EFFECT OF FINANCING TECHNOLOGY ON FINANCING GAP OF SMALL AND MEDIUM ENTERPRISES IN KISUMU, KENYA
Abstract
Even though SMEs play a significant role in Kenya's economic growth, poverty reduction, innovation, and job creation, research indicates that a funding shortfall of USD 19 billion (KES2.3 trillion) significantly hinders their existence and expansion. The insufficiency of business finance and credit is the cause of the financing gap. Now that alternative funding sources are joining the credit market, SMEs are using them. Thus, in Kisumu City, Kenya, the study looked at how financing technologies affected the financing gap of small and medium-sized businesses. A correlational research design was used for the investigation. The SME finance gap idea served as the study's foundation. Kisumu City, Kenya is home to 424 registered SMEs that make up the target population. A questionnaire was utilized to gather primary data, and an analysis was conducted on a sample of 81 SMEs selected from Kisumu City's Central Business District. To evaluate and enhance the validity and reliability of the research tools, a pilot study was conducted on 10 (12%) of the sample size. Both descriptive and inferential statistics were used to analyze the data. The research was examined using a basic regression model. The ANOVA statistic was utilized to ascertain the strength of the link, and the p-value was employed to test the independent variables' statistical significance. Fintech funding had a weakly significant impact on alternative financing for SMEs in Kisumu City, according to the study's simple linear regression results (ß = 0.220, p = 0.019). There was a high linear correlation between financing technology and financial gap, and the whole regression was judged to be statistically significant. As a result, HO1 was denied. The study found that the financial gap for SMEs in Kisumu City, Kenya, was significantly impacted by financing technologies. The study suggested that while making alternative financing selections, SMEs' owners and managers should take terms of payment and financing costs into account since these factors will impact their profitability.
Key Words: Financing Technology, Financing Gap, Small and Medium Enterprises
CITATION: Odhiambo, R. O., & Ndichu, P. (2025). Effect of financing technology on financing gap of small and medium enterprises in Kisumu, Kenya. The Strategic Journal of Business & Change Management, 12 (2), 1166 – 1176. http://dx.doi.org/10.61426/sjbcm.v12i2.3263
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DOI: http://dx.doi.org/10.61426/sjbcm.v12i2.3263
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