Financial Services Accessibility and Financial Literacy by Enterprenuers in the Small and Medium Enterprises in Nyandarua County, Kenya

Abstract

The interest in the Kenya‟s SME sectors has increased in the recent years. In the recent past, a lot of resources have been dedicated to the sector by the financial services and other sectors of the economy. The important role the sector plays in economic development, promoting dynamism & innovation, accelerating industrial development and employment creation among others cannot be underestimated. The sector employs over 10.5 million Kenyans and it has capabilities of accelerating the achievement of the Kenyan vision 2030 as an economic pillar. Despite its potential the sector faces numerous challenges, most which relate to entrepreneurs financial illiteracy. This has been seen as one of the contributors to the failure of most of the SMEs in the first few years of their start up. Lack of financial literacy skills in business has been portrayed in different ways i.e. through lack of budgeting and planning, inaccessibility to loans, mixing personal and business finances and others. The aim of this study was to determine the nature of relationship between financial accessibility and entrepreneur‟s financial literacy in Nyandarua County Kenya. Nyandarua County generally has a poor road infrastructure, low levels of literacy and has more farming oriented SMEs. This means it‟s more in agriculture or commercial based compared to other counties. This study aimed at finding out if entrepreneur financial literacy has an impact on access to financial services by the SME entrepreneurs. In order to achieve this objective, primary data was collected in the various major towns of Nyandarua County that were selected randomly. These towns included Njambini, Kwaharaka, Magumu Olkalau and Nyahururu towns. A questionnaire was administered to various owners of the SMES and/or their representatives to collect primary data. Information was collected from a sample of 100 SMEs which were selected randomly. The data was then analyzed using MS excel and EVIEWS packages. Descriptive statistics and regression analysis was used for data analysis. The results of the data analysis showed clearly a direct positive relationship between financial literacy and accessibility of financial services by SME entrepreneurs in Nyandarua County. The study also concluded that younger entrepreneurs have more access to financial services than their aged counterparts. The interest rates on loan and requirement for collaterals and guarantees were major hindrances to financial accessibility. Entrepreneur gender and SMEs age had no significant impact on financial accessibility