The general objective of this study was to investigate the impact of financial literacy on the performance of small and medium enterprises in Morogoro municipal. Descriptive research design was used and the researcher made use of both primary and secondary data to provide answers to the research questions. The study involved samples drawn from respondents that own or manage SMEs. Data was gathered through issuing questionnaires and conducting interviews to a sample population of 120 respondents that own or manage businesses. Non Probability sampling was used to purposely and conveniently select respondents to collect data. to analyze the findings the researcher used frequency distribution and cross tabulations which were computed using by the Microsoft excel and the report was presented using frequency tables. In order to determine the relationship and the significance of the relationship between independent variables financial attitude, financial behavior and financial knowledge with the dependent variable SMEs performance the study employed a correlation analysis and regression analysis of variance whereby the Statistical package for the social sciences (IBM SPSS) statistical software was used to conduct these statistical analyses. Results showed that the majority of respondents had adequate are financial knowledge as indicated by a majority of respondents who successfully answered questions on various concepts and terminologies associated with financial literacy; these included risk and return, time value of money, inflation and diversification. The study sought to examine the effects of financial behavior on the performance of SMEs, findings showed that financial behavior had a slight effect on the performance of SMEs. Furthermore the study examined the effects of financial attitude of owners and/or managers of SMEs and the subsequent effect on the performance of SMEs. Findings showed that the majority had a positive attitude when it came to setting financial targets for the future. It was concluded that being financially knowledgeable is not enough to make a business profitable, that knowledge needs to be put to use in the process of making decisions for the business as well as other activities in relation to the business. For instance understanding the concept of time value of money will not automatically make one make more profits, it is the use of that understanding in making financial decisions for the business that may result in increase in earnings. Furthermore it was concluded that efficient financial behavior, the likes of savings, retirement planning, debt management, budgeting and recordkeeping play a major role in SMEs performance. From the findings it was recommended that the government as well as other institutions dealing with financial matters should provide education and trainings on proper finance that aim at encouraging the use of financial knowledge in the decision making for businesses. Such efforts should have the ability to provide encouragement and motivation to business owners to have a positive approach with regards to the future of the business in terms of growth and expansion.