What question did this study set out to answer?

This research aims to explore how digital financial literacy and financial sophistication affect financial sustainability in manufacturing SMEs.

July 1, 2026Discover Sustainability0 citationsOpen Access

Digital financial literacy, financial sophistication and financial sustainability of manufacturing SMEs in Malaysia

HLHong Jin Liew AZAbdul Hadi Zulkafli HIHaslindar Ibrahim

Key Points

This research aims to explore how digital financial literacy and financial sophistication affect financial sustainability in manufacturing SMEs.
Quantitative research design using a self-administered questionnaire
Data collected from July 2024 to October 2024 with 113 responses from Malaysian Manufacturing SMEs
Analysis conducted using PLS-SEM via Smart PLS 4.1.1.2 software
Digital financial literacy positively influences financial sustainability.
Financial sophistication also positively impacts financial sustainability.
Risk governance and internal controls do not moderate the relationship between financial sophistication and financial sustainability.

Abstract

Due to the importance of Malaysian Manufacturing Small Medium Enterprises (SMEs), attainment of Financial Sustainability is essential. Previous findings evidenced that even a successful firm without the attainment of Financial Sustainability faces bankruptcy risk. Drawing upon the Knowledge-Based View (KBV) and Agency Theory, the aim of this research is threefold. Firstly, to investigate the influence of Digital Financial Literacy on Financial Sustainability. Secondly, to examine the influence of Financial Sophistication on Financial Sustainability. Thirdly, to determine influence of Risk Governance and Internal Controls in the relationship between Financial Sophistication and Financial Sustainability. The data were collected, using a self-administered questionnaire, from July 2024 to October 2024 based on a quantitative research design. A total of 113 responses from a cross-sectional survey from Malaysian Manufacturing SMEs was thereafter collected. Using Partial-Least Squares-Structural Equation Modelling (PLS-SEM) via the Smart PLS 4.1.1.2 software, the findings show that Digital Financial Literacy as well as Financial Sophistication has a positive influence on Financial Sustainability. Interestingly, Risk Governance and Internal Controls does not moderate the relationship between Financial Sophistication and Financial Sustainability. The theoretical and practical implications were presented alongside future research directions acknowledging the limitations of this study.

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