Financial Literacy Role in Enhancing Savings and Financial Performance among SMEs: Evidence from Licensed Hardware Stores in Kasarani Sub-County

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Published Dec 31, 2025
https://doi.org/10.71064/spu.amjr.2.3.2025.498
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Vol. 2 No. 3 (2025): Vol. 2 No. 3 (2025): Special Issue - African Multidisciplinary Journal of Research (AMJR) - 2025

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Kenneth Njoroge
St. Paul's University
Dr. John Muhoho
St. Paul's University
Robert Abayo
St. Paul's University

Abstract

Financial literacy plays a key role in the growth and performance of Small and Medium Enterprises suitable for economic growth by offering employment opportunities and supporting local supply chains. Despite their importance, many SMEs fail within a few years, often due to the financial illiteracy of their owners. However, limited studies have specifically examined hardware stores, a key SME segment in Kenya’s construction-driven economy. The focus of the study was to determine the influence of financial literacy on the financial performance of licensed hardware stores in Kasarani Sub-County. Study focused on saving as a financial literacy component. Guided by the Resource-Based View, the study’s approach was descriptive. Using a simple random sampling procedure, a sample of 334 hardware stores was selected from a population of 2,036 licensed hardwares stores in Kasarani Sub-County using Yamane’s formula. Data was collected via structured questionnaires, with reliability and validity confirmed through a pilot study in Ruiru Sub-County, and Cronbach’s alpha greater than 0.7.  The findings revealed that savings explained 14.1% of the changes in financial performance with a p-value less than 0.05, indicating a statistically significant and positive relationship. These results highlight that savings have a modest explanatory power on financial outcomes, with possible factors such as cash management, budgeting, and risk management outside the study explaining 85.9% of the changes in financial performance. The study recommends targeted financial literacy training and institutional support to strengthen SME structured savings culture as a pathway to improved profitability and long-term growth.

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How to Cite
Njoroge, K. ., Muhoho, D. J. ., & Abayo, R. . (2025). Financial Literacy Role in Enhancing Savings and Financial Performance among SMEs: Evidence from Licensed Hardware Stores in Kasarani Sub-County. African Multidisciplinary Journal of Research, 2(3), 630–651. https://doi.org/10.71064/spu.amjr.2.3.2025.498

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