Financial Literacy, Access to Digital Finance and Performance of Smes in Selected Commercial Areas in The Central Region of Ghana

Abstract

ABSTRACT The study assessed the relationship between financial literacy, digital finance and SMEs' performance in commercial areas of the Central Region. The specific objectives were to analyse the level of knowledge and use of digital platforms by SMEs; assess the relationships between financial literacy and access to digital finance; assess to digital finance and performance of SMEs. It was also to analyse the mediating effect of access to digital finance on the relationship between financial literacy and performance of SMEs. Using a quantitative research approach data was gathered from 400 SMEs in Cape Coast, Mankessim, Assin Fosu, Agona Swedru and Kasoa. Self-administered questionnaires were shared and a purposive sampling technique was employed. Using SPSS to test descriptive statistics, results from objective one indicates that, managers of SMEs in the study areas have more knowledge and utilize Mobile Money more than any of the country's digital platforms. The relationships between financial literacy, access to digital finance and SMEs' performance were assessed using PLS-SEM. Financial literacy was found to have a positive and significant impact on access to digital finance and access to digital finance also had a positive and significant impact on performance. Lastly access to digital finance partially mediates the relationship between financial literacy and SMEs' performance. This means, access to digital finance is just as important as having financial knowledge in terms of improving performance, therefore using digital platforms to trade would enhance firm performance. Digital trading platform providers should enhance their advertising and focus on making their platforms easy to use for the average consumer