Effect of Financial Literacy on Financial Performance of Small and Medium-Sized Enterprises in Kigali City, a case of Small and Medium-Sized Enterprises in Nyarugenge District
DOI:
https://doi.org/10.53819/81018102t2297Abstract
The study focused on assessing the impact of financial literacy on the financial performance of Small and Medium Enterprises (SMEs) in Nyarugenge district, Kigali city. Financial literacy, encompassing financial planning, record-keeping, and knowledge of financial access, was investigated to understand its influence on SME performance. Using a correlational design and quantitative methods, the study involved 211 SME proprietors across trade, manufacturing, and service sectors in Nyarugenge district. The research utilized a questionnaire as the primary data collection tool, ensuring a 100% response rate. Purposive and convenience sampling techniques were employed for participant selection. Findings indicated a significant relationship between financial planning skills and the financial performance of SMEs in Nyarugenge district, suggesting that proficient financial planning positively impacts financial outcomes. Similarly, effective record-keeping skills were linked to improved financial performance among surveyed SMEs. Additionally, knowledge of financial access significantly affected the financial performance of SMEs, indicating that understanding funding sources contributes to better financial outcomes. The study underscores the importance of financial literacy in enhancing SME success and advocates for tailored training and support in financial planning, record-keeping, and understanding financial access. These findings hold significance for policymakers, financial institutions, and business support organizations aiming to bolster SME accomplishments. Recommendations for SMEs in Nyarugenge district include enhancing financial resource allocation skills, prioritizing effective financial reconciliation with bank records, improving banking literacy among owners, seeking training for better financial decision-making, and staying updated on available funding opportunities. These actions aim to optimize fund utilization, ensure transparency and maximize financial opportunities.
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