DIGITAL PAYMENT SYSTEMS AND THE FINANCIAL PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NAIROBI COUNTY CENTRAL BUSINESS DISTRICT, KENYA
Keywords:
Digital Payment Systems, Financial Performance, SMEs, Nairobi CBD, Resource-Based ViewAbstract
purpose of study: This study examined how digital payment systems influence the financial performance of SMEs in Nairobi County’s Central Business District, Kenya. It specifically assessed effects on sales growth, profitability, operational efficiency, and business sustainability to address a contextual empirical gap.
methodology: A descriptive and correlational design was used, targeting 246 SMEs. Primary data came from structured questionnaires and interviews with owners, managers, and financial officers. Secondary data included KNBS and Central Bank reports. Analysis employed SPSS and SmartPLS, using descriptive statistics, Pearson correlation, and multiple regression.
findings: Digital payment systems had a statistically significant positive influence on SME financial performance (β = 0.285, p = 0.000). The overall mean agreement score was 4.25/5, indicating strong perceived benefits. SMEs reported higher sales volumes, improved customer satisfaction (mean 4.30), more accurate financial records (mean 4.18), faster payment collection (mean 4.22), and stronger overall financial outcomes (mean 4.28). The regression model explained 28.5% of performance variation. Diagnostic tests confirmed no multicollinearity, normality issues, heteroscedasticity, or autocorrelation. The null hypothesis was rejected, confirming digital payment systems as a significant driver of SME financial performance in Nairobi CBD.
conclusion: Digital payment systems significantly enhance SME financial performance in Nairobi CBD, improving sales, profitability, operational efficiency, and sustainability. They represent strategic technological resources under the Resource-Based View. SME owners should prioritize adoption, while policymakers and financial institutions must invest in infrastructure and training to lower adoption barriers.
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