The Influence of Financial Literacy on Entrepreneurial Success and Financial Well-Being Among Islamabad’s Small and Medium Enterprises

Abstract

This study examines the impact of financial literacy (financial knowledge, skills, and attitude) on entrepreneurial success and the mediating role of financial well-being in Small and Medium Enterprises (SMEs) in Islamabad. The research aims to explore how financial competencies influence business outcomes and the mechanisms through which financial well-being enhances entrepreneurial performance. Using a quantitative approach and a structured questionnaire, data were collected from 248 entrepreneurs representing diverse industries and business sizes. The relationships among the variables were analyzed using correlation, regression, and mediation analysis.The findings reveal that all components of financial literacy significantly influence entrepreneurial success, with financial attitude emerging as the most critical factor, followed by financial knowledge and financial skills. The study also confirms the mediating role of financial well-being, demonstrating that financial literacy impacts entrepreneurial success both directly and indirectly through enhanced financial well-being. These results emphasize the importance of fostering financial competencies and financial security to achieve sustained business growth.This research contributes to the literature by contextualizing these relationships in a developing economy, providing practical insights for policymakers, educators, and entrepreneurs. Recommendations include implementing targeted financial education programs and support mechanisms to improve financial literacy and well-being in the SME sector. Future research could expand to other regions, incorporate additional variables, and adopt longitudinal designs to gain a more comprehensive understanding