SMME Owners’ Financial Literacy and Business Growth

Abstract

The study sought to investigate a possible relationship between SMME owners’ financial literacy and business growth. Relationships between the SMME owners’ financial literacy and several aspects of possible business growth along the broad dimensions of financial, strategic and structural growth were also explored. To achieve this though, the study had to first establish whether SMME owners were financially literate or otherwise and whether their businesses showed some forms of growth. Primary data was collected in a cross-sectional manner, from a sample of small businesses drawn from a local chamber of commerce in the Gauteng Province of South Africa. The study empirically demonstrated that most small businesses showed signs of growth. The growth signs were however, predominantly along the financial and strategic growth dimensions rather than the structural dimension. Indeed, along the more tangible structural dimension, majority of SMMEs seemed to have stagnated. Curiously, the study was unable to demonstrate that a statistically significant relationship existed between owners’ financial literacy and the broad construct of business growth. Even when this broad construct was decomposed into different growth indicators drawn from the financial, strategic and structural growth dimensions, similar statistically insignificant relationships seemed to exist between the owner’s financial literacy and each of them, individually; the superficial interpretation of which could be that financial literacy of the SMME owner bears no relationship with the growth of the business; especially if finance experts can be retained as consultants or employees by the business.

DOI: 10.5901/mjss.2013.v4n13p397