Fintech Adoption, Financial Literacy, and Micro, Small, and Medium Enterprises in a Developing Economy

Abstract

With the rise of financial technology and the importance of financial literacy, our study aims to examine the role of fintech adoption and financial literacy on MSMEs financial performance. Also, we want to determine the moderating roles of fintech adoption and financial literacy on small business performance in Madagascar. The quantitative approach used 400 respondents collected from MSMEs owners in the municipality of Antananarivo, Madagascar. The data were then analyzed using Structural Equation Modeling (SEM-PLS) with SmartPLS version 4. Our findings show that financial literacy is positively associated with FinTech adoption. Second, Financial literacy significantly improves the financial performance of MSMEs. Third, FinTech adoption positively enhances the financial performance of MSMEs. Lastly, financial literacy does not moderate the relationship between FinTech adoption and Financial Performance. These results indicate that understanding the basic skills of finance is an asset for MSMEs owners to ensure their business profitability and soundness. Also, leveraging fintech products and services streamlines business operations and drives success and competitiveness. This study provides novel insights into fintech adoption and its impact on MSMEs in Madagascar and is among the few studies to integrate literacy as a moderating factor, particularly in the advancement of financial technology.