Effect of Financial Literacy on the Growth of Small and Medium Enterprises in Rwanda: A Case of Selected Small and Medium Enterprises in Nyarugenge District
Muroruhirwe Euphrosine & Thomas Tarus
University of Kigali,
https://orcid.org/0009-0008-0656-1702
Email: mureuph@gmail.com
Abstract: Financial literacy has been highlighted as a key driver for the growth of small and medium enterprises. However, there is a dearth of empirical research on this study in Rwanda, and specifically in Kigali city. The study examined the effect of financial literacy on the growth of SMEs in Nyarugenge District. The study is underpinned by the hypotheses that budgeting literacy, book keeping literacy and financial access literacy have no significant effect on the growth of selected SMEs. The target population was 2,489 SMEs from which a sample size of 345 managers were randomly selected. However, data was collected from 269 managers using the questionnaire. Data was analyzed through descriptive and inferential analyses. The finding for H01 shows that Budgeting literacy has no significant effect on the growth of selected SMEs in Kigali city, Nyarugenge District (β=.507; p<.05). Therefore, the first hypothesis is rejected. However, for H02, findings show that Book-keeping literacy has no significant effect on the growth of selected SMEs in Kigali city, Nyarugenge District (β=.058; p>.05). Therefore, the second hypothesis is accepted. For H03, Financial access literacy has no significant effect on the growth of selected SMEs in Kigali city, Nyarugenge District (β=.495; p<.05). Therefore, the third hypothesis is rejected. These findings hold relevance for policymakers, financial institutions, and business support organizations striving to enhance SME success. The recommendations include enhancing financial resource allocation skills, prioritizing effective financial reconciliation with bank records, improving banking literacy among business owners, seeking training for better financial decision-making, and staying updated on available funding opportunities.
