Subjective financial literacy and financial management practices among Agri-SMEs in Tanzania

Purpose The study investigates the influence of Subjective Financial Literacy on the adoption of financial management practices among small and medium-sized enterprise (SME) owner managers. Specifically, it examines how perceived financial competence impacts four key domains: Working Capital Management Practices, Financing Practices, Capital Budgeting Practices and Financial Reporting Practices. The objective is to assess whether subjective financial literacy acts as a meaningful factor associated with of financial behavior within entrepreneurial settings. Design/methodology/approach A quantitative, cross-sectional research design was employed using data collected from SME owner managers. The analysis was conducted using partial least squares structural equation modeling (PLS-SEM) to evaluate the structural relationships between Subjective Financial Literacy and the four dependent constructs. Reliability, validity, multicollinearity and predictive relevance were assessed to ensure robustness of the model. Findings The results revealed statistically significant positive relationships between Subjective Financial Literacy and all four financial management practices (β = 0.282–0.375, p < 0.001), with the model explaining between 7.9% and 14.0% of variance across domains. The strongest effects were observed in Working Capital Management Practices and Financing Practices, suggesting that self-perceived financial competence plays a greater role in domains involving operational liquidity and funding decisions. The influence on Capital Budgeting and Financial Reporting Practices, though significant, was more moderate, indicating that formalized or externally governed processes may dilute the behavioral impact of perceived literacy. Research limitations/implications This study is based on cross-sectional data, which limits causal interpretation of the observed relationships. Longitudinal research is needed to assess whether improvements in subjective financial literacy produce sustained changes in financial management behavior over time. Additionally, the study focused solely on SME owner-managers, which may constrain generalizability to larger firms or other sectors. Future research should investigate moderating variables such as firm size, digital financial tool adoption and access to finance to better understand the contextual boundaries within which subjective financial literacy influences financial practice adoption. Originality/value This study contributes to the growing body of research on behavioral finance and SME capability by empirically validating the role of Subjective Financial Literacy as a domain sensitive predictor of financial practice adoption. It emphasizes the necessity of integrating psychological constructs such as perceived competence into financial literacy programs and policy interventions targeting SMEs.