The effect of financial literacy on the performance of small and medium enterprises in Uganda

Abstract

The study assesses the effect of financial literacy on the small and medium enterprises in Ntinda subcounty, Nakawa division. The main objective of the study was to assess how financial literacy affects the performance of small and medium enterprises. Financial literacy was varied in terms of risk management, budgeting and financial record keeping where as the performance of small and medium enterprises was varied in terms of growth and efficiency. The researcher used a survey research design involving a qualitative and quantitative approach and a simple random sampling technique where samples were randomly selected from a sample of 56 respondents; data was collected by use of interviews and questionnaires. The collected data was analyzed using SPSS version 16.0 for questionnaires, while categorization was used for interviews. The findings of the study indicated that financial literacy determines efficiency in management of budgets, risk control and acquire financial record keeping skills that will eventually enhance the performance of the business. This makes financial literacy critical to SME performance. In conclusion, financial literacy has a positive influence on the performance of small and medium enterprises. The study concludes that financial literacy enhances knowledge on effective management of budgets, minimization of risks and maintenance of financial records. The study recommends that financial literacy should be improved by focusing on aspects such as budget management, financial record keeping hence increasing the growth and efficiency of business operations.