FACTORS AFFECTING FINANCIAL INCLUSION AMONG SMALL AND MEDIUM ENTERPRISES OWNERS IN NAIROBI COUNTY, KENYA

Abstract

The study sought to identify factors affecting financial inclusion among owners of small and medium-sized enterprises in Nairobi County, Kenya. The specific objectives were to: determine the effect of financial literacy, demographic characteristics, and information asymmetry on financial inclusion among small and medium enterprises owners in Nairobi County, Kenya. The analysis adopted a descriptive research design and targeted all of Nairobi County's registered SMEs which were 312,981. The respondents included owners of the SMEs. The sample was 384 owners who were selected using stratified random sampling. The study used primary data that was collected using structured questionnaires. Findings indicated that financial literacy has a positive and significant effect on financial inclusion among SMEs owners (β= .353, P =.000), demographic characteristics have a positive and significant effect on financial inclusion among SMEs owners (β= .628, P = .000), information asymmetry has a negative and significant effect on financial inclusion among SMEs owners (β= -.488, P = .000) and combined, financial literacy, demographic characteristics, and information asymmetry were significant (adjusted R2=0.678; F=202.750; P=0.000<0.05). The study concluded that demographic characteristics have the greatest effect on financial inclusion, followed by financial literacy and lastly information asymmetry. Based on the findings, the study recommended that SMEs owners should seek financial knowledge; the government should pass a statute that requires financial institutions to publish information regularly; and should ensure that all SMEs are financially included to enable them access credit easily and make sound financial decisions.