Analysing the need for financial literacy in micro-enterprises in the City of uMhlathuze, KwaZulu-Natal.

Abstract

Small, Medium and Micro-Enterprises (SMMEs) have a fundamental role to play in the South African Government’s National Development Plan. Jobs created by this sector are expected to alleviate poverty and drive economic transformation. Financial literacy is key to the sustainability of SMMEs. The main objective of the study was to establish the financial literacy needs of micro-entrepreneurs in the City of uMhlathuze, KwaZulu-Natal. The participants' financial literacy level was measured, and areas of financial literacy weakness were identified. The possibility of a significant relationship between financial literacy and the gender, age, education, and years in business of micro-entrepreneurs was also explored. A quantitative research approach was used to gather and analyse primary data collected from fifty micro-entrepreneurs in the City of uMhlathuze. A non-probability sampling technique was used, and hence the results are unique to these participants and should not be generalised. The study revealed a high level of financial literacy. The weakest domains of financial literacy were financial planning, budgeting and control; risk management; and understanding funding sources. Additional weaknesses include insufficient use of digital technologies and inefficient use of financial investment products. Inadequate knowledge of external funding sources and prevalent macro-environmental conditions were also revealed. Lastly, the study concluded that the demographic factors tested do not serve as suitable predictors of an individual’s financial literacy score. Financial education interventions are recommended to support the sustainability of SMMEs.