Financial literacy and business sustainability of selected small business enterprises in Nyendo market, Masaka Municipality, Uganda

Abstract

The purpose of this study, conducted in Nyendo Market, Masaka Municipality, was to investigate the effect of Financial Literacy on the sustainability of business enterprises. The study is premised on the evidenced problem of increasing tendency of failure of small business enterprises to survive amidst the prevailing tough economic times. The objectives of the study were to; establish the effect of Financial Knowledge on Business Sustainability, establish the effect of Financial Skills on Business Sustainability and assess the effect of Financial Behaviour on Business Sustainability. The theory of planned behaviour (Ajzen, 1991)), was cited to guide the study. The study uses a cross sectional survey based on a random sample of 123 business Managers/business owners or employees out of the target population of 180 representing a 66.6% response rate. Data was gathered by use of questionnaires, key informant interviews and document reviews using the qualitative and quantitative approaches to data collection and analysis. At univariate/descriptive level, findings indicate that the respondents possess a given level of Financial Literacy in form of the knowledge skills and exhibited financial behaviour despite not having high levels of education but attribute their business failures to poor government policies like unfair taxes and poor planning for businesses. At a bivariate level, the correlations of independent variables (Financial knowledge, Financial skills and financial behaviour) showed a significant positive relationship (r = 0.670, p < 0.00). However, using the regression model, the findings revealed that Financial Behaviour was the best predictor of Business Sustainability with (Beta 0.401) followed by Financial Knowledge (Beta 0.240) and Financial Skills (Beta 0.240). This implies that Business Sustainability is best achieved through Financial Behaviour. Results of the study show that Financial Knowledge, Financial Skills and Financial Behaviour significantly affect Business Sustainability and therefore the business owners, business Managers and employees should endeavor to acquire the necessary Financial Knowledge, Financial skills and sustain the required Financial Behaviour in order to sustain their businesses. Recommendations include but not limited to the following; Masaka Municipality should organize financial Education programs to create more awareness in financial related areas, drawing more attention to equipping business Managers/Owners/employees with the necessary Financial Skills.