FINANCIAL TECHNOLOGY AND PROFITABILITY OF SMALL AND MEDIUM ENTERPRISES IN NAIROBI CITY COUNTY, KENYA

Abstract

Small and medium enterprises are essential to economic growth, wealth generation, and employment in every nation. The manner in which SMEs in Nairobi, Kenya access, manage, and use their finances have been transformed by financial technology. SMEs make up 98 percent of all enterprises, account for 30 percent of annual employment, and make up 3 percent of the country's GDP. However, approximately 400,000, SMEs fail within two years. This has necessitated a rethink of whether these SMEs make profit or not. This research explored the effect of financial technology on Nairobi County's small and medium in size businesses' profitability for the period of 5 years (2019-2023). The objectives of the investigation was to explore the effect of mobile money on the profitability of SMEs, the effect of online banking on the profitability of SMEs, and the effect of agency banking on the profitability of SMEs. The investigation was anchored on technology acceptance, relationship lending and resource dependency theory. Stratified sampling method was utilized in selecting 269 SME representation of the populace. The instrument that was employed to gather data is the questionnaire. Multiple regression analysis was employed and ethical considerations were duly observed. The study found that mobile money services had significant positive effect on profitability; agency banking uncovered an insignificant effect that is positive on profitability as online banking disclosed significant positive effect on the profitability of SMEs in Nairobi City County, Kenya. The government should establish a comprehensive framework that supports the integration and expansion of mobile money services within the SME sector.