Financial Management Practices of Micro and Small Enterprises in Kenya: the Case Study of Kibera Nairobi

Abstract

Micro and Small enterprises play a vital role in the Kenyan economy either as an increasing employer or as a contributor to the gross domestic product. This research study was carried out in Kibera, Nairobi. It is a survey of the Financial Management practices of failed and practicing small enterprises. A structured questionnaire was administered to the respondents from the 'failed' and 'successful' businesses. The respondents were the proprietors or owners of the selected MSEs. The questionnaires were designed in line with the objectives of the study and used in the face to face interview. Most of the 'failed' MSEs were below five years and did not have formal financial management practices. Education status was a major influence in formal financial practices. Only about half of the existing MSEs were below five years. More than half adopted formal financial management practices with the majority having more education exposure.compared to the 'failed' MSEs. A myriad of challenges including, high competition, low customer purchasing power, inadequate capital and high cost of living were encountered by both failed and practicing MSEs. The conclusion reached after the analysis was that education, formal training and consultancy services are crucial for adoption of financial management practices, survival and the entire business success