FINANCIAL BEHAVIOR AND ATTITUDE OF THE MICRO ENTERPRISES

OWNER’S IN BARANGAY BANILAD, BACONG, NEGROS ORIENTAL

A Business Research Presented

to the Faculty of the College of Business Administration

Negros Oriental State University

In Partial Fulfillment

of the Requirements for the

Course BA 304 - Business Research

Cruz, Joanna Loi Ashlee

Escora, Justine Froy S.

Escorel, Cherry Lie

Gadayan, Patrick

Tindoc, Earl

2023
Abstract

The main objective of this study was to look into the Financial Behavior and
Attitude of the Micro-Enterprises in Barangay Banilad, Bacong, Negros Oriental.
Governments all over the world have recently begun to voice worry about the levels
among their citizens as a result of the impact of the well-known financial crisis, with this
issue being widely regarded as a contributing factor to the catastrophe. This has led to the
development of research on financial behaviour and attiotude, but it has primarily
concentrated on personal issues affecting the general population, creating a void with
regard to the financial literacy levels among small business owners. Since it aids in
comprehending and assessing the data required to make everyday decisions that have
financial implications in a company's day-to-day administration, financial conduct is
seen as a crucial component for the success of micro enterprises. The study explores the
idea that, with all other variables held equal, small business leaders levels should inspire
better performance. The chosen target's relevance is supported by the fact that small firms
are classified as micro enterprises.
The majority of respondents who correctly answered questions on a variety of
concepts and terminology linked with financial literacy, including risk and return, time
value of money, inflation, and diversification, indicated that the majority of respondents
had adequate financial knowledge. The purpose of the study was to investigate the
impacts of financial conduct on the performance of SCEs. The results indicated that
financial activity had a negligible impact on SCEs' performance. The study also looked at
the impact of the owners' and/or managers' financial attitudes on the performance of SCE
owners and/or managers. Results indicated that most people had a favourable attitude
about setting future financial goals. It was determined that having a solid understanding
of finances is not sufficient to turn a business profitable; this knowledge must also be
applied while making decisions for the company and carrying out other tasks associated
with the company. For instance, knowing the notion of time value of money does not
guarantee that one would make more money; rather, it is the application of that
knowledge to corporate financial decisions that may lead to an increase in profits. Also, it
was determined that effective financial behaviour, including budgeting, record keeping,
debt management, retirement planning, savings, and retirement planning, has a significant
role in SCEs performance. According to the results, it was advised that the government
and other organizations dealing with financial issues provide education and training on
good finance with the goal of promoting the use of financial knowledge in company
decision-making. Such initiatives ought to be able to inspire and motivate business
owners to adopt a positive outlook on the company's future prospects for development
and growth.
 CHAPTER I
The Problem and Its Scope

INTRODUCTION
Since the mortgage crisis, governments around the world have begun to express
concern about the levels of financial illiteracy among their citizens, owing primarily to
the daily confirmation of rising consumer over indebtedness and household bankruptcy
rates. Furthermore, financial illiteracy has been widely cited as a contributing factor to
the current financial crisis.(Atkinson and Messy, 2011). According to Refera et al.
(2016), in developed countries, the increasing cost of living, the increasing complexity of
financial markets, and the shift of retirement responsibility from the government to
individuals have resulted in an increase in interest in financial literacy because all of
these issues demand personal financial management capability in individuals and
households. They added that studies have recently revealed that developing countries
have been modestly recognizing financial literacy, with promising outcomes of financial
education and other interventions.
Firm performance is highly dependent on the level of financial knowledge that
business managers/owners have regarding decision-making processes, such as timely
payment of bills, properly managing debt to increase potential borrowers' credit
worthiness in order to ensure improvement in economic growth, poverty reduction, sound
financial systems, livelihoods, and general welfare of the people. Possession of extensive
knowledge to act on, as well as the wisdom to determine the best course of action, is
essential for accumulating vast wealth (RichDad.com 2012). Furthermore, as a measure
of the studied companies' business economic performance, these results are correlated
with their actual operating performance.
Small businesses continue to play an important role in efforts to trigger and
sustain equitable development and economic growth in both developed and developing
countries' economies. According to Nkundabanyanga and Kasozi (2014), financial
literacy is the ability of an individual to make informed judgments and effectively make
decisions regarding the use and management of money. In today's global economy,
corporations operating in various countries continue to focus their efforts on branding and
marketing rather than production, resulting in (Simeon and Lara, 2005). According to
Tarfasa et al. (2016), in many African countries, enterprise employment for both micro,
small, and medium enterprises is nearly double the level of total employment in
registered large-scale enterprises, confirming that small and medium enterprises are a
major source of livelihood for a large portion of the population.
STATEMENT OF THE PROBLEM

This study focuses on the effect of financial literacy on the performance of

Dumaguete City’s Small and Medium-Scale Enterprises. Specifically, this study aims
answer the following questions:
1. Identify the demographic profile of the respondents in terms of:
A. Age
B. Sex
C. Civil Status
D. Type of business
E. Year of exists
F. Capitalization
G. Type of Organization
H. Sales per month
2. Determine the degree of agreeableness of Financial Behavior of the micro enterprises
in Banilad, Bacong, Negros Oriental.
3. Determine the level of Financial Attitude of the micro enterprises in Banilad, Bacong,
Negros Oriental.

REVIEW OF RELATED LITERATURE AND STUDIES

After a comprehensive and in-depth search by the researchers, this Chapter

contains the related literature and studies. The studies and literature cited in this chapter
cover a variety of theories, notions, generalizations, and conclusions as well as the
progression of the study from its inception in the past to its current state. The researchers
will use this as a guide when creating their study. Also, the content in this chapter aids in
familiarizing readers with knowledge that is both dissimilar to and comparable to the
current Study.

RELATED LITERATURE

Several authors and professors have defined financial literacy in numerous

previous research and initiatives. In order to effectively use one's financial resources and
the information at hand, one must possess a certain set of skills and knowledge, which is
known as financial literacy. (Remund, 2010). Financial literacy is a combination of
information, behavior, awareness, attitude, and ability that is necessary for an individual
to make wise financial decisions that result in achieving financial well-being, (OECD,
2013). According to this definition, financial knowledge, financial behavior, and financial
attitude are the three key factors to consider when evaluating financial literacy. Only
three criteria should be used to evaluate financial literacy, according to (Messy &
Atkinson, 2012), as this is both reasonable and frequently done in literature.
Personal preference for financial matters is referred to as financial attitude. What
counts is your capacity for forward planning and upkeep of a savings account. According
to (Bushan & Mendury, 2014), fostering positive financial attitudes among the populace
should be the main goal if financial literacy among generations is to be improved. To
determine the level of financial literacy among women, numerous researchers have
performed surveys on financial planning behavior, investment behavior, bill payment
behavior, savings behavior, credit card behavior, and budget behavior. Financial behavior
refers to human actions that are important for managing money and making sound
financial decisions, such as creating and controlling an effective budget plan, paying bills
promptly, and regularly setting aside money (Bhushan & Medury, 2014; (Kalekye &
Memba, 2015). Financial conduct is crucial and a key part of financial literacy, according
to OECD (2013). According to Atkinson and Messy (2012), individuals with positive
financial behaviors such as prudent budgeting and concern for financial stability have
higher levels of financial literacy, whereas those with negative behaviors, such as heavily
relying on credit and loans, have lower levels of financial well-being. According to
(Baneerje, Kumar, & Philip, 2017) research, financial literacy has a beneficial impact on
financial awareness, which leads to an increase in financial inclusion behavior.
Micro scale business financial behavior is a crucial area of research. Decision
algorithms are crucial in the financial decision-making of small organizations since they
frequently have fewer financial resources than larger companies. (Huynh, 2017).
Financial behavior, financial literacy, and financial performance in small firms have all
been the subject of studies. An important topic of inquiry is how small business owners
make financial decisions. (Wong, 2021). Small and midsize businesses (SME) and
entrepreneurship have been acknowledged as important forces behind economic
development and a means of reducing poverty (Alshebami, 2021). Furthermore, potential
entrepreneurs must financially educate themselves in order to make better investment
judgments, make suitable planning decisions, and capture accessible market business
possibilities. This is due to the fact that financial education, also known as financial
knowledge, financial literacy, or financial awareness, is a crucial component of people's
financial behavior and financial attitude according to (Gilenko & Chernova, 2021).
Financial literacy is low even in industrialized economies with well-developed
financial markets, according to Lusardi and Mitchell (2011). On average, one-third of the
world's population is conversant with the fundamental ideas that guide daily financial
decisions. The average conceals the severe vulnerabilities of some population segments
and even the lack of knowledge about particular financial subjects. Also, there is
evidence of low confidence, particularly among women, and this has an impact on how
people approach and make financial decisions. The methods we use to evaluate financial
literacy, the levels of literacy we discover around the globe, the significance of those
findings for financial decision-making, and strategies for enhancing financial literacy are
all covered in the parts that follow.
According to Brown et al. (2006), micro scale business operators need to be
financially literate. Consider your ability to read and comprehend basic financial
statements as well as your proficiency with numbers in order to create wise judgements
and take efficient financial management decisions. Financial literacy is defined as "the
ability to understand and use corporate financial statements to develop important
financial ratios to analyze and manage a business" in a recent work by two writers (Pearl
and Eileen, 2014).
RELATED STUDIES

Financial literacy in Micro-Enterprises: The Case of Cebu Fish Vendors (Barte,

2012) demonstrates the lack of financial literacy among Pasil Fish Sellers. These were
demonstrated by the failure to record transactions, improper recording methods, severely
inadequate recording materials, and poor record-keeping procedures; by the absence of an
income statement or a systematic method for evaluating income and expenses; by the
lack of or ineffectiveness of cash planning; and by the subsequent use of high interest
loans. Their ability to manage their micro-enterprise is compromised by the combination
of these limitations, which also has a limited positive impact on their growth and income.
Nonetheless, it should be noted that these results mostly reflect the viewpoint of an
accountant. It is too soon to say whether or not their level of financial expertise is just
right for their requirements, whether or not practices like the pricing method or mental or
cash accounting work well for them, or whether or not their current practices are entirely
unrelated to those of formal organizations and GAAP conventions. It is strongly advised
that studies particularly created in this approach be conducted.
The Financial Literacy Levels of Small Business Owners and Its Connection with
Companies' Operating Process" (Fernades, 2015) examines the financial literacy levels of
small business owners in the northern region of Portugal and links these findings to the
success of their companies. While just 11% of small business owners reported to having a
rather low level of financial literacy, the results show that a fourfold greater proportion of
small business owners tend to overestimate their capacities. Also, research demonstrated
that although small business owners have the proper attitude toward financial matters,
their financial behavior deviates from the general pattern. The firms with null or negative
ROA, a measure used as a proxy for firms' performance, are linked to lower financial
literacy levels. This outcome increased the need for a more thorough analysis of the
relationship between small business owners' financial literacy skills and the performance
of their companies. The regression of the modified model shows a statistically significant
positive association between financial literacy rating and ROA. This enables us to draw
the conclusion that small business owners with higher financial literacy levels contribute
to the success of their companies. Also, given the relatively low level of financial literacy
among entrepreneurs observed in this study, there is a greater need for financial education
among this particular population.
The impact of financial behavior and attitude on the performance of SMEs was
the second goal of the study "The Impact of Financial Literacy on the Performance of
Small and Medium Scale Enterprises: A Study of SME's in Morogodo Municipal"
(Kirumbi, 2019). The results revealed that, despite the high scores that the majority of
respondents received for their financial knowledge, there were many uncertainties when
it came to applying that knowledge in real-world situations. The study's findings led the
researcher to the conclusion that small- and medium-sized businesses' financial behavior
has a substantial impact on their success. Nonetheless, the results demonstrate that there
are insufficient efforts to turn excellent financial habits into actions that would be
advantageous to their enterprises. Retirement planning, saving, debt management, record
keeping, and budgeting are factors that are hardly ever used in their organizations. It was
also discovered that the financial attitudes of SME managers had a significant impact on
the performance of SMEs. Nonetheless, the results indicated that SME managers and
owners had very unfavorable attitudes toward their financial activities. This was seen in
their lack of passion for long-term objectives, unwillingness to take chances, and lack of
interest in training programs to hone their financial skills, despite their awareness of the
significance of directing short-term actions toward long-term company goals.

RESEARCH METHODOLOGY

The design outlines what the researcher will do, from writing the proposal and its
operational implications to the final data analysis; we need to employ research designs to
facilitate the smooth sailing of the research objectives, including which data to collect,
how to collect them, and how to analyze them. Owners and managers of micro
enterprises were given questionnaires with a list of particular questions to respond to the
study questionnaires. The survey questionnaire that was used is just a revised version
from the research study entitled: “THE IMPACT OF FINANCIAL LITERACY ON THE
PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES”. The study
area for this study is Banilad, Bacong, Negros Oriental. The researcher chose this specific
area to conduct the study for a variety of reasons. First the study area is located in the
place of residence of the researcher. As a result, given the researcher's limited financial
and time resources, conducting the research is both feasible and feasible in terms of cost
and time. In this study the targeted populations were entrepreneurs and Micro enterprises
owners who conduct business around the municipal.
The primary data for this study were gathered through the use of a structured
questionnaire. The study used techniques for data collecting such interviews, audio
recording, and questionnaires to assure reliability. The administration of questionnaires
and interview guides to the sample was done with care in order to limit any potential
inefficiency of these tools during the data gathering procedure. Further, the data was
quantified, tabulated, evaluated, and analyzed after it was obtained. The weighted mean
and ranking were used as data analysis approaches, The scale, scale
range, and interpretation of both financial behavior and attitude are shown in Table 1 and
2.
Table 1. The scale of the Degree of agreeableness of Financial Behavior of the micro
enterprises in Banilad, Bacong, Negros Oriental.

Scale Scale Range Interpretation

4 3.28 - 4.0 Not Practiced at all

3 2.52 - 3.27 Slightly Practiced

2 1.76 - 2.51 Moderately Practiced

1 1.00 - 1.75 Highly Practiced

Table 2. The scale of the Level of Financial Attitude of the micro enterprises in Banilad,
Bacong, Negros Oriental.

Scale Scale Range Interpretation

4 3.28 - 4.0 Not Practiced at all

3 2.52 - 3.27 Slightly Practiced

2 1.76 - 2.51 Moderately Practiced

1 1.00 - 1.75 Highly Practiced

DEFINITION OF TERMS

Financial Behavior - any financial activities individuals perform that are important for
the management of a person's spending, savings, and budget.
Attitude - a person's perspective, judgment, and opinion toward how financing will be
handled in the company in light of its challenges, incentives, and rewards in facing this in
Business.
Micro Enterprise - Company or entity that employ less than 10 people and are usually
started by banks or other organizations with a small amount of cash advanced.
Economy - a system which distinguish the Business production and consumption. One of
the indicator of the business standing of a company or entity.
Business owners - a person or individual who sells and provide to the economy,
contributing a job and goods in the market.
Developing Country - Philippines is a country that is developing slowly due to some
factors like poverty, high crime rates, low job employment and corruption. Moreover, this
situation have limit and given factors to some entity businesses.
Budgeting - the allocation of money or funds in a given time period or beyond, tracking
cash inflow for a stability check.
Profitability - an instrument used to determine if a business is thriving or just making
enough money to keep operating.
Investing Management - A responsibility of an entity or company to hold an asset or
cash for developing, operating and maximizing.
Savings Management - a management of surplus funds from a business or entity in
terms of making the company have a reserve funds when needed.
 Presentation, Analysis and Interpretation of the Data
This chapter presents findings obtained from the population used and studied. Data was
collected through two collection instruments, namely; questionnaires and interviews. The
goal of data analysis is in the end be able to provide evidence in response to the research
questions and their corresponding objectives formulated to assist in analyzing the overall
objective of this study.
The sample for this study was 40 respondents; initially the researcher approached
50 respondents but due to lack of response from some respondents the total sample fell to
40 respondents.

Table 1.
Respondents Profile
Variable Frequency Percentage
Age
20 - 25 4 10%
26 - 30 6 15%
31 - 35 12 30%
36 - above 18 45%
Sex
Male 18 45%
Female 22 55%
Civil Status
Single 8 20%
Married 20 50%
Widowed 12 30%
Forms of Business Ownership
Sole propritorship 20 50%
Partnership 15 37.5%
Others (specify) 5 12.5%
Age of Business
Less than 5 years 0 0
5 - 10 years 4 10%
More than 10 years 36 90%
Income Range
P5,000 - P10,000 3 7.5%
P10,000 - P15,000 7 17.5%
P15,000 - P20,000 13 32.5%
P20,000 - above 17 42.5%

Table 1 shows that the demographic profile of the respondents. The most
significant age group of the Micro enterprises owners is 45% or 36 years old and above
while the least age group is 10% or 20-25 years old. In terms of the sex, 22 or 55%
female and 18 or 45% male. It can also be noticed that majority of the respondents is
married 20 or 50%, and the single is 8 or 20% and lastly the widowed is 12 or 30%. The
majority of Micro-enterprises were sole proprietors making up 50% of all businesses
from the sample population. Next were Partnerships which made up 37.5% of all
respondents, while Others forms of business made up 12.5%. Among the 40 micro
enterprises owners, Majority or 36 has operated their business in more than 10 years and
at least of them 0 less than 5 years. In terms of monthly sales, most of the respondents or
17 have a monthly sales of above P20,000 and the least of them have a monthly P5,000 -
P10,000.

Table 2.
Effects of financial behaviour on performance of Micro-enterprises owners
No Items 1 2 3 4 Mean Verbal
Description
1 I stick to a weekly or monthly budget. 0.66 0.5 0.23 0.2 1.59 Highly
Practiced
2 0.75 0.5 0 0 1.25 Highly
I create budgets to track my spending and
Practiced
performance.
3 0.43 0.5 0.53 0.6 2.06 Moderately
I am aware of how interest rates and
Practiced
inflation affect the loans I take out for my
company
4 1 0 0 0 1 Highly
I'm able to calculate the full debt position of
Practiced
my company
5 I set aside some of my monthly company 0.13 1.75 0 0 1.88 Moderately
earnings. Practiced
6 I intend to use my savings to expand my 0 1.75 0.15 0.2 2.1 Moderately
business in the future. Practiced
7 Information from my financial statements 0.38 0.75 0.38 0.5 2.01 Moderately
informs my decisions. Practiced
8 I understand the fundamental economic 0.25 1.5 0 0 1.75 Highly
principles required to make wise decisions Practiced
on saving and investing.
9 Even in the far future, I intend to keep 1 0 0 0 1 Highly
running this firm. Practiced
Mean Composite 1.40 Highly
Practiced

Table 2. determine the effects of financial behaviour on the performance of the

micro enterprise owners has an overall mean of 1.40 and therefore we consider this as an
indication that most of business owners in Brgy. Banilad, Bacong are highly aware and
practicing good financial management which includes their debt, saving, and investing
activities.
Table 3.
Effects of financial attitude on performance of Micro-enterprises
No Items 1 2 3 4 Mean Verbal
Description
1 The management of monthly costs is 1 0 0 0 1 Highly
important. Practiced
2 Setting financial goals for the future is 0.75 0.5 0 0 1.25 Highly
important. Practiced
3 The way I handle my money now will 0.75 0.15 0.53 0 1.43 Highly
impact how I manage it in the future. Practiced
4 Risk reduction ensures the safety of my 1 0 0 0 1 Highly
company. Practiced
5 My long-term financial objectives have an 0.7 0.35 0.3 0.1 1.45 Highly
impact on all of my short-term decisions. Practiced
Mean Composite 1.23 Highly
Practiced

Table 3 depicts the financial behavior and its implication to the performance of
Micro enterprises. It shows that the respondents got a composite mean of 1.23 which
means a well- approached financial goals and has the execution of right behaviour in
various financial management examined.

CONCLUSION

The study found that the Financial Behavior And Attitude of the Micro
Enterprises Owner’s in Barangay Banilad, Bacong, Negros Oriental had a moderate level
of financial understanding, were practicing financial behaviour, and had a financial
attitude that was frequently noticed or used. The business's performance as measured by
the annual capital served and the range of monthly income. When the amount of financial
conduct is compared across business types, ages of business owners, sexes, civil statuses,
organizational structures, and ages of businesses, there is also a considerable disparity.
Education level and business-related activities are profile elements that influence how
micro firms behave and think financially. While financial knowledge does not predict
corporate performance, the markers of financial literacy of financial conduct and attitude
do. The results support the following conclusions: 1) Financial knowledge considerably
enhances financial management behavior. 2) Financial attitudes have a significant
favorable influence on financial management behavior. 3) Financial knowledge, financial
attitudes, and financial personality all considerably improve financial management
practices in small and medium-sized firms in Batam City. 4) Personality strongly
influences money management actions in a good way. The adoption of money
management behaviors may be influenced by psychological characteristics other than
personality, which should be taken into account in future studies.
Therefore, the proprietors of micro enterprises would benefit from the suggested
action plan, which is the research's output. In order to improve the entrepreneurs'
financial knowledge, skills, and attitude to further improve the business performance of
their enterprises, the Local Government Unit (LGU) and the Department of Trade and
Industry (DTI) could conduct various financial literacy training/workshops and trade
fairs.