Authors
Elihuruma K. Daniel
Department of Business Management
Asheri Mwidege
Mbeya University of Science and Technology
Abstract
This study investigated the influence of financial knowledge on investment decisions among small and medium enterprises (SMEs) in Dodoma, Tanzania. Grounded in the Theory of Planned Behaviors (TPB), the research explores how financial knowledge shapes entrepreneurs’ confidence and decision-making processes. Using ordinal logistic regression analysis on survey data collected from SMEs, the findings reveal that financial knowledge significantly affects investment decisions, explaining approximately 20% of the variance. While the model shows moderate predictive power, results highlight financial knowledge as a critical factor in guiding investment choices, though other factors also play important roles. Based on findings, it is concluded that financial knowledge is critical in investment choices. Thus, it is recommended that the government should enhance financial education policies and practical training programs to improve SMEs’ financial literacy, ultimately supporting better investment outcomes and business growth.
Keywords
Financial Knowledge Investment Decisions Small and Medium Enterprises (SMEs) Theory of Planned Behaviors
How to Cite This Article
APA Citation
Daniel, E. K., & Mwidege, A. (2026). Influence of Financial Knowledge on Investment Decisions among Small and Medium Enterprises in Dodoma. International Journal of Economics and Management Intellectuals, 2(2), 37–43.
Conclusion
The ordinal logistic regression analysis confirms that financial knowledge significantly influences investment decisions among SMEs. While the model explains a moderate proportion of the variance, it highlights that having a solid understanding of financial concepts plays an important role in shaping investment behavior. However, the mixed goodness-of-fit results suggest that other factors beyond financial knowledge contribute to investment choices. Therefore, enhancing financial knowledge alone may improve investment decisions complemented by addressing additional social, psychological and contextual influences to foster better financial outcomes for small and medium enterprises.
Based on the conclusion that financial knowledge influences investment decisions therefore it is recommended that policymakers should prioritize the development and implementation of comprehensive financial education programs targeting SMEs. Also, programs should focus on improving financial knowledge, equipping entrepreneurs with practical skills for investment decision-making. Furthermore, policies should encourage collaboration between government agencies, financial institutions and educational bodies to create accessible and ongoing financial literacy initiatives that address the specific needs of small and medium enterprises.
On practical side, it is recommended that SMEs should actively seek financial training and resources to enhance their understanding of investment principles and risk management. Moreover, business support organizations and financial advisors can play a key role by providing tailored workshops, mentorship and easy-to-understand tools that build confidence and financial competence among entrepreneurs. Thus, integrating financial literacy into local business development services is inevitable to make more informed investment decisions, contributing to their growth and sustainability.
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