The desire by governments all over the world to improve the standard of living of their citizens has led to growth in the number of small and medium enterprises (SMEs). In Kenya, economic growth forms one of the pillars to attaining vision 2030 whose aim is to enhance the quality of living standards of Kenyans. However, the success of the SMEs is dependent upon a number of factors. A key ingredient in ensuring sound performance of SMEs is the level of financial literacy of the business people. The study aimed at assessing the influence of financial literacy on performance of small and medium enterprises. The objectives of the study were to evaluate the influence of budgeting skills, record keeping skills, credit management skills and tax compliance skills on performance of small and medium enterprises. The target population of the study was 3,916 consisting of the SMEs business community in Butere sub county, Kakamega County, Kenya. A sample of 390 was used in the study. The study employed a descriptive research design. Stratified random sampling was used in identifying the respondents. Data was collected using structured questionnaire. Regression equation was used to analyze the collected data. The study found out that financial literacy has a significant impact on the performance of SMEs. The study recommends that the government and non-governmental organizations should facilitate training of business people in the sector of SMEs so as to equip them with the necessary financial literacy skills in order to spur economic growth
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Author Name: Francis Mukatia Asakania
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Keywords: Financial literacy, Performance, SMEs, Credit management, Tax compliance.