Financial Literacy and Financial Inclusion: A positivist view of Proprietors of Small and Medium Enterprises in Fort Portal City, Western Uganda

Abstract

Purpose: The study aimed at examining the relationship between financial literacy and financial inclusion among proprietors of SMEs in Fort portal City, Western Uganda. Methodology: The study was anchored on a positivist paradigm, adopting cross-sectional and correlational designs. One hundred sixty-five proprietors of small and medium enterprises (SMEs) were purposively selected from 297 proprietors of registered SMEs operating in all Divisions of Fort Portal City in Western Uganda. Data were collected using a structured self-administered questionnaire from the proprietors who formed the unit of inquiry per SME. Pearson correlation and standard regression were used as the primary data analysis techniques. Findings: The study established that financial literacy is significantly positively associated with financial inclusion. Financial literacy accounted for 28% of the variance in financial inclusion among proprietors of SMEs in Fort Portal City. Unique contribution to theory, practice, and policy: The study uniquely contributes to financial inclusion literature by providing further evidence on the positive relationship between financial literacy and financial inclusion among proprietors of SMEs in Fort Portal city, Western Uganda. The study findings have supported the financial literacy theory of financial inclusion, which assumes that “financial literacy increases people’s willingness to participate in the formal financial sector.” It was recommended that proprietors of small and medium enterprises orient their strategic decisions towards increasing their financial literacy to improve their financial inclusion.