Financial Literacy, Financial Access, and Small Business Performance in Secondi-Takoradi Metropolis of Ghana: The Mediating Effect of Financial Capability

Even though studies have been conducted in the field of finance to examine the impact of financial literacy on small business performance, there is a lack of clarity regarding the specific mechanisms through which this influence is achieved. This paper seeks to address this gap by investigating the mediating role of financial capability in the relationship between financial literacy and small business performance in the Sekondi-Takoradi Metropolis of Ghana. The study utilizes structural equation modelling (SEM) techniques and employs Smart-PLS 3 software to test the proposed hypotheses. The empirical findings reveal that the association between financial literacy and small and medium-sized enterprise (SME) performance is not direct but rather mediated by financial capability. Furthermore, the results indicate that the financial capability of SME owners/managers has a significant impact on their firm\'s performance. Additionally, the findings support the mediation model, as financial capability also acts as an important mechanism through which financial access influences SME performance. Policymakers, SME operators, and other stakeholders should prioritize the key areas identified by these findings to enhance small business performance in Ghana.