Financial Literacy and Performance of Small and Medium Scale Enterprises in Damaturu Metropolis, Yobe State

Abstract

ABSTRACT
This study investigates the effect of financial literacy on the performance of SMEs in Damaturu Metropolis, Yobe State. Financial literacy was conceptualized through financial knowledge, financial behaviour, and financial experience, while performance was measured using both financial (profitability, revenue, and asset growth) and non-financial indicators (customer satisfaction, employee welfare, and sustainability). The study employed a survey research design, and data were collected from 181 SMEs randomly sampled from 335 enterprises registered with the Small and Medium Scale Industry Credit Board (SMSICB) in Damaturu. Structured questionnaires were administered, and the data were analysed using Partial Least Squares–Structural Equation Modelling (PLS-SEM). Findings reveal that financial knowledge, financial behaviour, and financial experience each have a significant positive effect on SMEs’ performance. Specifically, financial knowledge enhances decision-making and resource allocation, financial behaviour strengthens budgeting and operational efficiency, while financial experience improves risk management and opportunity recognition. The study concludes that financial literacy is a critical determinant of SME survival and growth in Damaturu. It recommends that government agencies, SME associations, and financial institutions develop targeted training programs and policies to strengthen the financial capacity of entrepreneurs for sustainable business performance.
 
Keywords: Financial literacy, SMEs performance, Financial knowledge and Financial behaviour.