The Effect of Financial Literacy on Performance of Small and Medium Enterprises in Trans Nzoia County

Abstract

The study was carried out to examine the aspect of the present day financial literacy of small and medium scale enterprises in Trans Nzoia County on business performance. More specifically, the study addressed the effect of financial literacy on performance of small and medium enterprises in Trans Nzoia County. The researcher used a descriptive research design. A sample of 85 SMEs was selected using stratified random sampling technique. The study population was stratified as hardware businessmen, clothes dealers, general retail traders and others. The study employed questionnaires to collect data from the field. Data was typeset using a computer to ease preparation of the report. Data was then tabulated and presented using descriptive statistics. The results of the research indicate that more performing SMEs employs more than three permanent employees, have been in business for more than five years, has an annual revenue growth of more than 10% and are basically financial literate. Secondly the researcher establishes that there is a positive strong effect of financial literacy on SMEs performance exists. Finally the researcher report urges the providers of various financial literacy programs to consider implementing a program which fits the culture and traditions of the context targeted and avoid one size fits all because different SMEs have different experiences. County of Trans Nzoia should focus more on the secondary education where technical and vocational training should be done to develop artisans, entrepreneurs and managers for the informal sector in both rural and urban centers.