Financial Literacy and Financial Performance of SMEs

The aim of this study is to examine the effect of financial Literacy on the financial performance of small and medium Size enterprises (SMEs). In order to attain the aforementioned objective, we use a quantitative research approach. Survey questionnaires were used to collect data from a sample of 145 SMEs sampled using convenient sampling. The researcher used structural equation modelling (SEM) as statistical tool to analyse collected data. The results of the findings revealed that financial knowledge, financial behaviour and financial attitude have a positive effect on the financial performance of SMEs. The study concluded that financially literacy of SMEs owners contributed positively to their financial performance. The study recommends that owner-managers of SMEs must make a conscious effort to improve upon their financial literacy by attending workshops, conferences and programs on financial literacy. Financial education programmes should be organised that will create more financial knowledge, attitudes and behaviour.