Adan Guyo Shibia

This study analysed factors influencing firms’ use of formal and informal finance in coping with droughts and floods. It utilized a cross-sectional survey of 802 mostly Micro and Small Enterprises (MSEs) in 27 counties in Kenya that are prone to droughts and floods. The study covered firms in manufacturing, wholesale and retail trade, and accommodation and food services sectors. Bivariate probit regressions reveal that choice of finance coping mechanisms varies by firm-specific characteristics, sector and locational features. Sectors with predominantly informal firms reveal higher usage of informal finance, signalling vulnerabilities. Micro firms and female-owned firms show dependence on informal finance, while educational attainment of the firm’s owner, location within urban clusters and larger firms are associated with use of formal finance in coping with droughts and floods. The findings reveal that firms’ adaptations to climate change risks require measures to facilitate access to formal finance and promoting interventions tailored around firm-specific variables, sector characteristics and business environment.

Purpose: This study investigates effects of firm-level, sector-level and business environment factors on manufacturing firms’ Research and Development (R&D) investment decisions in Kenya.Design/methodology/approach: Panel Probit regression model is employed to analyse effects of the explanatory variables on manufacturing firms R&D investment decisions.Findings: Access to external finance, lower informal sector competition, exports market participation, larger firm size and firms in high technology subsectors increase probabilities of undertaking R&D investment decisions.Research limitations/implications: The findings underscore the need to consider institutional framework, aimed at easing business environment constraints related to access to finance, export promotion and competition from informal sector enterprises. Future research should consider cross-country analysis within the Sub-Saharan African (SSA) region to understand implications of institutional contexts that prove to be a challenge to address in a study based within a single country.Practical implications: Policymakers need to consider addressing business environment constraints that impede R&D investments by private sector enterprises in developing countries. Formal private sector firms should design R&D investment strategies and lobby for policy interventions targeted at business environment constraints.Originality/value: This study considers effects of variables underexplored in existing literature, notably competition from informal sector firms, R&D-intensity technological classification and an objective measure of access to finance. The study also utilises a panel survey data, which was underexplored in prior studies within SSA economies.

This paper investigates effects of financial literacy on individual choices among formal financial services, informal financial services, and complete financial exclusion in Kenya. The study employed cross-sectional analysis using FinAccess national surveys 2009 and 2013 for 6,598 and 6,449 individuals, respectively. Multinomial probit regressions show that financial literacy is a strong predictor of individual demand for financial services. Financial literacy scores increases with increasing level of formality and average performance on financial literacy tests is generally lower than those reported in extant studies for developed countries. The findings suggest importance of policy efforts to promote financial literacy to expand individual access to formal financial services. To our knowledge this is the first paper in developing countries context to use both objective and self-reported measures of financial literacy and its role in individual choices among different financial access strands.