Digital Finance And Financial Resilience Of Smes In Kenya: The Mediating Role Of Access To Finance

Abstract

The rapid expansion of digital financial services has transformed the financing environment of small and medium-sized enterprises (SMEs) in emerging economies, yet increased digital financial access does not necessarily translate into stronger financial resilience. This paper examines the relationship between digital finance and SME financial resilience in Kenya and proposes a framework in which access to finance mediates this relationship. The study is motivated by Kenya's advanced digital financial ecosystem alongside persistent financing constraints facing smaller enterprises. A quantitative explanatory design is proposed, with primary data collected from SMEs and analysed using structural equation modelling or hierarchical regression with mediation analysis. Digital finance is conceptualised through digital payments, digital credit, mobile banking and digitally enabled savings, while financial resilience is reflected in liquidity capacity, cash-flow stability, shock absorption and business continuity. Digital finance is proposed to improve resilience both directly and indirectly, by reducing financing frictions and improving access to working capital, although excessive reliance on expensive short-term digital credit may weaken this relationship. The paper contributes to SME finance literature by shifting attention from financial inclusion as access toward financial resilience as an outcome of productive financial inclusion.