The role of financial literacy in shaping financial management, financing and investment decisions in spaza shop businesses: Evidence from Gamalakhe Township, South Africa

Background: Financial literacy (FL) is increasingly recognised as a key determinant of financial decision-making and business sustainability among informal micro-enterprises. Despite the importance of spaza shops in South African townships, limited evidence exists on how FL influences their financial management, financing and investment decisions.
Aim: This study examines the role of FL in shaping financial management practices, financing choices and investment decisions among spaza shop owners.
Setting: The study focused on spaza shop businesses in Gamalakhe Township, South Africa.
Methods: A quantitative design used survey data from 100 spaza shop owners. Financial literacy and financial decision-making variables were measured using validated Likert-scale items. Descriptive statistics and ordinal logistic regression assessed the influence of FL on budgeting, record-keeping, financing behaviour, investment decisions and financial risk management.
Results: Financial literacy had a statistically significant positive effect on key financial decisions. It significantly predicted the likelihood of selecting more favourable financing options (β = 1.636, p ≤ 0.001) and higher-level investment decisions (β = 1.942, p ≤ 0.001). Financial literacy was also positively associated with budgeting, record-keeping and risk mitigation.
Conclusion: Financial literacy functions as both a strategic resource and behavioural enabler, shaping financial decisions central to the sustainability of informal enterprises.
Contribution: The study provides empirical evidence from an under-researched township context and integrates resource-based and behavioural perspectives to explain financial decision-making among spaza shop businesses.