Assessment of The Level of Financial Literacy Among Microentrepreneurs in Relation To Their Business Growth
Assessment of The Level of Financial Literacy Among Microentrepreneurs in Relation To Their Business Growth
Assessment of The Level of Financial Literacy Among Microentrepreneurs in Relation To Their Business Growth
A Research Proposal
Presented to the
Faculty of the College of Business and Accountancy
JOSE RIZAL MEMORIAL STATE UNIVERSITY
The Premier University in Zamboanga del Norte
Dapitan City, Philippines
LAGE, JELA C.
(BSMA III)
APPROVAL SHEET
DEDICATION
This piece of work is a fruit of countless sacrifices and efforts. They heartily and proudly
dedicated this paper to everybody, especially those persons that were part and make this work
successful. From parents and guardians, to classmates and circle of friends whom extended their
help in the midst of problems while doing this paper. Above all, to the Almighty Father for His
The Researchers
ACKNOWLEDGEMENT
This study was made successful through the aid of important individuals who provided
direction and support the researchers over the course of this study’s completion. The researchers’
utmost gratitude is given to the following persons who helped widen their viewpoints throughout
this study.
To parents, who supported financially, morally, and spiritually from the time we started
our research study until its completion. Their encouragements gave us the motivation and spirit
To the ever dynamic and enthusiastic research instructor, Dr. Ana Flor C. Adrias who
endlessly supported us and continuously guided us in our research process in drawing out our
To our Research Adviser, Mr. Jay A. Roslinda, for sharing his knowledge and expertise
To the Subject Matter Experts, that cordially lend a hand in validating our instrument to
ensure it was organized, precise, and aligned to the variable used in the study.
To the Panelists, Mr. Janven A. Granfon, Dr. Ana Flor C. Adrias and Ms. Lovelle
Pallega, for their insightful comments and suggestions for the best outcome of our research
paper.
To our supportive and encouraging friends, who have been there to keep them determined
and resolved in making their way through finishing and submitting their study within the
Page
TITLE PAGE i
APPROVAL SHEET ii
DEDICATION iii
ACKNOWLEDGEMENT iv
ABSTRACT vi
LIST OF TABLES
LIST OF FIGURES
CHAPTER
Introduction
Conceptual Framework
Financial Literacy
Budgeting Literacy
Bookkeeping Literacy
Micro-entrepreneurs
Business Growth
Sales Revenue
Accumulated Assets
Number of Employees
3 RESEARCH METHODOLOGY
Research Method
Research Environment
Research Instrument
Validating the Instruments
Statistical Treatment
Summary of Findings
Conclusions
Recommendations
BIBLIOGRAPHY
APPENDICES
Appendix F – Questionnaire
CURRICULUM VITAE
LIST OF TABLES
1 Respondent’s Distribution 30
12
LIST OF FIGURES
Introduction
industry hence, it makes sense that many entrepreneurs find it difficult to deal with
numerous problems arising from certain circumstances. The business activities of various
companies regardless of their size are considered the lifeblood of the economy, given the
fact that they focus on making a profit (money) and investing in human capital, thus it is
countries are working to identify the variables that influence entrepreneurial success.
Related skills and knowledge in financial literacy are among the qualifications for
financial literacy conducted around the world have revealed that the majority of people
have very low levels of financial knowledge and expertise. This lack of financial literacy,
which is more pronounced for lower-income groups, is the root cause of people’s
financial difficulties. They don’t have a basic concept of how markets work, how to
handle their money, and other compound interests, inflation, and risk diversification are
managing and improving their business operations which is significant to the expansion
of the economy (Guliman, 2015) but, not all businesses have the luxury to do so
1
(Gonzalvo & Avila, 2019). With this case, they further added that micro-entrepreneurs
are encouraged to rely on their own capabilities, knowledge, behavior, and experiences to
aid the company in handling financial and operational crises which require conceptual
longer. The attributes that a manager possesses, however, are not enough to ensure a
According to the findings of Gonzalvo and Avila (2019), micro-business owners with a
high level of financial literacy tend to meet their bottom line positively which contributes
to a business earning a higher profit. Considering the fact that, business growth is
strongly correlated to financial literacy, its relationship plays a crucial role in the
entrepreneurs would greatly affect their business performance while on the run.
essential in managing their business well. Therefore, small business owners are advised
to give more emphasis on their financial literacy based on recent research and study
findings. Financial literacy provides the necessary knowledge, skills, and instruments for
competence. Unlike corporations, micro businesses have only very limited resources to
keep on operating in the industry which somehow results in a static progress of financial
Apart from limited resources, financial ignorance frequently causes an economic crisis
2
borrowing habits (Lusardi & Mitchell, 2014). Addressing these issues has been a major
concern for a long time. Therefore, additional research on financial literacy became
excessive recently given that the business world is turbulent and financial education has
been proposed to many entrepreneurs, especially to those small businesses that will help
employees, business owners, and the general population has determined many factors and
variables that could help enhance their financial literacy, which is through education,
financial literacy has a direct relationship with financial inclusions mediated through
financial training. They further added that an increased frequency of financial training in
education, it is expected that financial literacy levels will rise, the likelihood that small
business owners will face financial difficulties as a result of within their control factors,
such as excessive debt, will decrease, and the proportion of small business owners who
are merely employees of their companies rather than becoming leaders will be reduced
(Fernandes, 2015).
find out reasons and solutions in improving or alleviating the problem and suggested
measuring their level of financial literacy with other factors or variables that have a
3
indicators a business owner has to keep the business running. The bottom line (net profit)
of a business, which is a result of the various operations and performance a firm has
undertaken, explains the capacity of the business owner and the enterprise it handles to
In relation to that, the small businesses in Dapitan City, some but not all, show no
growth or small development in their business operations. With that case, the researchers
have taken into consideration the “Assessment of the Level of Financial Literacy among
provide a basis for knowing their degree of understanding of the four financial concepts:
budgeting, saving, investing, and borrowing for improvements that is beneficial to their
overall business operations. The results of this study will serve as an eye-opener for the
related programs that specifically aim to increase the financial literacy of micro-
entrepreneurs.
Conceptual Framework
“Relationship between Financial Literacy and the Growth of Micro and Small Enterprises
in Kenya: A Case of Kakamega Central Sub-country” where she used debt management,
Debt Management Literacy. Studies reveal that individuals with less financial
literacy are likely to face more challenges with regard to debt management, savings and
4
credit, and are less likely to plan for the future while those with higher financial literacy
are better able to manage their money, participate in the stock market and perform better
on their portfolio choice and are more likely to choose mutual funds with lower fees
(Hilgert, Hogarth, & Beverly, 2003; Lusardi & Mitchell, 2011; FSD, 2009). Moreover,
those who have greater financial knowledge are more likely to accumulate higher
amounts of wealth, have better debt management skills and avoid high interest payments
(Lusardi & Mitchell, 2011; Wachira & Kihiu, 2012). On the contrary, those who are
financially illiterate tend to borrow too much and generally use more expensive sources
of finance that may impact negatively on their business performance and are also likely to
report excessive debt position or inability to measure their debt position (FSD, 2009;
Master card, 2011). Obago (2014) in a study that sought to determine whether financial
literacy had any effect on personal financial management practice among employees of
commercial banks in Kenya using a sample of 100 respondents revealed that higher
numeracy skills have a positive relationship with higher levels of household wealth and
good financial decisions while poor numeracy was linked with unnecessary expenses.
Individuals with stronger numeracy and financial literacy are also more likely to
5
profits and minimize losses. Siekei et al.,(2013) established that there is a positive
relationship between budgeting skills acquired through financial literacy training and
that most micro enterprises are survivalist they might have some form of budgeting and
financial planning and control but on an informal basis a view that is corroborated by
Abanis, Sunday, Burani & Eliabu (2013) who found that most small businesses do not
financial products requires MSEs to have some level of financial knowledge in order to
select from among alternatives the best products for their businesses. Andoh and Nunoo
(2011) found that the financial literacy of owners of MSEs is a very important factor in
explaining utilization of financial services by MSEs. Low levels of financial literacy can
prevent MSEs from understanding and assessing financial products from financial
institutions. On the other hand, MSE managers who are financially literate will mount
Kihiu (2012) conducted a study to establish the impact of financial literacy on access to
financial services in Kenya by households using the 2009 National Financial Access
(FinAccess) survey data using the multinomial logit model. Findings revealed that factors
such as the age of the borrower, income, level of education and gender were significant in
determining access to financial services while marital status was found insignificant.
Financial literacy was also rated low as a factor in household decision making which
implies that majority of individuals did not value and seek out financial information in
6
making financial decisions although financial literacy was significant in explaining
exclusion from financial services market. Results also indicate that financial knowledge
with increased sensitization, more people can be pulled out of the excluded strand.
Education serves to enlighten people on the various financial services available while at
the same time creating awareness on how best to manage the available services. This
study only dwelt on how financial literacy affected access to financial services of
Bookkeeping Literacy. Larry and Cristopher (2009) define book keeping as “the
art of recording all money transactions so that financial position of an undertaking and its
enterprise, however simple requires written records which are used by managers as
guides to routine action, taking of decisions, formulation of general rules and maintaining
business without written records is like a blind man without his aid or a vehicle without a
driver for it does not know which way it is going. Frankwood, (2010) identifies the
following as the main benefits of keeping business records; They help in calculating
business profits or losses, reveal value of debtors in terms of amount due and when
payments are due so as to avoid heavy costs of bad debts, They reveal fast moving and
slow moving goods and those about to expire, They also help in business planning and
are needed by lenders of business finance etc. Hussein (1983) as cited by Ezejiofor,
Ezenyirimba, & Olise (2014) notes that, a good accounting system is not only judged by
how well records are kept but by how well it is able to meet the information needs of both
7
internal and external decision-makers. Quality accounting information will enhance
(2013) finds that increase in financial literacy leads to more frequent production of
financial statements and such an entrepreneur who produces financial statements more
voluntarily close his/her business. Ezejiofor et al., (2014) in a study to establish the
MSEs that kept proper books of account were able to measure accurately the performance
of their businesses. They also assert that business decisions with regard to expansion,
maintaining a competitive edge, prevention of business failure and filling tax returns need
and available in a timely manner. They caution that accounting systems that generate the
plays a critical role in economic growth of both developed and developing economies
which affirms the recent attention to the growth and sustainability of this sector. This
focus has been boosted by the formation of worldwide networks such as the Global
Entrepreneurship Network that aims at marshalling resources for the sector through
forums such as the Global Entrepreneurship Summit. Enterprise growth can be measured
in various ways. Gupta ,Guha, & Shiva (2013) suggests the use of quantitative features
such as; value addition, revenue generation, volume of assets and volume of business or
qualitative features like market position, quality of product, and goodwill of the
customers, on the contrary Mateev and Anastasov (2010) opines that financial structure,
8
productivity, sales revenue and total assets have a more direct impact on growth but
caution that the number of employees, investment in Research & Development, and other
intangible assets have minimal influence on the enterprise’s growth prospects. Chaston
and Mangles (1997) as cited by Lusimbo (2016) suggest that if an enterprise adopts
increases . In the study of Lusimbo (2016) she focused on the financial literacy skills of
the entrepreneur and how it affected the growth of MSE businesses. Growth was
dependent variables of the study. The first box found the financial literacy variables
which consist of debt management, budgeting, investing, and bookkeeping literacy. The
arrow pointing the second box is the dependent variable which is the business growth.
Financial Literacy
Business Growth
Debt Management
Sales Revenue
Budgeting
Accumulated Assets
Investing
Number of
Book Keeping
Employees
Literacy
9
Statement of the Problem
The purpose of this study is to assess the level of financial literacy among micro-
1.1 Gender,
1.2 Age,
growth of MSMEs?
10
Hypotheses
1. There is no significant relationship between financial literacy and the business growth
of MSMEs?
The results of this study are highly beneficial to the following individuals and
entities:
Business Institutions. The results may awaken the business institutions for a well-
enlighten them the importance of financial literacy as tool to meet their goals and
objectives.
Future Researchers. The future researchers will be able to use this study as reference to
gather relevant information that will guide them for their future research study.
their reference in knowing their deficiency from the different aspect of financial literacy
that help them in making improvements to fill in the needed areas regarding financial
sector.
Researchers. The researchers will gain knowledge about financial literacy that can also
business will be able to use this study as basis to know their financial literacy level and
11
Scope and Delimitation of the Study
This study is limited to the assessment of the Level of Financial Literacy among
study will measure the financial literacy of micro-entrepreneurs within the vicinity of
bookkeeping literacy. This research study will be conducted among the different micro
businesses in the city of Dapitan. Furthermore, it covers those entrepreneurs that are
terminology and measurements used during data collection. This is necessary to preserve
the data consistency. The following terms are defined for better clarity and proper
Accumulated Assets. Typically refers to the acquisition of financial assets that represent
Book Keeping Literacy. The capacity to understand and use the meta-language of
Budgeting Literacy. The knowledge of creating a defined plan to monitor and allocate
12
Business Growth. A reflection of the operation of the business or performance
measurement tool which determines the on-going status and growth of the business.
Employees. Individuals who work for an employer and who have a contract of
employment and receive compensation in the form of wages, salaries, and fees.
Financial Literacy. The capacity to utilize information and skills in the context of
security.
were putting money into the bank with the potential to grow in value over time.
Sales Revenue. The money a company makes from selling products or rendering
services.
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Chapter 2
This chapter presents the journal and studies related to the research conducted that
Financial Literacy
In the course of time, the business-related activities have significant changes that
affect its supporting sectors, specifically the financial sector that aid the MSMEs to keep
performing in the industry. So recently, financial literacy has been heeded by scholars
therefore lots of studies is conducted to resolve one of its many problems and mainly for
the security of financial sector (Guliman, 2015). Evidently, the complexity of today’s
financial environment is more intricate than it was before (Guliman, 2015, as cited by
Greenspan, 2005), and admitting the need of financial literacy will oversee this issue
among (Garg & Singh, 2018). There are various researches supported that a financial
literate person has more chances on achieving success, so having low financial
knowledge will have an antithetical outcome of the enterprises of all types (Gonzalvo &
Avila, 2019).
In the USA in 1787, the phrase “financial literacy” was first used in a letter to
Thomas Jefferson from John Adams, explaining that financial literacy is needed to
overcome the spread of difficulties in America towards credit, circulation, and nature of
14
coin (Garg & Singh, 2017, as cited by Financial Corps, 2014). As for this aspect, the term
financial literacy was used by several researcher and organization thereafter, and have
Additionally, financial literacy was linked to financial knowledge, but the latter is one of
This operational definition, encompasses the four most common areas of financial
aspect: budgeting, savings, borrowing, and investing (Dahmen & Rodriguez, 2014, as
cited by Remund). However, the financial knowledge alone did not entirely define the
notion behind financial literacy because financial skills and confidence are needed by
micro and macro entrepreneurs to have productive judgements. Studies shows that a
person with high degree of financial literacy tend to understand and perform better in
terms of numeracy, earnings and savings, investment and loan decisions, have low
spending capacity during crisis, and less likely to experience income shock since they
important for developing methods for a nation’s populace to become financially literate.
People with higher levels of literacy are more likely to create budgets, save money,
manage their spending and debt responsibly, trade stocks, and prepare pension funds,
among other things. In other words, a person is more likely to behave responsibly with
money in daily life if they have a better level of financial education and comprehension.
Everyone, needs to be financially literate so people can handle both their personal and
corporate finances. People that are financially literate have a higher chance of developing
their businesses and of obtaining outside investment (Andarsari & Ningtyas, 2019).
15
Furthermore, people with lower levels of financial literacy tend to make worse financial
judgments than people with higher levels of financial literacy. Given that a large portion
of the population lacks financial literacy and that victims of the subprime mortgage crisis
who were less financially savvy were frequently taken advantage of. Increased financial
can definitely have a positive impact a significant part in lowering the possibility of
helps their businesses function better, which together with the relatively low level of
financial literacy among entrepreneurs enhances the demand for financial education
(Matasy, 2010). With the help of sufficient program of financial education, it is expected
that financial literacy levels will rise, the likelihood that small business owners will face
financial difficulties as a result of within their control factors, such as excessive debt, will
decrease, and the proportion of small business owners who are merely employees of their
companies rather than becoming business leaders will be reduced (Fernandes, 2015).
financial literacy have explored various factors such as savings, earnings, their
activities, knowledge of bookkeeping, recording business transactions, and etc. (Garg &
Singh, 2017). Consequently, financial literacy has derived its meaning through research
16
Lusimbo (2016) mentioned that financial literacy can be measured using debt
about their citizens’ financial literacy. According to Cooperation and Development (Pisa,
2013), a number of factors, including the transfer of risk from governments and
the automatic pension and the increased use of contributory health schemes, have
contributed to the growing interest in financial literacy as a crucial life skill. All of these
trends have moved major financial decisions from institutions to individuals, which
According to studies, those with lower financial literacy are more likely to
struggle with managing their debt, savings, and credit, and are less likely to save for the
future. In contrast, those with higher financial literacy are better at managing their
money, are more successful investors, choose mutual funds with lower fees, and can
participate in the stock market (Hilgert, Hogarth, & Beverly, 2003; Lusardi & Mitchell,
2011; FSD, 2009). Additionally, persons with more financial understanding are more
likely to amass larger sums of wealth, have better debt management techniques, and steer
clear of paying excessive interest rates (Lusardi & Mitchell, 2011; Wachira & Kihiu,
2012). Contrarily, those who lack financial literacy frequently borrow excessive amounts
of money and use generally more expensive sources of financing, which may have a
negative effect on their company’s performance. They are also more likely to report
17
having an excessive debt load or to be unable to calculate their debt load (FSD, 2009;
Other than that, managing debt is also getting more and more attention by many
researchers (Nazni et al., 2012). According to Sullivan (1989), the debts problems begin
when an individual fails to handle his/ her accumulated debt that often increases steadily.
It is almost impossible for anyone to acquire a large sum of assets such as house and car
without resorting to loan. It is normal for an individual aged between thirty and forty to
have accumulated more debt than older people as they may attach to students loan,
mortgages, child expenses and etc. (Sophie, 2012). This may adversely affect young
key components that will make individual financial management in good shape (Chong et
Budgeting Literacy
Clarkson and Wallace (2010) claimed that budgeting plays a significant role in the
financial needs of the business in the future. The budget is a detailed plan that offers
information on the acquisition and utilization of resources over a period of time (Rehman,
Mohamed and Ayoup, 2019). During the budgeting process, management is allocated the
estimated rate of revenue, cash flows and possible costs. Budgets are essential for SMEs
within an organization to shared goals by offering a wider view of the desired target of a
SME (Muneer, Ahmad and Ali, 2017). Quantifying the target goals minimizes
18
uncertainty and provides a mutual view of the goals and thus promotes contact (Rehman,
employees, budgets often provide a valuable measure (Muneer, Ahmad and Ali, 2017). In
the form of a business plan, budgeting is important. This is especially important for
SMEs because these businesses must provide compelling business strategies when they
collect funds, unlike their larger counterparts (Warrick, 2017). In general, SMEs have
few to no successful records and are therefore regarded by capital providers as high-risk
activities (Durst and Gerstlberger, 2021). Without such track record, SME decision-
makers must convincingly show that their organizations have a sound strategy and a
reasonable profit plan. Consequently, a clear and practical budget is an integral part of a
outlook, rather than distracting themselves by short-term daily activities which do not
impact a company’s long-term competitiveness and longevity (Muneer, Ahmad and Ali,
2017). Budgets also help to review profitability by helping SMEs decisions to define,
the distribution of resources (Arnold and Artz, 2019). In addition, the budgets enable
SME decision makers to predict their enterprises’ potential success and proactively shape
the future rather than depend upon their business environment developments.
19
Banking Services Literacy
important factor of the low rate, also explaining the lower investment rate. Further, the
country’s prosperity and its safety net are cited as reasons for low savings rates.
Moreover, the study stated the demographic distribution of the country to have a
noticeable impact on the overall household savings rate, as savings index should be
higher for countries in their early stage of the life-cycle hypothesis but still shows a
relatively lower savings rates despite a young population that is perhaps unconvinced of
the need of savings. Nevertheless, times of economic crises, as well as the pandemic,
have revived the significance of building and maintaining personal liquidity and therefore
Saudi Arabia has recognized the key role household savings play in the economic
development of the country, as it was formulated as a part of Vision 2030 and its
Financial Sector Development Program. One of the key objectives of the program is to
diversify the financial sector to support the development of the national economy and
stimulate savings. That said, the role of banks in promoting financial literacy and
deposit products and mechanisms with varying combinations of liquidity and rate of
interest tailored to needs and preferences of different depositors. The additional benefit of
security from theft and damage, and in some cases robust insurance coverage has also
been contributive. As a store of value, bank deposits enjoy certain advantages over
tangible assets; deposits are convenient to hold as store of value and are safer and more
20
liquid – they can be converted into cash easily. They are also greatly divisible and often
less risky. However, despite these challenges, the extent of unbanked population, level of
financial literacy and consequently savings rate are still far from optimum.
For financial institutions to truly help consumers achieve financial health, most
experts believe that they must think of finance as a utility, a service that is continually
macro decisions. Many consumers are looking for tools or educational programs to
increase financial wellness. They are asking for help in understanding complicated
financial products. Accordingly, banks could consider offering awareness programs and
targeted seminars.
Bookkeeping forms part of the accounting process (Kimmel et al. 2012) and it
entails recording and reporting the financial transactions or economic events of a business
(Flynn and Koornhof 2005; Bragg 2011; Christiaanse and Hulstijn 2013; Ajao et al.
2016; Rosen 2016). Previous studies indicate that there is a prevalent insufficient
bookkeeping practices within Small Business Enterprises (Bruwer and Watkins 2010;
Marivate 2014; Ajao et al. 2016; Ademola et al. 2017). Bookkeeping skills are a
prerequisite for bookkeeping practices and the completion of financial records, and small-
duties. Maseko and Manyani (2011) point out that some of the small-business owners
maintain records but fail to prepare financial records. The objective of this paper is to
analyse the bookkeeping skills small business owners in the clothing retail industry
possess to be able to undertake bookkeeping duties. For the purpose of this paper,
21
accounting and bookkeeping will be used interchangeably both referring to the process of
Micro-entrepreneurs
suppliers of reasonably priced goods and services for the general public while also
producing a significant number of jobs. Low financial skills could have a negative effect
on the future of the business given how much micro-entrepreneurs have influenced
economic activity in the nation. Through careful and exact financial management of
effectively exploited and preserved. According to Brown et. Al. (2006), financial literacy
cutthroat industry.
Business Growth
The term performance refers to the capacity to meet a given set of goals (Usama
and Yusoff, 2019 as cited by Richard et al., 2009). Therefore, the term “business
when an entrepreneur make sound decisions all throughout the business operations. As
cited by Eniola, (2015); Begonja et al., (2016) in the same research, business
objectives or goals set by its investors over a specific time period, which enables the
22
organization to realize special or superfluous set goals relevant to the advancement of its
business in the market. Moreover, Rekarti and Doktoralina, (2017) stated that business
changes in the market environment that consist of customers, competitors and other
proposed in the literature (Barney, 2002). Performance can be characterized as the firm’s
comparison difficult. However in Khadijah Muhammad Usama and Wan Fauziah Wan
Yusoff (2019) research cited by Javed and Muhammad, (2011), mentioned that assessing
progressing through the use of indicators which permits an easy way to look into the
enterprise situation such as the annual sale turnover rate, growth, number of employees,
innovation, competition and resources availability are among the widely used element for
Making sound financial decisions will help a business become successful and stay
that way, as well as establish it as a top-tier enterprise (Racaza, 2022). Priorities, models,
Espinosa, & Soto, 2012). In addition, financial decision-making is a critical skill in the
individual to hire, which supplier to purchase, or technique to employ (Omarli 2017). The
23
ability to make a good decision with accessible and reliable knowledge is critical because
money is involved in the majority of their decisions. Also, Kase (2011) claimed that it is
critical to make financial decisions in order to transfer or carry out a specific financial
action under different but specific circumstances Managers must therefore make financial
and judgments based on the circumstances. Having clear insights about the business
positively productive.
yet ultimately, owners are responsible for the success of minority small businesses. Lack
results in exclusion, which forces actions like using high-interest credit cards and payday
loans that are the opposite of good business practices. The minority business ownership
ratio will continue to lag behind other entrepreneur groups if minorities are not given
equal opportunities to acquire the financial and management skills required to establish
business success (Jackson, 2021). Business performance of MSMEs are measured using
businesses sales revenue growth, number of employees, and their assets (Lusimbo, 2016).
the business’ net profit. However, many published researches revealed that in addition to
financial metrics, SMEs also employ other indicators. In Lusimbo’s (2016) study
24
business growth are measured using sales revenue, asset accumulation, and number of
employees as indicators.
Sales Revenue
As cited by Arcenildo et. Al. (2012), the most used indicators are the growth in
sales and cash flow indicator, indicating the trend to simplify the business control through
financial and market indicators. The business’ primary sources of income are measured
always the first metric listed on an income statement. It serves as an initial step in
accounting number, serves as the foundation for calculating net income, a key indicator
for evaluating a company’s health and making future plans. It is one of the key
Accumulated Assets
over time, asset accumulation enables one to amass wealth. Asset accumulation refers to
assets that produce income. It can be calculated based on the overall value of all assets,
the income generated by the assets, or the evolution of the asset’s total worth through
time.
Number of Employees
labor force. A business can take on more projects or execute them more quickly the more
individuals it has ready to work. On the other hand, firms are unable to finish projects if
25
there is not enough labor. Lack of productivity results in lower income and profit, which
Moreover, it’s crucial for small firms to hire new personnel at the proper time. Cash
flow can dry up and profits can drop if a company hires someone too soon. However, if
the business waits too long to hire a new employee, the commitments may outstrip the
capability, which will result in a backlog of incomplete business. When there is enough
work to warrant hiring more personnel and the financial status is secure enough to handle
the added and additional expense of a new employee, hiring should take place. The first
thing to do when thinking about hiring new staff is to review the financial data for the
business. Pay close attention to the business’ revenue and how it has evolved over time.
On the other hand, it’s crucial to get onboard with new employees before a workforce
issue arises. If sales have been increasing continuously over the course of several months,
it’s a solid indication that the current staff is contributing effectively to the business’
great growth. To keep up the growth rate, this implies the need to expand the company by
employees).
26
Chapter 3
RESEARCH METHODOLOGY
primarily centered on discussing the research environment and the respondents of this
study, the instrument used in data gathering as well as the corresponding statistical
treatments which served as guide in interpreting the data with respect to the ethical
Research Method
This methodology focuses more on the “what” of the research subject rather than the
“why” of the research. In other words, the descriptive research method was primarily
without covering “why” it happened. The use of the descriptive method will be necessary
27
in order to know the level of financial literacy among micro-entrepreneurs and its effect
on the resulting performance of the business. Also, to know whether such socio-
The questionnaire will become the basis of any process, observation, description, and
Research Environment
This study will be conducted in Dapitan City, Zamboanga del Norte. It has a land
determined by the 2020 Census from its 50 barangays, of which eight (8) barangays are
Linabo, Potol, Sta. Cruz, and Talisay; twenty-seven (27) are interior: Antipolo, Aseniero,
Larayan, Liyang, Ma. Cristina, Ma. Uray, Masidlakon, Opao, Owaon, and Oyan; thirteen
(13) are coastal areas: Banbanan, Baylimango, Canlucani, Carang, Guimputlan, Napo,
Oro, Polo, San Pedro, San Vicente, Sicayab-Bucana, Tag-ulo, and Taguilon; and two (2)
Dapitan City known as “Shrine City of the Philippines” became a chartered city
by virtue of Republic Act No. 3811 which was signed by then President Diosdado
Macapagal on June 22, 1963, thus the first city of Zamboanga del Norte province. In
28
present, the city was governed by Gov. Rosalina Jalosjos together with the Dapitan Ciy
29
Figure 2. Map of Dapitan City
Source: https://www.google.com/maps/d/u/0/viewer?mid=1PivfYnmdHnL8NQLNdNqy-cQL-9
s&hl=en_US&ll=8.636899090870342%2C123.4190105139218&z=11
Dapitan for the year 2021 based on the list of the Business Permit and Licensing Office.
The target respondents of the study will be the micro-entrepreneurs of Dapitan City,
Banonong, and Tambak. There should only be 10 respondents per barangay. The sample
30
Table 1. Respondent’s Distribution
Bagting 10
Dawo 10
Banonong 10
Tambak 10
Sta. Cruz 10
TOTAL 50
Research Instruments
found out relevant answers to the research questions formulated. The validity, reliability
and relatedness of the instrument will be reviewed and verified by the adviser, course
instructor and other experts in such field. The same questionnaire will be administered by
testing it with ten (10) micro-entrepreneurs. The questionnaire will be in a checklist form
that will present the preferable information sources administered to the respondents in
seeking information. It will contain two (2) parts, the first part calls for the profile of the
respondents. The second part calls for the financial literacy measure of micro-
31
content validity test by seeking the opinions of the subject matter experts in the field of
study. Their suggestions and comments are applied to the revisions of the instrument to
make sure it was organized, precise, and reliable. For a research instrument to be valid,
the statement chosen and included in the questionnaire are factual and pertinent to the
that are considered irrelevant or did not meet the required percentage were removed.
results throughout various tests. After the instruments are validated by subject matter
experts and formulated the final questionnaire output, the researchers conducted a pilot
testing that is administered to the ten (10) selected micro-entrepreneurs of Dipolog City,
Zamboanga del Norte to ascertain the reliability of our questionnaire. The research
instrument was measured using the Cronbach Alpha for reliability test. To pass the
reliability test using Cronbach Alpha, the result must reach at least 70%.
32
Data Gathering Procedure
process by presenting a letter for the respondents. Then, questionnaires were given to the
respondents upon their approval to participate in the data gathering. The respondents are
informal interview will be employed to the identified respondents to clarify their answers.
Afterwards, the given questionnaires were retrieved and analyzed by tallying the data and
information needed in the study. Lastly, after verifying their answers the gathered data
will undergo further statistical treatment with the used of Microsoft Excel.
Statistical Treatment
To determine the results of the study, it will be tallied and tabulated. After the
instruments have been collected from the respondents, the data gathered will be treated
Ethical Consideration. The study has ethical consideration that can be seen in the
process of gathering data, presenting theories, related literature, and studies. Thus, the
researchers made sure that the authors of information collected in every chapter of details
were cited and credited appropriately. Additionally, in the questionnaire presented in the
express themselves that are highly respected by the researchers together with the ethical
principle of discussing the gathered data. The resultant of the investigation lays factuality
33
of the overall content of the research and would be exceptionally used for research
Frequency Counting and Percentage will be used to determine the profile, i.e, age, sex,
years of operation, and business type of the respondents. The formula is:
Weighted Mean will be used to determine the level of financial literacy of micro-
Hence, the levels of satisfaction by weighted mean are five points scaled with the following
1 1.00-1.80 No knowledge
between the level of financial literacy of the respondents and their business performance.
❑
(Oi−E i)
x 2= ∑
❑ Ei
34
where:
Oi=observed value
Ei =expected value
35
Chapter 4
PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATA
This chapter presents the data gathered from fifty (50) micro-entrepreneurs in Dapitan
City to assess their financial literacy level in relation to their business growth. The responses of
the selected respondents were treated statistically in order to answer the statement of the
problem.
From the analysis of the respondents’ gender, majority of the micro-entrepreneurs are
female (72%) while male represented 28% as shown in the Table 3. This indicates that the
Male 14 28
Female 36 72
Total 50 100
Majority of the respondents indicated that they were between 26 – 35 years old which is
24%, 22% were between 45 – 55 years, 20% were between 36 – 45 years, 18% were above 55
years and 16% were between 18 – 25 years. This implies that majority of the microbusiness
36
Table 4 Respondents’ Profile in terms of Age
18 – 25 years old 8 16
26 – 35 years old 12 24
36 – 45 years old 10 20
45 – 55 years old 11 22
Total 50 100
Educational Attainment
The analysis established that majority of the micro-entrepreneurs had College education
level which constituted 78% of the total respondents, 20% had Secondary education and 2% had
finished TESDA/ALS education. This implies that most of the respondents in the research
None 0 0
Primary 0 0
Secondary 10 20
College 39 78
TESDA/ALS 1 2
Total 50 100
37
Nature of Business
The result of the analysis shows that majority of the respondents are in Retail/Wholesale
business which is 62%, 34% in Service business and 4% in Manufacturing as shown in Table 6.
This implies that majority of microbusinesses operating in Dapitan City are retail and wholesale
traders.
Manufacturing 2 4
Retail/Wholesale 31 62
Service 17 34
Agribusiness 0 0
Others 0 0
Total 50 100
Years of Operation
The analysis revealed that majority of the business have been operating for 0 – 5 years
already which constituted 54% of the total respondents, second on the rank were operating
within 6 – 10 years which constituted 26% of the total respondents, third on the rank constituted
10% of the total respondents that operates within 11 -15 years, fourth on the rank constituted 8%
of the total respondents that operates within 16 – 20 years and 2% for above 20 years as shown
in Table 7. The result indicates that there is a low rate of transition of microbusinesses to the next
level of growth.
38
Table 7 Respondents’ Profile in terms of Years of Operation
0–5 27 54
6 – 10 13 26
11 – 15 5 10
16 – 20 4 8
Above 20 years 1 2
Total 50 100
The Table 8 below contains the findings of the level of financial literacy among micro-
entrepreneurs in terms of debt management literacy. The statement “I can repay the loan
installments on time” owns the resulting mean of 4.42 which is verbally interpreted as excellent
knowledge. Followed by the statements “I can determine the total debt position of the business to
date” and “I can understand inflation effects and interest rates on the loans borrowed for the
business operation” which has a resulting mean of 4.37 and 4.30 respectively, interpreted
verbally as excellent knowledge. The last statement that is verbally interpreted as good
knowledge with a resulting mean of 4.16 is “I can compare the terms and conditions on various
finances before availing the services for the business”. This implies that most of the micro-
entrepreneurs can handle their debt diligently and are cautious of the debt deadlines, rates,
39
Table 8 Financial Literacy Level in terms of Debt Management Literacy
Statements WM Description
4. I can determine the total debt position of the business to 4.37 Excellent
date. knowledge
Budgeting Literacy
Table 9 shows the findings of the data analyzed about the level of financial literacy
budget plan to track spending in the business”, “I can make a budget plan to set performance
targets for the employees”, “I can prepare a written annual budget of income and expenditure for
the business”, and “I can prepare written financial planning of what I want to achieve in a year of
the business” which has the resulting mean 3.90, 3.84, 3.80 and 3.78 respectively are interpreted
as good knowledge. This implies that most of the respondents are literate enough to make budget
40
Table 9 Financial Literacy Level in terms of Budgeting Literacy
Statements WM Description
3. I can make a budget plan to set performance targets for 3.84 Good
the employees. knowledge
terms of banking services literacy. The statements are verbally interpreted as good knowledge
from the range of values 3.41 – 4.20 on the following situations: “I know how to operate a bank
account for the business”, “I know the requirements of banks in lending money to
microbusiness”, “I know where to go when the business needs extra finances”, and “I can access
other banks products (e.g., credit cards, bill payment service, and fixed deposit) for the business
other than loans” with a resulting mean of 4.16, 4.16, 4.00, and 3.68 respectively. This implies
that most of the respondents are knowledgeable enough on how to access banking services
offered.
41
Table 10 Financial Literacy Level in terms of Banking Services Literacy
Statements WM Description
1. I know how to operate a bank account for the business. 4.16 Good
knowledge
4. I can access other banks products (e.g., credit cards, bill 3.68 Good
payment service, and fixed deposit) for the business knowledge
other than loans.
Bookkeeping Literacy
bookkeeping literacy are presented below on Table 11. From the analysis of data, the statement
“I can prepare tax remittance documents” which has a resulting mean of 4.35 is verbally
interpreted as excellent knowledge. While the statements “I can prepare financial statements for
my business. (Income statement and balance sheet)”, “I can maintain and balance the ledger
resulting mean of 4.00, 3.75 and 3.62 respectively are interpreted as good knowledge. This
implies that most of the micro-entrepreneurs have knowledge on bookkeeping to record their
daily transactions.
42
Table 11 Financial Literacy Level in terms of Bookkeeping Literacy
Statements WM Description
4. I can maintain and balance the ledger book accurately. 3.75 Good
knowledge
43
44
45
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December 5, 2022
This is to formally recommend the following students to conduct their proposal defense for their
thesis.
This is to also certify that the group has consulted with the undersigned for the necessary
improvement of their paper.
Truly yours,
JAY A. ROSLINDA
Paper Adviser
Appendix B
51
Questionnaire for Micro-entrepreneurs
Dear respondents, this questionnaire aims at collecting information to help determine the
City. This questionnaire is adaptive form the study of Lusimbo (2016) entitled
“Relationship Between Financial Literacy and the Growth of Micro and Small
is for academic purpose only and will be treated as very confidential. Please fill the
3. Educational Attainment:
__ None
Graduate
Undergraduate
4. Nature of Business:
52
5. Years of Operation:
___11-15
Instruction: For letter B-E evaluate your knowledge and skills based on the rating scale
presented below.
5 Excellent knowledge
4 Good knowledge
3 Fair knowledge
2 Poor knowledge
1 No knowledge
S/no Statements 5 4 3 2 1
1. I can repay the loan installments on time.
2. I can compare the terms and conditions on various
finances before availing the services for the
business.
3. I can understand inflation effects and interest rates
on the loans borrowed for the business operation.
4. I can determine the total debt position of the
business to date.
53
B. Budgeting Literacy
S/no Statements 5 4 3 2 1
1. I can prepare written financial planning of what I
want to achieve in a year for the business.
2. I can prepare a written annual budget of income
and expenditure for the business.
4. I can make a budget plan to set performance targets
for the employees.
5. I can prepare a budget plan to track spending in the
business.
S/no Statements 5 4 3 2 1
1. I know how to operate a bank account for the
business.
2. I know where to go when the business needs extra
finances.
3. I know the requirements of banks in lending money
to microbusiness.
4. I can access other bank products (e.g credit cards,
bill payment service, and fixed deposit) for the
business other than loans.
S/no Statements 5 4 3 2 1
1. I can prepare financial statements for your
business. (Income statement and balance sheet)
2. I can prepare tax remittance documents.
3. I have an adequate knowledge of maintenance of a
cashbook.
4. Ability to maintain and balance the ledger book
accurately.
54
E. Measuring Business Growth
1. Check the appropriate column for the total value of assets in your business for the
Amount in pesos
Year
2. How many permanent employees do you have for the past five years?
Number of Employees
Year
55
3. Can you please check what is your sales revenue for the last five (5) years.
Amount in pesos
Year
56
Appendix C
Curriculum Vitae
Personal Background
Name : April Mae M. Al-os
Address : Purok Tonggo, Minaog, Dipolog City
Date of Birth : April 3, 2001
Place of Birth : Sergio Osmeña Sr.
Sex : Female
Civil Status : Single
Height : 5’2
Weight : 40 kg
Religion : Roman Catholic
Citizenship : Filipino
Father’s Name : Ronaldo M. Al-os
Occupation : Farmer
Address : Purok Tonggo, Minaog, Dipolog City
Mother’s Name : Juliet M. Al-os
Occupation : Dressmaker
57
Address : Purok Tonggo, Minaog, Dipolog City
Educational Background
Elementary : Sicayab Elementary School 2013-2014
Junior High School : Sicayab National High School 2017-2018
Senior High School : Jose Rizal Memorial State University 2019-2020
College : Jose Rizal Memorial State University
58
Appendix C
Curriculum Vitae
Personal Background
Name : Jela C. Lage
Address : Brgy. Nangcaan, Rizal, Zamboanga del Norte
Date of Birth : November 2, 2001
Place of Birth : Dr. Jose Rizal Memorial Hospital, Dapitan City
Sex : Female
Civil Status : Single
Height : 5’3
Weight : 55 kg
Religion : Seventh-Day Adventist
Citizenship : Filipino
Father’s Name : Jesus B. Lage
Occupation : Retired Government Worker
Address : Brgy. Nangcaan, Rizal, Zamboanga del Norte
Mother’s Name : Laxie C. Lage
Occupation : Housewife
Address : Brgy. Nangcaan, Rizal, Zamboanga del Norte
Educational Background
Elementary : Rizal Central School 2013-2014
Junior High School : Rizal National High School 2017-2018
Senior High School : Rizal National High School 2019-2020
College : Jose Rizal Memorial State University
59
Appendix C
Curriculum Vitae
Personal Background
Name : May Jisaper C. Manaba
Address : Patawag, Labason, Zamboanga del Norte
Date of Birth : May 15, 2002
Place of Birth : Patawag, Labason, Zamboanga del Norte
Sex : Female
Civil Status : Single
Height : 5’0
Weight : 50 kg
Religion : Roman Catholic
Citizenship : Filipino
Father’s Name : Jimmy F. Manaba Sr.
Occupation : Teacher
Address : Patawag, Labason, Zamboanga del Norte
Educational Background
Elementary : Patawag Elementary School 2013-2014
Junior High School : Saint Mary's College of Labason 2017-2018
Senior High School : Ave Maria College 2019-2020
College : Jose Rizal Memorial State University
60
Appendix C
Curriculum Vitae
Personal Background
Name : Kim Lester T. Tamiroy
Address : Purok 3, Clarin, Plaridel, Misamis Occidental
Date of Birth : December 01, 2002
Place of Birth : Tarlac City
Sex : Male
Civil Status : Single
Height : 5’7
Weight : 65 kg
Religion : Roman Catholic
Citizenship : Filipino
Father’s Name : Crommwel Tamiroy
Occupation : Farmer
Address : Purok 3, Clarin, Plaridel, Misamis Occidental
Educational Background
Elementary : Clarin Elementary School 2013-2014
Junior High School : Looc National High School 2017-2018
Senior High School : Looc National High School 2019-2020
College : Jose Rizal Memorial State University
61
Appendix C
Curriculum Vitae
Personal Background
Name : Rheze Melcah P. Villarin
Address : Motibot Sindangan, Zamboanga del Norte
Date of Birth : November 14, 2001
Place of Birth : Motibot Sindangan, Zamboanga del Norte
Sex : Female
Civil Status : Single
Height : 5’5
Weight : 71 kg
Religion : Roman Catholic
Citizenship : Filipino
Father’s Name : Rogeldo Villarin
Occupation : Electrician
Address : Motibot Sindangan, Zamboanga del Norte
Educational Background
Elementary : Motibot Elementary School 2013-2014
Junior High School : Siari John H. Roemer Memorial National High School 2017-2018
Senior High School : Siari John H. Roemer Memorial National High School 2019-2020
College : Jose Rizal Memorial State University
62