The impact of financial literacy on the performance of Small and Medium-sized Enterprises (SMEs): A review of literature

Tshepang Molosiwa and Jacob Holland
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Tshepang Molosiwa: Lecturer, School of Business & Leisure, Botswana Accountancy College, Gaborone, Botswana
Jacob Holland: Senior Lecturer, School of Business & Leisure, Botswana Accountancy College, Gaborone, Botswana

International Journal of Research in Business and Social Science (2147-4478), 2025, vol. 14, issue 3, 320-332

Abstract: This study investigates the impact of financial literacy on small and medium-sized enterprises (SMEs), focusing on its role in enhancing financial decision-making, access to finance, fintech adoption, and risk management. Grounded in Resource-Based Theory (RBT) and Human Capital Theory (HCT), financial literacy is positioned as both a strategic capability and a form of human capital that strengthens firm resilience and competitiveness. A systematic literature review was conducted, synthesising evidence from 18 empirical studies published between 2016 and 2024. Findings reveal that financial literacy significantly improves SMEs’ ability to budget, manage debt, and evaluate investment decisions. It also enhances creditworthiness through improved financial record-keeping, thereby facilitating access to financing. Moreover, digital financial literacy is identified as a catalyst for fintech adoption, which contributes to cost reduction, operational efficiency, and financial transparency. The study concludes that targeted financial literacy interventions are essential, especially in developing economies where SMEs face structural constraints. It calls for integrated financial education strategies involving policymakers, financial institutions, and SME development agencies. Further empirical research is recommended to examine the long-term and digital dimensions of financial literacy as a driver of sustainable SME performance. Key Words:Financial literacy, SME performance, fintech adoption, financial decision-making, human capital

Date: 2025
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