Effect of Financial Literacy and Performance SMEs. Evidence from Kenya

Abstract

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.

Keywords: Financial Literacy, Borrowing Financial Literacy, Budgeting Financial Literacy SME Performance