Perceptions of agency banking, financial literacy, and Financial inclusion of small and medium-sized enterprises in Bungoma county, Kenya.

Abstract

The main aim of the study was to examine the relationship between small and medium-sized enterprises’ (SMEs) perceptions of agency banking, financial literacy, and financial inclusion in Bungoma County, Kenya. The general objective was to assess how agency banking and financial literacy influence SMEs’ financial inclusion. The study was guided by five specific objectives: to examine the effect of agency banking perceived accessibility on financial inclusion, to determine the effect of perceived cost of agency banking services on financial inclusion, to establish perceived liquidity of agency banking on financial inclusion of SMEs, assessing the effect of perceived security of agency banking services on financial inclusion, and examining the role of financial literacy in influencing financial inclusion of SMEs in Bungoma County. A descriptive research design was adopted, and primary data was collected from SMEs owners and managers using structured questionnaires. A pilot study was conducted to evaluate the reliability and validity of the research questionnaire. The target population was 22,450 SMEs, of which a sample of 393 respondents was selected through cluster and stratified random sampling. 357 usable questionnaires were returned, yielding a response rate of 90.8%. Data was analyzed using descriptive statistics, Pearson correlation, and multiple regression analysis. SPSS software version 26 was used for data analysis. All five null hypotheses were rejected, indicating that agency banking dimensions and financial literacy both independently and interactively significantly influence the financial inclusion of SMEs in Bungoma County. Overall, the study concludes that financial inclusion among SMEs in Bungoma County is largely shaped by agency accessibility, liquidity, cost of services, security, and financial literacy, while the role of cost remains marginal. The study recommends strengthening liquidity management, enhancing security measures, expanding accessibility of agency outlets, rationalizing transaction costs, and promoting continuous financial literacy programs for SMEs to deepen financial inclusion in the county.