The Financial Literacy and Small and Medium Enterprises’ Performance in Lagos State, Nigeria: An Empirical Approach

Authors

Keywords:

Performance, SMEs, Financial Attitude, Financial Behaviour, Financial Knowledge

Abstract

The study examines the influence of financial literacy on the performance of SMEs with particular reference to SMEs registered with Lagos Business directory. The total population of the study comprises all 376 SMEs that registered and listed in Lagos Business Directory. Closed-ended questionnaires were employed to collect data from 190 SME entrepreneurs. The result reveals that the majority of the SME operators had a numeracy level of financial literacy of using a calculator for addition and subtraction only. This implies that most of the small business entrepreneurs did not have a spectrum of financial skills. It was also discovered that financial literacy dimensions independently and jointly influence SMEs’ performance. Therefore, the study recommends that SME entrepreneurs should leverage on the spectrum of financial skills, and also there should be a collaboration between SME entrepreneurs and accounting professional bodies in Nigeria, to organize seminars and workshops on financial literacy. Thus, this will go a long way to equip SME entrepreneurs with an array of financial skills such as book-keeping, cash management, inventory management, daily cash reconciliation and budgeting.

Downloads

Download data is not yet available.

References

Aifuwa, H.O., Musa, S.M., & Aifuwa, S.A (2020). Coronavirus Pandemic Outbreak And Firms Performance In Nigeria. Management and Human Resource Research Journal 9(4).

Anudu, O & Okojie, J. (2020). SMEs closures seen after Covid-19 pandemic. Available at https://businessday.ng/enterpreneur/article/smes-closures-seen-after-covid-19-pandemic/

Bandura, A. (1977). Social Learning Theory. Englewood Cliffs, NJ: Prentice Hall.

Bandura, A. & Ross, S. A. (1961).Transmission of aggression through the imitation of aggressive models. Journal of Abnormal and Social Psychology, 63,575-582.

Begonja, M, Filip, B. B & Gerbin, A. (2016) Innovation and business performance determinants of SMEs in the Adriatic region that introduced social innovation, Economic Research-Ekonomska Istraživanja, 29:1, 1136-1149, DOI: 10.1080/1331677X.2016.1213651.

Chepngetich, P. (2016). Effect of Financial Literacy and Performance SMEs. Evidence from Kenya. American Based Research Journal, 5, 26–35.

Chu, Z., Wang, Z., Xiao, J. J., & Zhang, W. (2017). Financial Literacy, Portfolio Choice and Financial Well-Being. Social Indicators Research, 132, 799–820.

Didier N. (2002).Manager Less Performances [Managing Performance], Insep Consulting Editions, Paris.

Disney, R., & Gathergood, J. (2013). “Financial Literacy and Consumer Credit Portfolios.” Working Paper, University of Nottingham.

Eniola, A. A., & Entebang, H. (2017). SME Managers and Financial Literacy. Global Business Review11(1), 35–64.

Eresia-Eke, C. E., & Raath, C. (2013). SMME Owners’ Financial Literacy and Business Growth. Mediterranean Journal of Social Sciences, 4, 397–406.

Gathungu, J.A., & Sabana, B. M (2018). Entrepreneur Financial Literacy, Financial Access, Transaction Costs and Performance of Microenterprises in Nairobi City County in Kenya. Global Journal of Management and Business Research: A Administration and Management 18(6); 39-51.

Gentry, R. J., & Shen, .W. (2010). The relationship between accounting and market measures of firm financial performance: How strong is it? Journal of Managerial Issues, 12(4), 514-530.

Geoffrey, K., Otieno, E., & Adam, S. (2016). A Study on the Influence of Financial Literacy on Financial Performance of Small and Medium Enterprises in Ruiru Town, Kiambu County, Kenya. International Journal of Economics, Commerce and Management Vol. IV, Issue 11, 416-437.

Gravetter, R. & Forzano, S. (2003). Research Methods for Behavioural Sciences, Belmont: Wardsworth. Greenspan, A. (2002) Financial Literacy: A Tool for Economic Progress: The Futurist, Vol. 36, (4).

Gunasekaran, A., Patel, C., & Tirtiroglu, E (2001). Performance measures and metrics in a supply chain environment. International Journal of Operations and Production Management, 2001. 21(1/2): p. 71-87.

Hartenian, L., & Gudmundson, D. (2000). Cultural Diversity in Small Business: Implications for Firm Performance, Journal of Developmental Entrepreneurship, 5 (3), 209–219.

Hilgert, M., Hogarth, J., & Sondra, B. (2003). Household Financial Management: The Connection between Knowledge and Behavior. Federal Reserve Bulletin, 309–322.

Huston, S. (2010). Measuring Financial Literacy. Journal of Consumer Affairs, 44: 296–316.

Khadijah, M. U., & Wan, F W (2019). The Impact of Financial Literacy on Business Performance. International Journal of Research and Innovation in Social Science (IJRISS)|Volume III, Issue X, 84-91.

Musabwasoni, G., Mulyungi, P., & Muganamfura, D (2018). Effects of Financial Literacy on loan Repayment among Small and Medium Entrepreneurs of Microfinance Institutions Case Study of Inozamihigo Umurenge Sacco in Nyaruguru District. IOSR Journal of Business and Management. Volume 20, Issue 5. Ver. IV (May. 2018), PP 19-37

Mutiso, A. N., & Muigai, R .G (2018). An Assessment of Financial Literacy and the Performance of UWEZO Funded SME’s in Kirinyaga County, Kenya. Journal of Economics and Sustainable Development. 9(6), 10-18.

Mwithigaa, E. M. (2016). Financial Literacy and Enterprises’ Performance Among Owner-Managed ICT SMEs in Nairobi County, MBA Dissertation. Retrieved From http//www.mwithigadissertation/unitedstateuniversity/w16968.

OECD (2020). Small, Medium, Vulnerable. Available at http://www.oecd.org/sdd/business-stats/statistical-insights-small-medium-and-vulnerable.htm

Okanta, S.U (2018). The Effect of Financial Literacy on the Efficiency of Small-Scale Enterprises in Abia State, Nigeria. International Journal of New Technology and Research. 4(3), 37-45

Oke, L.A (2018). Owner Financial Literacy Charateristic: Implication For Access To Finance Among SMEs in Kwara State Nigeria. Osogbo Journal of Management (OJM), 2018 3(1), 39 – 55.

Okpara, J. (2011). Factors constraining the growth and survival of SMEs in Nigeria Implications for poverty alleviation. Management Research Review, 34(2), 156-171.

Onugu, B. A. (2005). Small and Medium Enterprises (SMEs) In Nigeria: Problems and Prospects. A Dissertation Submitted To The St. Clements University, 2005.

Pandey, A. & Gupta, R. (2018). Entrepreneurs’ Performance and Financial Literacy: A Critical Review, International Journal of Management Studies, 5 (3), 1-14.

Rathnasiri, U. A. (2015). The Financial Management Practices of Small and Medium Enterprises in Sri Lanka. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics. 1(2), 374- 401.

Richard, P.; Devinney, T.; Yip, G., &d Johnson, G. (2008). “Measuring Organizational Performance as a Dependent Variable: Towards Methodological Best Practice”

Sajuyigbe, A.S., Adeyemi, A. Z. & Odebiyi, I. I. (2017). Financial Management Practices and Women Entrepreneurs Performance: An Empirical Investigation. IIARD International Journal of Economics and Business Management (IJEBM). 3(1), 70-79.

Usama, K. M. &Yusoff, W. F. (2019). The Impact of Financial Literacy on Business Performance, International Journal of Research and Innovation in Social Science, 3 (10), 84-91.World Bank Bulletin (2015). World Bank Bulletin, World Bank Publication, Washington D.C. Retrieved From http://www.worldbankbulletin.publication /centrepoint/.

Yadav, M. P. (2015). Model of Entrepreneurial Success: A Review and Research Agenda. Journal Of Advanced Academic Research, 2, 40–58.

Published

2020-08-30

How to Cite

Odebiyi, Itunu I, Fasesin, Oladipo O, & Ayo-Oyebiyi, G. T. (2020). The Financial Literacy and Small and Medium Enterprises’ Performance in Lagos State, Nigeria: An Empirical Approach. SOCIALSCI JOURNAL, 7, 46-54. Retrieved from https://purkh.com/index.php/tosocial/article/view/893

Issue

Section

Research Articles