<b>FROM AWARENESS TO INVESTMENT: UNPACKING THE RISK-BASED PATHWAY IN FINANCING DECISIONS</b>

This research undertakes an exploration of how the financial awareness is connected to the financing decisions of Micro, Small and Medium Enterprise (MSME) in Pakistan. The gaps that are addressed are significant because they fill a void in how we understand the way that financial literacy, risk knowledge and attitude are transformed into real world financing behaviors particularly through mediating constructs like risk perception, risk tolerance and intended behavior. A conceptual model integrating both cognitive and affective drivers of financing decisions is proposed and tested based on grounded behavior finance and decision making theory. Data from 200 MSME owners from different sectors were used to entail a quantitative, cross sectional design. Data analysis was supported by reliability and model fit testing of the structural equation modeling (PLS-SEM). The findings show that there is a strong relationship between financial literacy and risk knowledge and financial risk perception, risk tolerance, and intended behavior and financial decisions. Also important, risk perception acted as the key mediator, while financial literacy had a stronger indirect than direct effect on financing decision. In variance it explained 64% (R² = 0.64). Through the model presented in this study, we contribute to theory and practice in that it is behaviourally rich and offers actionable insights for policy makers, financial educators and MSME development programmes in emerging markets. Financial Literacy, Risk Perception, Risk Tolerance, MSMEs, Financing Decision, Behavioral Finance