The relationship between financial literacy and financial performance of registered small enterprises

Peter Mogale; Mulatu F. Zerihun; S.F Ngonyama; Ngonidzashe Chiranga

doi:10.36096/ijbes.v7i1.618

Authors

Peter Mogale Tshwane University of Technology
Mulatu F. Zerihun Tshwane University of Technology https://orcid.org/0000-0003-4797-928X
S.F Ngonyama Tshwane University of Technology https://orcid.org/0009-0007-2518-9259
Ngonidzashe Chiranga Tshwane University of Technology https://orcid.org/0000-0001-8150-0282

DOI:

https://doi.org/10.36096/ijbes.v7i1.618

Keywords:

Financial literacy, Financial performance, Small enterprises, Financial knowledge, GA- Rankuwa

Abstract

This study sought to examine the correlation between the financial literacy of small business proprietors and the performance of their enterprises in the northern region of Tshwane Ga-Rankuwa. The research utilised a quantitative methodology, employing a standardised questionnaire distributed to small business owners. A quantitative methodology underpinned the study's aims in examining a potential association between financial literacy and business performance. Data were examined via STATA/small enterprise, version 17. Descriptive and inferential statistics were conducted to analyse the distribution of study participants and their financial literacy. Multiple linear regression evaluated the relationships between predictor factors (socio-demographic characteristics and financial literacy) and return on assets. The small firms reported low to moderate profits and elevated returns on assets (ROA). Substantial correlations are present among family size, income level, and ROA, contesting the assumptions that education and experience are predictors of performance. Financial performance exhibits good connections with financial literacy and access to financing; nevertheless, the minor associations with knowledge and attitude highlight crucial dimensions of performance. Small firms must to seek methods to enhance profitability and invest in financial literacy. Authorities ought to enhance access to funding for small firms and should evaluate the relevance and quality of education concerning its contribution to financial literacy. The research demonstrated the significant influence of financial literacy and access on forecasting financial performance. Nonetheless, the correlation between financial literacy, attitudes, and actual financial results was less pronounced than anticipated.

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