funding and loans were beginning to gain popularity due to the increase in the number of micro finance institutions. On the whole, the research concluded that there is low financial literacy and low utilization of financial products among SMEs, but positive debt behaviour. The study recommended the introduction of financial education for SMEs and the development of the curriculum thereof, the increase in awareness campaigns, and an increase in access to information on financial products and services by the SMEs.
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In the year 2006, the government unveiled a blue print for developments of middle income status by the year 2030. Small and medium entrepreneurs (SMEs) were identified to be the key drivers to this initiative. Equity Group Foundation (EGF) supported the initiative by availing credit and financial literacy to SMEs. The SMEs form more than 99% of all enterprises in the world and they bring about economic growth in rural and urban setups and balanced developments. The global economy is heavily dependent on the success of SMEs. Equity bank founded a financial literacy program to provide the SMEs with relevant financial skills. SMEs in Kenya suffer from constrains like lack of training and management capacity that lower their resilience to risk and affects their growth. The general objective of the study was to establish the effects of EGF’s literacy training program on loan repayment by SMEs. The specific objectives of the study were to establish the extent to which book keeping, credit...
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The study aimed at identifying the effects of financial literacy training on business profitability by SMEs in coastal region using Kwale County as a case study. The study used a sample of 74 SMEs drawn from the 3 Sub-Counties of Kwale which included Kinang, Matuga and Msambweni. The research design used was descriptive survey method which involved the use of questionnaires and interviews. The population included SMEs who benefited from the training offered by World Bank through the Kenya Coastal Development Project in Kwale County. Simple random sampling method was used to determine the sample size. The findings established that financial literacy training positively influenced the performance of SMEs and hence profitability. Four variables were investigated: working capital management, savings, bookkeeping and financial accessibility skills, profitability being the dependent variable. The results were found to be statistically significant for all the variables although with negat...