Assessing the effects of financial literacy on the performance of small and medium enterprises in Windhoek
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Date
2022
Authors
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Journal ISSN
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Publisher
University of Namibia
Abstract
Financial literacy is one of the key factors for the effective operation of businesses including SMEs. Thus, the lack of financial training (financial knowledge) and poor financial management capacity could be detrimental to the effective management of business resources. This study assessed the effects of financial literacy on the performance of small and medium enterprises (SMEs) in Windhoek. For data collection, the study drew a sample of 100 registered SMEs (50 SMEs that attended the financial literacy training and 50 SMEs who did not attended the financial literacy training) using stratified and simple random sampling methods and structured
questionnaires. The study applied an ordinary least squares technique to examine the determinants and effects of financial literacy on the performance of SMEs in Windhoek. The results suggest that tertiary education and financial literacy training significantly influences financial knowledge. The study finds that attending the financial literacy training programme significantly increases the composite score index of financial knowledge by 0.04 units while being 30 – 50 years old significantly increases the index by 0.07 units. Completing tertiary education significantly increases the financial knowledge index by 0.10 units. Therefore, ensuring participation in the financial training initiative and educational attainment of individuals enhances the level of financial knowledge of SMEs. Financial literacy training and financial knowledge are both important determinants of the performance of SMEs in Windhoek. Specifically, a unit increase in the composite index of financial knowledge significantly increases the composite score of business performance by 0.16 units and attending the financial literacy training significantly increases the composite index of business performance by 0.14 units. Gender, number of dependents, age of business, business type, business ownership and educational attainment are also important in explaining the performance of SMEs. This suggests that policy options that promote financial literacy and financial knowledge will enhance the performance of SMEs in Windhoek.
Description
A thesis submitted in fulfilment of the requirements for the degree of
Master of Science (Accounting & Finance)
Keywords
Financial management, Financial literacy, Financial knowledge