Financial Management Knowledge and Financial Performance of Small and Medium Enterprises in Garissa Township Subcounty, Kenya
DOI:
https://doi.org/10.47941/ijf.4011Keywords:
Financial Management Knowledge, Financial Performance and Small and Medium EnterprisesAbstract
Purpose: The importance of SMEs is realized throughout Kenya's economy, as they contribute 70% to the country's GDP and account for 80% of employment creation. However, SMEs in Garissa Township appear to be undergoing severe financial constraints, as an estimated 60% of SMEs die within three years of existence. Poor financial management knowledge has been identified as a key contributor to their underperformance. This study investigated the influence of financial management knowledge on the financial performance of SMEs in Garissa Township.
Methodology: The study employed a descriptive correlational research design. The population comprised 716 SMEs operating in Garissa Township, as obtained from Garissa County records. The units of observation comprised managers of the SMEs. A sample size of 97 SMEs was derived from the target population. A questionnaire containing both open- and closed-ended questions was used to collect primary data, while a secondary data collection sheet was used for secondary data that was acquired from the respondents. Both descriptive and inferential statistics were used to analyze data and were generated through the Statistical Package for Social Sciences tool. The study employed a multiple linear regression to assess the relationships between the dependent and the independent variables. Thematic analysis was used to analyze the qualitative data. Data presentation was by way of graphs and tables.
Findings: The study established that financial management knowledge positively and significantly influences the financial performance of SMEs in Garissa Township. This is depicted by a beta value of 0.353 and a significance value of 0.000. The study concluded that financial management knowledge significantly influences the financial performance of SMEs in Garissa Township. Specifically, adequate financial literacy enhances transparency, improves decision-making, safeguards assets, and strengthens the financial sustainability and growth of small and medium-sized enterprises.
Unique Contribution to Theory, Policy and Practice: The study recommended that SME owners and managers enhance financial management skills through training. In addition, policymakers and SME support institutions should deliver financial management training and hands-on guidelines to enhance financial performance within SMEs and achieve better performance.
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Copyright (c) 2026 Abdifatah Garad Gedi, Dr. Steve Ondieki, PhD, Bashir M. Maalim, PhD
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