Financial Literacy and Performance of Selected Small and Medium Enterprises in Gasabo District, Rwanda

Boniface Mugabo, Osiemo & Athanas Kengere
Mount Kenya University
https://orcid.org/0009-0005-9733-4289
Email: bonfacemugabo@yahoo.com

Abstract: The general objective of this study was to assess the effect of financial literacy on performance of selected SMEs in Gasabo District, Rwanda. The study was anchored on Social Learning Theory, Behavioural Finance Theory, and Knowledge Spillover Theory. Descriptive and correlational research designs were applied. The target population comprised 592 registered SMEs in Gasabo District, from which a sample of 239 respondents was selected using Slovin’s formula and simple random sampling. Data were collected through questionnaires and interviews, while SPSS version 25 was used for descriptive, correlation, and regression analysis. The response rate was 91.20%, as 218 questionnaires were returned out of 239 distributed. The findings showed that book keeping had a positive and statistically significant effect on SME performance (B = 0.258, t = 6.999, p = 0.000). Financial planning had the strongest positive and statistically significant effect on SME performance (B = 0.530, t = 12.766, p = 0.000). Debt management also had a positive and statistically significant effect on SME performance (B = 0.228, t = 6.331, p = 0.000). The study concluded that financial literacy significantly improves financial management practices and enhances the performance of selected SMEs in Gasabo District. The study recommended that SME owners should strengthen financial planning, maintain proper financial records, and apply responsible debt management, while financial institutions and government stakeholders should provide targeted financial literacy training programmes to support SME growth.