Exploring the Effect of Entrepreneurial Savings Incentives as Determinant of Savings Mobilization among Micro and Small Enterprises

The outcome of research conducted on financial institutions across the world have indicated mixed findings on the effect of savings incentives in increasing savings mobilization among MSEs. Despite that other study findings have shown that savings incentives initiatives from financial institutions have encouraged consumers of financial products and services to increase savings mobilization, financial institutions offering automatic bank savings incentive programs report positive results. However, for any savings initiative to create an impact on the expected beneficiaries, savings incentives ought to meet the unique needs of their diverse consumers for them to be motivated to save even more with their respective financial institutions. The target population for this study was members registered with Kenya National Chamber of Commerce and Industry Trans Nzoia county and therefore were conducting business within the county. The design used for the study was mixed method The study used stratified sampling to categorize MSEs into three strata’s namely service manufacturing and commerce or trade and then random sampling was used to get the actual target population to be used in the study. To test the reliability and validity of research instruments pilot study was conducted and all the research instruments met the threshold of cronbach alpha of 0.70. The study also conducted correlation analysis among the financial literacy factors which were found to be significant to be used in the study. The major findings of the study indicated that there was a significant relationship between gender of entrepreneurs and savings incentives which determined the amounts of savings mobilized and therefore financial institutions to meet their customer’s expectations according to their genders. It was also found that significant relationship between number of family dependents which determined the amount of savings mobilized. There was also found to be a significant relationship between gender of entrepreneurs and the amount of money they mobilized with their financial institutions which depended on saving and withdrawal charges incurred when transacting. It was therefore concluded that financial institutions savings incentives do not necessarily entice customers to save with them but rather focus perhaps more on relationship enhancement to offer differentiated customer experiences to their respective clients. The study recommends that savings mobilizations institutions whether formal or informal should in collaboration with their clients (MSEs) work on viable savings incentives which will eventually benefit both of them because there are various savings incentives and when implemented outcomes are diverse. Therefore the expected beneficiary of the incentive ought to be involved in designing an incentive program for themselves without adversely affecting the gains anticipated from both parties. The study further recommends that financial institutions to design products and services which takes into consideration gender, level of education and the number of dependents in the entrepreneurs household which influences the decision to mobilize savings with financial institutions.