EFFECT OF FINANCIAL MANAGEMENT PRACTICES ON PERFORMANCE OF MICRO AND SMALL ENTERPRISES IN BUNGOMA TOWN
Abstract
Micro and Small Enterprises account for 75 per cent of the total employment and 30 per cent of the Kenya’s Gross Domestic Product. However two thirds of micro and small enterprises fail within the first few months of operation. This study sought to assess how selected financial management practices affect performance of MSEs in Bungoma Town, Kenya. Correlational research design was adopted and the target population for the study was 712 small scale traders in Bungoma Town from which a sample of 256 respondents were selected using the simple random sampling technique. Data was collected using questionnaire and was analyzed both descriptively and inferential using SPSS 26. Descriptive statistics such as mean and standard deviation were used to summarize responses. The correlation coefficient (r), coefficient of determination (R2) and analysis of variance (ANOVA) were calculated. The analysis showed that all the financial management practices had a statistically significant effect on performance of MSEs. The study established that liquidity management practices had greatest positive effect on performance of small and medium enterprises while asset management practices had least positive effect on the performance. Working capital management and financial reporting practices had also positive effect on the performance. The study concluded that adoption of financial management practices such as working capital management, liquidity management, asset management and financial reporting would result to improvement in medium and small enterprises in Bungoma Town. The study recommended that both county and National governments to start offering basic business and financial management skills as this would enable the MSEs to adopt various financial management practices. For further studies, Investigation on the impact of entrepreneurial characteristics on the financial management practices of MSEs is recommended.
Key Words: Working Capital Management, Liquidity Management, Asset Management, Financial Reporting
CITATION: Anangwe, Z. L., & Malenya, A. (2020). Effect of financial management practices on performance of Micro and Small Enterprises in Bungoma Town. The Strategic Journal of Business & Change Management, 7(2), 648 – 671.
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DOI: http://dx.doi.org/10.61426/sjbcm.v7i2.1648
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