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Financial literacy and Financial Performance of Micro and Small Enterprises (MSEs) in Mbarara city, Uganda

Title

Financial literacy and Financial Performance of Micro and Small Enterprises (MSEs) in Mbarara city, Uganda

Authors

Christone Arinda 

Keywords

  MSEs | Financial Performance

Publication Details

 Vol: 6; No: 4; Dec 20 | ISSN: 2455-3921

Abstract

The financial performance of MSEs is a major concern for Uganda with high solvency rate. To address this, Financial literacy has been acknowledged as a key concept required for the survival of these enterprises. However, the extent to which it affects financial performance of MSEs hasn’t been fully explained by existing literature thus the need for further investigation. Basing on gist of Resource Based Theory, the study sought to examine how financial literacy affects financial performance drawing an empirical investigation on MSEs in Mbarara city in Uganda. A cross sectional survey design was deployed where 285 registered MSEs were sampled from a population of 1100 registered MSEs. Financial literacy variables considered were book keeping, debt management and Budgeting and financial performance was measured by revenue growth, market growth and profit growth. Data was collected using a questionnaire and some extracted from reports and financial statements from these enterprises. Data corrected was statistically analysed and correlation and multiple regression were run to establish the effect and the relationship between the study variables. With the models developed, the study established that financial literacy significantly affects financial performance of MSEs. The study further concluded that financially literate MSEs perform better than financially illiterate ones and recommended that government and development partners should extend financial literacy training programs through workshops to MSEs aiming at instituting skills and knowledge for improved financial performance.

Correspondence

Christone Arinda, Department of Accounting and Finance, School of Management and Entrepreneurship, Kyambogo University, Uganda.

Citation:

Christone Arinda “Financial literacy and Financial Performance of Micro and Small Enterprises (MSEs) in Mbarara city, Uganda”. International Journal of Business and Economics Research (IJBER) 6.4 (2020): 536-551.