Attitude for inclusive finance: influence of owner-managers’ and firms’ characteristics on SMEs financial decision making

Abstract

Purpose The adoption and use of financial services by small- and medium-sized enterprises (SMEs) are pivotal in the development of inclusive financial markets. The purpose of this paper is to examine the influence of attitude on financial decision making of SMEs owner-manager. The attitude of SMEs owner-manager comprises of several factors; however, current study identifies few critical factors such as motivation, awareness and risk in the context of Pakistan. The study also includes the personal and firm characteristics as moderating variables to examine their effect on the relationship between attitude and financial decision making of owner-managers. Design/methodology/approach With the help of a structured questionnaire, total 285 valid responses are analyzed to accomplish the research objectives. The study uses SPSS and partial least square-structural equation modeling techniques in order to conduct analysis. The results of study highlight the importance of attitudinal factors such as awareness and risk. Moreover, the moderating effect of personal characteristics on the relationship between attitude and financial decision making has been found strong instead of firm characteristics. Findings The results show that the low awareness level of owner-managers regarding financial products and procedures significantly affects their attitude. Moreover, the less knowledge of financing terms as well as dominant role of owner-managers in taking firm decisions also increase the negative effect of risk factor on SMEs owner-manager attitude. Research limitations/implications The study suggested that policy makers should focus on the financial awareness of SMEs owner-manager to reduce the negativity of risk factor. Originality/value The study contributes toward the literature of inclusive finance and sustainability studies through better understanding of financial decision making of SMEs in emerging economies.

Technology Acquisition and SMEs Performance, the Role of Innovation, Export and the Perception of Owner-Managers

“…The low awareness level of owner-managers concerning financial products and procedures affects their attitude significantly. The less knowledge of financing requirements and the dominant role of owner-managers in making business decisions also increase the risk-averse effect on the firm's owner-manager attitude (Rabia and Hafeez 2019). Besides, the opaqueness in providing relevant information by SMEs means banks face information asymmetry, which may cause them to ration credit.…”

Financial Literacy of Micro, Small, and Medium Enterprises of Consumption Sector in Probolinggo City

“…As shown in the table, the average financial literacy of the owners-managers of MSMEs is 68.8%. It is considered as fair (Rasheed & Siddiqui, 2019). This figure suggests that the respondents have not yet mastered the knowledge and skills related to the financial product and service.…”

“…For example, Humaira and Sagoro (2018) asert that financial behavior had a significant effect on MSME performance. Rasheed and Siddiqui (2019) report that the MSME owner awareness on finance product and procedure significantly influenced their attitude in making financial decision.…”

The Impact of Founder’s Financial Behavior Traits and Literacy on SMEs Performance: Empirical Evidence from SMEs in Indonesia

“…The availability heuristic consists of investment information, and the more information you have, the more positive the impact on SMEs' Performance. The lack of finances and the dominant role of owner-managers in making professional decisions add to the negative impact of the risk factor on SME's owner-manager attitude (Rasheed & Siddiqui, 2019). As a result, founders wield more influence in SMEs ' decision-making.…”