Digital Financial Innovation and the Growth Performance of Small and Medium-Sized Enterprises: Evidence from Kenya

Digital financial innovation is frequently presented as a catalyst for small and medium-sized enterprise (SME) growth, yet the relationship between access to digital financial services and realised business performance remains uncertain. This article examines the Kenyan experience through an integrative review of peer-reviewed studies and documentary analysis of official financial inclusion and enterprise statistics. The analytical framework distinguishes mobile money and merchant payments, mobile banking, digital credit and digital financial capability, and traces their proposed pathways to sales, liquidity, investment, innovation and employment. Kenya offers an instructive setting because of the depth of its mobile-money ecosystem and the persistence of enterprise financing constraints. The 2024 FinAccess survey reports formal financial access of 84.8% and mobile-money usage of 82.3% among adults; these are population-level indicators rather than measures of SME growth. Empirical evidence shows heterogeneous effects: a Kenyan randomised trial identifies improvements in access to mobile loans following greater electronic-payment usage, whereas a comparative business study associates mobile-money use with innovation but not superior overall business performance. The article argues that digital finance enables growth conditionally, depending on product suitability, affordability, digital capability, business characteristics and complementary markets. Policy priorities include transparent pricing, interoperable merchant payments, responsible credit and enterprise-level longitudinal evaluation. The study contributes a cautious, mechanism-based interpretation of Kenya’s digital finance experience without treating adoption as proof of causality.