Financial literacy and performance of micro and small enterprises: The mediating role of fintech adoption

Amid rapid technological change and complex financial markets, integrating knowledge resources and technological capabilities is a strategic way to address the challenges facing micro and small enterprises and to bolster their performance. Drawing on the knowledge-based view and the dynamic capabilities view, this study examines the relationship between financial literacy and MSE performance, with FinTech adoption as a mediator. The study used a self-administered questionnaire to collect data from 438 MSE owner-managers selected through multistage sampling. Using partial least squares structural equation modeling (PLS-SEM), we find that financial literacy has a significant positive association with both FinTech adoption and MSE performance. FinTech adoption is also positively associated with MSE performance. Furthermore, FinTech adoption partially mediates the relationship between financial literacy and MSE performance. The findings reinforce the need to elevate financial literacy and FinTech adoption among MSEs to promote their performance and enhance their contribution to economic development.