Effects of financial literacy knowledge on the profitability of small and medium scale enterprises in Uganda, Kira Municipality

Abstract

This dissertation examines the influence of financial literacy knowledge on the profitability of SMEs within Kira municipality. The study addresses a gap in existing literature by investigating how varying levels of financial literacy among SME owners impact their business profitability. Through a mixed-method approach, including surveys and interviews, data is collected from a diverse sample of SMEs operating in Kira municipality. The research begins by assessing the financial literacy levels of SME owners and managers, utilizing a comprehensive questionnaire designed to evaluate their understanding of key financial concepts and practices. Subsequently, the study delves into the financial performance of these SME considering their profits. By employing statistical analysis, the study explores potential correlations between financial literacy levels and business profitability. The collected data are then subjected to rigorous statistical analysis, encompassing correlation analysis, regression modelling and other relevant techniques. The findings of this dissertation have implications for SMEs in Kira municipality and beyond, as they provide insights into the importance of financial literacy education for sustainable business growth. By identifying the link between financial literacy and profitability, this study contributes to the existing literature on SME development and offers recommendations for policymakers, business support organizations and educators to enhance financial literacy programs tailored to the needs of SMEs. The findings of this study reveal a significant positive correlation between the level of financial literacy and SME profitability. Furthermore, qualitative insights shed light on the specific financial literacy components that most impact profitability, such as budgeting, cashflow management, and investment decision-making. Ultimately this research aims to empower SME owners and promote the economic resilience of Kira municipality’s business landscape.