Determinants of basic and advanced financial literacy among micro and small enterprise (MSE) owner-managers

Financial literacy is a critical competence for MSE entrepreneurs, laying the foundation for identifying opportunities, navigating risks, and ensuring business sustainability. Grounded in Financial Socialization Theory, Human Capital Theory, and Contingency Theory, this study examines the factors determining financial literacy among MSE owner-managers. Using an explanatory quantitative research design, primary data were collected from 438 MSE owner-managers through a self-administered questionnaire. Participants were selected through a multistage sampling method that combined cluster, stratified, and convenience techniques. Data were analyzed using descriptive statistics to summarize sample characteristics and fractional logit regression to examine the determinants of basic, advanced, and overall financial literacy. OLS regression was also performed as a robustness check. The findings indicate that the determinants of financial literacy vary across its basic, advanced, and overall measures. Basic financial literacy is significantly associated with the owner-manager’s age, education, financial experience, religious affiliation, and type of business. Gender, education, financial experience, and the type of business are statistically significant predictors of advanced financial literacy. Overall financial literacy is significantly associated with gender, age, education, financial experience, firm age, and the type of business. The findings carry several theoretical, managerial, and policy implications for strengthening financial literacy among MSE owner-managers, improving the quality of their financial decisions, and maximizing the sector’s contribution to national economic development.