Chapter One — 1.1 Background to the Study

Over the past decade, the relationship between financial literacy and business survival rate of small and medium enterprises (smes) has become a subject of considerable debate among scholars and industry practitioners alike, particularly within the context of Developing Economies where operating conditions differ markedly from more developed markets.

Developing Economies presents a useful setting for examining this relationship precisely because the conditions there — structural, regulatory, and behavioural — differ from those typically assumed in the broader literature, most of which draws on evidence from more developed economies.

1.2 Statement of the Problem

Despite a growing body of literature on financial literacy, there remains limited consensus on the precise nature of its relationship with business survival rate of small and medium enterprises (smes), particularly within Developing Economies. Many organizations continue to make decisions about financial literacy without a clear, evidence-based understanding of how those decisions ultimately affect business survival rate of small and medium enterprises (smes). This gap between practice and empirical understanding is the central problem this study seeks to address.

1.3 Objectives of the Study

1. To examine the effect of Financial Literacy on business survival rate of small and medium enterprises (smes) in Developing Economies.
2. To assess the extent to which financial literacy influences business survival rate of small and medium enterprises (smes) within the study area.
3. To identify the challenges associated with financial literacy in relation to business survival rate of small and medium enterprises (smes).
4. To recommend strategies for optimizing financial literacy in order to improve business survival rate of small and medium enterprises (smes).

1.4 Research Questions

1. What is the effect of financial literacy on business survival rate of small and medium enterprises (smes) in Developing Economies?
2. To what extent does financial literacy influence business survival rate of small and medium enterprises (smes) within the study area?
3. What challenges are associated with financial literacy in relation to business survival rate of small and medium enterprises (smes)?
4. What strategies can be adopted to optimize financial literacy in order to improve business survival rate of small and medium enterprises (smes)?

1.5 Significance of the Study

Beyond its academic contribution to the field of entrepreneurship, this study has practical value for management teams within Developing Economies seeking to understand how financial literacy translates into measurable outcomes around business survival rate of small and medium enterprises (smes). It is equally useful to students and future researchers looking for a localized empirical reference on this relationship.

1.6 Scope of the Study

In terms of scope, this MSc study confines itself to Developing Economies, focusing specifically on how financial literacy relates to business survival rate of small and medium enterprises (smes) within that setting. Findings are interpreted within these boundaries rather than as universal claims applicable to every organization or market.