Factors Affecting Financial Inclusion among Small and Medium Enterprises Owners in Nairobi County, Kenya

Abstract

The overall objective of the study was to determine factors affecting financial inclusion among owners of small and medium enterprises in Nairobi County, Kenya. Specifically, the study sought to establish the effect of financial literacy, demographic characteristics and information asymmetry on financial inclusion among owners of small and medium-sized enterprises in Nairobi County, Kenya. The analysis adopted descriptive research design. The study population was all of Nairobi County's registered SMEs owners which were 312,981. The sample was 384 SMEs owners who were selected using stratified random sampling. The study used primary data that was collected using structured questionnaires. Data was analysed using descriptive statistics (mean and standard deviation), correlation analysis as well as simple and multiple linear regression analysis. The SPSS software was used to analyse the data. The results also showed that financial literacy and demographic characteristics had a positive correlation with financial inclusion of (r=0.613) and (r=0.552) respectively while information asymmetry was strongly and negatively correlation with financial inclusion (r=0.626). Financial literacy and demographic characteristics were found to have a positive and significant effect on financial inclusion among SMEs owners (adjusted R2=0.374; F=172.706; β=0.706; P=0.000<0.05), adjusted R2=0.302; F=125.734; β=0.804; P=0.000<0.05) respectively, while information asymmetry has a negative and significant effect on financial inclusion among SMEs owners (adjusted R2=0.390; F=184.896; β=-0.751; P=0.000<0.05). Combined, financial literacy, demographic characteristics and information asymmetry were significant (adjusted R2=0.678; F=202.750; P=0.000<0.05). Based on the results, the study concluded that demographic characteristics have the greatest effect on financial inclusion among SMEs owners in Nairobi County. Based on the findings, the study recommends that SMEs owners should strengthen their financial literacy skills; the County government should ensure that everyone whether old or young has equal access to financial credit; financial institutions should disclose all relevant information pertaining to financial services to business owners. Further studies should also be carried out on other factors affecting financial inclusion not included in the study to determine whether they have a significant influence on financial inclusion among small and medium enterprises owners in Nairobi County, Kenya