Background of the study
Statement of the problem
Objectives of the study
Scope and limitation of the study
Significance of the study
Organization of the study
Operational definition of terms
Historical background of small scale
REVIEW AND THEORETICAL FRAMEWORK
Theories about variables (dependent and
Concept and definition of financial
Determinants of financial literacy
Importance of financial literacy
Financial literacy basics for
Nature of small scale enterprises
Roles of small scale enterprises in the
Problems and challenges facing small
Population of the study and method of
Sample and sample size determination
Sampling procedure and sampling
Method of data collection and data
Instrument reliability test
PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS
Test of hypothesis
Discussion of findings
OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
Summary of findings
Suggestion for further studies
4.1: Distribution of questionnaire and response
4.2: Distribution of respondent according to
4.3: Distribution of respondent according to Age
4.4: Distribution of respondent according to
4.5: Distribution of respondent according to
4.6: Extent to which financial literacy is
adopted by small scale
4.7: Extent to which accounting records enhance
the profitability of
small scale enterprises
4.8: problems that hinder utilization of
LIST OF FIGURES
1: Conceptual model of financial literacy
of the study
Like little drops of water
that forms a mighty ocean, the littleness of small scale businesses from the
cradle has been the bedrock of industrialization in developing countries of the
world. Globally, small scale enterprises have contributed enormously in
improving the standard of living of the people by providing jobs to relieve the
society of social embarrassment, stimulating indigenous entrepreneurship and
utilizing scarce resources.
Presently, as part of
the Millennium Development Goals (MDGs), effort is being made to reduce poverty
rate in developing countries. Effort is also being made to reduce the reliance
of people on government and so-called ‘white collar jobs’. These are achieved
through the growth and development of small scale enterprises (Eneh, 2007).
Furthermore, small scale enterprises play important roles in the economic
growth and development of every nation. They are a veritable vehicle for the
achievement of national macro-economic objectives in terms of employment
generation at low investment cost and enhancement of apprenticeship training.
Financial literacy as
the name implies occupies a centre-stage in the quest to achieve an overall
degree of success in an organization, (Bernheim, 2008). It also enhances to a
reasonable degree, a business goal of financial profit. Thus, financial
literacy (or lake thereof) has played a key role in the success and failure of
our nations business for the past centuries. Companies and businesses have
therefore been charged with ensuring that adequate and proper books of accounts
are kept so as to ensure reliability of their financial statements. This will
in the long run help improve their level of profitability.
Furthermore, profit can
analogously be viewed as the life-blood of a business and hence the accounting
bases, concepts and principles adopted ought to capture and report all the
relevant information to ensure reliability in its measurement (Nelson and
Onias, 2011). Also Enikanselu and Oyende (2009) made it clear that no business
can run effectively without being financially literate and also having one form
of accounting records or the other. It
can therefore be deduced that appropriate financial literacy is important for a
successful management of any business, whether big or small.
is to say that it is crucial that financial literacy be encouraged among small
scale enterprises so as to enable them be able to supply complete and relevant
financial information needed to improve on decisions made by them, and to also
enhance their profitability. This research study therefore examines financial
literacy and its impact on profitability of small scale enterprises.
of the problem
Since the present
civilian administration came into being in 1999, it has put in place policy
measures, schemes and support schemes to develop the small scale enterprise
sub-sector and to increase its performance.
today’s Nigeria, small scale enterprises have not performed creditably well and
they have not played expected significant role in spite of the fact that they
have been regarded as the bulwark for employment generation and technological
and foremost is the problem associated with small scale enterprises lack of
financial literacy which is evident in their inability to keep complete
accounting records. This invariably has resulted into a situation where SSEs
operating in the state cannot capture adequately the business profit. This is
because in the process of calculating profit, financial data are assembled in a
way that can help make informed judgment and take decisions about the business.
These financial data can not be assembled without adequate financial literacy.
This problem has ultimately affected the profitability of small scale
addition to the above is SSEs lack of awareness of financial risk and
opportunities, reckless expenditure, use of business funds for personal
transactions, limited access to bank credit facilities and insurance policies.
These and many can be addressed by being financially literate.
the researcher believes that these inherent problems could be attributed to the
neglect of financial literacy by small scale enterprises in Cross River State.
of the study
The main objective of
this study is to clearly promote financial literacy as a tool to improving on
the profitability of small scale enterprises in Calabar municipality of Cross
River State. The specific objectives of the study are as follows:
To examine the extent to which financial
literacy is adopted by small scale enterprises in Calabar Municipality.
To determine the extent to which
accounting records enhance the profitability of small scale enterprises.
To ascertain the problems that hinders
the utilization of accounting records by small scale enterprises.
1.4 Research questions
study developed the following research questions that will guide the researcher
in the quest to finding solutions to these research problems:
what extent is financial literacy adopted by small scale enterprises in Calabar
what extent does accounting records enhance the profitability of small scale
are the problems that hinder the utilization of accounting records by small
1.5 Research hypothesis
In order to set a good base for carrying out the research, the
following hypotheses were posed, believing that by the time adequate answers
have been provided, the study would have covered necessary grounds. To achieve
this, the study seeks to test the following two (2) operational hypotheses
outlined in null form:
Ho: The level of adoption of financial
literacy by small
scale enterprise is low.
Ho: The utilization of accounting
records does not significantly influence
the profitability of small scale enterprises.
1.6 Scope and limitations of the study
With a large
percentage of businesses in the state falling within the small scale
enterprises sub-sector, the need to clearly define the scope and area of the
study becomes imperative.
study is therefore confined to the small scale enterprises operating in Calabar
Municipality of Cross River State, and yet it is easy to use the result of this
research to gain insight into the entire small scale enterprises.
Municipality has been chosen because of its peaceful nature and the serene
vicinity, as it is a necessary panacea for the survival of the business and
also for this study. Thus, all the necessary information needed for this study
will be collected from this region of the state.
of the study
A study of this nature could not have been carried
out without any hitch. Notable among the constraints was the paucity of
relevant empirical literature in finance literacy among small scale
enterprises. Empirical information on problems of small scale enterprises are
abundant in literature but work done on their financial literature is still
scanty and that was a serious limitation to the study.
Despite this challenge, this study still represents
a true picture of all that was obtained from small scale businesses in Calabar
1.7 Significance of the study
Given the vital role
and contribution which small scale businesses in developed and developing
countries make, and considering the ongoing reforms by the Central Bank of
Nigeria for a sustainable financial literacy framework for small and medium
scale enterprises in the country, the significance of this study cannot be over
The significance of
this study therefore lies in the attempt to document the factor that is truly
critical to the profitability of small scale enterprises but which have not been
appreciated, recognized or factored into the various incentives schemes and
policy measures being put up for SSEs in the state and the nation at large.
This critical factor is financial literacy among SSEs which is a pivotal
requirement to its success and profitability.
In addition, this
research will equip owners of small scale enterprises by encouraging them to
give the keeping of proper accounting records a greater priority in the
objectives of their business. With this, adequate information about the
profitability of the business will be accurately known.
Also awareness will be
created by this study on the urgent need to improve on the financial literacy
level of SSEs owners as well as to improve on their accounting practices. This
will help formalize their business operations in a way that will suit their
Furthermore, apart from
the result of the study contributing to the “knowledge bank” of small scale
enterprises, it will stimulate more researches into this area since from
research literature work in this field is still minimal.
Lastly, it will be my
pre-requisite for the award of Bachelor of Science (B.Sc.) Degree in
1.8 Organization of the study
This study is presented
in five (5) chapters. These chapters are organized in a sequential manner that
will aid careful investigation and easy achievement of the objectives.
Chapter one is a
preview of the background of the study and the problem(s) that necessitated the
research. This leads to the outline of the objectives, significant of the
study, research questions and operational hypothesis within the sample scope of
small scale enterprises in Calabar Municipality of Cross River State.
Chapter two presents
the review of relevant works as it relates to the study. Also, theories about
the dependent and independent variables were discussed. It also examines the
theoretical framework of financial literacy and small scale enterprises.
Chapter three reveals
the methods of data collection in relation to the research design, population
and sample with emphasis on the model specification, estimation, validation and
reliability of research instrument.
Chapter four presents
and analyses the data and also the findings, dealing with the extent to which
small scale enterprises adopt financial literacy and conversely the utilization
of accounting records by SSEs and its influence on profitability.
Chapter five summarizes
major findings from the study, recommends tentative policy thrust and also
states suggested areas of further research.
1.9 Operational definition of terms
financial literacy is used inter-changeably with accounting literacy. It is
also pertinent to state that the concept of financial literacy and small scale
enterprises from empirical literatures available lack a consensus definition.
Therefore, for the purpose of this research, the following definitions are
given as peculiar to the study:
Scale Enterprises: Small scale enterprises can be defined as a business with employment level of not
more than 5 persons and with an annual
turn over of less than Five Hundred Thousand
Naira (N500, 000).
Literacy: Financial literacy is the ability to understand basic accounting and finance
concepts as well as its application,
the ability to use such knowledge and skills to manage financial resources effectively for a lifetime of
financial well being.
is the business ability to generate revenue
in excess of the cost incurred in producing these revenues.
1.10 Historical background of small scale
Economic history is
well stocked with enough insights into the humble beginnings of present day
grand corporations. Evidences abound that almost all the multinational giant
corporations were once small industries, growing as their industry grew. Even
at the international level, in the early stages of her industrialization,
Japan’s economy was dominated by traditional industries, and by a large number
of small scale firms, drawing their strength not from the abundance of capital
but rather from her supply of labour (Ogechukwu, 2011).
In concrete terms,
small scale enterprises constitute a greater percentage of all registered
businesses in Nigeria, and they have been in existence for quite a long time
Independence Historical Development
Prior to Nigerian
independence, the business climate was almost totally dominated by the colonial
and other European multinational companies like United African Company (UAC),
GB Olivant, Unilever Plc, Leventis Stores, etc. Towards the tail end of the
1950s, the Nigerian Industrial Development Bank (NIDB) was founded to assist
potential entrepreneurs to get involved in Agricultural exploration of natural
resources, commerce and industrial production.
However, few Nigerians
mostly the semi- illiterates benefited from the generous government attitude of
this time. This was because during this time, Nigerians considered the civil
service to be more prestigious than business despite the creation of the Colony
Development Loans Board by the colonial administration.
A major and
remarkable breakthrough in small scale business came about through the
Indigenization Decree of 1972 and later the Nigerian Enterprise Promotion Act
of 1977. There were genuine attempts by the federal government to make sure
that Nigerians play an active role in the development of the economy.
in its 1970-1974 National Development Plan, the federal government gave special
attention to the development of small scale industries particularly in rural
areas. This was in recognition of the roles of small scale businesses as the
seedbeds and training grounds for entrepreneurship.
this decade, government policy measures placed emphasis on the technological
aspects of industrial development of small scale industries in Nigeria. Various
Nigerian governments within this decade embarked in creative measures to divert
efforts towards the maximum exploitation of natural resources, and tried to
discourage capital intensive mode of production in the light of abundant
resources available. Some basic policies were formulated and these policy
measures as construed placed a great emphasis on the technological aspects of
industrial development of small scale enterprises.
is worthy of note that the introduction of the Structural Adjustment Programme
(SAP) during the Babangida regime made matters worse for employers of labour
and created a veritable ground for self-employment.
During this period,
both federal and state governments have contributed to the growth of small
scale enterprises in Nigeria especially in the rural areas. Various fiscal and
non-fiscal incentives have been established for investor and entrepreneurs in
the small scale sector of the economy. Of special mentioning was the strategy
adopted by the federal government towards the training and motivation of the
unemployed graduates, to be gainfully employed in out-of-school
entrepreneurship development programs. Thus on the presentation of viable and
feasible projects, approved loans are disbursed through pre-selected commercial
banks assisted by the National Directorate of Employment (NDE).
The Peoples Bank of Nigeria (PBN) was
also in the vanguard of granting soft loans to unemployed youths and artisans,
and this was aimed at diverting the attention of youths from government
salaried jobs, to that of gainful self-employment. Thus, the Peoples Bank in
collaboration with the National Directorate of Employment were solely charged
with the responsibility of generating employment through their various programs
for thousands of unemployed Nigerians.
period, government at all levels has become increasingly interested in grooming
young potential youths to be self employed and be successful entrepreneurs. To
show its seriousness, the federal government has through its educational
agencies like the National Business and Technical Education Board (NABTEB), the
Nigerian Universities Commission (NUC) and the National Youth Service Corps
(NYSC) gave a directive that entrepreneurship development courses be incorporated
into the curriculum of secondary and tertiary institutions as well as NYSC