THE EFFECT OF FINANCIAL LITERACY ON FINANCIAL DECISION MAKING IN LOCAL NON-GOVERNMENTAL ORGANIZATIONS

Abstract

This study examines how financial literacy influences decision-making within local nongovernmental organizations (NGOs) in Addis Ababa, Ethiopia, with a focus on NGOs that support individuals with intellectual disabilities. Financial literacy is an essential skill for making sound financial decisions, and this research investigates whether a greater understanding of finances among NGO employees leads to better financial choices for their organizations. By surveying decision-makers in five selected NGOs, the study gathered quantitative data through questionnaires to explore how knowledge, behaviors, and attitudes about money impact financial decisions.The findings reveal that financial knowledge plays a significant role in improving financial decision-making. Employees with a strong understanding of financial concepts tend to make more informed, effective choices. On the other hand, financial behavior, such as being overly cautious or risk-averse, can sometimes limit the flexibility needed for sound decisions. Financial attitude, though important, has a weaker effect on decision-making compared to knowledge, suggesting that while a positive mindset helps, it’s the practical understanding of finances that truly drives better decisions.In conclusion, financial literacy is crucial for enhancing decision-making in NGOs, especially in the nonprofit sector where careful management of resources is essential. The study recommends providing employees with ongoing financial education, focusing on key areas such as budgeting, risk management, and strategic planning. By fostering a culture of financial awareness and equipping staff with the right tools, NGOs can improve their financial decisions and better support their missions