Financial Technology and Financial Inclusion of Small and Medium Enterprises in Kenya: Do Government Regulations Really Matter?

Small and medium enterprises are considered vital in Kenya due to the significant role which they carry out towards the attainment of the big four agendas with respect to the country’s vision 2030. Despite this importance, these businesses continue to be financially excluded. Studies relating to digital transformation and financial inclusion are characterized by underlying research gaps cutting across conceptual, contextual to methodological gaps. As such, this study which originates from the Doctoral dissertation of the first author in which the co-authors served as supervisors sought to evaluate the nexus between digital transformation and financial inclusion of small and medium enterprises in Kenya. Diffusion Innovation Theory and Financial Intermediation Theory were utilized and explanatory research design was adopted. The top 100 small medium enterprises in Kenya constituted the target population and the sample size was 200 based on purposive sampling and simple random sampling techniques where two respondents were picked from each of the Small Medium Enterprises of interest. A response rate of 81.5 percent was achieved through the use of questionnaires. The study established a significant nexus between digital transformation and financial inclusion of small and medium enterprises in Kenya. Consequently, the study concluded that digital transformation is important in determining the financial inclusion of small and medium enterprises in Kenya. The study recommended that the management of small and medium enterprises should fully invest in digital transformation so as to maximize its underlying benefits of flexible financial services.

The study sought to examine the effect of mobile phone technology, agency banking services and online banking services on financial inclusion of Small and Medium Enterprises in Kenya. This study originates from the Doctoral dissertation of the first author where the co-authors served as supervisors. Technology Acceptance Model and Asymmetric Information Theory were adopted. The study adopted explanatory research design. The top 100 Small Medium Enterprises in Kenya constitute the target population and the sample size was 200 based on purposive sampling technique and simple random sampling where two respondents were picked from each Small Medium Enterprises of interest. Multiple regression technique was used for the analysis of data. A response rate of 81.5 percent was achieved. Primary data was used which was collected using a questionnaire. The study used multiple regression analysis. It was established that mobile phone technology and agency banking services had insignificant effect on financial inclusion of small and medium enterprises in Kenya. The study found that online banking services had significant effect on financial inclusion of small and medium enterprises in Kenya. The study recommends that business managers should capitalize on the underlying benefits of online banking by fully utilizing and exploring its various services. Online banking services should be supported and enhanced by the government in view of its importance in fostering financial service accessibility which in turn improves financial inclusion. Further studies can evaluate the effect of mobile phone technology and agency banking services on financial inclusion of small and medium enterprises in Kenya based on a different methodology.

Policy makers and scholars acknowledge the significance of small and medium enterprises in stirring the economic growth and development in developing and developed economies. In spite of the generally fast pace by which access to financial services for small and medium enterprises is being established, significant segments of the small and medium enterprises sector do not yet benefit from the expansion. This study therefore investigated the effect of financial statement lending on access to financial services by small and medium enterprises in Kenya. The study further sought to establish the moderating effect of the credit information sharing on the relationship between financial statement lending and access to financial services by small and medium enterprises in Kenya. The study was based on Financial Intermediation Theory and information asymmetry theory. The target population comprised 4,253 small and medium enterprises in Kenya. A sample size of 366 SMEs was target by the study. The study adopted multistage sampling technique to obtain the SMEs respondents. Primary data was utilized and was acquired through semi-structured questionnaires. Data was analysed using descriptive and inferential statistics. Heckman two step selection model was applied in regression analysis. The findings of regression analysis show that financial statement lending had a positive and significant effect on access to financial services among SMEs in Kenya. The results established that credit information sharing had insignificant moderating effect on the relationship between financial statement lending and access to financial services among the SMEs in Kenya. The study concluded that financial statements play a critical role in ensuring small and medium enterprises access financial services. Lenders can determine the financial position of the business by analysing their cashflow in order to be able to advance the credit that the business is able to pay based on their financial statement. Keywords: Financial Statement Lending, Financial Services, SMEs, Kenya. DOI: 10.7176/RJFA/12-16-06 Publication date: August 31 st 2021

This study sought to validate existing sustainability performance measurement scales in the context of Small and Medium Enterprises (SMEs) in Kenya. The study was cross-sectional. Data were collected through a structured questionnaire from a sample of 221 SMEs drawn from a target population of 517 SMEs using a stratified random sampling strategy. The respondents were apex managers of the sampled SMEs. Valid responses were received from 134 respondents representing a 60.63 percent response rate. Descriptive statistics and confirmatory factor analyses were performed to achieve the study’s objective. From the analysis, four-factor loadings were extracted suggesting that the sustainability performance of SMEs in Kenya could be viewed from a quadruple bottom line perspective, that is, economic, internal processes, environmental and social perspectives. The study confirmed the reliability and validity of the measurement scales. The study, therefore, concluded that sustainability performance measurement in SMEs in Kenya could best be viewed from the integration of environmental, social, internal processes, and economic performance aspects. The study recommends empirical studies in Kenya to integrate the four dimensions in assessing SMEs’ performance

The study examines the role of proactiveness, a key dimension of Entrepreneurial Orientation (EO), in the development of Micro, Small, and Medium Enterprises (MSMEs) in Kenya. MSMEs are important for economic growth and job creation in emerging economies, but their expansion in Kenya is hindered by limited credit access, regulatory instability, infrastructural gaps, and intense competition. EO provides a framework for firm competitiveness, with proactiveness, defined as a forward-looking orientation that enables firms to anticipate change, exploit opportunities, and act ahead of competitors, emerging as a particularly strategic capability. Despite its importance, empirical evidence on proactiveness in African MSMEs remains limited. To address this gap, the study adopted a sequential mixed-method design targeting 284 manufacturing firms and innovation-oriented startups in Nairobi. Quantitative data from structured questionnaires were analysed using regression, while qualitative insights from semi-structured interviews highlighted how proactive practices supported opportunity identification, market adaptation, and resilience. Results revealed a significant positive effect of proactiveness on MSME growth (r = .631; β = .574, p < .001), explaining nearly 40 per cent of performance variance. Qualitative findings reinforced that firms embedding proactive scanning and early market entry strategies sustained superior growth despite resource constraints. The study advances EO theory by highlighting proactiveness functions both as a behavioural orientation and a dynamic capability in turbulent environments. Practically, managers are encouraged to institutionalise proactive practices, while policymakers should design ecosystems that reward forward-looking strategies. These insights position proactiveness as a pathway to inclusive and sustainable MSME development in Kenya and comparable economies.

Purpose: This study explores the impact of brand awareness on the performance of small and medium enterprises (SMEs) in Kenya. Methodology: Guided by a positivist philosophy, the research employed a mixed methods approach to gather and analyze both quantitative and qualitative data. A total of 385 questionnaires were administered to SME stakeholders, with primary data collected for analysis. Quantitative data were analyzed using descriptive and inferential statistics, while qualitative responses were examined thematically. Findings: The findings indicate that brand awareness particularly through social media platforms is a crucial determinant of SME success. Active social media engagement enhances brand recognition, fosters trust, increases visibility, and contributes to improved customer acquisition and retention. Comments and feedback from social media users serve as a vital input in shaping product design and marketing strategies, underscoring the role of customer perceptions in building brand identity. Unique Contribution to Theory, Practice and Policy: The study recommends that SMEs adopt structured social media management strategies focused on increasing brand visibility. This includes providing timely, personalized responses to customer inquiries and leveraging visually appealing content to enhance brand recall and engagement.

The performance of most small and medium enterprises in Kenya has been declining, which is evidenced by increased cases of closure after short operating period. This study sought to examine the influence of entrepreneurial strategic capability on the performance of small and medium enterprises in Kenya. The study adopted a descriptive cross-sectional research design and the target population was 2400 small and medium enterprises in Thika town’s light industrial area. The study sampled 331 small and medium enterprise owners using stratified random sampling. Results indicated that entrepreneurial strategic capability had a positive and significant influence on the performance of small and medium enterprises (β=0.697 P < .000). The study concluded that strategic capability has a positive and statistically significant influence on the performance of small and medium enterprises. The implication is that strategic capability is paramount in determining the performance of small and medium enterprises. The recommendation was that business owners should strengthen their competitive advantage capabilities. The focus should be on product/service differentiation, competitive prices, business segment awareness, and quality products/services.

Purpose: The purpose of this study was to find out the relationship between business development services and growth of small and medium enterprises in Kenya
 Methodology: The study adopted a descriptive survey design. The target population was 422 manufacturing SMEs in Nairobi County who are members of Kenya Association of Manufacturers. Nairobi County was purposively selected. Both stratified and simple random sampling was used to select a representative sample. Both primary and secondary data collection techniques were employed. A Pilot study was conducted on 20 manufacturing SMEs in Kiambu County to establish and improve on the validity and reliability of research instruments. Data collected was coded and stored in tabular form using Microsoft Excel. Data was analyzed using both quantitative and qualitative data analysis methods. Quantitative data was analyzed using Statistical Package for Social Sciences (SPSS) Version 25 software through descriptive statistics (measures of central tendency and measures of dispersion). Data was presented through Tables.
 Results: The study found out that there was a significant positive relationship between business development services and growth of small and medium enterprises in Kenya. According to the results of this study, 23% of growth of small and medium enterprises in Kenya is explained by business development services.
 Unique contribution to theory, practice and policy: The study recommended that policies should be formulated to strengthen public-private partnerships should be established and strengthened to nurture and support the overall entrepreneurial ecosystem in order to encourage greater growth among manufacturing SMEs, foster academia-industry collaborations for creation of new technologies and innovation in the existing technologies. Appreciate the local technologists and encourage local technology development by providing tax reliefs for preferred industries.

Despite its potential, the impact of digital finance on small and medium enterprises’ access to funding remained underexplored, with limited empirical evidence and an incomplete understanding of how digitalization addressed information-related challenges. In Kenya, small and medium enterprises were critical to economic growth. However, many small enterprises faced financial exclusion due to limited access to traditional banking systems. This study investigated the impact of accessibility to digital financial services on financial inclusion among small and medium enterprises in Taita Taveta County, a county characterized by a burgeoning digital economy and a significant reliance on mobile financial solutions. With the rapid growth of mobile money platforms, particularly M-Pesa, and digital lending services, small enterprises gained unprecedented access to financial resources that were previously out of reach. The research employed a quantitative approach, utilizing a structured questionnaire to gather data from 125 SMEs across various sectors in Taita Taveta County. The findings revealed that digital financial services, particularly mobile money platforms like M-Pesa and digital lending services such as Tala and M-Shwari, substantially enhanced small enterprises' access to financial resources, thereby mitigating traditional barriers to finance. The study identified key factors influencing the adoption and utilization of digital financial services, including technological literacy, cost-effectiveness, and the perceived ease of use. Furthermore, it explored the implications of these services on small and medium enterprises' operational efficiency, growth potential, and overall contribution to economic development. This research not only contributed to the theoretical discourse on financial inclusion but also provided practical insights for policymakers and financial institutions aiming to foster an inclusive financial ecosystem for small and medium enterprises in Kenya. Additionally, the study highlighted the role of digital financial services in improving transaction efficiency and reducing reliance on traditional banking infrastructure. The results underscored the importance of digital financial services in promoting financial inclusion, ultimately contributing to the economic development of small and medium enterprises in Taita Taveta County.

This study was designed to investigate the effect of environmental-based motives on firm performance. The study targeted manufacturing Small and Medium Enterprises based in Kenya whose performance has been negatively affected by high industry competition, low technology uptake, and industry regulation. The study was geared towards establishing the environmental-based motives pushing and pulling manufacturing Small and Medium Enterprises toward strategic alliance formation. To this end, the study was set to investigate whether compliance with government regulation, the need to grow market share, and the need to increase customer base motivates manufacturing Small and Medium Enterprises in Kenya to form strategic alliances. The target population for the study consisted of 74 SMEs and the study adopted descriptive and explanatory research designs and collected data from company CEOs or senior managers. Descriptive and inferential statistics were used to analyze the survey data. The study findings indicated that environmental-based motives have a positive and significant effect on the performance of manufacturing Small and Medium Enterprises in Kenya (Adj R2 = 0.484). Based on these findings, the study concluded that environmental-based motives of compliance with the government regulation, market share, and customer base motivate manufacturing Small and Medium Enterprises to form strategic alliances and that these motives have a positive and significant effect on firm performance. The study contributed to the general body of knowledge by bridging the contextual and empirical gaps identified after the literature review. The study recommends that top management teams in the manufacturing industry should map environmental-based motives and align such motives to specific aspects of their value chain activities.

The role small and medium enterprises play in propelling economic growth in Kenya and worldwide cannot be overlooked. However, the majority of these businesses, particularly in developing countries experience severe competition from large international businesses. Most of these small businesses have ended up closing down since they could not cope with the rapidly growing competitive environment. This paper sought to investigate the role of entrepreneurial marketing capability on the performance of small and medium enterprises in Kenya. The study adopted a descriptive cross-sectional research design. The study target population constituted small and medium enterprises in Thika town’s light industrial area, Kiambu County in Kenya. The entire target population comprised approximately 2400 licensed small and medium enterprises majorly in manufacturing, trade, and service sub-sectors. The study sampled 331 small and medium enterprise owners using stratified random sampling. The findings revealed that entrepreneurial marketing capability positively and significantly influences the performance of small and medium enterprises. The study concluded that entrepreneurial marketing capability is a significant contributor to small and medium enterprises’ performance. The study recommended that small and medium enterprise owners should strengthen their marketing capabilities. In particular, they should focus on the following aspects: Market sensing, partner linking, customer-focus strategy, regular branding, and discounted sales. Improving these aspects will result in enhanced business performance.

The performance of most SMEs in Kenya is declining, as evidenced by the increasing number of closures after operating for a short time. This study assessed the moderating influence of information and communication technology on the relationship between entrepreneurial capabilities and performance of small and medium enterprises in Kenya. The study adopted a descriptive cross-sectional research design and target population was 2400 small and medium enterprises in Thika town’s light industrial area. The study sampled 331 small and medium enterprise owners using stratified random sampling. The study found that the relationship between entrepreneurial skills and performance of small and medium-sized businesses is moderated significantly positively by information and communication technologies. The study recommended that SME owners embrace the use of information and communication technologies in managing their businesses. Entrepreneurs should strengthen aspects relating to information and communication technology such as infrastructure, skills, and experience.

The main purpose of the study was to investigate the factors affecting Small and Medium Enterprises in Kenya. Specific objects of the study included establishing how nurturing and development is a factor influencing Succession Planning in Small and Medium Enterprises The study will be significant to the Small and Medium-scale Enterprises, and the government who will appreciate and understand the factors affecting Succession Planning of Small and Medium Enterprises. This will enable policy makers, practitioners and other SMEs stakeholders to identify the factors that affect the growth of the SMEs with a view to understand and appreciate the importance of their services to financing of Small and Medium Enterprises and be able to encourage use of succession plans. It will also provide background information to researchers who may want to carry out further research. The study established that small and medium enterprises have a succession plan, replace the current owner/manager with a successor in good time, plan ahead for succession and customers do find it easy to get used to the new owner. The study recommends a need for the government and SMEs to create an appropriate information base to support and promote SMEs in Succession planning and come up with a follow up policy and mechanism

This study investigated the influence of entrepreneurial orientation on business model innovation in medium enterprises in Kenya. The study was grounded on the dynamic capabilities view. A descriptive cross-sectional survey research design was adopted to achieve the study’s objective. The sampling frame was the Klynveld Peat Marwick Goerdeler (KPMG) East Africa and the Nation Media Group annual Top100 companies in Kenya. Stratified random sampling was utilized to derive 221 companies that were used in the study. Primary data were collected from single respondents comprising senior managers of the participating firms. A total of 134 questionnaires were analysed. Ordinary least squares regression analysis revealed that entrepreneurial orientation positively and significantly influenced business model innovation in medium enterprises in Kenya. On the basis of the results, this study concluded that entrepreneurial orientation is necessary for enterprises to benefit from business model innovation. The study recommends that managers of medium enterprises in Kenya embrace entrepreneurial behaviour and attitude to enhance business model innovation practices. It is further recommended that policymakers should develop and implement policies that encourage innovation and entrepreneurial behaviour. The study clarifies the position of entrepreneurial orientation in relation to BMI. Additional studies are recommended.

This study investigated the influence of entrepreneurial orientation on business model innovation in medium enterprises in Kenya. The study was grounded on the dynamic capabilities view. A descriptive cross-sectional survey research design was adopted to achieve the study’s objective. The sampling frame was the Klynveld Peat Marwick Goerdeler (KPMG) East Africa and the Nation Media Group annual Top100 companies in Kenya. Stratified random sampling was utilized to derive 221 companies that were used in the study. Primary data were collected from single respondents comprising senior managers of the participating firms. A total of 134 questionnaires were analysed. Ordinary least squares regression analysis revealed that entrepreneurial orientation is an antecedent of business model innovation among medium enterprises in Kenya. On the basis of the results, this study concluded that entrepreneurial orientation is necessary for enterprises to benefit from business model innovation. The study recommends that managers of medium enterprises in Kenya embrace entrepreneurial behaviour and attitude to enhance business model innovation practices. It is further recommended that policymakers should develop and implement policies that encourage innovation and entrepreneurial behaviour. The study clarifies the position of entrepreneurial orientation in relation to BMI. Additional studies are recommended.