Financial Literacy and Growth of Medium Enterprises in Kisumu County, Kenya

Abstract

This study examines the effect of financial literacy on the growth of medium enterprises (MEs) in Kisumu County, Kenya. Specifically, it assesses four dimensions of financial literacy—investment literacy, working capital management literacy, accounting knowledge, and financial analysis skills—and their association with enterprise growth. A descriptive research design was applied, and structured questionnaires were distributed to a stratified sample of 400 registered MEs, yielding 112 usable responses. Data were analyzed employing descriptive statistics, Pearson’s correlation coefficient, and multiple regression analysis. Results indicate that overall financial literacy explains 60.3% of the variation in enterprise growth (R² = 0.603). Working capital management literacy, accounting knowledge, and financial analysis skills had statistically significant positive effects on growth, whereas investment literacy did not have a significant effect. The study recommends targeted capacity building in practical financial management skills for ME owners and calls for further research to investigate additional factors explaining the remaining variance of 39.7% in growth.