Do Budgeting Practices Affect Saving Behaviour among Small Scale Entreneurs in Kenya? Evidence from Kisumu Central Constituency
Keywords:Small Scale Entrepreneurs, Financial Planning, Monitoring Spending, Tracking Spending Pattern, Financial Decisions
World Bank Development Indicators' most recent data reveals that the nation's Gross Domestic Savings as a proportion of gross domestic product(GDP) was 11.09 percent in 2017, 11.64 percent in 2018, 11.25 percent in 2019 and 12.83 percent in 2020. This shows that the country’s domestic savings is increasing but relatively low. As a result of this the country presents a significant development challenge. Individuals need to learn the basic knowledge of financial areas so that people may make knowledgeable financial decisions about how to earn, spend, save, manage, and invest their money. The purpose of this study was to answer if budgeting practices has an effect on saving behavior among small scale entrepreneurs in Kenya. The study's particular objectives were to; establish the influence of monitoring spending, financial planning and tracking spending pattern on saving behavior among small entrepreneurs. The study was guided by Life Cycle Theory and Financial Literacy Theory. Correlational research design was employed in the study. The target population comprised of 914 registered small entrepreneurs in Kisumu town central constituency who have been in business for at least 2 years. The study adopted Yamane sampling technique and obtained 278 respondents. Open-ended and closedended structured questionnaires were employed to gather primary data. To test reliability of the questionnaire, the study piloted 28 respondents who were excluded in the final study. The study then used Cronbach’s Alpha to test reliability. The results showed that budgeting practices (α=0.828) and budgeting practices (α=0.870) all had a strong alpha value of above 0.7 which indicates that the instrument is reliable. The study findings revealed that; monitoring spending was significant (β= .376; p=.000˂ 0.05) that is an increase of 1 unit in monitoring spending causes an increase of .376 units in saving behavior, financial planning was significant (β= .333, p=.000˂0.05) that is an increase of 1 unit in financial planning causes an increase of .333 units in saving behavior and tracking spending pattern was also significant (β= .179, p= .000˂0.05) that is an increase of 1 unit in monitoring spending terms causes an increase of .179 units in saving behavior. There was a strong positive and significant association between budgeting and saving behavior thus rejecting the null hypothesis. The study concludes that budgeting practices enhances saving behaviour of small entrepreneurs in Kenya and recommends that small scale entrepreneurs should practice all aspects of budgeting which includes monitoring spending, financial planning and tracking spending pattern should be among small scale entrepreneurs in Kenya. This will enable them to compare what they have spent with regard to what they had planned thereby helping them improve their saving behavior.
Abongo, S. (2017). The Effect of Budgeting Process on The Financial
Performance of Top 100 Small And Medium Firms in Kenya. Nairobi
Kenya: University of Nairobi.
Brown, J. D. (2002). The Crobach alpha reliability estimate.
Shiken:JALT Testing & Evaluation SIG Newsletter, 17-19.
Bryman, A., & Bell, E. (2015). Business Research Methods. Oxford
Cooper, D., & Schindler, P. (2016). Business Research Methods 12th
Edition. McGraw Hill Higher Education.
Gliem, J. A., & Gliem, R. R. (2003). Calculating, Interpreting and
Reporting Cronbach's Alpha Reliability Coeffient for Likert- Type
Scales. In Midwest Research to Practice Conference in Adult,
Continuing and Communit Education (pp. 82-88). Columbus.
Isaac, L., Lawal, M., & Okoli, T. (2015). A Systematic Review of
Budgeting and Budgeting Control in Government Owned
Organizations. Research Journal of Finance and Acconting Vol 6 (6).
Kisumu County Trade Department. (2021, July).
Klimaitiene, R., & Ramanauskaite, J. (2019). Insight into Budgeting
Practices : Empirical Study of The Largest Manufacturing Companies
in Lithuania. Science and Studies of Accouting and Finance Problems
And Perspectives 13(1), 19-27.
Kombo, D., & Tromp, D. (2011). Proposal and Thesis Writing.
Nairobi: Paulines Publications Africa.
Mbogo, M., Olando, C., & Macharia, J. (2021). Effect of Budgeting
Practices on Financial Performance of Manufacturing Small and
Medium Enterprises in Nairobi County , Kenya. Journal of
Language, Technology and Entrepreneurshipin Africa volume 12,
Mohamed, A. I., Evans, K., & Tirimba, I. O. (2015). Analysis of The
Effectiveness of Budgetary Control Techniques on Organizational
Performance at Dara-Salaam Bank Headquaters in Hargeisa
Somaliland. International Journal of Business Management and
Economic Research Vol 6(6).
Mugenda, O., & Mugenda, A. (2003). Research Methods:
Quantitative and Qualitative Approaches. Nairobi: African Centre for
Mwaguni, H. J., Mbugua, J., & Rambo, C. (2020). Budgets and
Performance of Research Projects in Public Universities in the
Coastal Region , Kenya. European Journal of Business and
Management Research .
Mwangi, I. (2020). Household Saving Behaviour in Kenya: A
Discrete Choice Approach. Economics and Sustainable Development,
Nafisatu, A. D. (2018). Effect of Budget and Budgetary Control on
Firms Performance: A Case Study of the East African Portland
Cement Company Limited. United States International University -
Ngina, N. K. (2020). Influence of Financial Literacy On Financial
Management practices : A survery of Dairy Farmers Managed by KUnity
SACCO in Limuru Sub County.
Onduso, E. O. (2013). The Effect of Budgets on Financial
Performance of Manufacturing Companies in Nairobi County.
University of Nairobi.
Ribaj, A., & Mexhuani, F. (2021). The Impact of Savings on
Economic Growth in Developing Country. Journal of Innovation and
Shafinar, I., Koe, W.-L., Karim, R. A., Yusof, N., & Ishmail, S.
(2020). Saving Behavior Determinants in Malaysia: An Empirical
Investigaton. Kne Publishing.
Shanghverzy, T. (2003). Market and Community as Strategies for
Change. In H. A., L. A., F. M., & H. D., International handbook of
educational change(vol.1) (pp. 576-595). Dordrecht: Kluwer
Copyright (c) 2022 ESI Preprints
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.