Financial Technology Adoption and Performance of Micro, Small and Medium Enterprises (MSMEs) In Nairobi County, Kenya

Abstract

Financial Technology (Fintech) has emerged as an important enabler of Micro, Small, and Medium Enterprise (MSME) performance by improving access to financial services, enhancing operational efficiency, and strengthening business competitiveness. Despite the rapid expansion of Fintech services in Kenya, empirical evidence on how different dimensions of Fintech adoption influence MSME performance and how contextual factors shape this relationship remains limited. This study examined the effect of Financial Technology adoption on the performance of MSMEs in Nairobi County, Kenya. Specifically, it assessed the effects of Mobile Payment Platforms, Digital Lending Platforms, Digital Financial Management Tools, and Digital Market Platforms on MSME performance and examined the moderating effects of Digital Literacy, Trust and Security Concerns, and Internet Access. The study was anchored on the Technology Acceptance Model, Innovation Diffusion Theory, and Resource-Based View. A descriptive cross-sectional survey design was adopted, targeting 1,000 registered MSMEs in Nairobi County. Using Yamane’s formula, a sample of 286 MSMEs was determined and selected through stratified random sampling. Primary data were collected using structured questionnaires administered to MSME owners and managers. Of the 286 questionnaires distributed, 201 were successfully completed, yielding a 70.3% response rate. Data were analyzed using SPSS Version 27 through descriptive statistics, Pearson’s Product Moment Correlation, and Hierarchical Moderated Multiple Regression. The findings established that all four Fintech dimensions had positive and statistically significant effects on MSME performance. Mobile Payment Platforms recorded the strongest effect (β = 0.382, p < 0.001), followed by Digital Market Platforms (β = 0.301, p < 0.001), Digital Lending Platforms (β = 0.244, p < 0.001), and Digital Financial Management Tools (β = 0.118, p = 0.045). Collectively, the four dimensions explained 55.1% of the variation in MSME performance (R² = 0.551). Incorporating the moderating variables increased the explanatory power to 64.7% (R² = 0.647), representing an additional 9.6% variance explained. The study concludes that Fintech adoption significantly enhances MSME performance and that Digital Literacy, Trust and Security Concerns, and Internet Access strengthen this relationship. It recommends strengthening digital infrastructure, affordable internet access, digital literacy, cybersecurity, and consumer protection while encouraging financial institutions and Fintech providers to develop secure, affordable, and MSME-oriented solutions.