Digital Financial Literacy and Usage as Determinants of SME Financial Performance: Evidence from Kurunegala District, Sri Lanka

Abstract

Small and medium-sized enterprises (SMEs) increasingly rely on digital financial technologies to improve business operations and financial management. However, limited empirical evidence exists regarding how digital financial literacy and digital financial usage jointly influence SME financial performance in Sri Lanka, particularly at the district level. Despite growing interest in digital financial inclusion, limited empirical studies have examined this combined effect in district-level Sri Lankan contexts. Therefore, this study examines the impact of digital financial literacy and digital financial usage on the financial performance of SMEs in the Kurunegala District, Sri Lanka. A quantitative cross-sectional research design was adopted, and primary data were collected through a structured questionnaire from 64 SME owners and managers using convenience sampling. Descriptive statistics, correlation analysis, and multiple regression analysis were conducted using JAMOVI software. The findings reveal that both digital financial literacy and digital financial usage have a significant positive effect on SME financial performance. The regression model explained 62.1% of the variance in financial performance, with digital financial literacy demonstrating a stronger association than digital financial usage. This study contributes to limited Sri Lankan literature by providing district-level evidence from Kurunegala on digital financial capabilities and SME performance. However, findings are constrained by a small sample size (n=64) and convenience sampling, limiting generalizability. The study offers practical implications for policymakers and financial institutions in strengthening SME digital financial capabilities.