ANALYSIS OF FACTORS INFLUENCING THE FINANCIAL PERFORMANCE OF YOUTH OWNED ENTERPRISES IN KILIFI COUNTY, KENYA

Abstract

Youth owned enterprises are businesses which are owned and run by individuals within the age bracket of 18-35 years. These enterprises are usually small in size with low entry barriers coupled with low capital requirements. They significantly reduce youth unemployment both at the national and regional level. However, these enterprises have not been performing well financially due to several challenges such as finance. A significant number of them fail to grow while some collapse even before being launched. The purpose of this study was to analyze the factors influencing the financial performance of youth owned enterprises in Kilifi County, Kenya. Theories of resource-based view, the firm growth and social learning guided the study. The target population was 150 registered youth owned enterprises from which a sample of 108 was drawn. The study adopted a descriptive research design. Primary data was collected using structured questionnaires with both open and closed ended questions. A pilot study was conducted to pre-test and fine tune the questionnaires. Completed questionnaires were then checked for accuracy and consistency then coded and analyzed using SPSS version 20. Descriptive statistics, correlation analysis and multiple regression analysis were used to analyze the data. The questionnaire response rate was 100%. The computed Cronbach Alpha for the constructs was greater than 0.700 and thus reliable. Findings show that 59% of the respondents were male while 41% were female and that 38% were aged 24-29 years, 31.5% (30-35) and 30.6% (18-23). About 75% of the businesses had been in operation for less than 5 years and that 82% of the respondents faced challenges in accessing capital. Furthermore, the results show that 58% of the enterprises were sole proprietorship with less than 5 employees and that 55% of the respondents relied on capital from family and friends, 27% from microfinance and 16% from banks. Correlation analysis show that access to capital had the highest significant influence on financial performance of youth owned enterprises (0.902), followed by government regulation (0.882), enterprise characteristics (0.851), entrepreneur characteristics (0.745) while training services had the lowest influence (0.665). Results of the regression analysis show that the adjusted R square is 0.868 which implies that 86.8% of the variations in the dependent variables are explained by the independent variables. The variables which were significant were access to capital (with a coefficient of 0.314), training services (0.214), enterprise characteristics (0.200), government regulations, (0.147) and entrepreneur characteristics (0.139). The study concludes that youth entrepreneurs faced challenges in accessing capital, lack formal training, there is legality and smooth operation since they are aware of business regulations, and that higher level of education and enterprise experience seem to enhance greater business performance. The study recommends that government should come up with a policy that redesigns the available lending programs for youth owned enterprises to enhance accessibility of finance; need to provide targeted and better training services to the youth entrepreneurs to ensure minimal business failure; still need to arrange for workshops and seminars periodically to sensitize youth entrepreneurs to ensure that their businesses remain in good standing; mentorship or apprenticeship programs be introduced to inculcate relevant experience and skills in business management, and that there is need to reduce personal risks by moving to limited liability from sole proprietorship of business ownership.