Exploring the effects of financial knowledge on better decision-making in SMEs

González-Prida, Vicente et al. Article Exploring the effects of financial knowledge on better decision-making in SMEs Administrative Sciences Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel Suggested Citation: González-Prida, Vicente et al. (2025) : Exploring the effects of financial knowledge on better decision-making in SMEs, Administrative Sciences, ISSN 2076-3387, MDPI, Basel, Vol. 15, Iss. 1, pp. 1-25, https://doi.org/10.3390/admsci15010024 This Version is available at: https://hdl.handle.net/10419/321169 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Received: 25 October 2024 Revised: 31 December 2024 Accepted: 7 January 2025 Published: 11 January 2025 Citation: González-Prida, V., Pariona-Amaya, D., Sánchez-Soto, J. M., Barzola-Inga, S. L., Aguado-Riveros, U., Moreno-Menéndez, F. M., & Villar-Aranda, M. D. (2025). Exploring the Effects of Financial Knowledge on Better Decision-Making in SMEs. Administrative Sciences,15(1), 24. https://doi.org/10.3390/ admsci15010024 Copyright: © 2025 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/ licenses/by/4.0/). Article Exploring the Effects of Financial Knowledge on Better Decision-Making in SMEs Vicente González-Prida 1,* , Diana Pariona-Amaya 2, Juan Manuel Sánchez-Soto 2, Sonia Luz Barzola-Inga 2, Uldarico Aguado-Riveros 2, Fabricio Miguel Moreno-Menéndez 2and Mark David Villar-Aranda 2 1Department of Industrial Management I, University of Seville, 41092 Seville, Spain 2Faculty of Administrative and Accounting Sciences, Peruvian University of Los Andes, Huancayo 12000, Peru; [email protected] (D.P.-A.); [email protected] (J.M.S.-S.); [email protected] (S.L.B.-I.); [email protected] (U.A.-R.); [email protected] (F.M.M.-M.); [email protected] (M.D.V.-A.) *Correspondence: [email protected] Abstract: The knowledge on financial management highly matters as it assists the microentrepreneurs in the making of right and sustainable business decisions. This research seeks to examine the effects of financial literacy on microenterprise decision-making in order to improve rational decision-making in financial management. A structured questionnaire with Likert-scaled options was used to measure micro-entrepreneurs’ financial decision-making capacity in terms of information processing and decision-making. They demonstrate a favorable relationship between financial education and rationality, which refers to micro-entrepreneurs’ capacity to select from a range of acceptable options. Based on the findings presented in this research, it is suggested that greater efforts should be paid to the integration of financial literacy within any form of entrepreneurial training targeting improvement in sustainability dimensions and qualities of decisions made by micro-entrepreneurs. Through increased financial knowledge, micro-entrepreneurs can manage financial problems effectively and thereby support the growth of sustainable microenterprises. Moreover, such observations suggest that all future policies must focus on and incorporate financial literacy as the defining strategy towards the improvement of the microenterprise sector and, therefore, economic growth. Keywords: decision making; financial education; micro-entrepreneurs; rational decisions; small and medium enterprises (SME); sustainability; sustainable development 1. Introduction People are usually familiar with the concept of purchasing power because it is a fundamental aspect of life and influences numerous economic choices on a daily basis. However, preparation for making appropriate financial decisions remains insufficient. Knowledge and training have become essential for raising living standards, creating growth opportunities, and forming sound financial practices that enable wise choices to be made at every stage of life, all of which support a stronger economy. This scenario requires making assertive financial decisions for both an individual and a businessperson so that it may provide the indicated and satisfy the objective of enhancing the standard of living and narrowing the gap of economic inequality between countries. It is carried out by the provision of financial literacy, which leads to social inclusion and reduction in the rate of over-indebtedness. Financial education promotes changes in knowledge, behavior, and attitudes, without socioeconomic or cultural discrimination, benefiting both individuals Adm. Sci. 2025,15, 24 https://doi.org/10.3390/admsci15010024 Adm. Sci. 2025,15, 24 2 of 25 and institutions. This means buying financial products and services in a reasoned and sensible way, following the buyer’s skills depending on the income level, and leaning on the support of regulating agencies for the protection of the consumer’s interests. The analysis presented addresses the innovative strategies adopted by microentrepreneurs in response to the COVID-19 pandemic, highlighting the importance of financial education in rational decision-making. It is noted that a large amount of microenterprises had to renegotiate their contracts with suppliers or go into family debts, while the medium and large enterprises had to borrow from banks. Regarding these decisions, women had very active participation. Measures taken because of the pandemic included discounts, home delivery, and the widening of products and services. In addition, the rapid adaptation of micro-entrepreneurs to digital media is noteworthy, which was long overdue. Nevertheless, people’s insufficient financial literacy has resulted in the growth of delinquency and might pose further threats to the financial sphere and the economy of the country. This research also points out that informality in micro and small businesses has grown significantly in the context of the study, affecting employment and business closures. The lack of sufficient state programs for SMEs and the necessity of financial literacy are the key problems. Many problems of an economic nature have to be addressed for the quality of life to be improved, and financial education has not been given the deserved place in curricula. The study establishes that microenterprises contribute a large amount of employment and GDP income in Peru, though they are faced with challenges resulting from inadequate financial literacy. Late payments and lack of liquidity are recurring problems, exacerbated by the granting of long-term loans, which are not adequate for the needs of microenterprises. It is concluded that it is urgent to implement adequate financial education to improve the sustainability of enterprises and the country’s economy (INEI,2022). This study has been conducted within a time frame of December 2022 to October 2023, and the findings have been affected by this time horizon. The study focuses on micro-entrepreneurs, who constitute the social group of interest, and is carried out in a specific geographical area, specifically in the Marketing and Licensing Division of a municipality in Peru. From a social perspective, this research has the potential to benefit micro-entrepreneurs in the commercial sector, especially in regions of the Selva Central. Here, financial literacy is introduced as an essential component that is discussed as the main factor for all businessmen and businesswomen. Thus, it helps to create family budgets, start saving practices, and make reasonable decisions on credits and insurance so that we can support the longevity of proper financial management. This research focuses on analyzing the relationship between financial education and decision-making of microentrepreneurs, with a particular focus on how these variables interact in the context of small and medium-sized enterprises, which is a critical aspect for their sustainable development. Specific issues are broken down into several key areas: the relationship between the family budget and decision-making, the impact of savings on business decisions, the influence of credits on business management, and the role of insurance in decision-making. These aspects are fundamental to understanding how micro-entrepreneurs can improve their financial management and, therefore, their long-term sustainability. In other words, the research gap addressed by this research is to attend to the fact that there is not a deep literature regarding understanding the impact of financial literacy on the decisionmaking of micro-entrepreneurs in implementing their businesses, especially in countries with adverse economic environments such as Peru, where microenterprises struggle to meet cash and working capital needs for their businesses. The general objective of the research is to establish the relationship between financial education and decision-making of micro-entrepreneurs, providing a framework to improve the effectiveness of leadership and management in the sustainable development of small and medium-sized enterprises. Adm. Sci. 2025,15, 24 3 of 25 Specific objectives include identifying the relationships between family budget, savings, credit, and insurance with business or financial decision-making. Therefore, the following research questions can be stated: RQ1. How does financial education influence micro-entrepreneurs’ decision-making? RQ2. What is the impact of financial education on the long-term sustainability of microenterprises? RQ3. How do elements of financial education, such as household budgeting, savings, credit, and insurance, interact in the business management of microenterprises? The structure of the research is designed to address the objectives in a systematic manner. It starts with the problem statement, which comprises the goals, the reasoning, the formulation, the delimitation, and the description of the problematic reality. The theoretical framework focuses on conceptualizing the own background in Peru and internationally, the theoretical and scientific bases, and the conceptual framework of the variables and dimensions. In the research hypothesis, there are the general and specific hypotheses with conceptual and operational definitions of the variables. Finally, the methodology covers the research method, the type, level, and design of the research, as well as the population, sample, data collection techniques, data processing and analysis, and the ethical aspects of the research. This comprehensive approach not only seeks to contribute to academic knowledge but also to offer practical tools to improve the management and sustainability of microenterprises in a context of increasing economic complexity. 2. Theoretical Framework Financial education is based on four pillars: savings, family budget, credits, and insurance. These elements are essential for financial management in households and for evaluating the financial behavior of the population. Public and private institutions and nonprofit organizations have expressed their concern about the impact of financial education on individual and national income. Ultimately, increasing financial knowledge is vital to developing skills and competencies that allow informed and rational decisions to be made, thus maximizing economic well-being (Mungaray et al.,2021). In this context, the present research was developed with the aim of determining the relationship between financial education and decision-making by micro-entrepreneurs. The methodology used was the scientific method, specifically the hypothetical-deductive method, with a non-experimental correlational descriptive design. The research, at a relational level, adopted a quantitative approach on a population of 361 owners, with a sample of 186 micro-entrepreneurs. The technique used was a survey, and the instrument, a Likert scale questionnaire. The economic situation in Peru reflects a worrying trend in the Latin American region; according to the report by S&P Global Ratings, banks are facing a decline in capitalization and asset quality indicators. In Peru, there are situations with liquidity and profitability problems, driven by factors such as inflation, rising interest rates, political uncertainty, and unemployment. In a similar context, Mexico has implemented financial education courses in its educational curriculum from early childhood education, with the support of the public and private sectors. It aims to raise the awareness and advancement of such a goal or concept commonly referred to as financial health or the state of being financially inclusive. Once the population reaches an adequate level of financial education, the government promotes individual economic progress through access to financial products and services, such as savings, credit, insurance, and retirement plans. The process entails making rational decisions in situations, especially where short-term negative impacts may affect personal and business finances (World Bank,2022). From a macroeconomic perspective, accurate decision-making in the financial sector is crucial in the fight against poverty indices within an individual and a nation. Specifically, financial education and facilities of the formal FS have numerous Adm. Sci. 2025,15, 24 4 of 25 advantages, especially for SPMs. Such advantages include the setting of plans for handling economic exigencies and leveraging chance during an effective production phase. In Mexico these strategies have helped in enhancing social need fulfillment and economic enfranchisement of the inhabitants, especially the women. Business finance has been considered an important aspect of knowledge in the field of industrial organization and business management with special reference to SMEs. In this regard, and from a Peruvian point of view, we find studies such as the following: Rengifo Tuesta and Silva Cayao (2022) conducted a study in the hardware sector of Tarapoto, where a moderate positive relationship was determined between financial education and decision-making, with a correlation coefficient of 0.942. This means that financial education has a direct control over 89 percent of decisions made in this sector. From a theoretical point of view, the study is based on fundamental works such as the “Master Book of Financial Education” (BAC-Credomatic Financial Network,2009) and “Administration” (Robbins & Coulter,2018), which address the variables of financial education and financial decision-making, respectively. The present study offers an approach to problem solving and a presentation of solutions to the specific problems and needs of the analyzed context; at the same time, they form a basis for future research. Methodologically, although no explicit justification is presented, the study adapts instruments from previous research, such as ref. (Rojas,2020), which explores the improvement of micro-entrepreneurs’ decisionmaking through financial education. This methodological adaptation provides a measure of specificity to the variables at issue consistent with the agenda of sustainability and sound empirical growth of SMEs discussed in the literature on leadership and efficient management practices in the sustainable development of SMEs. On the other hand, Pérez et al. (2021) investigated the relationship between financial education and personal finances of small and micro-entrepreneurs in Moyobamba. Using a quantitative approach and a non-experimental cross-sectional design, it was concluded that there is a moderate positive relationship between both variables, which highlights the importance of financial education in personal financial management. Similarly, Pérez et al. (2021) investigated the significant link between financial literacy and efficient management of users of banking institutions in the province of San Martín. Using a non-experimental cross-sectional design with a correlational scope, it was found that greater financial education translates into better skills to manage personal finances, which underlines the importance of financial education in effective financial management. A research study focused on the financial education of members of a savings and credit cooperative (Carhuavilca & Zegarra,2021), of simple descriptive design, revealed that there is a medium-level relationship between financial education and members’ financial management. The development of financial education plans was recommended to improve trust and responsibility between members and the cooperative. Finally, ref. (Ahmed & Zulfiqar,2023), (Seraj et al.,2022), and (Kulathunga et al.,2020) examined how the study of financial reports influences decisionmaking. Through a quantitative approach and a correlational design, it was concluded that, although managers consider the analysis of financial reports, these are not decisive in all decisions, especially when it comes to liquidity and debt indicators. Financial literacy is critical as a component of good leadership and sound management within SMEs required for sustainable development aspirations and good business management. From an international perspective, financial education has become an essential component for the sustainable development of small and medium-sized enterprises (SMEs) and for improving personal and organizational financial management. In his turn, López et al. (2022) focused on the effectiveness of financial education programs in Latin America and pointed out that these programs were meaningful to enhance the financial literacy and capacity of the entrepreneurs. But when defining the type of these programs, they Adm. Sci. 2025,15, 24 5 of 25 noted that the structure of these programs is mostly prescriptive, which does not contribute to the practical formation of financial literacy, especially in conditions of exclusion and poverty. A redesign of these programs with government support is suggested to address these issues. In a related study (Ferrada et al.,2018), authors analyzed the presence of financial education activities in primary school textbooks in Chile. They concluded that financial education from an early age is crucial to fostering a financial culture that improves personal and family financial health, thus contributing to social well-being. Ref. (Gabriel et al.,2020) explored financial education in women in Medellin, finding that those with higher academic training and higher incomes demonstrated better financial control and a tendency to save, highlighting the importance of financial education in making informed decisions. Ref. (Joia & Cordeiro,2021) proposed the creation of a fintech for financial education for children, with the aim of providing them with tools for responsible management of money and financial risks. This initiative seeks to promote financial inclusion and contribute to several sustainable development goals, such as reducing inequality and poverty. In this sense, ref. (Romero & Ramírez,2018) examined the relationship between financial decision-making and financial knowledge in SMEs, concluding that managers with more education and training in finance use financial and technological tools more, which has a positive impact on business management. These studies highlight the importance of financial education as a pillar for effective leadership and sustainable management in SMEs, aligning with sustainable development goals and effective business management. According to the works of (Lombardi et al.,2016) financial education is characterized as a system of knowledge and instruments that help assess financial potential and use resources and money in the best possible manner. Decision-making is a basic act in any human activity, as it implies the one’s or more individual’s constant and focused thinking, which involves disciplines such as philosophy of knowledge, science, logic, and creativity (Amaya,2015). In the financial world and throughout the present contribution, concepts like credit, credit history, creditor, as well as capital, entrepreneur, or inflation are basic for the SMEs. This is due to the fact that the understanding of financial education and informed decision-making leads to better business management and leadership in support of the sustainable development goals and efficient organizational arrangements (BAC-Credomatic Financial Network,2009). Over the past decade, financial management and financial literacy in strategy formulation and sustainable operations have received increasing interest among scholars. Carrying out a previous and extensive study on the financial administration and planning of the SMEs of Quevedo, Silva et al. (2023) found that decent financial management practices correlated well with successful decision-making. This study therefore highlights the need for long-term developmental reforms in relation to viable attainment of sound business performance across local business environments. In line with this, Abdelkareem and Augustyn (2023) study the role of knowledge visualization in Egyptian SMEs’ strategic decision-making, pointing to the enhancements in decision-making quality and commitment as a result of the use of knowledge visualization. They used global variables to show that knowledge visualization can improve strategic decision-making and therefore decision-making results. In the context of agribusiness in Nigeria, Obi-Anike et al. (2023) showed that there is a positive effect of financial information literacy on strategic decisionmaking and sustainable performance. It is important to understand that the question of the financial literacy of individuals in the management of their organizations and attainment of profitable economic goals is the key concept stressed in this study. In fact, L. Guo et al. (2022) offered a vertices-connected macroscopic picture of the financial decision-making field by conducting a scientometric and bibliometric analysis and pointed out hot topics and emerging trends such as intergroup differences in financial decision-making. In so Adm. Sci. 2025,15, 24 6 of 25 doing, this analysis provides a quantitative approach to the emergent trend of the financial decision-making research. In addition, Atmaningrum et al. (2021) investigated the determinants of investment, which included financial literacy, income, and self-discipline. He and his colleagues’ study expands on the influence of financial behavior and financial attitudes in determining the conflict or no conflict in investment. Both Burchi et al. (2021) and Ye and Kulathunga (2019) focused on the role of financial literacy in sustainable entrepreneurship. Burchi et al. used a cross-sectional survey and confirmed a positive correlation of financial literacy on sustainable enterprises in Central Europe; the authors encouraged extracurricular initiatives in enhancing entrepreneurial competencies. Likewise, Ye and Kulathunga also stressed the fact that improvement of the level of financial literacy, accessibility to financing, and an appreciation of risk profiles can enhance SME sustainability in the Sri Lankan context, thereby highlighting the cogs in the wheel of the above-laid correlation in the context of developing economies. Overall, these studies spur, in unison, the multifunctional approaches to asserting financial literacy and management for the improvement of strategic decision-making and promoting sustainable business models within different settings. Below is a synoptic table with the main references analyzed, including their advantages and disadvantages, as well as the research gap left unaddressed (Table 1). Table 1. Summary of the main references analyzed. Reference Pros Cons Research Gap (Mungaray et al.,2021) Comprehensive exploration of financial education’s impact on micro-entrepreneurs. Limited focus on macroeconomic implications. Lack of longitudinal data to analyze long-term effects of financial education. (Silva et al.,2023) Highlights the role of financial management practices in SMEs for strategic optimization. Focused only on Quevedo SMEs, limiting generalizability. Excludes comparative analysis with SMEs from other geographic or economic contexts. (Pérez et al.,2021) Demonstrates a strong correlation between financial education and personal finance skills. Lacks a deeper look into external influencing variables, such as economic policy. No discussion on the scalability of findings to larger businesses or other regions. (L. Guo et al.,2022) Provides a macroscopic view of trends and hotspots in financial decision-making research. Lacks case-specific insights; data interpretation is heavily dependent on statistical models. Does not explore practical implementation or decision-making at organizational levels. (Obi-Anike et al.,2023) Strong focus on the interplay between financial literacy and agribusiness performance. Limited to agribusiness; does not consider other SME sectors. Minimal attention to cross-industry applications or policy implications. (Burchi et al.,2021) Links financial literacy with entrepreneurship and sustainable development. Limited to Central Europe, without accounting for global or diverse economic conditions. Overlooks specific mechanisms that enhance financial literacy’s impact in resource-constrained contexts. (Ye & Kulathunga,2019) Discusses financial literacy and accessibility to finance in developing countries. Focuses narrowly on Sri Lanka, reducing applicability to other developing economies. Lack of exploration of digital financial education tools and their role in SME growth. The present research attends to several research gaps identified in the literature. It is performed by analyzing Peruvian micro-entrepreneurs and their financial education in the scope of credit and debt decision-making and underscoring the importance of financial literacy towards improving microenterprise efficiency and vulnerability to risks. Adm. Sci. 2025,15, 24 7 of 25 3. Materials and Methods 3.1. Knowledge of Finance 3.1.1. Benefits of Financial Education Financial education is a fundamental pillar in the economy of individuals, localities, and nations, directly influencing business liquidity and financial inclusion. According to Ramos et al. (2017), financial literacy affects decisions by the dimensions such as perception, knowledge, ability, utilization, and implementation. In addition, they identify essential criteria for evaluating financial education, such as retirement planning, inflation, arithmetic, insurance, credit, savings, investment, and risk diversification. They are needed to develop the economic wellness and enhance the standard of living of people through sound financial functioning. In ref. (Fabris & Luburic,2016), authors stress that the main objective of financial education is to increase the competitiveness of public and private companies through rational financial decisions. This can be well illustrated given the rise in over-indebtedness ratios due to poor handling of personal assets. Financial literacy, young people, and children’s financial literacy in particular are still poor globally, so it is necessary to raise it for sustainable development. Analyzing the results of the study of Widyastuti et al. (2020), it can be defined that the intentions of teachers in Indonesia regarding financial education and financial behavior are positively correlated. This result reinforces the need for incorporating financial literacy into teacher education for the enhancement of the financial behavior of the next generation. According to the OECD (2008), financial education is an organized and continuous process through which citizens obtain knowledge to enable them to make sound decisions concerning financial services and products. It is necessary for making risk evaluations, for developing backup strategies, and for taking profit from financial openings that enhance business and personal welfare. 3.1.2. Theories of Financial Education On the same note, while discussing financial education or financial literacy, it is important to be able to capture the extent of its impact on the education sector and, more to the point, how to overcome barriers to drawing rational conclusions on the financial decisions to be made. Ref. (Huston,2010) proposes that financial education should include knowledge of concepts, theories, and tools, followed by a SWOT analysis to identify limitations and develop instruments with standardized indicators applicable to all sectors, without discrimination of age, sex, social, economic, and cultural conditions. Financial education is a pending subject, since financial decisions have short-, medium-, and longterm consequences (Barbara & Eugene,2021). Numerous topics are studied in schools; however, financing issues are usually excluded, and this task is assigned to parents, who do not always have proper education. This can lead to wrong decisions that impact one’s decisions on personal and business life. The authors suggest that financial decision-making should be reasonable and informed. In addition, they recommend implementing programs, training, and workshops that promote continuous learning of innovative knowledge in financial education. According to BAC-Credomatic Financial Network (2009), financial education is a tool that contributes to the comprehensive training of people, improving their personal, family, social, and entrepreneurial financial management. This is achieved through the development of capacities, competencies, attitudes, values, and positive habits, essential for a successful financial culture and assertive decision-making. BAC-Credomatic Financial Network’s (2009) “Master Book of Financial Education—A System for Living Better” noted a noticeable lack of incorporation of financial management in education curricula. The basic areas include, but are not limited to, savings, investment, credit, insurance, taxation, and Adm. Sci. 2025,15, 24 8 of 25 protection in financial endeavors, which turns this book into a reliable manual on financial literacy. It is, therefore, significant for micro-entrepreneurs to be informed in order to act rationally and not to become a target for financial fraud. Thus, financial education adds to the flow of knowledge and improvements of values as well as skills that are required in managing financial resources, controlling and distributing expenses, investing in education, purchasing goods and services, and providing for one’s needs after they retire. 3.1.3. Dimensions for Financial Education In the context of this research, four fundamental dimensions have been identified that underlie financial education and its impact on personal and family financial management as follows: • The first dimension, the family budget, refers to the financial behavior of individuals, who often lack the habit of planning their expenses based on their income and needs. This deficiency is attributed to the lack of adequate financial education in formal educational systems, which is aggravated in a consumer society that ignores financial problems. The preparation of a personal budget is essential to control finances, allowing a conscious distribution of resources between fixed and variable expenses, such as food, debt, recreation, and health, which is crucial to achieving financial freedom (BAC-Credomatic Financial Network,2009, pp. 169–178). • The second dimension, savings, is closely linked to investment, as it represents the conservation of current resources with a view to the future. This concept refers, among others, to savings, stocks, and bonds: financial choices are capable of influencing people’s quality of life on a large scale (Huston,2010) as cited in (Ramos et al.,2017). • The third dimension, credit, involves the use of future resources in the present through financial products such as credit cards and loans. Still, it is required to have effective financial education aimed at decreasing the linked costs of credit money, helping people make proper decisions according to the EU financial market environment (Huston,2010) as cited in (Ramos et al.,2017). • Finally, the fourth dimension, insurance, focuses on the protection of resources and risk management through specific financial products. To emphasize, recognizing these ideas is crucial for having sufficient insurance protection in case of something to maintain individual and family finance security (Huston,2010) as cited in (Ramos et al.,2017). These dimensions are important for the acquisition of financial behaviors that foster effective and sustainable economic management in line with the sustainable development goals of SMEs. 3.2. Making Financial Decisions 3.2.1. On Financial Decision-Making Decisions on utilization of financial resources are not centralized but involve almost all the members of the family, including the parents, spouses, and even children, in managing the general finances of the household. Ref. (Kim et al.,2017) were concerned with the ways of introducing education and advice related to financial management into the family, proposing that such an approach may contribute to continuous and systematic improvement in the assessment of potential gains, as well as losses in personal, familial, and business perspectives. In this regard, Ref. (Duarte et al.,2020) emphasizes the necessity to work towards a strengthening of the skills in the economic and financial education of the teachers as well as the students so as to foster change agents to adopt rational decisions. However, their research revealed a significant lack of skills and capabilities in this area, which led to the proposal of an articulation between financial education and informed decision-making, supported by training programs for teachers in public and Adm. Sci. 2025,15, 24 15 of 25 a direct correlation with the lack of knowledge in personal and business finances. This situation is aggravated when entrepreneurs base their decisions on personal experiences and beliefs, rather than on objective and analyzed information, which limits their ability to make effective rational decisions. However, even with due provision of these resources and programs launched by different institutions, the mentioned tendency to ignore these suggestions at the moment of the decision-making process remains. This puts more emphasis on leadership and management changes for sustaining business development hence underlining the significance of education in every economic activity by stressing on the financial knowledge as the key foundation for generating sound and pertinent decisions. Table 10. Dimension 1—Variable 2—Rational Financial Decisions. Level Interval Count Percentage Deficient 7 to 16 94 50.54% Regular 17 to 26 78 41.94% Optimum 27 to 35 14 7.53% Total 186 100.00% Table 11. Dimension 2—Variable 2—Limited Rational Financial Decisions. Level Interval Count Percentage Deficient 4 to 9 96 51.61% Regular 10 to 15 74 39.78% Optimum 16 to 20 16 8.60% Total 186 100.00% 4.2. Normality Test—Inferential Statistics Inferential statistical analysis performed using the normality test (Table 12), the Kolmogorov–Smirnov test reveals that the data collected on the variables of financial education and decision-making do not follow a normal distribution, with a p-value less than 0.05. This justifies the use of non-parametric tests, accepting the alternative hypothesis and rejecting the null hypothesis. Table 12. Normality Test—Inferential Statistics. Shapiro–Wilk Statistical gL Next. Financial Education 0.236 186 0.000 Financial Decision-Making 0.223 186 0.000 In the hypothesis testing (Table 13), the Spearman Rho correlation coefficient was used, suitable for correlational studies with ordinal measurement scales (Hernández & Mendoza, 2018). Testing the general hypothesis (Table 14, Figure 1) shows a strong positive correlation between financial education and decision-making, with a correlation coefficient of 0.786 and a p-value of 0.000, leading to the rejection of the null hypothesis. Similarly, specific hypothesis 1 (Table 15, Figure 2), which examines the relationship between household budget and decision-making, also shows a strong positive correlation (r = 0.789, p= 0.000), confirming the alternative hypothesis. Adm. Sci. 2025,15, 24 16 of 25 Table 13. Correlation coefficient. Relationship Type (r) Range Relationship Significance r is 1 direct relationship (positive) (+0.10 to +0.24) Very weak positive correlation Significant (pvalue < 0.0) Highly significant (pvalue < 0.01) Not significant (pvalue > 0.05) (+0.25 to +0.49) Weak positive correlation (+0.50 to +0.74) Average positive correlation (+0.75 to +0.89) Strong positive correlation (+0.90 to +0.99) Very strong positive correlation (+1) Perfect positive correlation r is 1 inverse relationship (negative) (−0.10 to −0.24) Very weak negative correlation (−0.25 to −0.49) Weak negative correlation (−0.50 to −0.74) Average negative correlation (−0.75 to −0.89) Strong negative correlation (−0.90 to −0.99) Very strong negative correlation (−1) Perfect negative correlation Note: The table shows the correlation indices and the significance level of the results. Source: Own elaboration, based on (Hernández & Mendoza,2018, p. 346). Table 14. Correlation between financial education and decision-making. Correlations financial education decision-making Spearman’s Rho financial education Correlation coefficient 1.000 0.786 ** Next (bilateral) 0.000 N 186 186 decisionmaking Correlation coefficient 0.786 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Adm. Sci. 2025, 15, x FOR PEER REVIEW 17 of 25 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Figure 1. Scatter diagram between financial education and decision-making. Table 15. Correlation between family budget and decision-making. Correlations family budget decision-making Spearman’s Rho family budget Correlation coefficient 1.000 0.798 ** Next (bilateral) 0.000 N 186 186 decision-making Correlation coefficient 0.798 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Figure 2. Scatter diagram between family budget and decision-making. Regarding specific hypothesis 2 (Table 16, Figure 3), a strong positive correlation is observed between savings and decision-making, with a coefficient of 0.797 and a p-value Figure 1. Scatter diagram between financial education and decision-making. Adm. Sci. 2025,15, 24 17 of 25 Table 15. Correlation between family budget and decision-making. Correlations family budget decision-making Spearman’s Rho family budget Correlation coefficient 1.000 0.798 ** Next (bilateral) 0.000 N 186 186 decisionmaking Correlation coefficient 0.798 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Adm. Sci. 2025, 15, x FOR PEER REVIEW 17 of 25 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Figure 1. Scatter diagram between financial education and decision-making. Table 15. Correlation between family budget and decision-making. Correlations family budget decision-making Spearman’s Rho family budget Correlation coefficient 1.000 0.798 ** Next (bilateral) 0.000 N 186 186 decision-making Correlation coefficient 0.798 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Figure 2. Scatter diagram between family budget and decision-making. Regarding specific hypothesis 2 (Table 16, Figure 3), a strong positive correlation is observed between savings and decision-making, with a coefficient of 0.797 and a p-value Figure 2. Scatter diagram between family budget and decision-making. Regarding specific hypothesis 2 (Table 16, Figure 3), a strong positive correlation is observed between savings and decision-making, with a coefficient of 0.797 and a pvalue of 0.000, which again supports the acceptance of the alternative hypothesis. Specific hypothesis 3 (Table 17, Figure 4), which analyzes the relationship between credits and decision-making, shows a correlation coefficient of 0.790, with a p-value of 0.000, confirming the strong positive correlation. Table 16. Correlation between savings and decision-making. Correlations saving decision-making Spearman’s Rho saving Correlation coefficient 1.000 0.797 ** Next (bilateral) 0.000 N 186 186 decisionmaking Correlation coefficient 0.797 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Adm. Sci. 2025,15, 24 18 of 25 Adm. Sci. 2025, 15, x FOR PEER REVIEW 18 of 25 of 0.000, which again supports the acceptance of the alternative hypothesis. Specific hypothesis 3 (Table 17, Figure 4), which analyzes the relationship between credits and decision-making, shows a correlation coefficient of 0.790, with a p-value of 0.000, confirming the strong positive correlation. Table 16. Correlation between savings and decision-making. Correlations saving decision-making Spearman’s Rho saving Correlation coefficient 1.000 0.797 ** Next (bilateral) 0.000 N 186 186 decision-making Correlation coefficient 0.797 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Figure 3. Scatter diagram between savings and decision-making. Table 17. Correlation between credit and decision-making. Correlations credits decision-making Spearman’s Rho credits Correlation coefficient 1.000 0.790 ** Next (bilateral) 0.000 N 186 186 decision-making Correlation coefficient 0.790 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Figure 3. Scatter diagram between savings and decision-making. Table 17. Correlation between credit and decision-making. Correlations credits decision-making Spearman’s Rho credits Correlation coefficient 1.000 0.790 ** Next (bilateral) 0.000 N 186 186 decisionmaking Correlation coefficient 0.790 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Adm. Sci. 2025, 15, x FOR PEER REVIEW 19 of 25 Figure 4. Scatter diagram between credits and decision-making. Finally, specific hypothesis 4 (Table 18, Figure 5), which assesses the relationship between insurance and decision-making, also indicates a strong positive correlation (r = 0.719, p = 0.000), leading to accepting the alternative hypothesis. Thus, these results reveal the significance of financial literacy enhancement as a necessary precondition allowing offering relevant financial diagnoses and effective solutions, as well as contributing to the further development of SMEs. Table 18. Correlation between insurance and decision-making. Correlations insurance decision-making Spearman’s Rho insurance Correlation coefficient 1.000 0.789 ** Next (bilateral) 0.000 N 186 186 decisionmaking Correlation coefficient 0.789 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Figure 4. Scatter diagram between credits and decision-making. Finally, specific hypothesis 4 (Table 18, Figure 5), which assesses the relationship between insurance and decision-making, also indicates a strong positive correlation (r = 0.719, p= 0.000), leading to accepting the alternative hypothesis. Thus, these results reveal the Adm. Sci. 2025,15, 24 19 of 25 significance of financial literacy enhancement as a necessary precondition allowing offering relevant financial diagnoses and effective solutions, as well as contributing to the further development of SMEs. Table 18. Correlation between insurance and decision-making. Correlations insurance decision-making Spearman’s Rho insurance Correlation coefficient 1.000 0.789 ** Next (bilateral) 0.000 N 186 186 decisionmaking Correlation coefficient 0.789 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Adm. Sci. 2025, 15, x FOR PEER REVIEW 19 of 25 Figure 4. Scatter diagram between credits and decision-making. Finally, specific hypothesis 4 (Table 18, Figure 5), which assesses the relationship between insurance and decision-making, also indicates a strong positive correlation (r = 0.719, p = 0.000), leading to accepting the alternative hypothesis. Thus, these results reveal the significance of financial literacy enhancement as a necessary precondition allowing offering relevant financial diagnoses and effective solutions, as well as contributing to the further development of SMEs. Table 18. Correlation between insurance and decision-making. Correlations insurance decision-making Spearman’s Rho insurance Correlation coefficient 1.000 0.789 ** Next (bilateral) 0.000 N 186 186 decisionmaking Correlation coefficient 0.789 ** 1.000 Next (bilateral) 0.000 N 186 186 ** The correlation is significant at the 0.01 level (two-tailed). Figure 5. Scatter diagram between insurance and decision-making. In other words, the general null hypothesis (H0) and alternative hypothesis (H1) for the study are as follows: - General Null Hypothesis (H0). Financial education and decision-making among micro-entrepreneurs in the Province of Chanchamayo were conducted, and no real relationship was found. - General Alternative Hypothesis (H1). This study confirms the existence of a direct correlation between perceived financial literacy and actual financial behavior among microenterprises in the Province of Chanchamayo. Specific hypotheses related to different dimensions of financial education include: 1. Specific Null Hypothesis for Budgeting (H0). Family budgeting and microentrepreneur’s decision-making is not related at all. Specific Alternative Hypothesis for Budgeting (H1). This study shows that family budgeting and decision-making play an important role in the life of micro-entrepreneurs. 2. Specific Null Hypothesis for Savings (H0). No correlation exists between savings and decision-making when it comes to micro-entrepreneurs. Adm. Sci. 2025,15, 24 20 of 25 Specific Alternative Hypothesis for Savings (H1). In this study, carried out with micro-entrepreneurs, there was an established relationship between savings and decision-making. 3. Specific Null Hypothesis for Credit Management (H0). There is no correlation between the credit management and the decision-making of the micro-entrepreneurs. Specific Alternative Hypothesis for Credit Management (H1). On balance, therefore, there is a relationship between credit management and decision-making among micro-entrepreneurs. 4. Specific Null Hypothesis for Insurance (H0). Insurance has no correlation with decision-making among micro-entrepreneurs. Specific Alternative Hypothesis for Insurance (H1). A clear correlation exists between insurance and decision-making for all the micro-entrepreneurs. 5. Discussion This research examines the relationship between financial education and decisionmaking in micro-entrepreneurs, revealing a strong positive correlation, with Spearman’s Rho correlation coefficient of 0.786 and a p-value of 0.000. These findings support the acceptance of the alternative hypothesis, highlighting the importance of financial education in business management. Authors in ref. (Pérez et al.,2021) conclude that financial education is crucial for the efficient use of financial resources, investment decision-making, profitability, and savings, thereby reducing excessive debt. Financial literacy, which encompasses understanding of interest rates and financing costs, is essential for rational financial decisions, such as choosing appropriate credit cards. Ref. (López et al.,2022) states that there is a need to incorporate financial literacy in education right from childhood and that the absence of such a tool reduces the ability of citizens to make appropriate decisions on issues to do with finance. In ref. (Ferrada et al.,2018), authors support the incorporation of financial literacy as part of basic education whereby numeracy subjects shall be used in imparting substantial, important, and functional financial skills. Important players are identified as Junior Achievement, an NGO that has been implemented as an example of financial education from childhood. Ref. (Joia & Cordeiro,2021) highlights that financial education is often the responsibility of public and private organizations and proposes a fintech project for children, with recreational modules that promote responsible money management and a culture of savings. This approach seeks to establish alliances with financial institutions to generate trust and raise awareness about the importance of financial education. In this research, authors have selected a statistical analysis that, despite the fact that this has a low level of complexity, it is considered enough to achieve the established goals. This characteristic of the data set and the formulated hypotheses entail the application of basic statistical procedures to look for significant associations of the variables of interest. This is sufficient to reach useful and realistic conclusions regarding the impact of financial education on the micro-entrepreneurs’ decision-making without the need to employ other complex procedures that may not yield added advantage in this particular scenario. In other words, with regard to the statistical solutions employed in the study, it is understandable that while the current strategies employed do offer substantial significance in looking into the connection of financial literacy with decision-making among the micro-entrepreneurs, there exists further potential for the research. Future research could be useful to solve more detailed problems and analyze the connection between two variables by using more complex statistical methods. This could, for instance, involve the use of multivariate analysis or Structural Equation Modeling in order to measure additional effects that may exist between both variables. Such developments would supplement the Adm. Sci. 2025,15, 24 21 of 25 current research and enhance the knowledge base about the influence of financial literacy on micro-entrepreneurial choices. As ref. (Romero & Ramírez,2018) notes, microenterprises’ outcomes depend on managers’ decision-making, which also depends on microfinance financial literacy. This knowledge is crucial in academia as well as in practical training for the continuation of different companies over their life cycle. Furthermore, concerning the accounting documentation, the author suggests the use of accounting information systems, including free software or Microsoft Excel, to enhance the traceability. Findings of the study re-affirm the significance of financial literacy as a means of strengthening the micro-entrepreneurs’ decision-making, arguing for its significance in handling money and various financial concepts as well as boosting entrepreneurs’ business performance. This is especially important for such individuals, most of whom invest their money in risky business ventures with little capital investment. The study also holds that every working financial literacy model must inter-connect the household/budget and business finance. Nevertheless, some limitations to the research are worth noting. It targets only the Province of Chanchamayo, and so the current study results may not be extended to other regions or counties. Moreover, this study is cross-sectional, which inhibits drawing causal relationships; also, the data were self-reported. However, there is a requirement of an extended theoretical model that involved personal financing and business financing to support the economic growth issues above. From a practical point of view, the study recommends the necessity of designing intervention programs to improve the financial literacy of micro-entrepreneurs, which should involve cooperation between universities, governmental agencies, and businesses focused on the improvement of the literacy level of the population and on the micro-entrepreneurs level in particular. In other words, this research explores the relationship between various financial dimensions and decision-making in micro-entrepreneurs, revealing a significant positive correlation in several key aspects. First, a strong correlation was identified between the family budget and decision-making, with Spearman’s Rho correlation index of 0.798 and a p-value of 0.000, supporting the acceptance of the alternative hypothesis. Such findings correspond with the research (Gabriel et al.,2020), who point to the significance of proper financial decisions for dealing with daily issues by stressing the family background and culture as the aspects influencing financial literacy. Likewise, a positive correlation was found between savings and decision-making, with an index of 0.797 and a p-value of 0.000. According to ref. (Rutkauskas & Stasytyt ˙ e,2022), the managers should assess the financial opportunities and design the saving and investment portfolio, which may be necessary in some sectors like hardware. As for the credit indicator, the correlation coefficient is equal to 0.790, which agrees with (Abdul kareem et al.,2023) and (Du & Shen,2024) on the matter of the role of managing credits in business profitability. Financial literacy that addresses investment and credit histories and other areas important for saving and proper decision-making is relevant. Finally, a positive correlation was observed between insurance and decisionmaking, with an index of 0.789. Ref. (Carhuavilca & Zegarra,2021) highlights the need for informed financial decisions in the daily operations of micro-entrepreneurs, emphasizing the importance of financial skills to manage risks prudently (Figure 6). In this regard, it is necessary to contribute towards raising awareness of financial resources and their services, particularly for strategically insecure micro-entrepreneurs. It is suggested that ministries of economy, finance, education, and social inclusion extend financial literacy by using any media, thereby promoting the effective financial literacy. Adm. Sci. 2025,15, 24 22 of 25 Adm. Sci. 2025, 15, x FOR PEER REVIEW 22 of 25 opportunities and design the saving and investment portfolio, which may be necessary in some sectors like hardware. As for the credit indicator, the correlation coefficient is equal to 0.790, which agrees with (Kareemet al., 2024) and (Du & Shen, 2024) on the matter of the role of managing credits in business profitability. Financial literacy that addresses investment and credit histories and other areas important for saving and proper decisionmaking is relevant. Finally, a positive correlation was observed between insurance and decision-making, with an index of 0.789. Ref. (Carhuavilca & Zegarra, 2021) highlights the need for informed financial decisions in the daily operations of micro-entrepreneurs, emphasizing the importance of financial skills to manage risks prudently (Figure 6). Figure 6. Correlation between dimensions and decision-making. In this regard, it is necessary to contribute towards raising awareness of financial resources and their services, particularly for strategically insecure micro-entrepreneurs. It is suggested that ministries of economy, finance, education, and social inclusion extend financial literacy by using any media, thereby promoting the effective financial literacy. 6. Conclusions This research has established a significant relationship between financial education and decision-making in micro-entrepreneurs, evidencing a strong positive correlation. The analysis, based on Spearman’s Rho correlation index, reveals that financial education is closely linked to the ability of micro-entrepreneurs to make informed decisions, with a correlation coefficient of 0.786 and a p-value of 0.000, which leads to rejecting the null hypothesis and accepting the alternative hypothesis. This result highlights the need for financial literacy as one of the key aspects of SMEs sustainable development, with a focus on rational financing and risk management. Furthermore, a positive correlation has been identified between the family budget and decision-making, with a coefficient of 0.798, highlighting the relevance of adequate financial planning at the family level for business success. The savings dimension also shows a significant positive correlation (r = 0.797), suggesting that fostering a savings culture is crucial for the financial stability of microentrepreneurs. Regarding credits, the research reveals a positive correlation of 0.790, indicating that adequate credit management is essential to improve profitability and avoid over-indebtedness. Finally, the relationship between insurance and decision-making, with a coefficient of 0.789, highlights the importance of insurance as a tool to mitigate risks and ensure business continuity. Despite the usefulness of this research, it is, however, not without limitations. The research focuses only on the Province of Chanchamayo, which might restrict the transferability of the obtained results to other provinces or other countries. Further, the study is Figure 6. Correlation between dimensions and decision-making. 6. Conclusions This research has established a significant relationship between financial education and decision-making in micro-entrepreneurs, evidencing a strong positive correlation. The analysis, based on Spearman’s Rho correlation index, reveals that financial education is closely linked to the ability of micro-entrepreneurs to make informed decisions, with a correlation coefficient of 0.786 and a p-value of 0.000, which leads to rejecting the null hypothesis and accepting the alternative hypothesis. This result highlights the need for financial literacy as one of the key aspects of SMEs sustainable development, with a focus on rational financing and risk management. Furthermore, a positive correlation has been identified between the family budget and decision-making, with a coefficient of 0.798, highlighting the relevance of adequate financial planning at the family level for business success. The savings dimension also shows a significant positive correlation (r = 0.797), suggesting that fostering a savings culture is crucial for the financial stability of micro-entrepreneurs. Regarding credits, the research reveals a positive correlation of 0.790, indicating that adequate credit management is essential to improve profitability and avoid over-indebtedness. Finally, the relationship between insurance and decision-making, with a coefficient of 0.789, highlights the importance of insurance as a tool to mitigate risks and ensure business continuity. Despite the usefulness of this research, it is, however, not without limitations. The research focuses only on the Province of Chanchamayo, which might restrict the transferability of the obtained results to other provinces or other countries. Further, the study is based on a cross-sectional survey, and the data are self-reported, and thus, the results can be influenced by different types of biases. The implications of the theoretical background require the creation of an extended theoretical model that would focus on the integration of financial literacy for the purpose of personal and business financing, as well as the contribution of financial literacy to economic growth. In practice, the results concern the necessity of developing concrete financial literacy intervention programs for micro-entrepreneurs, which may include cooperation between schools, the Ministry of Education, other government agencies, and financial companies to improve this specific population group’s literacy level. The guidelines generated from this research indicate the critical importance of enhancing financial literacy among micro-entrepreneurs and the active involvement of the public and private sectors in the organization of conventions such as workshops and seminars. The urgency of incorporating financial literacy as part of learning curricula so that young people form positive habits of personal finance is emphasized. Therefore, there is a need for micro-entrepreneurs to be equipped with financial management skills that cover aspects of family budgeting, savings, the right credit choice, and appreciation Adm. Sci. 2025,15, 24 23 of 25 of the positive impacts of insurance that are important when working on the growth and sustenance of the business. These actions will foster not only their economic development but also ensure the enhancement of business and economic structure at the national level, making a stronger environment to perform well in the future challenges. Author Contributions: Conceptualization, D.P.-A. and J.M.S.-S.; methodology, J.M.S.-S. and S.L.B.-I.; validation, S.L.B.-I. and U.A.-R.; formal analysis, D.P.-A. and M.D.V.-A.; investigation, M.D.V.-A. and J.M.S.-S.; resources, S.L.B.-I.; data curation, U.A.-R.; writing—original draft preparation, F.M.M.- M.; writing—review and editing, V.G.-P.; visualization, V.G.-P.; supervision, V.G.-P. and F.M.M.-M.; project administration, F.M.M.-M. All authors have read and agreed to the published version of the manuscript. Funding: This research received no external funding. Institutional Review Board Statement: Not applicable. Informed Consent Statement: Not applicable. Data Availability Statement: Data are contained within the article. Conflicts of Interest: The authors declare no conflicts of interest. References Abdelkareem, R., & Augustyn, M. (2023). Knowledge visualisation and strategic decision-making outcomes in small and medium-sized enterprises. Journal of Information Science. 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