Financial Literacy on Digital Banking and Financial Performance among Small and Medium- Sized Enterprises in Sri Lanka

Abstract

This study delves into how financial literacy shapes the relationship between digital banking and the financial performance of small and medium-sized enterprises (SMEs) in Sri Lanka. Quantitative data were gathered from 380 SMEs across nine provinces using a deductive approach. Utilizing SPSS, the study scrutinized how financial literacy moderates the connection between digital banking and SME financial performance. Results reveal a significant and positive moderating influence of financial literacy on this relationship. Furthermore, the study highlights the constructive impact of digital banking on SME development and financial performance in Sri Lanka. Importantly, participation in financial literacy programs provided by entrepreneurial support organizations emerges as a crucial factor in equipping SME owners with the requisite knowledge for making informed financial decisions. This research underscores the pivotal roles of financial literacy and digital banking in bolstering SMEs, advocating for their strategic utilization to elevate financial performance. Additionally, it fills an important gap in understanding by examining how mobile, digital, and digital banking affect SMEs in Sri Lanka. This emphasizes the crucial role of financial literacy in encouraging the adoption of digital banking and promoting SME growth in developing economies.