Abstract:
Digital financial literacy comprises the knowledge, attitudes, and skills required
to use digital technologies safely and effectively for financial tasks. This study
examines the impact of digital financial literacy on entrepreneurial performance
among small and medium enterprises (SMEs) in Matara District, Sri Lanka. As
digital transformation reshapes the entrepreneurial landscape, understanding how
digital financial competencies influence business performance becomes critical for
developing economies undergoing rapid technological change. The study adopted
a deductive, quantitative research approach with a cross-sectional survey design.
Snowball sampling was used because there was no comprehensive list of SMEs
that use digital financial tools. Primary data were collected from 114 SMEs
through a structured questionnaire adapted from validated instruments with contextual
modifications for Sri Lanka. All questions were constructed as five-point
Likert-scale items. The results of the multiple regression model indicate that
59.7% of the variance in entrepreneurial performance (R2 = 0.597, F = 32.026,
p < 0.000) is predicted by digital financial literacy. Among the five dimensions
of digital financial literacy, four dimensions significantly predicted performance,
including Digital Financial Risk Control (β = 0.285, p = 0.000), Awareness of
Digital Financial Risk (β = 0.289, p = 0.005), Financial Knowledge (β = 0.193,
p = 0.031), and Digital Knowledge (β = 0.171, p = 0.044). Notably, Knowledge
of Digital Financial Services (β = 0.001, p = 0.986) did not show a significant
effect, suggesting that mere awareness of available tools is insufficient without
reliable infrastructure, user-friendly platforms, and supportive regulatory environments.
Results emphasize the need for comprehensive digital financial literacy
programs that focus on risk management and practical application rather than
basic awareness. Policymakers, financial institutions, and educational institutions
should prioritize interventions that bridge the gap between knowledge and effective
implementation. This study contributes to the literature on digital financial
literacy in developing economic contexts, providing empirical evidence from a regional
district perspective and identifying critical competencies for SME success
in digitalized markets.
