Understanding the Factors that Influence Financial Literacy in Small Businesses: Evidence from Bangladesh

Md. Saidul Islam, Md. Akash, Shake Farhan, Md Jahidul Islam Jahid and Md.Omit Hasan Ovi
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Md. Saidul Islam: Banking and Insurance, University of Rajshahi, Rajshahi, Bangladesh.
Md. Akash: Finance and Banking, Hajee Mohammad Danesh Science and Technology University, Dinajpur, Bangladesh.
Shake Farhan: Management Studies, University of Rajshahi, Rajshahi, Bangladesh.
Md Jahidul Islam Jahid: Finance and banking, Carmichael College, rangpur, Bangladesh.
Md.Omit Hasan Ovi: Finance and Banking, Hajee Mohammad Danesh Science and Technology University, Dinajpur, Bangladesh.

International Journal of Research and Innovation in Social Science, 2023, vol. 7, issue 12, 492-505

Abstract: The goal of this study is to examine the factors that influence the general financial literacy, specific financial literacy, and total financial literacy of Micro and Small businesses entrepreneurs. The data for the study was gathered from 402 Responders across three districts in Bangladesh. By using the ordered logit model, the results reveal that the age of the entrepreneur has a positive and significant impact on the different types of financial literacy for the MSEs in Bangladesh. Furthermore, the study found that micro and small-service enterprises have a considerably higher level of financial literacy than their manufacturing counterparts. Additionally, the findings indicate that entrepreneurs with higher levels of education have significantly higher levels of financial literacy across all categories. The gross profit ratio of the enterprise is identified as the most influential factor affecting the financial literacy of entrepreneurs. The study shows that the higher the gross profit ratio of the firm, the significantly higher the level of financial literacy in all three categories for entrepreneurs. The study recommends that companies should allocate a portion of their profits toward educating their employees to improve their financial literacy. The government should also support MSEs by providing assistance to improve the financial literacy of the firms.

Date: 2023
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