FINANCIAL PLANNING SERVICES AND ACCESS TO CREDIT BY MICRO ENTERPRISES IN THE FORMAL SECTOR IN KENYA

Abstract

The study investigated the influence of financial planning services on access to credit for micro-enterprises in the formal sector in Kenya. This was due to the lack of available credit from banks and other financial organizations, caused by the high rate of credit default based on personal judgment. Agency theory was used to hypothesize the interconnection between the variables of financial planning services and access to credit. A descriptive survey design was employed, with a sample size of 384 determined by the Cochran formula from a population of 1,215,184 micro-enterprises regulated by the government of Kenya. Sample size proportion was used to ensure proportionate representation from the eight former Administrative Regions of Kenya. The study gathered and analyzed primary data using semi-structured questionnaires. Descriptive statistics were used to compute means, frequencies, and standard deviation from grouped data obtained from the overall Likert scale while inferential statistics such as logistic regression, were applied to investigate the relationship between the study variables using advanced SPSS computer software version 23. The results of the logistic regression analysis indicated that financial planning services had a positive influence on access to credit. The findings indicated the significance of financial planning services. However, the low levels of financial planning services have hindered access to credit for financing the regulated micro-enterprises, thereby affecting the overall performance of the MSMEs sector. Based on these findings the study recommends that the government of Kenya should develop effective strategies to promote financial planning services to increase access to credit. Some of the engagements involve the licensing of more certified financial planners and the government through the Micro and Small Enterprises Authority should provide technical assistance and incentives to credit counseling and financial planning firms and professionals to ensure that credit counseling and financial planning services are provided to the micro-enterprises in the formal sector in an effective and efficient manner.