The Influence of Business Group Factors on the Financial Performance of Informal Micro Retail Enterprises in Nairobi

Abstract

The study focused on the informal micro retail sector in Nairobi researching on the enterprises in the Smart Duka project run by a Non-Governmental Organization and investigating the use of group participation and its effect on the financial performance of these enterprises which are located in the informal settlements of Nairobi. Prior studies have focused more on areas outside the informal sectors of Nairobi and have had limited focus on the effect of group participation on financial performance of enterprises which the current study sought to address. The financial performance and business factors of the enterprises that joined groups (treated group) were compared to financial performance and business factors of the enterprises that did not join groups (control group) in the project. The research design used a triangulation approach using an experimental and explanatory designs to study causal links investigating if there is a link between variables. Primary and secondary data from the project was used to get quantitative data collected from the sample of 116 retail enterprises in groups randomly picked using probability sampling from the project and 116 retail enterprises not in groups. Based on the results of the study, the null hypothesis of financial performance of enterprises in business groups being less or equal to that of enterprises not in business groups was accepted due to the difference between the treated and control groups being statistically insignificant despite being higher and hence ways of making this difference significant should be addressed. The managerial factors had positive insignificant effects, strategic fit factors had positive significant effects while financial factors had negative insignificant effects on financial performance of the enterprises. The study offered novelty by focusing on the most marginalized of micro enterprises-those operating in informal settlements within Kenya's capital -Nairobi while considering the effect of group networks and magnitude effect of group factors on financial performance of micro enterprises.