The nexus between financial literacy and entrepreneurial success among young entrepreneurs from a low-income community in Cape Town: a mixed-method analysis

Abstract

PurposeThis paper aims to explore the association between financial literacy and entrepreneurial success among young entrepreneurs within an economically disadvantaged community in Cape Town, South Africa.Design/methodology/approachThe mixed-method approach was adopted for the study. In-depth interviews were used in collecting the qualitative data while structured interviews using questionnaires were administered in collecting the quantitative data. The participants for the study were strictly young entrepreneurs.FindingsThe study found that entrepreneurs understood the concept of financial literacy and this was corroborated by their financial literacy average score of 59.03, which is above the national financial literacy average score of 54.00. The study further revealed that a positive association exists between financial literacy and entrepreneurial success. Hence, high levels of financial literacy result in increased business success.Research limitations/implicationsThe sample size of the study was relatively small, for which reason, a mixed-method approach was adopted to strengthen the research findings. The research also considered only one disadvantaged community in South Africa (Khayelitsha).Originality/valueTo the best of the knowledge, the influences of financial literacy on the success of small and medium enterprises (SMEs) among young entrepreneurs have not been well-explored in economically disadvantaged areas within the South African context. As a result, this study sheds light by assessing the level of financial literacy among young entrepreneurs in economically disadvantaged communities and by determining the relationship between financial literacy and entrepreneurial success. The study further provides recommendations on policy-making to ensure that through successful entrepreneurship, developmental challenges such as unemployment can be reduced.