Effects of Financial Inclusion on Performance of Micro and Small Enterprises: A Case of Kawangware Ward, Nairobi County

Abstract

Financial inclusion is an intervention strategy that seeks to overcome the market friction that hinders the markets from operating in favour of the poor and underprivileged. It offers incremental and complementary solutions to tackle poverty, to promote inclusive development and to address MDGs and The Kenya Vision 2030. The main aim of this study was to determine the effects of financial inclusion on the performance of micro and small enterprises in Kawangware ward, Nairobi County. The objectives included: investigating indicators of financial inclusion among the MSEs in Kawangware ward; assessing the determinants of performance among the MSEs in Kawangware ward; testing the financial factors that affected performance of the MSEs in Kawangware ward; and analysing the effects of financial inclusion on the performance of the MSEs in Kawangware ward. The research design used in this study was descriptive research design. The target population comprised 236 MSEs in Kawangware ward out of which a sample of 71 respondents was selected. The study used primary data collected using questionnaires which was analysed using SPSS. The study concluded that financial inclusion ensured access to appropriate financial products and services needed by MSEs for improved business performance. It also showed that for meaningful financial inclusion to be achieved, the enterprise’s financial performance must be improving with time and that financial inclusion had a positive effect on performance of MSEs. The study also recommended that for financial growth, access and usage of safe, easy and affordable source of finance should be prioritized as they are a pre-condition for accelerating growth and reducing income disparities and poverty.