Effect of Financial Literacy on Effective Investment Decision-Making among Small and Medium Enterprises (SMEs) Managers in Rwanda: A Case Study of SMEs in Kayonza District

Justine Muhongerwa & Tarus Thomas
University of Kigali
Email: mujustine45@gmail.com

Abstract: This study investigates the effect of financial knowledge on the investment decisions-making among Small and Medium Enterprises (SMES) Managers in Kayonza District, Rwanda. A descriptive research design was employed, utilizing both quantitative and qualitative methods to collect data. The target population consisted of 289 individuals, and a sample size of 289 respondents was surveyed, including participants from various backgrounds, such as professionals, small business owners, and local investors. A total of 289 completed questionnaires were returned, along with interviews from 10 key informants. Data analysis was conducted using SPSS software version 25, incorporating Pearson correlation and regression analysis techniques. The results revealed a strong positive correlation between financial knowledge and investment decisions (r = 0.789), indicating that higher financial knowledge is linked to more informed and effective investment choices. Furthermore, regression analysis demonstrated that financial knowledge significantly predicts investment decisions, with a standardized beta coefficient of 0.403 and a p-value of 0.000. Despite the positive impact of financial literacy, challenges such as gaps in understanding more technical financial concepts, like interest rates and financial statements, were highlighted. The study recommends enhancing financial literacy programs focused on advanced financial topics, providing ongoing training for individuals, and strengthening support systems for improving investment decision-making among the population of Kayonza District.