DIGITAL LENDING AND FINANCIAL PERFORMANCE OF MICRO AND SMALL ENTERPRISES OWNED BY YOUTH IN KAKAMEGA COUNTY, KENYA
DIGITAL LENDING AND FINANCIAL PERFORMANCE OF MICRO AND SMALL ENTERPRISES OWNED BY YOUTH IN KAKAMEGA COUNTY, KENYA
Annette Aseyo Alwena - Postgraduate Student, Department of Accounting and Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
Dr. Charity Njoka (PhD) - Lecturer, Department of Accounting and Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
Access to digital lending can be an enabler for young people in businesses in Kenya. However, youth Micro and Small enterprises are at dismal financial performance. There are reported low financial performance indicators such as low profitability, low revenue increase, diminishing loan repayment and equally weak liquidity state among MSE Owned by youth. In Kakamega the annual report of loan repayment among the youth reported a default of 71.82%. Limited studies have assessed digital lending and financial performance of youth enterprises at large leaving business literate cadre unexplored. The researcher sought to close the knowledge gap on digital lending. Basically, the study analyzed the effect of digital lending on financial performance of MSE owned by youth in Kakamega County Kenya. Specifically established the effect of period of loan repayment, interest rate on loan and amount of loan on financial performance of MSE Owned by youth in Kakamega County. Theoretically, information asymmetry, credit risk and stakeholder theory were utilized. In this study the target population was 1,689 as per the 2022 MSE owned by youth in Kakamega. The study sampled 313 MSE owned by youth in Kakamega County. Statistical Package for Social Sciences was adopted in analyzing both descriptive and inferential statistics from obtained questionnaires. The Ordinary Least Square model was adopted. The study found that loan installment approach has improved financial performance of MSEs in Kakamega implying the installments are essential. The findings from the linear regression analysis noted a statistically notable significant positive association coefficient between loan repayment Period and the level of financial performance of youth owned SMEs observed among small and medium firms (P0.003<.005). The study established that capacity to borrow determines loan to be awarded hence improving financial performance of MSEs in Kakamega. The findings from the linear regression analysis noted a favorable correlation coefficient for amount of loan amount and financial performance of youth owned SMEs among small and medium firms (P0.002<.005). The linear regression analysis noted a statistically significant influence of correlation coefficient for loan interest rate and the level of youth owned SMEs financial performance observed among youth owned SMEs (P0.00<.005). Conclusively digital lending has a positive significant effect on financial performance of Micro and Small Enterprises owned by youth in Kakamega County Kenya. The study recommend that the youth owned SMEs should subscribe to loan repayment to enable them to execute and pay their loans easily, hence conveniently managing the debt. Secondly, the youth owned SMEs should utilize the amount of loan given on investment worth projects that would in the long run yield success. The youth owned SMEs should subscribe to loan interest rate that are achievable as this would enable them realize better profits.
