The effect of financial literacy on financial performance of small and micro enterprises in Kibera slums, Nairobi County
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Date
2015Author
Chamwada, Vincent K
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Financial literacy has been identified as a one of the key competencies required for the
establishing, management and thriving of SMEs. However, the exact effect they have on the
financial performance of SMEs hasn’t been fully established by the available literature thus the
need for further research in this area. This study sought to establish the influence of financial
literacy on the financial performance of SMEs in Kibera Slums, Nairobi County. A descriptive
survey design was adopted in conducting the study. The study population entailed the SMEs in
Kibera slum of which a representative sample was selected through simple random sampling
technique. The main study instrument was a questionnaire which comprised of both open ended
and close ended questions each addressing the study's objectives. The data collected was
analyzed using SPSS and the significance of the results tested using inferential statistics such
analysis of the variance, Z-tests, T-test and F-tests. The study found that financial literacy levels
remained low among the SME owners. The study further found out that financial literacy and
size of the firm to had significant positive influence on the financial performance while the
influence of the amount of capital invested had insignificant influence. The results of the
multiple regressions revealed that there is a significant strong positive relationship between
financial literacy, capital invested, size and financial performance of SMEs. From the results, the
study concluded that high levels of financial literacy, capital invested and size of the SMEs led to
higher financial performance. The study recommends that the County government to invest in
instilling financial literacy knowledge to SMEs owners and the SMEs owners also to ensure that
they be financially literate so as to improve the financial performance of the SMEs. Future
research was recommended to be done using longitudinal study designs in order to provide a
better assessment of how the study variables change over time.
Publisher
University of Nairobi