Financial literacy as a driver of micro-enterprise growth: a case study of micro-enterprises in Nairobi City County

Abstract

This study explores the relationship between financial literacy and micro-enterprise growth, specifically focusing on the impact of financial literacy on monthly revenue generation among micro-enterprises in Nairobi City County, Kenya. Using a sample of 100 micro-entrepreneurs, a quantitative analysis was conducted to assess the extent to which financial literacy influences business performance. The regression analysis revealed a strong positive correlation (R = 0.890) between financial literacy and monthly revenue, with financial literacy explaining 79.3% of the variance in revenue (R² = 0.793). The ANOVA results demonstrated that this relationship was statistically significant (F = 374.897, p < 0.001). Each one-point increase in the financial literacy score was associated with an average increase of 0.852 units in monthly revenue. These findings underscore the critical role of financial literacy in driving business success, suggesting that enhancing financial knowledge among micro-entrepreneurs could lead to substantial improvements in revenue performance. The study highlights the need for targeted financial education programs to support the growth and sustainability of micro-enterprises in Nairobi City County.