Financial literacy and SME firm performance

Abstract

The performance of the SME firm was viewed along the full proportions of financial, strategic and structural development. The socioeconomic function performed by SMEs is widely known in developing and emerging countries. But, in recent times, developing and developed nations have become more and more concerned about the level of financial literacy of the entrepreneur. This has emanated from peculiar to declining public and private to support systems and wide-ranging developments in the financial marketplace. Concern was also intensified by the challenging faced by the SME firm in financial context aided by the recognition that dearth of financial literacy has been one of the many elements responsible for lacks proper knowledge or information about financial decision making and that these decisions could, in turn, have tremendous unexpected consequences. Subsequently, financial literacy is now globally recognized as a major factor of economic and financial stability and development of SMEs for performance. A series of tangible trends underpin the growing worldwide interest in financial literacy as a major life skill, thus, this study set to review the influence of financial literacy on the performance of the SMEs from Nigeria's context. The study will serve as an information because that will promote and orient SMEs firm performance towards financial awareness, knowledge and perceive attitude. Also, the applied significant framework developed will assist SMEs firm owners and policy makers to identify the importance of financial literacy.

Financial Literacy Among Sme’s in Malaysia

“…According to research, individuals with high financial behavior are more likely to participate in stock market and formal financial markets for investment (Klapper and Panos, 2011;Jennifer and Chi, 2018) pay bills on time, anxiously evaluate financial products, prefer savings than borrowings in crisis time, self-assess the affordability of products (Atkinson and Messy, 2012;Agarwalla et al, 2013) actively save, have a bank account, have a formal credit, more capacity of spending (Klapper and Panos, 2011;Atkinson and Messy, 2012;Agarwalla et al, 2013) prefer low cost borrowing (Allgood and Walstad, 2013;Khalifa, 2018) accumulate and manage assets well (Van Rooij et al, 2007), plan and monitor household budget and personal finance (Atkinson and Messy, 2012;Agarwalla et al, 2013) and do retirement planning (Lusardi and Mitchell, 2008;2011a;Van Rooij et al, 2009). Eniola and Entebang (2016) stated that an entrepreneur with high level of financial literacy perform better towards their business success. At the same time, Lusardi and Scheresberg (2013) claimed that the entrepreneur with high levels of financial literacy will not borrow from borrowings that have high cost of money.…”

Reviewing Financial Literacy for SMEs and Entrepreneurs in Developing Economies

“…From the analysis on two studies attempted to categorize financial literacy into knowledge and understanding, skills, attitudes and confidence and ultimately behavior. [3,4] Varying degree of financial contents was revealed in these studies. The most featured domains based on budgeting and planning, financing, borrowing, investing and saving, preparation of financial statements and banking services.…”

“…In light of the changing business environment, financial literacy is considered to be the capability to adequately oversee financial resources over the business lifecycle and connect effectively with financial products and services. [4] . The management of firm financial resources requires knowledge, skill, attitude and experience with the goal to dealing with the survival of the firm, profit maximization, sales maximization, capturing a market share, minimizing staff turnover and internal conflicts; and maximizing wealth.…”

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“…(Barney, 1991). Penelitian ini mendukung beberapa penelitian sebelumnya yang dilakukan oleh Dahmen and Rodríguez (2014), Aribawa (2016), Eniola and Entebang (2016) yang menyatakan bahwa literasi keuangan berdampak positif terhadap kinerja usaha.…”

“…Penelitian ini menunjukkan bahwa dengan literasi keuangan yang tinggi membantu entrepreneur membuat keputusan keuangan dengan baik serta berpengaruh positif terhadap kinerja usaha. Hasil penelitian ini sejalan dan mendukung penelitian sebelumnya yang dilakukan oleh Dahmen and Rodríguez (2014), Aribawa (2016) dan Eniola and Entebang (2016). Hasil penelitian ini memberikan implikasi teoritis yakni mendukung teori RBV yang menyatakan bahwa untuk mencapai kinerja usaha yang bertumbuh dan memiliki keunggulan kompetitif maka pengusaha harus mampu memiliki pengelolaan sumber daya yang lebih berharga, langka, tidak dapat ditiru, dan tidak dapat digantikan (Barney, 1991).…”