Influence of financial literacy on investment decisions of managers of small and medium enterprises in Mogadishu, Somalia

This research aimed to explore how well managers of smal
and mediumenterprises (SMEs) in Mogadishu, Somalia, understand financial concepts
such as savings, managing debt, handling financial risks, and
planning forretirement, and how this understanding affects their investment decisions.The background of the study highlights that many SMEs in Mogadishu
struggle to sustain their operations, with low profits or failure often due topoor investment choices. To investigate the link between financial literacy
and investment decision-making among these managers, the study was
based on the principles of modern portfolio theory. The research used a
correlational design to analyze data from 250 targeted SMEs, with 154
respondents selected through stratified random sampling. Data collection
was facilitated by questionnaires, and the analysis involved calculating
means, standard deviations, and conducting regression analysis. The findings
indicated that among the financial literacy components, debt management
had the most significant impact on investment decisions (β=0.490, p<0.05),
followed by financial risk management (β=0.137, p<0.05), and lastly, the
ability to save (β=0.128, p<0.05). The study concluded that financial literacy
plays a crucial role in influencing investment decisions among SME managers
in Mogadishu, suggesting that improving financial knowledge could lead to
better business outcomes