Abstract:
While financial literacy has been widely studied globally, limited research exists on its impact
on investment performance in emerging economic hubs like Kamembe city, Rwanda. This
study fills this gap by examining how financial literacy influences investment decisions and
performance among local investors, providing context-specific insights for policymakers and
financial educators. The research was motivated by the growing recognition that financial
literacy plays an important role in determining investment decisions, improving financial well being, and enhancing resilience in times of economic uncertainty. The specific objectives of
the study were to assess the level of financial literacy among investors, evaluate their
investment performance, and evaluate the effect of financial literacy on investment
performance.
A mixed-methods approach was employed, combining quantitative data from a structured
questionnaire administered to 150 investors. The quantitative data were analyzed using
descriptive statistics, correlation, and regression analysis in SPSS. Key indicators assessed
under financial literacy included knowledge, skills and behavior specifically on budgeting,
saving, borrowing, and investing. Investment performance was measured using return on
investment rate and sales growth rate.
The findings revealed that most investors possessed a moderate level of financial literacy, with
the majority scoring between 3 and 4 on a 5-point scale. Investment performance , most
investors were generally moderate performers with 41%, the best high performers cover 22%
and the rest of 37% are qualified as low performers. A significant positive correlation (r =
0.291, p < 0.01) was found between financial literacy and investment performance. Regression
analysis confirmed that financial literacy significantly predicts investment performance (R² =
0.085, p < 0.001), supporting the study's hypothesis. The study also explored investors’
experiences with financial distress, showing that while a large number faced financial
challenges, many overcame them through strategies such as borrowing, selling assets, and
diversifying business activities. The study has important implications for policymakers,
educators, and financial institutions aiming to strengthen financial literacy programs to foster
sustainable investment growth and economic empowerment.
