ISSN: 2222-6990
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This research article sought to establish the influence of financial reporting requirement in formalizing small and micro enterprises in Kenya. The study took the form of a descriptive survey design which is an efficient method of collecting original data and systematic information from a wide range of respondents. The target population was 1200 SME’s operating in Nairobi Central Business District and registered with the Nairobi County government. The sample size was 369 respondents, calculated using Yamane Sampling Formula. The study employed stratified and systematic random sampling to select SME’s from 4 different sectors and also incorporated commercial banks and microfinance institutions in the sampling distribution. Data was collected by use of open and close-ended questionnaires supplemented by an interview schedule and an observation checklist. The researcher used descriptive and inferential statistics such as mean, standard deviation, correlation and multiple regression analysis. The study findings showed that availability of financial records eliminate information asymmetry thus allowing for better monitoring. Further, availability of quality and credible financial information enhances business access to loan facilities and better credit terms. The study recommended that the SMEs need to formalize their operations to ease credit access from lenders hence realize growth and improved performance.
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