Relationship between financial literacy and Entrepreneurial Success in Nairobi County Kenya

Abstract

Kenya is an entrepreneurial country and the SME sector is one of the key drivers of Kenyan economy. Majority of Kenyans whether educated or not want to be entrepreneurs by engaging in various business activities ranging from farming to offering professional services such as lawyers and doctors. However, not all entrepreneurs succeed in growing their small enterprises to successful business. In fact most of new businesses end up as a failure within the first five years after the commencement. The objective of this paper is to find out whether there is a relationship between entrepreneurial success and SMEs success by interviewing a sample of seventy nine entrepreneurs who are registered and operates in Nairobi County. The samples were randomly picked from a population of 27,485 SMEs where questions in both financial literacy and SMEs success are asked. The data collected was then analyzed to establish relationship between financial literacy and SMEs success. From the research findings, all the SMEs interviewed were found to have some level of financial literacy and on average most entrepreneurs scored well above average in financial literacy. Highly successful entrepreneurs scored highly in financial literacy and demonstrated high understanding of finance. In contrast, less successful entrepreneurs exhibited stagnant growth, and low level of financial literacy majority of whom were found to be in informal sector. This study concludes that there is a positive relationship between financial literacy and entrepreneurial success in Nairobi County. It further suggests that financial literacy plays a key role in SMEs success both in formal and informal sectors.