Abstract:
The purpose of this study was to establish the influence of financial literacy on the growth of micro and small retail business in Nairobi County, Kenya. The study focused on three specific objectives which were to assess the influence of financial awareness on the growth of micro and small retail businesses, to determine the influence of financial behaviour on the growth of micro and small retail businesses, and to establish the influence of financial attitude on the growth of micro and small retail businesses in Nairobi, County Kenya.
The study utilized a descriptive design approach which was useful in obtaining primary data; the target population was 150 owners-managers of micro and small enterprises in Nairobi County. Stratified sampling techniques were used where a sample of 109 respondents was selected while primary data was collected through structured questionnaires. The data was analyzed using both inferential and descriptive statistics. The study also employed a regression model against a sample size of 109 selected from a population of 150 micro and small retail businesses in Nairobi County.
The findings regarding financial awareness and the growth of micro and small retail businesses in Nairobi, County Kenya, showed that financial awareness has enabled owners of small retail businesses make better financial decisions for the growth of their business and that they are able to keep a record of the cash-flow by recording the incomes and payments appropriately for the business. The descriptive results further revealed that owners of small and retail businesses are able to compute various financial ratios for their business using the information on the financial reports. The regression results revealed that financial awareness had a weak positive relation to the growth of micro and small retail businesses in Nairobi, County Kenya with β=.394 (p=0.000).
The findings regarding financial behaviour and the growth of micro and small retail businesses revealed that most owners of small and retail businesses have clear understanding of the terms of credit and interest rates, they can access credit from financial providers at minimal cost and they have a payment terms agreement with their suppliers and customers. The descriptive results further revealed that owners of micro and small enterprises have a good relationship with their credit facilities and that they use mobile money applications to access loans and finances. The regression results of the research in regards to financial behaviour and the growth of micro and small retail businesses in Nairobi, County Kenya discovered that financial behavior had a moderate positive influence on the growth of micro and small retail businesses in Nairobi, County Kenya β=.536 (p=0.000).
The findings relating to financial attitude and the growth of micro and small retail businesses revealed that most of the owners of small and micro-retail businesses base their short-term business decisions based their long-term goal decision and that they are willing to undertake financial training. The descriptive results also revealed that they are aware of the various risks that may impact my business and that they plan for unexpected emergencies when operating their business. Regression between financial attitude and the growth of micro and small retail businesses in Nairobi, County Kenya revealed that financial attitude positively as well influences the growth of micro and small retail businesses in Nairobi, County Kenya with β=.501(p=0.000).
The study concludes that financial literacy variables (financial awareness, financial behavior, and financial attitude) have a positive influence on the growth of micro and small retail businesses in Nairobi, Kenya. The study further concludes that financial awareness among owners and managers of micro and small businesses in Nairobi County Kenya will close out the financial skills gap which is prevalent in this sector. In addition, good financial behavior will improve financial decisions made by entrepreneurs of small and micro enterprises in various areas of business performance such as cash and debt management, and finally entrepreneurs with a positive financial attitude have a better grasp of managing financial risks that affect micro and small retail businesses in Nairobi, County Kenya.
The study recommends that policymakers in Kenya’s micro and small businesses sector should consider improving financial awareness among micro and small retail business owners by creating more awareness and seminars to help the small business owners to become more financially literate and thereby promoting growth in this sector. In regards to financial behaviour, the study recommends the need for training programs on budgeting and planning, debt management, record keeping, saving, and retirement plans in schools and other institutions that seek to promote financial literacy and practice. The study also recommends the importance for the public and private institutions, schools, family and friends to put efforts in influencing the attitudes of MSE managers and owners positively. Additionally, further studies and investigations are crucial, especially on other factors affecting the growth of micro and small retail businesses such as technological factors in the wake of modern advancements in digital technology.