Business sustainability of SMEs in emerging markets and entrepreneurs’ financial literacy

Financial literacy is increasingly recognized as a determining factor for the sustainability of small and medium-sized enterprises (SMEs), particularly in emerging markets characterized by economic volatility, limited access to financing, and structural uncertainty. This study investigates the relationship between entrepreneurs’ financial literacy and the sustainability of SMEs in the commercial sector of Guayaquil, Ecuador. A mixed-methods approach was adopted using a nonexperimental, cross-sectional design with an explanatory–correlational scope. The quantitative phase involved a survey of 392 entrepreneurs and SME stakeholders selected through probabilistic sampling (N = 392; calculated minimum: n = 264, G*Power 3.1), complemented by semistructured interviews with three experts in business financial management. The results indicate significant gaps in key financial competencies, particularly in cash flow management, budgeting, and interpretation of financial statements, leading to reactive and informal financial decision making. The internal consistency of the instrument was high for both the financial literacy subscale (α = 0.893) and the financial management practices subscale (α = 0.915). Statistical analysis indicates a strong and significant positive association between financial literacy and sustainability-oriented financial management practices (ρ = 0.808; p < .001), positioning financial literacy as a key factor associated with SME sustainability in emerging markets. These findings are discussed in the context of recent international evidence from Ethiopia, Nigeria, Saudi Arabia, and Southeast Asia, and specific policy implications for Ecuador’s SME development ecosystem are derived.