Financial Knowledge and Financial Behaviour as Drivers of SME Growth in a Fragile Economy: Evidence from Cameroon

Abstract

This study examines the effect of financial knowledge and financial behaviour on the growth of small and medium-sized enterprises (SMEs) operating in a fragile economic environment. Drawing on the Resource-Based View, human capital theory, and the OECD financial capability framework, the study conceptualises financial literacy as a multidimensional capability and operationalises it through its cognitive and behavioural components, namely financial knowledge and financial behaviour. Using cross-sectional survey data collected from 304 SMEs in the South West Region of Cameroon, the study employs Ordinary Least Squares (OLS) regression complemented by diagnostic tests including correlation analysis, Variance Inflation Factors (VIF), and the Breusch–Pagan test for heteroskedasticity. The results reveal that financial knowledge (β = 0.289, p < 0.01) and financial behaviour (β = 0.431, p < 0.01) significantly and positively influence SME growth, with financial behaviour exerting a stronger effect. The model explains approximately 37.3% of the variation in SME growth. The findings indicate that while financial knowledge enhances entrepreneurs’ decision-making capacity, disciplined financial behaviour translates into actual performance improvements. The study contributes to the literature by positioning financial capability as a strategic internal resource in fragile economies and provides policy-relevant insights for SME development in sub-Saharan Africa.