Determinants of access to credit among the Small and Medium Enterprises in Kibra, Nairobi: moderated by financial literacy

Abstract

The research examined critical determinants affecting SME access to financial resources for Small and Medium Enterprises (SMEs) in Kibra Constituency, Nairobi County. The global economy depends critically on SMEs, which support substantial employment and GDP growth but still have difficulty accessing funding. The research focuses on three key factors: firm characteristics, financial characteristics, and entrepreneurial characteristics, with financial literacy as a moderating variable. Using a quantitative research design, data was collected through self-administered questionnaires to owners and managers, obtaining a sample of 200 respondents. Multiple linear regression models were used to examine the relationships between the variables, while hierarchical regression analysis was employed to assess the moderating effect of financial literacy. This approach measured how financial literacy influences the pattern of finance accessibility in relation to entrepreneurial characteristics. The findings reveal that firm size and financial characteristics such as audited financial statements, firm performance, tangible assets, and tax compliance significantly influence Access to Credit. Managers who exhibit entrepreneurial characteristics gain better outcomes concerning funding access through their accumulated work experience and active engagement in business networking activities. Financial literacy is a moderator that boosts the funding access capability of SMEs while linking their entrepreneurial characteristics to potential outcomes. The findings reveal that improving financial transparency and enhancing entrepreneurial skills and financial literacy creates essential conditions for better SME funding opportunities. Hierarchical regression results showed that financial literacy strengthened the relationship between entrepreneurial characteristics and Access to Credit. The study offered strategic recommendations to financial institutions, policymakers, and SME operators while providing critical knowledge about SME financing challenges that help similar contexts.

Keywords: Access to Credit, SMEs, Financial Literacy, Kibra, Entrepreneurial Characteristics, Firm Characteristics, Financial Characteristics, Regression Analysis, Microfinance, Access to Credit, Financial Inclusion, Kenya, Loan Accessibility, SME Funding, Moderating Effect