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Financial literacy of micro entrepreneurs in Davao city

Preprint · October 2019

DOI: 10.14322/PUBLONS.R5258360

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Hubermane Ciguino
Université Quisqueya
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 Financial literacy of micro entrepreneurs in Davao city

Hubermane Ciguino

Université Quisqueya, Centre de Recherche en Gestion et Economie du Développement

(CREGED), 218 Avenue Jean Paul II, Port-au-Prince, Haïti

Post-publication review

Financial Literacy is considered to be the financial literacy of microentrepreneurs to

help micro-businesses cope with financial difficulties by making strategic promotions
that mitigate risks such as accumulated savings, asset diversification and insurance
underwriting (Miller et al., 2019, Glaser and Walther (2013). In a study by Bruhn and
Zia (2011) on the impact of the financial literacy program on the income of young
entrepreneur firms, the results reveal that entrepreneurs with a high level of financial
literacy have better financial performance and higher turnover 'business.

NZ (2011) states that financial literacy has five distinct components. They monitor
finances, plan, choose financial products, stay informed and control their finances.
According to Huston (2010), financial literacy includes the ability and confidence of an
individual to use financial literacy to make financial decisions. One of the challenges
facing financial institutions is the low level of financial awareness among small
business owners.

The study aims to deter the level of financial literacy of selected microentrepreneurs in
Davao City. In this article the author has structured it as follows: introduction, micro
entrepreneurship and financial literacy, measuring financial literacy, method, results
and discussions, the determinants of financial literacy in others and the conclusion.

According to the study, financial literacy includes four key elements: record keeping,
budgeting, personal finance and saving. In this study, the author used these four
elements to improve the financial literacy of microentrepreneurs. In this sense, financial
educators not only had to learn to save but also to understand why to save.

I agree with the author’ proposals, however, these four elements are not enough to talk
about financial literacy: the microentrepreneur experience has to be added to the
business because the experience in the business line gives a management practice
that helps the microentrepreneur to better make investment decisions in time to
maximize profits.

Financial literacy is different for men than for women. Men have a higher potential for
financial literacy than women. In that case, those with low financial education also have
a low level of education.

A questionnaire was administered to 100 microentrepreneurs randomly selected in the

city of Davoa operating in the small business. To facilitate the analysis, the author has
implemented a technical regression model with financial literacy defined as

"Y”: y= β0+β1sexi+ β2educi+∈i

 where it is defined as the level of financial literacy of the microentrepreneur. According
to the results, financial illiteracy is widespread among the uneducated.

I don’t agree with the author, sex and education are not enough to determine the level
of financial literacy at the microentrepreneur, it also requires: managerial experience
in the sector of activity and risk behavior.

Remarks:

1. Is the level of education sufficient to measure the financial literacy of a

micronetrepreneur?

2. Why did not you take into account the experience in business and also in the
industry?

Conclusion

This study has shown the strength of microentrepreneurs in the sustainability of their
microenterprises. It must be pointed out that entrepreneurs are not able to maintain
accounting, savings and fundraising registers. It has been found that in this regression
analysis, education is a determinant that would increase the financial competence of
entrepreneurs. Nevertheless, education is not enough to measure financial literacy,
other future studies could address this aspect.

References

Bruhn M, Zia B 2011. Stimulating Managerial Capital in Emerging Markets: The Impact
of Business and Financial Literacy for Young Entrepreneurs. World Bank Working
Paper. From <http://econ. worldbank.org/external/default/main? page> (Retrieved on
27March 2014).

Glaser M, Walther T 2013. Run, Walk, or Buy? Financial Literacy, Dual-Process

Theory, and Investment Behavior
From<http://www.busman.qmul.ac.uk/newsandevents/events/eventdownloads/bfwgc
onference2013acceptedpapers/114912.pdf> (Retrieved on 18 March 2014).

Huston SJ 2010. Measuring Financial Literacy. J of Consumer Affairs, 44(2): 296-

316.

Organisation for Economic Co-operation and Development 2005. ImprovingFinancial

Literacy: Analysis of Issues and Policies From<http://titania.
sourceoecd.org/vl=4607980/cl=25/nw=1/rpsv/ij/oecd themes/9998007x/v200
5n30/s1/p1l.>(Retrieved on 20 February 2014).

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