Vol. 2 (Iss. 1) 2021, pp. 79-94 African Journal of Empirical Research https://ajernet.net ISSN 2709-2607 DOI: https://doi.org/10.51867/ajer.v2i1.16 79 Licensed Under Creative Commons Attribution (CC-BY NC) EFFECT OF DIGITAL FINANCIAL SERVICES ON THE GROWTH OF SMES IN KENYA Nandwa Nelly Awinja 1 and Olanrewaju Isola Fatoki 2 1 nellynandwa32@gmail.com; 2 lanrefatoki@kca.ac.ke 1,2 KCA University, Kenya. ------------------------------------------------------------------------------------------------------------------------------------------------------------- ABSTRACT The digital economy is a new business environment that enables enterprises to operate and provide services via the Internet and digital platforms. The study was on the effect of economic digitisation on growth of SMEs in Nairobi CBD. The specific objectives were to determine the effect of digital financial services, digital content, digital values and skills and the effect of online advertising on the growth of small and medium enterprises. The sample size in this study was 1000 SMEs formally registered in the study area from where a sample of 300 was randomly selected. The questionnaire was employed for the purpose of data collection from which out of the 300 questionnaires distributed, 180 were returned representing a 60% response rate. Guided by the research objectives, the data collected through the questionnaire were sorted, coded and presented in graphical and tabular forms for the purpose of descriptive analysis. To determine the significance of the relationship between the dependent and independent variables, a regression analysis was carried out using the Statistical Package of Social Sciences (SPSS) version 24. The study established that digital financial services were significant factors in ensuring growth of SMEs in Kenya. The study concluded that Mobile payments have become a favorite means of making financial transactions. The study also established that Applications available for mobile digital devices is expected to increase enormously. Digital payment technology has increased over the last decade. From the findings, it was concluded that Consumers grow more familiar with the different payment systems available and encourage more transactions. The SMEs should explore the possibility of forming a management committee to streamline economic digitisation issues. It is recommended that the organization clearly spell out economic digitisation procedures and criteria. This can stir positive growth among SMEs establishments and can result in effective management. The Government and the various agencies should also make provisions for training programs for SMEs to empower them in terms of economic digitisation. The SMEs should not rely on external professionals to assist in digitisation as this may be expensive. It is also recommended that the SMEs should adopt digital financial services. E-commerce will ensure increased profitability for small and medium enterprises. They should also have Social networking sites, which have proved to be popular online activities in relation to time, spent. They should also adopt Innovation driven entrepreneurship as it contributes to increase in sales revenue, market share, efficiency, customers’ loyalty and fi rm profitability. Keywords: Digital Financial Services, Growth of SMEs in Kenya, Digitisation, Digital Payment Technology, E-Commerce ------------------------------------------------------------------------------------------------------------------------------------------------------------- I. INTRODUCTION There is no universally accepted definition of the term digital economy. However, a most common, albeit somewhat narrow understanding is the internet-based economy or the share of Gross Domestic Product (GDP) accounted for by the Information and Communications Technology (ICT) sector (Government of Kenya, 2019). The digital economy is a new business environment that enables enterprises to operate and provide services via the Internet and digital platforms. This allows corporations, people and government to interact seamlessly through government-to- community (G2C), enterprise-to-customer (B2C) and business-to - business interactions (B2B). Annual double figure growth around the world has been estimated in this newly emerging phenomenon. Economic and political forces are key to this rise, although they also stem from technological innovation. The upsurge in the Internet was associated with changes in the economy in the past decades and still forms the basis for growth in the digital economy. But new ICTs have been disseminating and underpinning economic changes successively since the 2000s and 2010s. Increased data usage intensity through data distribution and analytics of data and algorithmic decision-making, robotics, and new tech automation includes integration of associated sensors into more objects (the internet of things); new user devices (smartphones, moving devices, tablets, netbooks, portfolios, 3D printers; advanced digital models (digital platforms; cloud calculation, digital services). A series of digital accesses stem from these technologies: potential measures can be undertaken by an individual or organization driven by purposes in the environment within which they operate by the use of a digital system (Heeks 2017). These include: data-fiction (extension of the event on which data are stored), digitisation (transformation of every