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Financial literacy among small and medium enterprises in Zimbabwe.

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Global concerns about financial literacy have heightened following the 2007/8 global financial crisis where it became apparent that lack of financial literacy was one of factors that contributed to the detrimental financial decisions taken. There is global recognition that poor financial decisions have a harmful overspill impact on financial and economic stability. In light of the importance of financial literacy in all economies, this study was conducted to ascertain the level of financial literacy among Small and Medium Enterprises (SMEs) in Zimbabwe that are key contributors to economic growth. The study was motivated by the need to develop a comprehensive financial literacy strategy which, if implemented, would enable business players to operate in the current financial landscape characterised by an influx of complex financial products. This research sought to relate financial literacy to financial product awareness and utilization and describe the financial behaviour of SMEs and their patterns of debt management. While governments across the world have expressed concern about the financial literacy levels of different population cohorts and have launched financial education programmes, Zimbabwe is lagging behind. Despite numerous initiatives by the government to support SMEs, business growth remains subdued, the sector remains financially excluded and many businesses fail within the first five years of operation. Research indicates that business failure is a result of poor financial management, hence it became necessary to establish the level of financial literacy of SMEs so that a comprehensive financial literacy strategy could be developed to address the phenomenon. A quantitative cross sectional research design was employed, with data collected by means of a questionnaire administered to a sample of 384 SMEs in Harare and Bindura district. The study‟s findings revealed that financial knowledge was low, notably among the young and aged, those who are single, separated or divorced and, surprisingly, those with more business experience. Significant differences were noted across age groups, business sectors and years of experience in business. Although SMES exhibited positive and somewhat positive financial behaviour, a correlation analysis between financial literacy and financial behaviour revealed a weak positive relationship, calling for the need to seek strategies to address financial literacy. The study also established that SMEs are not aware of many financial products, nor do they utilize them. An association between financial knowledge and financial product awareness was noted, with those with high financial knowledge being aware of many financial products. However, no association was noted between financial knowledge levels and financial product utilization. Regarding debt behaviour, the research established that SMEs were not comfortable with their debt positions but because they were aware of the consequences of default, they made sure they met their financial obligations on time. In times of financial distress, friends and relatives were the main sources of funding and loans were beginning to gain popularity due to the increase in the number of micro finance institutions. On the whole, the research concluded that there is low financial literacy and low utilization of financial products among SMEs, but positive debt behaviour. The study recommended the introduction of financial education for SMEs and the development of the curriculum thereof, the increase in awareness campaigns, and an increase in access to information on financial products and services by the SMEs.


Doctoral Degree. University of KwaZulu-Natal, Durban.