EFFECT OF FINANCIAL LITERACY ON THE FINANCIAL PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES (SMES) IN BORNO STATE NIGERIA
Abstract
ABSTRACT
Small and Medium Enterprises (SMEs) play a vital role in economic growth and poverty reduction, yet many in Borno State struggle with poor financial management. This study examined the effect of financial literacy on SME performance, focusing on record-keeping, debt management, and use of financial services. A survey design was adopted, and 94 questionnaires were distributed to SME owners in Maiduguri, with 79 valid responses analyzed. Results showed that 87.3% of SMEs practiced record-keeping, and frequent updates were linked to higher profitability. Debt management practices revealed that 68.4% owed loans, but only 57% had repayment plans, though confidence in repayment was relatively high. Findings also showed that 79.7% used financial services, mainly savings, business accounts, and mobile banking, which improved cash flow and revenue generation. The study concludes that financial literacy significantly enhances SME performance but gaps remain in record coverage and repayment discipline. It recommends targeted training for SME owners, improved access to inclusive financial products, and policies to support sustainable financial practices. Strengthening financial literacy will enhance SME resilience, stability, and long-term growth in Borno State.
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