Financial literacy and business performance among female micro-entrepreneurs
-
DOIhttp://dx.doi.org/10.21511/imfi.19(1).2022.12
-
Article InfoVolume 19 2022, Issue #1, pp. 156-167
- Cited by
- 1218 Views
-
1029 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The poor performance of female entrepreneurs, exemplified in their inability to realize their full potential and compete fairly with their male counterparts owing to financial illiteracy, motivated this study. Therefore, this study examined the effect of financial literacy on business performance among female micro-entrepreneurs. Using the survey research design, data were collected from 247 female entrepreneurs from six states in the North-Eastern region of Nigeria. The hypotheses developed for the study were tested using path modeling-structural equation modeling with the aid of SmartPLS software version 3.2.7. The result revealed that all proxies of financial literacy (financial education, cash forecasting, and bookkeeping have significant effects on business performance of female entrepreneurs. Additionally, the paper revealed that financial education contributed more to the variance in business performance of the female micro-entrepreneurs, this was followed by bookkeeping practices, while cash-forecasting has the least effect on the variance in business performance. This implies that financial education is essential for the success of female micro-entrepreneurs. Thus, this study advocates the need for continuing trainings and workshops for female micro-entrepreneurs on financial concepts such as bookkeeping, cash forecasting, and market volatilities.
- Keywords
-
JEL Classification (Paper profile tab)L26, M13
-
References62
-
Tables8
-
Figures1
-
- Figure 1. Measurement model assessment
-
- Table 1. The study population
- Table 2. Analysis of demographic profiles of respondents
- Table 3. Construct validity and reliability
- Table 4. Discriminant validity – Heterotrait – Monotrait (HTMT) criterion
- Table 5. Hypothesis testing results
- Table 6. Effect sizes (f2)
- Table A1. Financial literacy
- Table A2. Organizational performance
-
- Acs, Z. J., & Armington, C. (2006). Entrepreneurship, agglomeration and US regional growth. Cambridge: Cambridge University Press.
- Acs, Z. J., Audretsch, D. B., Braunerhjelm, P., & Carlsson, B. (2004). The missing link: The knowledge filter and entrepreneurship in endogenous growth (Discussion Paper no. 4783). London, UK: Center for Economic Policy Research.
- Acs, Z., Braunerhjelm, P., Audretsch, D., & Carlsson, B. (2009). The Knowledge Spillover. Theory of Entrepreneurship. Small Business Economics, 32(1), 15-30.
- Akter, S., D’Ambra, J., & Ray, P. (2011). An evaluation of PLS based complex models: the roles of power analysis, predictive relevance and GoF index. Proceedings of the 17th Americas Conference on Information Systems (AMCIS2011) (pp. 1-7). Detroit, USA: Association for Information Systems.
- Arumona, J., Erin, O., Onmonya, L., & Omotayo, V. (2019). Board financial education and firm performance: Evidence from the healthcare sector in Nigeria. Academy of Strategic Management Journal, 18(4), 1-14.
- Asaad, C. T. (2015). Financial literacy and financial behavior: Assessing knowledge and confidence. Academy of Financial Services, 24(2), 101-117.
- Chepngetich, P. (2016). Effect of financial literacy and performance SMEs. Evidence from Kenya. American Based Research Journal, 5(11), 26-35.
- Cohen, J. W. (1988). Statistical power analysis for behavioural sciences (2nd ed.). Hilladale, Lawrence Erlbaum Associates, New Jersey.
- Contrera, D., & Julian, A. (2018). Cash management as a competitive advantage.
- Darus, N. M., Yunus, A. R., & Rahman, N. W. (2017). Factors enhancing the performance of SMEs’ services sectors: A conceptual framework. International Journal of Advanced and Applied Sciences, 4(3), 160-166.
- Eniola, A. A., & Entebang, H. (2015). SME Firm performance-financial innovation and challenges. Procedia - Social and Behavioral Sciences, 195, 334-342.
- Erin, O., Olojede, P., & Ogundele, O. (2017). Corporate governance attributes and financial disclosure quality: Evidence from listed firms in Nigeria. ICAN Journal of Accounting and Finance, 2(1), 355-377.
- Ernest, N. (2018). The role of bookkeeping on the survival of very small businesses in the Kumba Municipality. International Journal of Advanced Engineering, Management and Science, 4(10), 713-723.
- Eton, M., Uwonda. G., Mwosi, F., Ogwel. B. P., & Obote, D. (2019). Cash management and financial performance of business firms in Northern Uganda a case of Lira District. International Journal of Business management and Technology, 3(4), 115-125.
- Fessler, P., Silgoner, M., & Weber, R. (2019). Financial knowledge, attitude and behavior: Evidence from the Austrian survey of financial literacy. Empirica, 47, 1-19.
- Fight, A. (2006). Cash flow forecasting. United Kingdom: Elsevier.
- Fonseca, L., Ramos, A., Rosa, Á., Braga, A., & Sampaio, P. (2016). Stakeholders satisfaction and sustainable success. International Journal of Industrial and Systems Engineering, 24(2), 144-157.
- Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39-50.
- Gottesman, A., & Morey, M. (2006). Does a better education make for better managers? An empirical examination of CEO educational quality and firm performance (SSRN Working Paper 564443).
- Gunday, G., Ulusoya, G., Kilic, K., & Alpkan, L. (2009). Effects of innovation types on firm performance. Journal of Faculty of Engineering and Natural Sciences, 34956.
- Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2014). A Primer on partial least squares structural equation modelling. Thousand Oaks, CA: Sage.
- Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017). A primer on partial least squares structural equation modelling (PLS-SEM) (2nd ed). Thousands Oak, CA: Sage Publications.
- Halkias, D., Nwajiuba, C., Harkiolakis, N., & Caracatsanis, S. M. (2011). Challenges facing women entrepreneurs in Nigeria. Management Research Review, 34(2), 221-235.
- Haniffa, R. M., & Cooke, T. E. (2008). Culture, corporate governance, and disclosure in Malaysian corporations. Abacus, 38(3), 317-341.
- Hassan, I. B., & Mugambi, F. (2013). Determinants of growth for women owned and operated micro enterprises: The case of Garissa, Kenya. International Journal of Business and Commerce, 2(7), 45-55.
- Hastings, J. S., Madrian, B. C., & Skimmyhorn, W. L. (2013). Financial literacy, financial education and economic outcomes. Annual Review of Economics, 5, 347-373.
- Hathaway, I., & Khatiwada, S. (2008). Do financial education programs work? (Working Paper 08-20). Federal Reserve Bank of Cleveland.
- Hilgert, M., Hogarth, J., & Beverly, S. (2003). Household financial management: the connection between knowledge and behaviour. Federal Reserve Bulletin, 89(7), 309-322.
- Hogarth, J., & Hilgert, A. (2002). Financial knowledge, experience and learning preferences: Preliminary results from a new survey on financial literacy. Consumer Interests Annual, 48, 1-23.
- Holmes, S., & Gupta, D. (2015). Opening Aladdin’s cave: Unpacking the factors impacting on small businesses. In A. Moore & J. Simon (Eds.), Small business conditions and finance (pp. 37-56). Sydney: Reserve Bank of Australia.
- Hulland, J. (1999). Use of partial least squares (PLS) in strategic management research: A review of four recent studies. Strategic Management Journal, 20(2), 195-204.
- Hung, A., Parker, A. M., & Yoong, J. (2009). Defining and measuring financial literacy (RAND Working Paper Series WR-708). Santa Monica, CA: RAND Corporation.
- Kevehazi, K. (2020). Importance of female entrepreneurship. Proceedings of FIKUSZ ’16 Symposium for Young Researchers (pp. 87-98).
- Kim, J. (2001) Financial knowledge and subjective and objective financial well-being. Consumer Interests Annual, 47, 1-3.
- Kinyanjui, D., Kiragu, D., & Kamau, R. (2017). Cash management practices on financial performance of small and medium enterprises in Nyeri Town, Kenya. Saudi Journal of Business and Management Studies, 2(3), 215-221.
- Krejcie, R. V., & Morgan, D. W. (1970). Determining sample size for research activities. Educational and Psychological Measurement, 30, 607-610.
- Ladanu, W. K., & Ayedun, T. A. (2016). A perspective study of women micro-entrepreneurs in the rural areas of Osun State, Nigeria. International Journal of African and Asian Studies, 21, 1-5.
- Liman, M., & Aminatu, S. M. (2018). Operating cash flow and corporate financial performance of listed conglomerate companies in Nigeria. Journal of Humanities and Social Science, 23(2), 01-11.
- Liu, J., Pacho, F. T., & Xuhui, W. (2019). The influence of culture in entrepreneurs’ opportunity exploitation decision in Tanzania. Journal of Entrepreneurship in Emerging Economies, 11(1), 22-43.
- Lusardi, A., & Mitchell, O. S. (2007). Financial literacy and retirement preparedness: Evidence and implications for financial education. Business Economics, 42(1), 35-44.
- Maseko, N., & Manyani, O. (2011). Accounting practices of SMEs in Zimbabwe: An investigative study of record keeping for performance measurement (A case study of Bindura). Journal of Accounting and Taxation, 3, 171-181.
- Miller, M., Godfrey, N., Levesque, B., & Stark, E. (2009). The case for financial literacy in developing countries: Promoting access to finance by empowering consumers. World Bank, DFID, OECD, and CGAP joint note, Washington, DC.
- Mkasanga, E. A. (2015). Cultural dimensions and performance of women’s entrepreneurial initiatives: A case of Mvomero district, Tanzania. Sokoine University of Agriculture, Morogoro.
- Moore, D. (2003). Survey of financial literacy in Washington State: Knowledge, behavior, attitudes, and experiences (Technical Report no. 03-39). Social and Economic Sciences Research Center, Washington State University.
- Mutegi, K., & Phelister, N. (2015). Financial literacy and its impact on loan repayment by small and medium entrepreneurs. International Journal of Economics, Commerce and Management.
- Nachmias, F. C., & Nachmias, D. (2009). Research methods in the social sciences (6th ed.). London: Arnold.
- Neneh, B. N. (2016). Performance implications of financial capital availability on the financial literacy – performance nexus in South Africa. Investment Management and Financial Innovations, 13(2-2), 354-362.
- Nunnally, J. C. (1967). Psychometric theory. New York: McGraw-Hill.
- Owolabi, F., Ajibolade, S., & Uwuigbe, U. (2021). The design and use of performance measurement innovations and organizational outcomes in Nigerian listed companies. Problems and Perspectives in Management, 19(2), 91-103.
- Pandey, A., & Gupta, R., (2018). Entrepreneur’s performance and financial literacy. International Journal of Management Studies, 5(3), 22-49.
- Pandey, N., & Bharthi, M. (2020). An empirical study on women’s perspective of women-led enterprises: With special reference of Maharashtra. VESIM Business School, Chembur, Mumbai.
- Pavković, A., Andelinovic, M., & Misevic, D. (2018). Measuring financial literacy of university students. Croatian Operational Research Review, 9(1), 87-97.
- Rashid, U. K. B. (2017). The effects of entrepreneurial management, entrepreneurial orientation and ethics on the women-owned SMEs business performance in Malaysia (An unpublished doctoral dissertation submitted to Universiti Utara Malaysia).
- Reijonen, H. (2008). Understanding the small business owner: what they really aim at and how this relates to firm performance: A case study in North Karalia, Eastern Finland. Management Research News, 31(8), 616-629.
- Seedhouse, A., Johnson, R., & Newbery, R., (2016). Potholes and pitfalls: The impact of rural transport on female entrepreneurs in Nigeria. Journal of Transport Geography, 54, 140-147.
- Siekei, J., Wagoki, J., & Kalio, O. (2013). An Assessment of the role of financial literacy on performance of small and micro enterprises: case of Equity Group Foundation Training Program on SMES in Njoro district, Kenya. Journal of Economics and Finance, 1(7), 250-259.
- Stone, D., Ben, W., & Stephanie, B. (2008). Reducing materialism through financial literacy. CPA Journal, 78(2), 12-14.
- Stone, M. (1974). Cross validatory choice and assessment of statistical predictions. Journal of the Royal Statistical Society, 36(2), 111-147.
- Tantasuntisakul, W. (2015). Determinants of business performance among women entrepreneurs in Southern Thailand (An unpublished doctoral dissertation submitted to Universiti Utara Malaysia).
- Turner, D. P., & Houle, T. T. (2019b). Assessing and interpreting reliability. Headache, 59, 653-658.
- Uddin, R., Biswas, T., Ali, J., & Khatun, M. S. (2017). Accounting practices of small and medium enterprises in Rangpur, Bangladesh. Journal of Business and Financial Affairs, 6(4), 298-305.
- Ukanwa, I., Xiong, L., & Anderson, A. (2018). Experiencing microfinance: effects on poor women entrepreneurs’ livelihood strategies. Journal of Small Business and Enterprise Development, 25(3), 428-446.