ASSESSING THE MODERATING ROLE OF FINANCIAL LITERACY ON THE RELATIONSHIP BETWEEN E-ACCOUNTING ADOPTION AND FINANCIAL PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN ELDORET CITY
Bernard Kamorok Keino - Kisii University, Kenya
Dr. Francis Nyarombe, (PhD) - Kisii University, Kenya
Dr. Cornelius Kurere - Kisii University, Kenya
ABSTRACT
This study aims to assess the moderating role of financial literacy on the relationship between e-accounting adoption and financial performance among Small and Medium Enterprises (SMEs) in Eldoret City, Kenya. Recognizing SMEs as vital contributors to economic growth and employment, the research addresses the gap in understanding how digital financial tools influence business outcomes in a developing country context. Using a sample of 421 SMEs selected through stratified random sampling, data was collected via structured questionnaires and analyzed through regression models. Results reveal that 77% of respondents actively use e-accounting to manage financial records, with a mean rating of 3.87 on a 5-point Likert scale, indicating strong adoption. Additionally, 78.5% of SMEs possess adequate financial literacy, with a mean score of 3.91, which significantly moderates the positive impact of e-accounting on financial performance (β=0.180; p<0.05). The findings demonstrate that increased e-accounting practices are associated with improved financial outcomes, highlighting the importance of financial literacy in maximizing digital tools’ benefits. Based on these insights, the study recommends policymakers and financial institutions enhance digital literacy through targeted training, promote supportive policies such as tax incentives, and improve digital infrastructure to foster sustainable growth of SMEs in Eldoret City.