INFLUENCE OF FINANCIAL LITERACY AND WORKING CAPITAL MANAGEMENT ON FINANCIAL GROWTH OF SMALL BUSINESS ENTERPRISES IN KAKAMEGA COUNTY, KENYA
Abstract
This study sought to investigate the influence of financial literacy and working capital management on financial growth of small business enterprises in Kakamega County, Kenya. The study used descriptive survey design. The study targeted 319 small business enterprises operating in a formalized organizational structure in Kakamega County, Kenya. The study used structured questionnaire as the main research. Statistical Package for Social Sciences (SPSS) version 24 was used in data analysis. From a total of 178 questionnaires, 108 questionnaires were returned when completely filled depicting a response rate of 60.7% which was good for generalizability of results to a wider population. From the values of unstandardized regression coefficients with standard errors in parenthesis, both independent variables financial literacy and working capital were significant predictors of financial growth of small business enterprises (dependent variable). The study concluded that financial literacy arising from education level and or financial management training of small business owners or managers can boost financial growth of small business enterprises because the financially literate owners or managers can understand and help mitigate financial needs of their small businesses. Further, effective working capital management can significantly influence financial growth of small business enterprises. The study recommended that first, small business owners or managers should embrace financial literacy training to assist them effect sound financial management measures in their business which will subsequently boost financial growth of their small business. Secondly, small business owners or managers should effectively management working capital of their business to avoid the business experiencing cash problems which definitely will have a bearing on financial growth of the business.
Key Words: Financial Literacy, Working Capital, Financial Growth, Small Business Enterprises
CITATION: Muneria, W. B., & Otinga, H. N. (2019). Influence of financial literacy and working capital management on financial growth of small business enterprises in Kakamega County, Kenya. The Strategic Journal of Business & Change Management, 6 (2), 1 – 17.
Full Text:
PDFReferences
Abuzayed, B. (2012). Working capital management and firms‟ performance in emerging markets: the case of Jordan, International Journal of Managerial Finance, 8(2):155 – 179.
Adera, A (2005).Instituting Effective Linkages Between The Formal And The Informal
Financial Sectors In Africa: A Proposal/L'etablissement De Liaisons Effectives Entre Le Secteur Financier InstitutionnelEt Non Institutional EnAfrique: Une Proposition. Savings and development, 5-27.
Alao, J., &Kuje, E. (2010). Determination of technical efficiency and production function for small scale furniture industry in lafia metropolis, Nasarawa State, Nigeria. J. Agric. Soc. Sci, 6, 64–66.
Appuhami, R. (2008). The impact of Firms capital expenditure on working capital management: An empirical study across industries in Thailand. International Management Review, 7(1):8-21.
Atieno, R (2013) Linkages, access to finance and the performance of small scale enterprises in Kenya. Journal of Accounting and Business research 3(1), 33-48.
Atril P (2006). Financial Management For Decision Makers (4th edition) Prentice Hall. International Inc. New Jersey.
Ayyageri,,M. Beck ,T and Demrguc-Kunt, A (2007) Small enterprises across the globe, Small Business Economic,29 (4) 415-434.
Aryeetey, E.A (2004).“Supply and Demand for Finance of Small Enterprises in Ghana”, World Bank Discussion Papers, No.251, African Technical Series, Washington D.C.
Ball, R. (2006). International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and business research, Vol 36, issue 1, pp.5-27.
Berger, A. N., &Udell, G. F. (2006). A more complete conceptual framework for SME finance. Journal of Banking & Finance, Vol 30, issue11, pp.2945-2966.
Bhattacharya, H. (2001). Working Capital Management Strategies and Techniques. Prentice Hall, New Delhi.
Bodie, Z. &Merton, C. (2000).Finance. International Edition, Prentice-Hall, New Jersey
Brennan, M., Maksimovic, V. and Zechner, J. (2003). Vendor financing, Journal of Finance, 4(3):27-41.
Bowman, U.N. (2006).Transferring the Management in the family owned business. Waco Texas Baylor University.
Brigham, F. &Ehrhardt, C. (2004). Financial Management: Theory and Practice. 11th
Edition, South-Western College Publishing, New York
Cant, M. Brink, A. &Ligthelm, A.A. (2003). Problems experienced by small businesses in South Africa 16th Annual Conference of Small Enterprise Association of Australia and New Zealand.
Caves, R., & Barton, D. (1991).Efficiency in US manufacturing industries.MIT Press.
Chakraborty, K. (2008).Working Capital and Profitability: An Empirical Analysis of Their Relationship with Reference to Selected Companies in the Indian Pharmaceutical Industry, ICAFI University Press, Hyderabad.
Chang, C., & Robin, S. (2012). Knowledge sourcing and firm performance in an
industrializing economy: the case of Taiwan (1992–2003). Empirical Economics, 42(3), 947–986.
Chijoriga, C and Cassiman, V (2016).Governance Trainer's Manual for Financial Services Associations.Nairobi:K-RepFedha Services Company Limited.
Cooper, D., &Schinder, P. (2007).Business Research methods (8th Ed.). New Delhi: Tata McGraw hill.
Creswell C A (2003).Business Ethics (2nd edition). New York: Oxford University Press.
Daniels, L., C. Donald Mead &Musinga., M. (2005). Employment and income in micro and small enterprises in Kenya. KREP Research Paper No. 26. Nairobi
Dunne, P., Hughes, A. (2003) ‘Age, Size, Growth & Survival Revisited’ Working Paper No. 23, Small Business Research Center, University of Cambridge.
Economic Survey, (2012).Kenya Vision 2030: A Globally Competitive and Prosperous Kenya. Government of Kenya, Government Printer, Nairobi.
Fatoki, O., &Asah, F. (2011).The Impact of Firm and Entrepreneurial Characteristics Finance, Vol 60, issue, pp.137-177.
Federation of Finnish Enterprises (2002). Yritysrakenne Suomessa. Helsinki: SuomenYrittäjät.
Filbeck G, Krueger T. (2005).Industry related differences in working capital management, Mid-American Journal of Business ; 20(2):11-18.
Galindo, A., & Schiantarelli, F. (2003). Credit Constraints and Investment in Latin America.
Inter-American Development Bank, Washington, DC
Garcia – Turuel P.J. & Martinez-Solano PM, (2007).Effects of WCM on SME profitability. International Journal of Management Finance 3; 164 – 177.
Ghosh, S. and Maji, S. (2004). Working capital management efficiency: a study on the Indian Cement industry, The Management Accountant, 39(5):363‐72.
Hambrick, D. C. (2007). Upper Echelons Theory: An Update. Academy of Management Review 2007,.Vol. 32, No. 2, 334–343.
Hambrick, D. C., and Mason, P.A. (1984). Upper Echelons: The Organization as a Reflection of its Top Managers. Academy of Management Review,9:193-206.
Hambrick, D. C, and Finkelstein, S. (1987). Managerial Discretion: A Bridge between polar views of Organizational Outcomes. Research in Organizational Behaviour, 9:369-406)
Harper, M., & Soon, T. T. (2009). Small enterprises in developing countries: Case studies and conclusions. London: Intermediate Technology
Hutchison, D., Farris, T. and Anders, S. (2007). Cash-to-cash analysis an Management, The CPA Journal, 77( 8):42-47.
Le, T B, N. Venkatesh, S & Nguyen V, T (2006). Getting bank financing study of
Vietnamese prite firms Asial pacific journal of management, 23(20), 209-227.
Ionelaet al., (2011) SME Performance.International Studies of Management Organization.(17)185-195
Kabethi, W. (2013). The Effect of Working Capital Management Practices on The Financial Performance Of Small And Medium Enterprises In Kenya, Unpublished MBA Project, University of Nairobi
Kangai, D (2014).SME performance.Kenya Perspective. Unpublished MBA thesis,
University of Nairobi, Kenya.
Kasseeah, H. &Thoplan, R. (2012). Access to Financing in a Small Island Economy: Evidence from Mauritius.Journal of African Business, 13, 221-231.
Kinyua, K (2014),Overcoming Barriers to Enterprise Growth: The Experience of Micro and Small Enterprises in Rural Kenya. Nairobi: University of Nairobi Press
Kothari, C.R., (2008), Research Methodology: Methods and Techniques, New Age International Publishers.
Le, V., &Harvie, C. (2010). Firm performance in Vietnam: Evidence from manufacturing small and medium enterprises. Economics Working Paper, 04-10, 2010, 33.
Mason, C. & Stark, M., (2004), What Do Investors Look For In A Business Plan? A
Comparison of The Investment Criteria Of Bankers, Venture Capitalists And Venture Capitalists. International Small Business Journal, 22: 227-248.
Mohanty SC (2013). An analysis of working capital management in selected public and Private organizations in mining sector in Orissa. 3(1):1-10.
Mugenda, O. M., & Mugenda, A. G. (2008).Research Methods: Quantitative and Qualitative Approaches. Nairobi: Acts Press
Mugenda, O. M., & Mugenda, A. G. (2003).Research Methods: Quantitative and Qualitative Approaches. Nairobi: Acts Press
Mugo,N (2012)Financial factors that affects performance of SMES in Kenya Unpublished MBA Project, University of Nairobi.
Mutungi, W. (2010). The relationship between working capital management policies and financial performance of oil marketing firms in Kenya, Unpublished MBA Project, University of Nairobi
Nyabwanga, R. N., Odera, P. Luminba M. Odondo, A.J. & Otieno, S. (2012) Effects of working Capital Management Practices on Financial Performance: A study of Small
Scale Enterprises in Kisii south District, Kenya. African Journal of Business Management 6 (18) 5807 – 581
Olawale B (2010).Firm growth and liquidity constraints: a dynamic analysis. Small Business Economics 27(2), 139–156.
Organization for Economic Co-operation and Development (2009). Measuring entrepreneurship, a collection of indicators. OECD Report. London
Opiyo, R. O. (2015). Factors influencing access to financial services among small business holders in Kasipul sub county, Homabay County. Unpublished Doctoral dissertation submitted to University of Nairobi).
Owolabi S A (2012). Effective working capital management and profitability: A study of selected quoted manufacturing companies in Nigeria. Economics and Finance Review.;2(6):55–67.
PadachiK( 2006). Trends in Working Capital Management and its Impact on Firms’ Performance: An analysis of Mauritian small manufacturing firms. International Review of Business Research Papers.;2(2):45-58.
Pandula, G. (2011). An Empirical Investigation of SMEs’ Access to Bank Finance: The case of an Emerging Economy. ASBBS Annual Conference Paper, 18(1), 255-273. La Trobe University, Australia.
Richard,M, Schoenberg, R. (2009).Measuring the performance of corporate acquisitions: An empirical comparison of alternative metrics. British Journal of Management, 17: 361-370.
Raheman, A. &Nasri M. (2007). Working Capital Management and profitability – case of Pakistani Firms.International Review of Business Research papers, 3 (1), 279-300
Santos J. B and Brito, L. A. L (2012); Toward a Subjective Measurement Model for Firm Performance.BAR, Rio de Janeiro, v. 9, Special Issue, art. 6, pp. 95-117.
Saunders, M., Lewis, P & Thornhill.A, (2012). Research methods for business students.5th Ed, Pearson Education UK.
Shin &Soenen (2005).“Efficiency of working capital management and corporate profitability”. Practice and Education.
Siddiquee, M. Khan, N. Shaem, B. and Mahmud, T. (2009). Analyzing Working Capital Performance: evidence from Dhaka stock exchange .2(3):1-5
Smith, A. (2004). The Wealth of Nations, New York, Modern Library Inc., 262-263.
Wang, Y. J. (2002). Liquidity management, operating performance, and corporate value: evidence from Japan and Taiwan, Journal of Multinational Financial Management, 12:159-69.
Wanjohi, M. A (2009) Challenging facing SMEs in Kenya. Accounting and Auditing, 7 (5), 105-106.
W B, (2012)., Doing business in a more transparent world. World Bank. WB,(2002)Promoting SMEs for Development. World Bank.
Woldie A, Leighton, P and Adebimpe A (2008). Factors influencing small and medium enterprises (SMEs): An exploratory study of owner/manager and firm characteristics; Banks and Bank Systems, Volume 3, Issue 3.
Zariyawati, M., Annuar, H. and Rahim, A. (2009). Working capital management and corporate performance: case of Malaysia, Journal of Modern Accounting and Auditing, 5(11): 47-54.
Zhou, L., W.P. Wu, and X. Luo (2007). "Internationalization and the Performance of Born
Global SMEs: The Mediating Role of Social Networks," Journal of International Business Studies, 38(4), 673-690.
DOI: http://dx.doi.org/10.61426/sjbcm.v6i2.1095
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 3.0 License.
PAST ISSUES:
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.