Title:
THE IMPACT OF FINANCIAL LITERACY OF OWNERS ON THE PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES IN SRI LANKA

Authors:
P.A.N.S. Anuradha, Sri Lanka

Abstract:

The developing countries' Small and Medium Scale Enterprises have stagnated instead of expanding and sophisticating. The chosen population involves the women entrepreneurs in Sri Lanka in regard to the Women Entrepreneurs Finance Initiative (We-Fi). The study aims at studying the impact of financial literacy on entrepreneurs' performance. The financial literacy and corporate performance composite index were computed, and a regression analysis was carried out to determine the effect of financial literacy on corporate performance. The study found that financial literacy in Sri Lanka has a statistically significant impact on the business performances of the selected sample. Through improved financial literacy, the SME owners along with their ventures can therefore boost their performance. The research found that financial literacy allows entrepreneurs to escape corporate failure resulting from poor financial decision-making. However, only general analysis and observational studies have examined the impact of financial literacy on entrepreneurs' business performance. Therefore, financial literacy is an essential component of knowledge in our modern society for entrepreneurial performance. Entrepreneurs with insufficient financial literacy are therefore more likely to make financial decisions with negative effects on their businesses. Nevertheless, it can be a crucial factor to improve financial literacy education both for primary and tertiary institutions.