Influence of financial literacy credit uptake by youth enterprises in Machakos town Kenya

Abstract

Credit to youth undertaking small-scale businesses enables them to engage in self-employment projects with the main goal of generating income. However, credit uptake by youth depends on and is enhanced by the possession of business and entrepreneurial skills which are critical components of financial literacy. The biggest challenge to most youth is financial illiteracy which makes them lack the ability to integrate what they know with what they can do to eam a living. This study sought to examine how financial literacy influences credit uptake by youth enterprises in Machakos Town, Kenya. Specific objectives were evaluating the influence of bookkeeping skills, budgeting skills, debt management skills, and financial knowledge on credit uptake by youth entrepreneurs in Machakos Town, Kenya. The study employed a descriptive research design. From a target population of 1704 youth enterprises, a sample of 314 were selected randomly to participate as respondents. A structured questionnaire was used to collect data. Simple and Multiple regressions were used to find parametric estimators whose t and f statistics tested the hypotheses. The regression results revealed an R2 of 0.728. This meant that holding other variables constant, financial literacy variables accounted for 72.8% of the variability in credit uptake by the sampled youth entrepreneurs. Coefficient of bookkeeping skills (0.53) had a p = 0.001 this meant that bookkeeping skills positively and significantly influenced the dependent variable. Coefficient of budgeting skills (0.449) had a p = 0.012 this meant that budgeting skills positively and significantly influenced the dependent variable. Coefficient of debt management skills (-0.158) had a p = 0.212 this meant that debt management skills negatively and insignificantly influenced the dependent variable. Coefficient of financial knowledge (0.823) had a p = 0.000 this meant that financial knowledge positively and significantly influenced the dependent variable. From the study findings, three of the financial literacy measures were found to positively influence credit uptake by the sampled youth enterprises. Hence, the study recommends the government to initiate training and mentorship programs for youth entrepreneurs in financial literacy to enable them to have the skills to finance and grow their businesses. The financial institutions should incorporate programs on financial literacy to enable the borrowers equip themselves with the relevant skills that will help increase credit uptake