SME Managers and Financial Literacy

Abstract

The aim of this study is to examine the level of small and medium enterprises (SMEs) business owners–managers’ financial literacy and its impact on firm’s performance. The article applied a random sample and structural equation modelling (SEM) approaches in assessing the influence of SME business owners–managers’ level of financial literacy within the three states in the southwest Nigeria. The findings show the complete effect of business owner–manager’s financial knowledge, financial awareness and financial attitude in converting financial literacy to increase in firm performance. Also, they confirm that financial knowledge and awareness of SME business owners–managers are obviously not a prerequisite for the performance of SMEs, but entrepreneur characteristics in decision-making and relationship to financial attitude have a comparison with financial literacy. The research limitation evolves from cross section information observation that solely covers the southwestern part of the country. Additionally, inspired to meet the analysis gap is panel data analysis. Training courses through strategic orientation on the attitudinal perception of SME business owner–manager and basic business management skills, capacity-building aspect, leadership development as well as networking via relationship marketing and management on financial literacy may have significant effect on SMEs’ performance and growth for the managers in general in Nigeria. The article is one of the first to examine the level of financial literacy of SME business owners–managers in Nigeria. The article therefore sets an important benchmark for further research in this area.

How Does Financial Literacy Promote Sustainability in SMEs? A Developing Country Perspective

“…The positive influence of financial literacy on sustainability is consistent with the results of Eniola and Entebang [20], who found that financial literacy had a direct, positive impact on the performance of Nigerian SMEs, and Purnomo [109], who also found that financial literacy had a direct impact on SMEs' performance. We identified financial literacy as an important component of organisations' intellectual capital and thus our findings are consistent with those of Carmeli and Tishler [31], who found that intellectual capital had a positive effect on SMEs' sustainability.…”

“…Empirical studies have shown that levels of financial literacy are low amongst entrepreneurs. Eniola and Entebang [20] identified a lack of financial literacy as a common problem in SMEs; lack of financial literacy has an impact on business organizations in the starting up phase and subsequently. Kotzè and Smit [21] concluded that lack of financial literacy was the main reason for the failure of SMEs.…”

“…Increasing a firm's financial literacy may improve its attitude to financial risks and challenges. Improving a firm's financial literacy would help to improve both knowledge and managerial skills, leading to better management of financial resources and affairs [20].…”

Encouraging Financial Literacy Through Corporate Social Responsibility of Financial-Service Businesses in Indonesia: A Conceptual Paper

“…Within the last decade there have been many studies conducted by previous research regarding financial literacy, especially in emerging countries, such as India [6], Bosnia and Herzegovina [7], South Africa [8][9][10][11], Latvia [12], Dominican Republic [13], Mexico [14], Tanzania [15], and Nigeria [16]. Most of studies regarding financial literacy in emerging countries focused on knowledge standards of financial literacy, i.e.…”

The Role of Mutual Guarantee Institutions in the Financial Sustainability of New Family-Owned Small Businesses

“…Likewise, insufficient financial literacy has been recognised as one of the main reasons for the failure of SMEs [10] and as a barrier to the sustainable development for these companies [7]. [11] identified the impact of the lack of finance on business organisations in the start-up period. The role of knowledge-based resources in promoting sustainability in SMEs is a very contemporary issue and financial literacy has been considered as the key to financial decision making [7].…”