Formal Financing and Financial Performance of Youth-Based Small and Medium Enterprises: Evidence from Bungoma County, Kenya

• Author(s): James Wanjala Juma ; Abraham Malenya
• Paper ID: 1709929
• Page: 1635-1683
• Published Date: 05-08-2025
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 9 Issue 1 July-2025

Abstract

Youth unemployment remains a critical challenge in Kenya, with youth-based Small and Medium Enterprises (SMEs) offering potential solutions for economic empowerment. This study examines the influence of formal financing on the financial performance of youth-based SMEs in Bungoma County, Kenya. Using a descriptive survey design, data were collected from 231 youth entrepreneurs through structured questionnaires. Correlation and regression analyses revealed a strong positive relationship (r = 0.735, p < 0.001) between formal financing and financial performance, with formal financing explaining 54% of performance variance (R² = 0.540). The regression coefficient (? = 0.620, p < 0.001) indicates that increased formal financing access significantly improves youth SME performance. However, barriers including high interest rates and stringent collateral requirements limit access. The study recommends policy interventions to improve formal financing accessibility for young entrepreneurs.

Keywords

Formal Financing, Youth Entrepreneurship, SME Performance, Financial Inclusion

Citations

IRE Journals:
James Wanjala Juma , Abraham Malenya "Formal Financing and Financial Performance of Youth-Based Small and Medium Enterprises: Evidence from Bungoma County, Kenya" Iconic Research And Engineering Journals Volume 9 Issue 1 2025 Page 1635-1683

IEEE:
James Wanjala Juma , Abraham Malenya "Formal Financing and Financial Performance of Youth-Based Small and Medium Enterprises: Evidence from Bungoma County, Kenya" Iconic Research And Engineering Journals, 9(1)