Abstract:
A survey was administered in Jimma town SMEs to identify the financial literacy level
among SMEs owners and its impact on performance of their business. Since majority of
the respondents were male, age group between 26-45 and at least professional certificate
of educational level, existing financial literacy gap or performance represents these
categories. Regardless of existence or absence of finical literacy, current status of the
enterprises as compared to their initial condition was assessed. The result shows that
most of the enterprises showing positive growth in terms of their market share, volume
sale, and in overall performance. Furthermore, financial literacy knowhow and its level
on the enterprises was evaluated through assessing financial management system, saving
practice, record keeping experience and budget management capacity of the enterprises.
Results revealed that, enterprises are still showing limitations in terms of efficient
financial management skill, record keeping as an information source to make decision,
sufficient saving for further expansion of the enterprises, and limited budget planning
knowhow and skill for monitoring purpose. Despite those limitations, enterprises
exhibiting a positive growth which might be associated with conventional business
practices. Had it been the traditional trend further supplemented with good financial
literacy practices, those enterprises in a positive trend could show a remarkable growth.
This is because, the correlation result confirms that, there is a positive corelation of
financial literacy on performance of the enterprises. Eventually, absence of relevant and
consistent financial literacy related training for the enterprises identified as a critical
limiting factor to support the day to day efficient business of the enterprises. In order to
enhance their performance, enterprises should be supported with trainings in areas of
financial management system, saving culture and discipline, good record keeping
practices and efficient budget planning skill.
