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Assessing the Effect of Financial Literacy Among Managers on the Performance of Small-Scale Enterprises

The small-scale sub-sector continues to be a fundamental catalyst for job creation and economic growth in Ghana. About 35 per cent of labour is provided by the sub-sector and shows the importance of harnessing its potentials in developing the Ghanaian economy. It has been established that financial literacy has a significant influence on whether or not small-scale enterprises succeed. Yet, the exact effect of financial literacy on small-scale enterprise performance has not been fully identified in Ghana, hence the need for the present study. This study examines the effect of financial literacy (awareness, attitude and knowledge) of managers on the performance (financial and non-financial) of small-scale enterprises in the La Nkwantanang Madina Municipality of Ghana. Primary data were obtained from 200 small-scale managers through structured questionnaires. The data were analysed using structural equation model. The results revealed a significant effect of financial literacy on firm performance (both financial and non-financial performance). Also, all the three components of financial literacy (awareness, attitude and knowledge) have a significant positive effect on both financial and non-financial performance. However, individual characteristics (age of the individual, educational level and experience) have no significant effect on financial performance, whereas tax becomes useful when used as a regulatory tool of small enterprises. Capacity building programmes are therefore recommended to increase financial literacy among managers/owners of small-scale enterprises.

Author - Joseph Kwadwo Tuffour, Awurabena Asantewa Amoako, Ernestina Otuko Amartey
Journal - Global Business Review

Source - https://doi.org/10.1177/0972150919899753