Effect of Financial Literacy on Investment Decisions of Small Medium Enterprises in Rwanda: A Case of Coffee Shops in the City of Kigali

Financial literacy encompasses the possession of awareness, knowledge, attitudes, and skills essential for effective money management. It plays a pivotal role in fostering financial development and driving economic growth within a country. With these considerations in mind, it becomes imperative to evaluate the financial knowledge of the younger generation, particularly undergraduate students, who are envisioned as the future investors and catalysts for economic transformation. This research aimed to assess the impact of financial literacy on investment decisions among Small and Medium Enterprises. The study population comprises 120 coffee shop managers and owners, was selected through random sampling. The first objective was to assess the effect of financial awareness on investment decisions among coffee shops in the City of Kigali. The Second objective was to assess the effect of financial knowledge on Investment Decisions among Coffee shops in the City of Kigali. The third objective was to assess the effect of financial skills on investment decisions among Coffee shops in the City of Kigali. The fourth objective was to assess the effect of financial attitude on investment decisions among Coffee shops in the City of Kigali. The study adopted Inferential statistics Analysis design in order to interpret data. Therefore, both quantitative (questionnaire) and qualitative (interview) research techniques were used by the researcher in order to collect data (information) related to the objectives of the study and for data analysis. The findings showed that the coefficient of correlation (R-value)=0.678. This indicates that there is a moderate and positive relationship between the financial literacy and investment decisions among coffee owners and/or managers in the city of Kigali. Findings revealed that the financial awareness had a positive coefficient of the estimate which was significant (β= 0.212, p<0.05) at 5% level of significance. Furthermore, financial knowledge had a positive coefficient of the estimate which was significant (β=0.243, p< 0.05). Also, skills had a positive coefficient of the estimate which was significant (β= 0.232, p<0.05). Moreover, financial attitude had a positive coefficient of the estimate which was significant (β=0.313, p<0.05). Coffee shop owners should invest in ongoing financial education and training to enhance their financial knowledge and skills. This can include courses, workshops, and access to financial experts to ensure they stay updated with industry trends. Coffee shop owners should seek guidance on ROI calculation methods and tools to make more informed growth decisions. Improving the ability to assess the return on investment (ROI) for various business expansion strategies is crucial.