Enhancing Agri-SME Performance in Tanzania: The Role of Financial Management Practices and Digital Literacy

Agriculture based small and medium enterprises (Agri-SMEs) remain central to livelihoods and local economic development in Tanzania. Yet, many continue to struggle to grow and sustain their operations. One of the reasons often cited is the way these enterprises manage their financial resources, especially in the current era where business processes are increasingly influenced by digital tools. This study examined how working capital, financial reporting, and financing practices influence the performance of Agri-SMEs; and explored whether digital literacy plays a strengthening role in these relationships. Using a quantitative cross-sectional survey design and Partial Least Squares Structural Equation Modeling (PLS-SEM) on data collected from 427 Agri-SMEs, the findings established strong support for the model: both Financial Reporting Practices (β=0.393,p < 0.001) and Financing Practices (β=0.363,p < 0.001) significantly and positively influence Digital Literacy. Furthermore, Digital Literacy was confirmed as a primary driver of Agri-SME Performance (β=0.338,p < 0.001) and was found to significantly mediate the effects of reporting and financing practices on performance. Critically, the study revealed a conceptual misalignment regarding liquidity management, as Working Capital Management Practices did not demonstrate a statistically significant effect on Digital Literacy (β=0.071,p = 0.187) or Agri-SME Performance (β=0.024,p = 0.213), suggesting these routines are likely manual or informal in this context and fail to stimulate digital capability. Ultimately, the findings demonstrate that digital literacy functions as a sustainability enabling capability by allowing Agri-SMEs to translate structured financial practices into durable performance gains. In this context, sustainability is understood as the long term economic viability, resilience, and competitiveness of agri-based enterprises operating within increasingly digitalized financial and market systems.