Influence of Financial Literacy on Credit Uptake by Youth Enterprises in Machakos Town, Kenya

Abstract

Credit to youth undertaking small-scale businesses enables them to engage in self-employment projects with the main goal of generating income. However, credit uptake by youth is believed to be depended on and enhanced by the possession of business and entrepreneurial skills which are critical components of financial literacy. The biggest challenge to most youth is financial illiteracy which makes them lack the ability to integrate what they know with what they can do to earn a living. This study sought to examine how financial literacy influences credit uptake by youth enterprises in Machakos Town, Kenya. Specifically, the study focused on establishing the influence of bookkeeping skills, budgeting skills, debt management skills, and financial knowledge on credit uptake by youth entrepreneurs in Machakos Town, Kenya. The study employed a descriptive research design. From a target population of 1704 youth enterprises, a sample of 314 were selected randomly to participate as respondents. A structured questionnaire was used to collect data. Simple and Multiple regressions were used to test hypotheses. The regression results revealed an R2 of 0.754. This meant that holding other variables constant, financial literacy variables account for 75.4% of the variability in credit uptake by the sampled youth entrepreneurs. Generally, all the measures of financial literacy had a positive significant influence on the dependent variable. Specifically, the coefficients of bookkeeping skills, budgeting skills, debt management skills, and financial knowledge all had a p = 0.000. The findings of this study provide a guide on the policy that targets financial literacy as a critical component in enhancing self-employment by youth in Kenya.