i

UBIS UNIVERSITY OF BUSINESS & INTERNATIONALSTUDIES

RUE DE LAUSANNE 94 1202 GENEVE, SWITZERLAND
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FINAL THESIS

A thesis/dissertation submitted in (partial) fulfilment of the requirement for the degree of

Masters of Business Administration Of University Business and International Studies,
Geneva, Switzerland.

February 2020

Title: FINANCIAL LITERACY LEVEL OF MANAGERS / OWNERS OF SMALL AND

MEDIUM ENTERPRISES IN DUBAI

Name: HAZAR KHAN Date of Submission: 25th Feb 2020

Thesis Supervisor: RAJESHWAR NALIMELA
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THESIS SUPERVISOR NAME: RAJESHWAR NALIMELA

We undersigned
MR HAZAR KHAN
MR RAJESHWAR NALIMELA

We have read the school policy on plagiarism and that I am aware of the disciplinary
approvals which will result from using source without acknowledgement.

Signature & Date

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Abstract

The study aims to explore the financial literacy level of managers/owners of small and

medium enterprises in Dubai and scrutinize the correlation between socio-demographic

attributes and financial literacy level. To attain this aim, the quantitative research

methodology was implemented via survey questionnaire, which was given to 120

participants, from which 103 respondents returned the completed survey. The data was

evaluated via descriptive statistics and chi-square tests along with cross-tabulations. This

result revealed that managers/owners of SMEs in Dubai possess moderate financial literacy

level. Most of the participants scored moderately on all three dimensions (knowledge,

attitude, and behavior) of financial literacy level. Additionally, the outcome of chi-square

exhibited no relationship between any of the socio-demographic attributes and financial

literacy levels among the respondents. This implies that the SMEs managers/owners in Dubai

do not have substantial differences in their literacy level due to gender, age, education level,

and business experience.

Keywords: Financial literacy level, SME, managers, owners

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Table of Contents

Acknowledgment.......................................................................................................................ii
Declaration.................................................................................................................................ii
Abstract.....................................................................................................................................iv
Table of Contents.......................................................................................................................v
List of Tables...........................................................................................................................vii
List of Figures.........................................................................................................................viii
CHAPTER 1: INTRODUCTION..............................................................................................1
1.1 Background of the Research.............................................................................................1
1.2 Research Aim...................................................................................................................5
1.3 Research Objectives.........................................................................................................5
1.4 Research Questions..........................................................................................................5
1.5 Rationale of the Research.................................................................................................6
1.6 Significance of the Research............................................................................................6
1.7 Structure of the Dissertation.............................................................................................7
CHAPTER 2: LITERATURE REVIEW...................................................................................8
2.1 Theoretical Foundation.....................................................................................................8
2.2 Financial Literacy.............................................................................................................9
2.3 Financial Literacy and Small and Medium Businesses..................................................14
2.4 Conceptual Framework..................................................................................................21
2.5 Hypotheses.....................................................................................................................22
CHAPTER 3: RESEARCH METHODOLOGY.....................................................................23
3.1 Research Approach.........................................................................................................23
3.2 Research Philosophy......................................................................................................23
3.3 Research Design.............................................................................................................24
3.4 Data Collection Method.................................................................................................25
3.4.1 Instrument................................................................................................................25
3.5 Sampling Strategy..........................................................................................................26
3.5.1 Sample Size..............................................................................................................26
3.5.2 Sampling Type.........................................................................................................26
3.6 Data Analysis Techniques..............................................................................................27
3.7 Research Ethics..............................................................................................................28
CHAPTER 4: RESULTS AND FINDINGS............................................................................29
4.1 Data Screening................................................................................................................29
4.2 Descriptive Statistics......................................................................................................29
4.2.1 Gender......................................................................................................................29
4.2.2 Age...........................................................................................................................30
4.2.3 Education Level.......................................................................................................32
4.2.4 Business Experience................................................................................................33
4.2.3 Financial Literacy Level..........................................................................................34
4.2.4 Financial Knowledge...............................................................................................34
4.2.5 Financial Behavior...................................................................................................37
4.2.6 Financial Attitude....................................................................................................40
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4.2.7 Total Financial Literacy Level Score.......................................................................42

4.3 Financial Literacy and Socio-Demographics.................................................................44
4.3.1 Gender and Financial Literacy.................................................................................44
4.3.2 Age and Financial Literacy......................................................................................45
4.3.3 Education Level and Financial Literacy..................................................................47
4.3.4 Business Experience and Financial Literacy...........................................................49
CHAPTER 5: ANALYSIS AND DISCUSSION....................................................................52
5.1 Discussion.......................................................................................................................52
CHAPTER 6: CONCLUSION AND RECOMMENDATIONS.............................................54
6.1 Conclusion......................................................................................................................54
6.2 Recommendations..........................................................................................................55
5.3 Further Research.............................................................................................................57
References................................................................................................................................58
Appendix..................................................................................................................................58
Survey Questionnaire............................................................................................................58
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List of Tables

Table 1 Data Screening..........................................................................................................29

Table 2 Gender........................................................................................................................30
Table 3 Age.............................................................................................................................31
Table 4 Education Level..........................................................................................................32
Table 5 Business Experience...................................................................................................33
Table 6 Percentage of Correct and Incorrect Answers............................................................34
Table 7 Financial Knowledge Score........................................................................................35
Table 8 Financial Knowledge Score Statistics........................................................................36
Table 9 Percentage of Correct and Incorrect Answers............................................................37
Table 10 Financial Behavior Score.........................................................................................38
Table 11 Financial Behavior Score Statistics..........................................................................38
Table 12 Percentage of Correct and Incorrect Answers..........................................................40
Table 13 Financial Attitude Score...........................................................................................40
Table 14 Financial Attitude Score Statistics...........................................................................41
Table 15 Financial Literacy Level (FLL)................................................................................43
Table 16 Gender * FLL Crosstabulation.................................................................................44
Table 17 Chi-Square Tests (FLL and Gender)........................................................................45
Table 18 Age * FLL Crosstabulation......................................................................................46
Table 19 Chi-Square Tests (FLL and Age).............................................................................47
Table 20 Education Level * FLL Crosstabulation..................................................................48
Table 21 Chi-Square Tests (FLL and Education Level).........................................................49
Table 22 Business Experience * FLL Crosstabulation............................................................49
Table 23 Chi-Square Tests (FLL and Business years)............................................................50
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List of Figures

Figure 1 Conceptual Framework..........................................................................................22

Figure 2 Gender Distribution..................................................................................................30
Figure 3 Age Distribution.......................................................................................................31
Figure 4 Education Level Distribution....................................................................................32
Figure 5 Business Experience Distribution.............................................................................33
Figure 6 Financial Knowledge Score Distribution..................................................................36
Figure 7 Financial Behavior Score Distribution.....................................................................39
Figure 8 Financial Attitude Score Distribution.......................................................................42
Figure 9 Financial Literacy Level Distribution.......................................................................43
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CHAPTER 1: INTRODUCTION

1.1 Background of the Research

In the current global economic situation, there is an advance and expansion of

competitiveness among organizations in the markets. According to Berisha and Pula (2015),

there are many transformations in the organizational scope due to several changes in the

economy on international level, such as the increase in capital concentration, new

technologies, and management tools, changes in consumption habits and work relationships,

as well as greater insertion in the country of global retail chains. Faced with such a situation,

companies need to equip themselves with instruments that give them greater security in their

operations, as a way of preparing themselves to face high competition (Sin et al., 2016;

Sitharam, & Hoque, 2016), being the need for managers to continually seek relevant

information that guide their decisions.

The efficient use of financial management tools and techniques enables companies to

better understand the direction they are taking (Brooks, 2015). Among other advantages, it is

possible to assess the company’s equity, control its inventories, issue general reports

management, better manage cash, identifying where financial bottlenecks are and planning

the finances to have greater subsidies for better decision making (Shapiro & Hanouna, 2019).

Small and medium enterprises (SMEs) are regarded as quite significant for the

development of the economy affecting the Gross Domestic Product or GDP. SMEs are the

basic sources of innovation, entrepreneurship, and employment creation (Ilegbinosa &

Jumbo, 2015; Lewandowska, Stopa, & Humenny, 2015; Abdullah, 2019). In Dubai, SMEs

serve as a backbone of the economy, subjecting to 46% GDP of Dubai and 51% of the

workforce (Dubai SME, 2019). Regarding the government, they are focused on improving

the performance, predictivity, and contribution of SMEs. This means that the government is
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promoting SMEs to become a contributor to the sustainable economic development of Dubai

(Dubai SME, 2019).

According to Aruna (2015), small and medium companies face some situations like

high competition, lack of own working capital, seasonal sales, lack of cost control, poorly

sized inventories, lack of criteria in the analysis of customers and the method of the sale

price. These factors end up contributing to the failure of many companies of this size.

According to research carried out by Karadag (2015), the factors that most cause the

mortality of companies are related to financial management, the lack of capital turn, lack of

customers, and financial problems. Thus, knowing how to conduct the financial management

of the business is characterized as a deficiency on the part of the entrepreneurs, which

significantly affects the results of companies (Wolmarans & Meintjes, 2015).

Furthermore, the relevance of small businesses to the economic context of countries,

especially in terms of job and income generation, has been highlighted by several studies

(Ilegbinosa & Jumbo, 2015; Lewandowska et al., 2015; Berisha & Pula, 2015). However,

research shows that the reality of these is impacted by factors that hinder its development,

hinder competitiveness and cause high rates of early extinction of this size of companies

(Karadag, 2017). Among the initiatives that contribute to reducing the dangers of early

mortality, is pertinent that the company’s manager/owner has tools that allow him to obtain

and use information about the performance of the company’s business areas and/or of the

sectors it manages (Tehseen & Ramayah, 2015). Concerning this, it is up to this professional

to implement and use control systems and adequate management tools to optimize results

business. Therefore, an organization’s financial planning and control require management

capable of presenting positive results in the different aspects that involve the and, in a

specific way, internal control reveals the reality of the company through the use of

appropriate instruments (Muneer, Ahmad, & Ali, 2017).

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In this direction, the financial administrator has a broad field of work to act in terms

of types of organizations, the main activities of which refer to the cash management; credit

granting; managing the collection of accounts receivable and payment of debts; fundraising

(loans, financing, issuance of titles, etc.); investment decision; planning finances; cost

management and evaluation of economic and financial performance (Shapiro & Hanouna,

2019). However, there are a small number of studies that aim to understand the roles and

functions performed by the administrators of small and medium companies, particularly in

Dubai.

Financial literacy is the essential skill of those who operated in the market financial

situation in an increasingly complex scenario. For this reason, the governments of developed

countries seek approaches to intensify and increase the level of financial literacy of the

population. With the current market scenario, which has shown itself to be increasingly

volatile, increasingly technical knowledge is needed to invest in the financial market

(Wolmarans & Meintjes, 2015). According to Agyei (2018), financial literacy is typically

knowledge to shape the needs of financial education and explain the verification of financial

returns. Definition and measuring financial literacy is imperative to understanding the

educational influence and barriers to essential financial choice. Having good financial

education means having a behavioral and attitude to seek information and align that

knowledge with planning, that is, educating themselves in sense of what one have and what

one want in the short or long term. In this way, the existence of a high financial literacy level

in a population helps strengthen the economy, as they are more educated (financially literate)

people operating in aiming at financial growth. Part of that knowledge must be acquired in

your school education. According to Adomako and Danso (2014), financial literacy has the

function of leverage individuals' understanding of their financial transactions by making them

more capable of making decisions.

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Burns (2016) stated that technological, regulatory and economic conditions have

increased the complexity of financial services, and the financial knowledge on the part of the

population, compromising decisions financial statements of individuals. In this context,

knowing managing resources has become something of great importance to maintain personal

finance. It has also been mentioned that hasty decisions, misapplied resources, and options

for credit lines not consistent with the market, present the great risk of an individual

becoming just one more in the list of market defaulters (Petty et al., 2015). According to

Mazzarol (2014), making conscious decisions, knowing where and how to apply own

resources and determine the best line for taking credit, are actions that can reflect the basic

characteristics of an entrepreneur or SME manager’s success, and thus show quality financial

education.

The success of a company depends largely on how the company buys, distributes,

utilizes and manages funds (Banerjee, 2015). This implies that if a company can effectively

manage its capital, the company manager must certainly have some literacy in terms of

financial and monetary cycles. In several countries, financial literacy is becoming

progressively identified as a significant policy objective (OECD, 2015). Financial literacy

refers to the extent to which an individual understands significant financial notions and has

the aptitude and confidence to make decisions about personal financing. The Organization for

Economic Cooperation and Development (OECD, 2015) created the Network International

Financial Education (INFE) which promotes the sharing of experiences and knowledge on the

theme stimulates the development of analysis and political recommendations. The OECD

together with INFE developed a research tool that can be used to measure the financial

literacy of people in different countries, taking into account taking into account aspects such

as knowledge, attitudes and behaviors that are associated with the global concepts of financial
 5

literacy. Thus, highlighting the importance of financial literacy for both the individual and the

country.

Adomako, Danso, and Ofori Damoah (2016) proposed that lack of skills, knowledge,

attitudes, and awareness for managing financial resources in a difficult, transparent and

professional manner are the major hinderances to the productivity and sustainability growth

of such companies. Inadequate personal financial knowledge can lead the manager/owner to

make unsuitable and unproductive financial decisions (Eniola & Entebang, 2016).

1.2 Research Aim

The aim is to investigate the financial literacy level (FLL) of managers/owners of

SMEs in Dubai and investigate the correlation between financial literacy level and socio-

demographic attributes.

1.3 Research Objectives

The study objectives are;

 To inspect the financial knowledge level of managers/owners of SMEs.

 To explore the influence of gender on FLL among SMEs managers/owners.

 To test the influence of age on FLL among SMEs managers/owners.

 To determine the influence of education level on FLL among SMEs

managers/owners.

 To scrutinize the influence of business experience on the FLL among SMEs

managers/owners.

1.4 Research Questions

 What is the FLL of managers/owners of SMEs in Dubai?

 How socio-demographic characteristics are associated with SMEs managers/owners’

FLL?
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1.5 Rationale of the Research

SME owners are faced with numerous financial decisions when doing business. That

is why financial knowledge has become an imperative tool for managers/owners of SMEs

(Eniola & Entebang, 2016). Literature in this area shows that SMEs managers in developed

and developing economies possess lower financial literacy and that only a few can

understand the basic financial concepts (Eniola & Entebang, 2016; Agyei, 2018). This subject

is noteworthy because the lack of knowledge about financial decision-making often creates

problems that hamper the work of SMEs. Since banks and other organizations taken into

account financial knowledge prior to dealing with SMEs managers/owners, this state is a

challenge for them trying to improve their companies’ performance. Moreover, previous

studies focused on financial affordability and the overall business environment as the most

crucial factors affecting the SMEs performance (Bouazza, Ardjouman, & Abada, 2015;

Ngek, 2016; Al-Maskari, Al-Maskari, Alqanoobi, & Kunjumuhammed, 2019). These studies

did not scrutinize the FLL among managers/owners of SMEs, as it is a significant skill that

influences the monetary performance of SMEs. Moreover, there is no study in the literature

focusing on SMEs in Dubai. Therefore, this study attempts to evaluate the FLL of managers/

owners of SMEs in Dubai and its association with socio-demographic attributes. The

motivation for the study was to fill this gap and provide a knowledge base for existing

debates about the financial knowledge of owners and managers of SMEs in Dubai.

1.6 Significance of the Research

Financial literacy of entrepreneurs or managers/owners assist them in making

effective decisions and hence affect their performance. This study will identify the literacy

level related to the finance of managers/owners of SMEs in Dubai. Moreover, the results will

also identify if different socio-demographic characteristics affect the FLL or not. These study

findings will enable managers/owners and those responsible for the development of SMEs to
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develop suitable strategies and measures for improving the productivity of SMEs with the

help of financial education.

1.7 Dissertation Structure

Chapter 1 offers a review of study topic and presents the research questions to be

answered in the research. Chapter 2 aims to explore previous studies linked with financial

literacy in the context of this study. Subsequently, the methodology followed to achieve the

research aim is discussed in chapter 3. The survey results are elaborated along with figures

and tables in chapter 4. Consequently, the interpretation of the findings and comparison with

previous evidence is disucssed in chapter 5. The last section elaborates the summary of study

focusing on the results while providing future directions.

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CHAPTER 2: LITERATURE REVIEW

This chapter provides an outline of the previous literature associated with FLL of

managers/owners. The concept of FLL and its significance in the light of research evidence

will be discussed. Moreover, these sections also describe the research framework and the

hypotheses of this study.

2.1 Theoretical Foundation

Resource-Based Theory or RBT is the basis of the current study. RBT theory of

strategic management is widely used in the literature on management and entrepreneurship.

RBT explores how company resources can aid in creating a stable competitive edge. The

company’s resources include physical, financial, human, technology, and marketing

resources (Alvarez & Barney, 2017). The mentioned resources are characteristics of the

company described by RBT, which can bring its profitability, growth and maximum vitality.

RBT theory holds that these resources must be expensive, rare, and imitative (Hitt, Xu, &

Carnes, 2016). However, to gain a company’s competitive advantage, it is recommended that

managers analyze resources, assess opportunities, analyze competitive advantages, choose

strategies, and recognise resource gaps.

Regarding the issues of business productivity and financial literacy, RBT can be

implemented. Monetary information and skills influence how companies opt, use, manage

and manage financial assets (Eniola & Entebang, 2016). In addition, the manager’s extent of

financial competence indicates the financial knowledge level that he/she have or acquires

with time. This knowledge (resources) affects the effectiveness of financial decisions and

company strategies. This is especially true for SMEs, where the owner-manager usually has

the right to make decisions. Financial decisions are the most crucial decisions that a

managing owner must make when conducting business. The results of such decisions will

seriously affect the profitability, development, and survival of their activities (Adomako et
 9

al., 2016). SMEs use unique, solid tangible as well as intangible assets as the basis for

maintaining their competitiveness, which can lead to high productivity. Material resources

comprise of financial capital (such as capital, and debt) as well as physical capital (such as

cars). Whereas intangible assets include skills, experience, entrepreneurial knowledge,

administrative measures, and repute (Iramani, Suryani, & Lindiawati, 2018).

The theory indicates that the shortage of organizational, human, financial resources

and facilities diminishes the innovative activity of the company (Karadag, 2015). This can

affect the distribution of company products and services, which ultimately diminishes its

performance. Lack of financial resources is the main obstacle in the expansion of SMEs, in

particular, because it averts them from obtaining new technologies that enhance their

productivity and competitive advantage (Wolmarans & Meintjes, 2015). Alternatively, earlier

research concentrated more on accessibility and inaccessibility of finance rather than the

knowledge of owner and manager of financial understanding. This study fulfills the

mentioned gap by exploring how the knowledge of owners and managers affects the

functioning of such companies.

2.2 Financial Literacy

Lusardi (2015) supported the position of the OECD, based on the results of PISA

(2012), where they assumed that financial literacy must be considered as a crucial ability for

involvement in the current economy. The citizens with low financial knowledge experience

greater difficulty in managing their economies and making financial decisions in a rational

and conscious manner. It is common to find in the literature the use of the term ‘financial

education’ to designate a concept similar to the one adopted here ‘financial

literacy’. According to Xiao and O’Neill (2016), around half of the studies use the

terminologies “financial literacy” and “financial education” as synonyms. Potrich, Vieira, and

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Kirch (2015) warn that the term ‘financial knowledge’ is also found to denote the same

theme.

It has been proposed that financial literacy goes further and adds the concept of

financial behavior, financial knowledge, and financial attitude. Financial education is related

to a person’s financial knowledge. Therefore, literacy would be a broader concept than

financial education (Grohmann, Kouwenberg, & Menkhoff, 2015). Financial education is a

composition of the behavior, attitude, skill, knowledge, and awareness required to implement

monetary decisions to accomplish financial welfare. The literature does not reveal

standardized forms of analysis of education, nor a single and conclusive nomenclature (Xiao

& O’Neill, 2016). For OECD, financial education is a procedure through which monetary

investors or consumers develop their awareness of financial conceptions and products. Thus,

the present study analyzes the set of variables presented by the OECD with adaptations,

calling them variables for determining the degree of financial literacy. Although the literature

presents other models for the measurement of literacy, Tokar Asaad (2015) warns that the

contemporary nature of the subject has not yet allowed the rigorous validation of methods

other than that of the OECD.

Financial behavior is formed through economic and non-economic beliefs that

influence the administrative process and choices of individuals (Grohs-Müller & Greimel-

Fuhrmann, 2018). Financial behavior is, for the OECD, the most important element of

financial literacy; advanced levels of literacy are the result of expenditure planning and the

formation of financial security. In contrast, certain behaviors, such as extreme usage of credit,

can lessen financial welfare (Grohmann, Klühs, & Menkhoff, 2018). Knowledge, in turn, is a

specific type of human capital attained through the course of life, in which learning is

converted into the capacity to manage income, expenses, and savings effectively.
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A study by Gentile, Linciano, and Soccorso (2016) shows that a person with greater

financial knowledge are more aware of the need to seek specialized technical advice when it

comes to personal finance. The study also suggests that higher literacy rates are associated

with other factors and, amongst these, education or higher education would be the main

factors. The study by Lusardi and Tufano (2015), identified that debts with lower costs are

mostly contracted by people possessing greater financial literacy. SMEs are able to adapt to

the needs of the market, they can make quick and effective decisions, reacting immediately to

changes and market demands (Ahn, Minshall, & Mortara, 2015). However, it is in the

organization and financial control that there is great difficulty in this segment of

entrepreneurs. Financial literacy includes an individual’s aptitude and confidence in using

financial knowledge for making monetary decisions (Mitchell & Lusardi, 2015).

The literature attributes to entrepreneurs’ managerial failures as one of the causes for

failure of small and new ventures (Atsan, 2016). In such a scenario, it has been found that

incubators appear, with the purpose of encouraging the progress of capabilities and skills in

business management. Thus, it is assumed that entrepreneurs who seek the incubation of new

ventures, to receive support from specialized and trained professionals in several areas of

knowledge, are those who have the lowest or worst levels of financial literacy (Mutegi,

Njeru, & Ongesa, 2015).

For many years, financial literacy has not been consistently defined in the literature,

although recently Klapper, Lusardi, and Van Oudheusden (2015) have provided an

encouraging and widespread financial definition that has gathered 3 pillars: knowledge,

attitude, and behavior. Throughout the globe, public often use several terminologies, such as

synonyms, to explain concepts of financial knowledge, such as financial opportunities,

education, knowledge, and culture.

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Similarly, previous studies (Klapper, Lusardi, & Van Oudheusden 2015; Agarwalla,

Barua, Jacob, & Varma, 2015; Porto & Xiao, 2016) have shown that in some countries there

is a tendency to consider research associated with financial knowledge as a good method of

financial literacy. Previously, the literature could not come to a consensus on a general

explanation of financial literacy, the definitions were developed on the basis of the same goal,

that is, personal financial condition. An example of the basics of financial literacy can be

understood from the definitions proposed by Tokar Asaad (2015), where the author describes

it as the capacity to perform advised judgments as well as make effective decisions about the

consumption and monetary management. The definition says that financial literacy is

measurement of people’s comprehension of significant financial conceptions and has the

following capabilities and level of confidence; manage private finances with adequate short-

term solutions and thoughtful long-term financial forecasting, paying attention to events in

life and changing economic conditions.

As mentioned above, the financial literacy definition combines three central concepts

(OECD, 2015), which are the key points that fully define financial knowledge today.

Similarly, Potrich, Vieira, and Mendes-Da-Silva (2016) claimed that knowledge, awareness,

skills, and behavior are combined as financial literacy. They are essential for making the right

monetary decisions and for attaining financial wellbeing (Stolper & Walter, 2017). This

definition is based on today’s most relevant work linked with calculating financial knowledge

of the general public, such as OECD pilot activities in 14 countries, including Asia, Eastern

Europe, Western Europe, Africa, and Latin America.

Furthermore, the main achievements in financial literacy domain were found in the

literature after the subprime lending crisis of 2007, since it was concluded that the lack of

financial culture was a factor contributing to this crisis (Smyczek, & Matysiewicz, 2015). On

one hand, it is widely believed that investor savings apply to complex financial products
 13

without a full understanding of their risks. On the other hand, financial institutions cannot

fully understand their financial difficulty in selling financial products (Calcagno &

Monticone, 2015; Abubakar, 2015). Recent advancements in the area of financial literacy

emphasise on personal finance issues by measuring the FLL faced by the general public. To

demonstrate the need for financial education, which will help reduce asymmetric information

among citizens, Hastings, Madrian, and Skimmyhorn (2013), Bayrakdaroğlu and Şan (2014),

Janor, Yakob, Hashim, Zanariah, and Wel (2017), reviewed, compared, and analyzed studies

on this subject in Malaysia, the United States, and Turkey during the recent years.

One of the main conclusions of these authors is associated with huge differences in

financial literacy rates from previous studies. These studies made it very difficult to establish

realistic criteria for the results obtained in these different countries and to identify gaps in

future studies. They also emphasized the use of financial knowledge as the basis for

supporting the demand for financial education, as at that time, it was mentioned as one of the

reasons for financial instability. This phenomenon is associated with easy access to credit

cards and ready-made credit cards and the speedy progress of marketing of financial products

Previously, the main concern was protecting the end consumer to prevent a lack of

information (especially from financial institutions), which was the goal of financial education

(Ene & Panait, 2017). To increase the number of informed clients so that they can make

better decisions, and thus minimizing the chances of becoming a client is misleading financial

problems. To gain market share, competition between financial institutions has exacerbated

this information asymmetry. Although citizens were encouraged to be in control of their

retirement earnings (Prast & van Soest, 2016), the government noted another equally

important socio-economic event, which largely supported the demand for financial education.

Governments around the world are changing their practices by encouraging people to take
 14

greater liability for their retirement incomes rather than relying entirely on government

pensions (Prast, & van Soest, 2016).

Regarding the financial literacy, Garg and Singh (2018) emphasized that the study

found a contradiction regarding the low FLL of students, while previous studies generally

showed that individuals with greater monetary literacy are influenced by financial knowledge

level. In the years following the financial crisis, one can more and more study financial

knowledge, since financial illiteracy is usually seen as an aggravating factor in a crisis. The

main intention of this latest study is to maintain the demand for financial education to protect

end-users from even more complex financial products on the market (Garg & Singh, 2018).

Xu and Zia (2012) performed research investigating financial literacy around different

parts of the globe, with inconsistencies mainly found in the definition and measurement of

the subject. In recent years, the OECD has made significant progress in its studies of financial

literacy, as it can offer a broad definition of financial literacy worldwide (Atkinson & Messy,

2012). It was noted that due to the globalization of financial literacy standards, financial

literacy is still widespread, even if financial markets are developing or changing rapidly.

Financial literacy encompasses the concepts of knowledge, behavior and financial

attitude, it has the power to influence national savings and indebtedness levels. People with

low literacy make incorrect use of available instruments by paying additional costs in

operations or increasing its indebtedness in an inconsequential way (Abubakar,

2015). Financial literacy goes beyond pure and simple financial education. Financial literacy

has two dimensions: understanding, which represents personal financial knowledge and its

utilization that is the application of knowledge in the management of personal finances.

2.3 Financial Literacy and Small and Medium Businesses

SMEs present obstacles that intervene in the implementation of management systems

for decision-making, including resistance to change, fear of the use of technologies, change
 15

of culture, high costs and lack of resources, weak accounting, and financial culture, and poor

financial education (Wang, 2016). Therefore, the adequate support of an accountant is

required that guides financial decisions to improve performance (Abraham & Schmukler,

2017).

According to Ayandibu and Houghton (2017), the sustainable economic development

of SMEs depends on their different capitals, be they physical, financial resources, among

others. However, the most important is human capital and dimension that unites SME

progression with the development of a country. Therefore, it is the one that most important

aspect that requires investment. The new economies require high skills in their managers or

owners so that organizations have greater intellectual capital that allows them to be

sustainable. This is called the ‘knowledge economy’ and has become a basic asset more

valuable than land, labor, and capital assets (Muda & Rahman, 2016). Entrepreneurs with

greater financial knowledge will have the possibility of better managing their companies for

optimal performance. Moreover, they might even have fewer financial problems and know

how to better address any inconvenience (Ključnikov & Belás, 2016).

Many investigations have managed to establish the significance of financial education

or financial knowledge in the success of SMEs, especially in their beginning stage (Tang &

Baker, 2016). Financial knowledge could be explained as the knowledge an entrepreneur

must have in a way that allows him to understand the information relating to personal

finances and business. It helps people feel committed and more involved with the

organization. Boden and Miles (2019) establish that financial knowledge is important for an

economy and can be measured through the interpretation that an entrepreneur gives to

financial reports, the terminology used in business, the use of technology as support and the

management of risk. In particular, in the study of Abdullah and Azam (2017), a conceptual

model was proposed relating financial knowledge to financial practice and business success,
 16

in a sample of small businesses in Malaysia, stating that there is a highly positive correlation

between each of them, that is, the greater the financial knowledge, the greater the financial

practice will be implemented and both will lead to business success.

The rare financial knowledge literature for small business owners offers a slightly

different definition of financial knowledge, which is the main difference in the understanding

of information in financial statements (Delić, Peterka, & Kurtovic, 2016). Instead of just

getting an idea of financial knowledge, it is better to focus solely on the concept of borrowing

and saving, raising interest rates, inflation and the diversification risk concept. Akaeze (2016)

claimed that small business owners should be capable to assess the information required to

make assessments that have monetary implications or affect a business. According to Lusardi,

Michaud, and Mitchell (2017), monetary knowledge of SME owners should consider the

capability to read and understand basic accounting to make knowledgeable decisions and take

effective decisions in money management.

The definition of financial knowledge related to personal financial matters is more

extensive and generally accepted. However, the definition of financial knowledge about small

enterprises requires not only higher knowledge, but also reading and understanding finance

(Eniola & Entebang, 2016). The ability to communicate information and financial behavior

should be associated with the analysis of financial information. Calcagno and Monticone

(2015) proposed that financial preferences or relationships should be positively related to

financial knowledge and behavior in making daily management decisions. However, due to

the fact that little consideration is given to financial knowledge of small business owners, the

literature does not provide a complete definition of financial knowledge in a business

environment. Financial knowledge will vary for personal financial management issues. Since

many economies in the world depend on the businesses success, it is vital not only to provide

financial knowledge to the general public but also to small business owners (Burns, 2016).
 17

As per Blank (2020), in most small enterprises, the owner is usually positioned as an

employee who is mainly focused on the field of activity of the enterprise. This results of

which is that the company’s strategies and plans are forgotten and can play a role in financial

education. Stam and Spigel (2016) through an educational program demonstrated the growth

of financial knowledge among entrepreneurs. They also discussed the success of financial

knowledge and small business by breaking the link between financial knowledge and the

difficulties faced by entrepreneurs.

As mentioned earlier, the literature on the financial knowledge of SME owners is very

scarce, and no literature has been found comparable to current studies to determine

benchmarks. Sage (2012) surveyed 300 small enterprises for FLL measurement of small

firms in Canada, assessing the perceptions, knowledge, and habits of small business owners

regarding financial and resource management. The main results of this study satisfied the

respondents with areas in which they need to know more (financial planning, taxes, and cash

flows), and areas where they feel more comfortable (working with clients, working with

suppliers and managing). Although the study has interesting results, their results are based on

respondents’ opinions and not on a specific understanding of financial reporting, which is

equivalent to providing financial knowledge that provides an accurate financial knowledge

level. To understand the frequency of use of technical and accounting software, several

questions were also asked from this study, which was given by the institutions conducting

this study.

Hussain, Salia, and Karim (2018) performed a study based on the financial knowledge

of entrepreneurs with a small group of entrepreneurs. For the study, the author selected 37

firms based on their size within the UK. The idea of the study is based on the belief that small

business owners who need less financial training are less likely to understand the financial

situation of the business and make informed financial decisions for accountants and financial
 18

advisors. The conclusion was that even if the participants seem to understand that they have

financial literacy, they still do not recognize it. Moreover, the study identified that financial

literacy among managers of SMEs can aid them in making effective decisions (Hussain,

Salia, & Karim, 2018).

In a study, the author interviewed 14 SMEs owners in California to establish their

degree of financial insight and the habit of using financial statements to make management

decisions, which is almost the same measure as their financial level literacy (Pearl & Eileen,

2014). According to their research, financial knowledge of small enterprises is defined as

capability to recognize and utilize financial statements for creating crucial financial ratios for

evaluating and managing a business. The questions used in their study focused on two of the

three pillars, three of which had a generally accepted financial literacy definition in the

literature: financial knowledge and behavior, but not financial relationships. In this study, the

author concludes that the lack of a clear link among financial knowledge and the financial

difficulties faced by entrepreneurs and a good financial education can partially reduce

financial difficulties.

Figueiredo and Brochado, (2015) studied the degree of financial knowledge of

Portuguese entrepreneurs in incubation companies in northern and central Portugal. Although

the questionnaire used to carry out its work was mainly based on questions about the level of

business confidence and financial behavior, it did not contain any questions about financial

knowledge. This is not only the basis of financial literacy in matters of personal financial

management but also the main problem of measuring the degree of financial literacy of small

business owners according to the literature. Despite this gap, the most important results of the

authors’ work show that 66% of the study sample have good financial knowledge (Figueiredo

& Brochado, 2015). Taking into account the research of the financial knowledge of small

business owners, found to date in the literature, it can be noted that no one can serve as a
 19

standard for this study. This gap in the literature meets the needs of this study, which has two

main goals, assessing the degree of financial knowledge of SME owners and correlating it

with socio-demographic characters.

As far as we know, there is no literature to study the association among company

performance and the degree of financial knowledge of SME owners in Dubai. This is normal

because there are few studies on financial knowledge of SME owners. In particular, since the

structure and functions of the owner or board of directors will directly influence the

operational efficiency and productivity of the firm. Thus, studying the contradiction between

the relations between these two variables (operating indicators and the degree of financial

knowledge of the business owner), the research indicates that high financial literacy of

business owners should provide a constructive influence on the operating performance of the

firm due to their financial knowledge, attitude and behavior (Karadag, 2015). The expected

result of this relationship or the expected positive correlation between the above variables

will not only improve the results obtained using the constructed questionnaire but also

demonstrate the need for financial education.

Morris (2015) argues that human resources include training, skill, expertise,

judgment, intellect, attitude, interactions, and understanding of individual managers in a

company. Prior empirical researches of entrepreneurial and organizational understanding

have shown that financing solutions for SMEs are more based on empirical training than

formal methods. Noe, Hollenbeck, Gerhart, and Wright (2015) noted that by relating human

resource procedures with the necessary capabilities, they can build the potential of their work

pool and achieve improved results. These capable employees can determine when the

organization is suitable for obtaining the necessary financial resources to satisfy the

organization.
 20

Furthermore, Vanauken, Ascigil, and Carraher, (2017) proposed that expertise and

knowledge are essential because they give time for identifying opportunities, developing

relationships and learning how to work with financiers, including venture capitalists and bank

managers this is why most entrepreneurial training is empirical. While some studies report

that only small and medium-sized business leaders actively use their knowledge to create a

competitive advantage, others have found that this is accompanied by increased opportunities

as companies move from higher education, which can improve organizational capabilities

(Anwar, 2018). In this regard, knowledge-related human capital is an important source of

maintaining a company’s competitive advantage, as it has nothing to do with the four

standards on the market and competitors cannot copy or buy it in the market. This implies

that obtaining skills can consistently provide financial knowledge for managers and business

owners; this can contribute to company productivity.

As Barazandeh, Parvizian, Alizadeh, and Khosravi (2015) stated, the attitude and

behavior of entrepreneurs become a priority as a transition between strategy and business

performance. These models are focused on the attitude and behavior of the organization, and

not on the knowledge, skills or capabilities of the company since the attitude, behavior, and

responsibilities of business owners and employees can affect business performance. As a

result, the role and behavior of business owners can help create a competitive advantage. The

attitude is largely related to the financial decisions of entrepreneurs and managers and their

financial situation. Nevertheless, there are many aspects that have an impact on the attitude of

entrepreneurs, including their mood and environment (Boermans, & Willebrands, 2017).

Impatient entrepreneurs do not necessarily make the right decisions because they make the

decision rather quickly and are often impulsive rather than rational.

According to Wolmarans and Meintjes (2015), many SMEs fail because they lack

financial knowledge, a lack of business understanding, and insufficient financial knowledge,

 21

which weakens entrepreneurial activities. Financial management is mentioned as a crucial

option for managing the progression of SMEs. Most researchers believe that entrepreneurs,

irrespective of age, always participate in decision-making processes linked with procurement,

distribution, and resources utilization (Reijonen, Tammi, & Saastamoinen, 2016). Such

processes certainly introduce financial implications; therefore, to be efficient, entrepreneurs

must have knowledge of finance.

Malecki (2018) argue that entrepreneurs often have the adequate financial knowledge

to take the difficult financial complications they confront. According to Tehseen and

Ramayah, (2015), financial knowledge provides significance to their entrepreneurial skills.

Entrepreneurs who want to flourish must be confident in their financial situation and should

be completely aware of the circumstances. If the owner or manager is uninformed in

financing organizations, then the company’s financial knowledge is also absent. This leads to

a decrease in innovation, which leads to competitiveness and insufficient awareness of

various sources of financing leading to the bankruptcy of SMEs (Tehseen and Ramayah,

2015). These opinions tend to concur that entrepreneurs do not possess financial knowledge,

and this lack reduces the likelihood of acquiring various sources of financing, which tends to

competitiveness and high efficiency of the company.

2.4 Conceptual Framework

The research framework is developed as per the research hypothesis, identifying the

independent and dependent variables.

 22

Figure 1

Conceptual Framework

Source: Researcher (2020)

2.5 Hypotheses

On the basis of empirical evidence of other studies, the hypotheses for this study are

proposed below;

H1: Male SME managers/owners have a greater level of financial literacy as compared to

females.

H2: Middle-age SME managers/owners have a greater level of financial literacy as compared

to young ones.

H3: SME managers/owners having higher education levels have a greater level of financial

literacy.

H4: SME managers/owners having higher business experience have a greater level of

financial literacy.
 23

CHAPTER 3: RESEARCH METHODOLOGY

This section describes briefly the methodological approaches used in research

highlighting the steps and approaches chosen for this study to achieve the study aim. The

chapter provides justifications related to the selection of research methods.

3.1 Research Approach

Adopting a definite approach for research is important because it will greatly assist

researchers in their research and evaluation. Furthermore, it is classified into two kinds:

deductive and inductive (Walsham, 2018). Inductive approaches are associated with

explanatory qualitative research, which starts with observation and then extends to theory and

interpretation. Conversely, deduction methods must be actively quantified (Leung, 2015).

Induction depends on the study of different experiences as well as practices. Regularity,

patterns, and similarities in experiences are measured to create hypotheses or to accomplish

goals. Induction stimulates a comprehensive understanding of the world that is increasingly

looking for unique ideas and universality. By offering an inductive approach beginning with

the subject, researchers try to formulate accurate hypotheses and recognize introductory

relationships in the research process (McFarland et al., 2018). In addition, Steffen, Rüthing,

and Huth (2018) identified that induction is often referred to as the bottom-up method, which

displays a knowledge processing method in which analysts use perception to form concepts

or describe images of the phenomenon under scrutiny. In current research, the investigator

has adopted a deductive research approach to quantify the FLL of the managers/owners of

SMEs in Dubai.

3.2 Research Philosophy

It is an imperative measure of research procedure. Research philosophy is well a

process through which it is possible to collect, evaluate and use information regarding a

specific phenomenon. A realistic research philosophy depends on trained people and

 24

researchers to obtain specific measurement methods (Antwi & Hamza, 2015). This is a

standard that illustrates what researchers think about their work environment (Hughes &

Sharrock, 2016). Thus, it discusses the rules and concepts of knowledge that change how

researchers perceive and how people formulate and promote. Hermeneutics is a method based

on observations and interviews. The collection of secondary data, however, is common in the

philosophy of explanatory research, where meaning usually begins at research process end.

This study is based on a positivistic paradigm, because the work of nature researchers

is based on observable social objects, therefore the philosophical approach of nature

researchers is perceived in positivism. Research strategies are based on data collection and

hypothetical development. These assumptions will be verified and confirmed for further

investigation. Another feature of this philosophy is that positivism researchers follow a very

structured methodology to advance this hypothesis.

3.3 Research Design

Research design denotes the approaches used in studies that combine the diverse

constituents of the study. Thus, there are three key research designs; qualitative, quantitative

and mix methodology to build research structures. It has been established that quantitative

study proceeds by using statistical data, while qualitative methods make use of data and

theory from previous research studies (Brannen, 2017). Conversely, mixed methodology

(quantitative and qualitative) are also suitable for obtaining large amounts of reliable data or

information.

Quantitative research is typically accompanied to acquire statistical results for the

entire populace of a certain research objective. A quantitative study has been set up to

determine how many people think, act or feel in a certain way. Quantitative research involves

a large sample size and focuses on the number of responses, instead of obtaining qualitative

research for a more focused or emotional understanding.

 25

In quantitative research, the goal is to determine the correlation between variables

within a population. Qualitative research is a technique or point of view for studying things

and participating in the laws of things inherent in the nature of social phenomena or

conflicting changes in things. Therefore, this research is centered on quantitative research

design to get the desired results.

3.4 Data Collection Method

Each study requires that the data collection method is specified when collecting

information for each analysis or study variable. Therefore, there are two methods of

collecting data for collecting precise statistics, which are primary and secondary processes.

From the point of view of primary data gathering, data is collected from reliable, real and

unique sources, since it is primarily comprised of raw data that was not encompassed in

previously conducted research studies (Quinlan et al., 2019). Primary data could be used for

quantitative as well as qualitative research and may include interviews, surveys, and other

methods. Secondary method for data collection, on the contrary, is grounded on existing

information obtained from sources (such as articles, magazines, reports, and the internet).

Furthermore, both research designs can use secondary techniques for data collection.

The main difference between secondary and primary information is the direction

collection of primary data by researchers through the use of interview structures, focus

groups, experiments, surveys, and mandatory collection while secondary data are quickly

available and can be used by several individuals through publications, newspapers, and

magazines (Beins, 2017). In this research, the researcher has embraced the primary data

technique and has collected the data through a survey questionnaire technique.

3.4.1 Instrument

The survey questionnaire (attached in the appendix) used in present study is primarily

grounded on the questionnaire proposed by OECD for business enterprises (OECD/INFE,

 26

2019). Some of the adopted questions are modified but the majority of the questions are the

same. The questions are categorized into four sections; the 1st section covers four

demographic questions. The next three sections are financial knowledge (9 questions),

financial behavior (10 questions), and financial attitude (4 questions).

3.5 Sampling Strategy

To the planning of a sampling suitable to achieve the requirement of statistical

representation, the researcher must devote his activity and best attention and competence in

proper sampling.

3.5.1 Sample Size

One of the fundamental elements that the researcher considers for the choice of the

dimension "n" of his sample is the risk of "accidental error" which depends precisely on this

dimension, being inversely proportional to the root of n (Malterud et al., 2016). The sample

size holds great significance and therefore in this research, size of the sample is 120. The

survey was sent to 120 different business owners and managers of Dubai to attain the desired

results.

3.5.2 Sampling Type

In research terms, a sample is a group of people, objects, or objects that are the tasks

of several people and should be measured. The sample should represent the population so that

one can summarize the results of the study as a whole. Various sampling methods are

available that can be classified into two kinds: non-probabilistic sampling and probabilistic

sampling. The former method is more labor-intensive and more expensive than non-

probabilistic sampling. With non-probabilistic (non-random) samples, one does not start with

the full frame of the sample, so some people have no chance or are selected. It is cheaper and

more convenient (Etikan, Musa, & Alkassim, 2016).

 27

This research is based on a non-probability sampling method which is further divided

into 4 types. However, in this research, the researcher has adopted convenience sampling.

Convenient sampling is performed using a non-probabilistic method, which does not offer the

same probability or adding samples to all units of the population. Some groups or individuals

are chosen even more often than others (Etikan, Musa, & Alkassim, 2016). Convenient

sampling is probably the easiest sampling method since participants are selected as per their

willingness and availability to participate.

3.6 Data Analysis Techniques

It is demarcated as the process of systematic implementation of statistical approaches

to determine and distribute information. As described by Harding (2018), various analytical

techniques which can extract inductive explanations from the collected set of data, while

differentiating amongst interesting phenomena and statistical fluctuations in the data.

However, a greatest imperative fundamental to ensure data reliability is accurate analysis of

recognized research outcomes. In addition, it was found that integrity problems are related to

statistical and non-statistical analysis (Silverman, 2016). The data obtained from the

questionnaire is transferred into the excel sheet and coded as per the given instructions of the

OECD guidelines (OECD/INFE, 2019). The aim is to code the data in a way that it can

present the financial literacy score of participants. The sum of the parts ranges from 0 to 23

points, as every question can be scored according to the right answer given. Therefore, the

higher the score, the greater the literacy of the participants.

Besides, there are many data analysis methods, depending on the type of study. There

are some methods that can be utilized to verify research information. This study is grounded

on statistical data analysis, which is the most frequently quantitative data analysis method

that has been used, and they are further divided into two methods: inference and descriptive

statistical analysis. Nonetheless, it has been found that descriptive analysis can evaluate a
 28

single variable; therefore, although inferential analysis is complicated and proves relationship

between many variables, it is often called one-dimensional analysis (Podsakoff & Podsakoff,

2019). Thus, in this research descriptive statistical data analysis technique is implemented to

analyze the FLL of Dubai business owners and managers while cross-tabulation and Chi-

square tests are applied to find the association between demographics and FLL. For this

purpose, collected data from the respondents will be examined by means of using software

which is known as SPSS.

3.7 Research Ethics

According to Greenwood (2016), the researcher conducting a study has to consider all

the ethical issues that might come across during the research process. The present study is

primary research including the respondents, making it necessary to protect the right of them.

One of the main ethical concern is consent, meaning that the research purpose is informed

about the details of the study and asked if they want to participate or not. This means that the

respondents cannot be forced to be part of the study. Moreover, participants must have the

right to withdraw from study anytime they want (Williams & Pigeot, 2017), which has been

mentioned in the consent form. Moreover, the confidentiality of the participants has been

ensured, as the names of the participants will not be presented in any form. Moreover, data

has been protected in a password-protected personal computer, ensuring that only the

researcher can have access to it.

 29

CHAPTER 4: RESULTS AND FINDINGS

This chapter presents and gives an explanation of the results obtained from the

analysis of the raw data acquired from the questionnaire. The aim is to give meaning to the

data so that it can be interpreted and understood. Firstly, the descriptive statistics explaining

the socio-demographic data will be presented, followed by frequency literacy level and its

association with socio-demographic characteristics.

4.1 Data Screening

Prior to analysis, the data taken from the participants were coded and edited with the

help of OECD guidelines given in the 2019 MSME questionnaire (OECD/INFE, 2019). The

answers considered as correct was given the code ‘1’ while the wrong answers were marked

as ‘2’. The statistical figures relate to the response rate of the subjects are presented in Table

1.

Table 1

Data Screening

Unfinished Questionnaires
Questionnaires Questionnaires Questionnaires Evaluated
Distributed Received

120 109 (90.8%) 6 (5%) 103

Source: Researcher (2020)

A total of 120 people were approached to contribute in the survey. From these

participants, 11 (9.1%) did not return the questionnaire whereas 6 (5%) did not complete the

questionnaire appropriately, as presented in the table below.

4.2 Descriptive Statistics

The sociodemographic characteristics and the constructs of the FLL are presented one

by one with the help of frequency tables.

4.2.1 Gender. The managers/owners of SMEs recruited for the study were mostly

males as given in the following table.

 30

Table 2

Gender

Cumulative
Frequency Percent Valid Percent Percent
Valid Male 76 73.8 73.8 73.8
Female 27 26.2 26.2 100.0
Total 103 100.0 100.0
Source: Researcher (2020)

Figure 2

Gender Distribution

Source: Researcher (2020)

From the table, it can be inferred that 76 participants were men accounting to 73.8

percent of the participants whereas only 27 (26%) participants were women. This shows that

most of the respondents were male.

4.2.2 Age. Age of the participants is classified in different sections with ten years

ranges, as presented in Table 3.

 31

Table 3

Age

Cumulative
Frequency Percent Valid Percent Percent
Valid 21-30 5 4.9 4.9 4.9
31-40 16 15.5 15.5 20.4
41-50 27 26.2 26.2 46.6
51-60 24 23.3 23.3 69.9
61-70 26 25.2 25.2 95.1
71 and above 5 4.9 4.9 100.0
Total 103 100.0 100.0
Source: Researcher (2020)

Figure 3

Age Distribution

Source: Researcher (2020)

In the above table, it can be observed that 26% of the participants were from the 41-

50 age group whereas 25 percent and 23 percent were from the 21-30 and 51-60 age group

respectively. Moreover, the remaining 31-40 age groups represent 16 percent of the

respondents while 61-70 and 71 and above accounts for 5 percent each.
 32

4.2.3 Education Level. To know the education level of the respondents, four options

ere given to them, as seen in the table below.

Table 4

Education Level

Cumulative
Frequency Percent Valid Percent Percent
Valid Apprenticeship/Qualificati
10 9.7 9.7 9.7
on/Diploma
University degree
28 27.2 27.2 36.9
(Undergraduate)
Postgraduate Qualification 43 41.7 41.7 78.6
Professional Qualification 22 21.4 21.4 100.0
Total 103 100.0 100.0
Source: Researcher (2020)

Figure 4

Education Level Distribution

Source: Researcher (2020)

The table above highlights that the majority of the participants, that is approximately

42 percent (43 respondents), possess postgraduate qualification whereas diploma holder was
 33

the least accounting to 10 percent of the participants. The remaining 27 percent have a

university degree while 21 percent have a professional qualification.

4.2.4 Business Experience. The years the participants have worked in the business

sector are divided into five different sections (presented in Table 5).

Table 5

Business Experience

Cumulative
Frequency Percent Valid Percent Percent
Valid Less than 1 year 1 1.0 1.0 1.0
1-5 years 18 17.5 17.5 18.4
6-10 years 30 29.1 29.1 47.6
11-15 years 37 35.9 35.9 83.5
16 years and more 17 16.5 16.5 100.0
Total 103 100.0 100.0
Source: Researcher (2020)

Figure 5

Business Experience Distribution

Source: Researcher (2020)

It can be inferred that the highest number of participants have 11 to 15 years of

experience making up around 36% of the total respondents. In contrast, 29 percent have 6 to
 34

10 years of experience whereas 17 percent have 1 to 5 years or 16 years and more experience.

Only 1% of the participants possess less than a year experience, implying that most of the

participants can be considered as experienced.

4.2.3 Financial Literacy Level. Respondents’ FLL has been measured by three

constructs namely financial knowledge, financial behavior, and financial attitude. In the

financial knowledge section, questions related to interest, financial management, accounting,

risk, and insurance were asked to check the basic knowledge. Moreover, the financial

behavior section addresses the deposit services, recording, financial protection for the

company, planning, and risk for finding if the behavior is financially savvy or not. On the

other hand, financial attitude quantifies the perception and attitude of the respondents related

to planning and forecasting. Therefore, it can be stated that the financial literacy score is

obtained from the combination of these three dimensions.

4.2.4 Financial Knowledge. In this section, there were nine questions based on

different finance concepts. The questions are related to the basic financial ideas that help in

making finance-related decisions on a daily basis. The concepts that make up this construct

include, return risk, inflation, compound interest, simple interest, and financial management.

All the questions in this section were multiple-choice questions and the correct answer means

a score of ‘1’ while the wrong answer means no score. Therefore, the score of this section

ranges from 0 to 9. The proportion of correct and incorrect answers of the questions are

presented in the table below.

Table 6 Percentage of Correct and Incorrect Answers

Correct Incorrect
Area Frequency Percentage Frequency Percentage
Simple Interest 88 85.44 15 14.56
Compound Interest 50 48.54 53 51.46
Keeping Records 41 39.81 62 60.19
Financial Management 45 43.69 58 56.31
Inflation 58 56.31 45 43.69
Business Financing (ROA) 48 46.60 55 53.40
 35

Business Financing (Dividends) 46 44.66 57 55.34

Return and Risk 56 54.37 47 45.63
Risk 56 54.37 47 45.63
Total 52.64 47.36
Source: Researcher (2020)

In the above table, it has ben shown that a high proportion of participants have

knowledge regarding simple interest. Other than that, all the other questions have

approximately half proportion of correct and incorrect answers. However, it is noteworthy

that the proportion of financial management, records, ROA, and dividends is less than 50%,

though close to it. The total financial knowledge score is presented in the table below

statistically highlighting the frequency of respondents against the score range of 0 to 9.

Table 7

Financial Knowledge Score

Valid Cumulative
Frequency Percent Percent Percent
Valid 2 8 7.8 7.8 7.8
3 10 9.7 9.7 17.5
4 28 27.2 27.2 44.7
5 27 26.2 26.2 70.9
6 20 19.4 19.4 90.3
7 6 5.8 5.8 96.1
8 3 2.9 2.9 99.0
9 1 1.0 1.0 100.0
Total 103 100.0 100.0
Source: Researcher (2020)

The above table showed that none of the participants gave all the wrong answers as

the score starts from 2, implying that the participants have given at least two correct

responses. Only one participant scored the highest possible score of 9 whereas 3 respondents

scored 8. Most of the participants scored 4 (27%) or 5 (26%) meaning that they answered half

of the answers correctly. On the other hand, 8 (7.8%) participants got a score of 2 while 10

(9.7%) participants got 3 answers correctly. Moreover, participants who gave 6 and 7 answers
 36

correctly are 20 (19.4%) and 6 (5.8%) respectively. Furthermore, a summary of the frequency

knowledge statistics is presented in the table below.

Table 8

Financial Knowledge Score Statistics

N Valid 103
Missing 0
Mean 4.7379
Median 5.0
Mode 4.0
Std. Deviation 1.46837
Minimum 2.0
Maximum 9.0
Source: Researcher (2020)

In Table 8, it can be observed that mean financial knowledge score is 4.7 with

standard deviation of 1.46. This suggests that on average the participants scored

approximately 5 points out of 9. Moreover, the mode is 4 indicating that most of the

participants have moderate financial knowledge level. The total knowledge scores are also

presented in the figure below.

Figure 6

Financial Knowledge Score Distribution

Source: Researcher (2020)

 37

It is visibly displayed in Figure 6 that higher percentages are subjected to a moderate

financial knowledge level. Therefore, it can be concluded that a higher number of subjects

have moderate level knowledge of basic financial conceptions.

4.2.5 Financial Behavior. The second aspect of financial literacy is financial

behavior according to OECD. This dimension measures the degree to which the

managers/owners of SMEs in Dubai can make wise decisions related to finance. It identifies

if the behavior and decisions taken by them are financially savvy or not. From the total ten

questions, five questions of this dimension are multiple-choice questions whereas five

questions are based on the 5-point Likert scale. As per the OECD guidelines, the correct

answers for each question including the Likert scale responses are added. Therefore, each

answer is given a score of ‘1’ for a correct answer. This means that the score of financial

behavior ranges from 0 to 10. For each question, the individual data is presented in the table

below.

Table 9 Percentage of Correct and Incorrect Answers

Correct Incorrect
Area Frequency Percentage Frequency Percentage
Separation account 91 88.35 12 11.65
Shopping around 66 64.08 37 35.92
Keeping Records 82 79.61 21 20.39
Insurance 1 48 46.60 55 53.40
Insurance 2 62 60.19 41 39.81
Financial protection 72 69.90 31 30.10
Planning 66 64.08 37 35.92
Financing 64 62.14 39 37.86
Long-term planning 41 39.81 62 60.19
External influences 38 36.89 65 63.11
Total 61.17 38.83
Source: Researcher (2020)

As depicted in Table 9, majority of respondents have knowledge related to record

keeping and account separation as 82% and 91% gave right answers. Whereas the lowest
 38

correct answers are given related to external influence on the business making up 38%. The

total financial behavior score is presented in Table 10 with the frequency distribution.

Table 10

Financial Behavior Score

Valid Cumulative
Frequency Percent Percent Percent
Valid 2 3 2.9 2.9 2.9
3 3 2.9 2.9 5.8
4 10 9.7 9.7 15.5
5 15 14.6 14.6 30.1
6 29 28.2 28.2 58.3
7 24 23.3 23.3 81.6
8 14 13.6 13.6 95.1
9 4 3.9 3.9 99.0
10 1 1.0 1.0 100.0
Total 103 100.0 100.0
Source: Researcher (2020)

As presented in Table 10, none of the respondents scored 0 or 1 for the financial

behavior score meaning that the participants gave at least two correct answers. It can be

observed that the maximum number of subjects, accounting to 28% (29 respondents), get 6

correct answers. On the contrary, only 1 respondent (1%) scored all ten answers correctly and

4 scored 9 points. Moreover, 3 participants got 2 and 3 scores each while 10 gave 4 correct

answers. On a scale of ten, 15 reached the half score (5), 24 gave 7 correct answers, 14 gave

8 correct answers. This implies that most of the participants scored in the mid-range, which

can be validated from the statistics table given below.

 39

Table 11

Financial Behavior Score Statistics

N Valid 103
Missing 0
Mean 6.1165
Median 6.0000
Mode 6.00
Std. Deviation 1.59841
Minimum 2.00
Maximum 10.00
Source: Researcher (2020)

The statistics in Table 11 represents that the mean financial score was 6.1 with a

standard deviation of 1.59 meaning that the average score of the financial behavior is 6.1.

moreover, 6 mode also indicates the same that most of the participants scored 6 out of 10

points, highlighting the moderate financial savvy behavior. The aggerate financial behavior

scores are also displayed in Figure 7.

Figure 7

Financial Behavior Score Distribution

Source: Researcher (2020)

 40

As depicted in Figure 7, financial behavior score for most of the participants lies in

the middle range. Thus, it can be inferred that most of the managers/owners of SMEs in

Dubai have a moderate level of financial savvy behavior.

4.2.6 Financial Attitude. The last dimension is the financial attitude, which measures

the preferences and attitudes related to financial planning. OECD (2015) stated that long-term

and short-term planning for financial decisions should be included in the literacy

questionnaire. In this section, the attitude towards long-term stability in terms of finance is

considered to be positive whereas those who opt for short-term financial goals are not

considered as financially literate enough. There are four questions in this section adapted

from the OECD survey (OECD/INFE, 2019), which are constructed on the 5-point Likert

scale rating. According to the OECD survey, the correct answer for each question was

marked as ‘1’ while an incorrect answer as ‘0’. The table below presents the proportion of

each question individually in terms of correct and wrong answers.

Table 12 Percentage of Correct and Incorrect Answers

Correct Incorrect
Area Frequency Percentage Frequency Percentage
Long-term planning 1 64 62.14 39 37.86
Financing 62 60.19 41 39.81
Long-term planning 2 58 56.31 45 43.69
Insurance and risk 54 52.43 49 47.57
Total 57.77 42.23
Source: Researcher (2020)

As presented in Table 12, the correct answer proportion is more than 50 percent for all

the questions, implying that more than half of the participants gave correct answers indicating

that their attitude is towards long-term planning. Highest proportion of correct answer was

linked with first question related to future planning. Similar to the other dimensions, the score

of all the questions were aggregated to investigate the level of financial attitude. The score

ranges from 0 to 4, presented in the table below along with frequency distribution.
 41

Table 13

Financial Attitude Score

Valid Cumulative
Frequency Percent Percent Percent
Valid 0 2 1.9 1.9 1.9
1 18 17.5 17.5 19.4
2 42 40.8 40.8 60.2
3 28 27.2 27.2 87.4
4 13 12.6 12.6 100.0
Total 103 100.0 100.0
Source: Researcher (2020)

As presented in the above table, only two respondents gave all incorrect answers

while 13 gave all the correct answers making up 12.6 percent of the participants. Moreover,

the highest number of participants that is 42 (40.8%) scored 2 points and 28 respondents

(27.2%) scored 3 points. Therefore, it can be said that most of the participants have a low

financial attitude level, implying that they focus on short term financial plans. The aggregate

score is presented in the form of overall statistics in Table 14.

Table 14

Financial Attitude Score Statistics

N Valid 103
Missing 0
Mean 2.3107
Median 2.0000
Mode 2.00
Std. Deviation 0.97044
Minimum 0.00
Maximum 4.00

As portrayed in Table 14, the mean is 2.31 along with the 0.97 standard deviations.

This means that the average score was 2.3 while mode represents that the majority of the

respondents scored 2 points. The total financial attitude score is presented below in Figure 8.
 42

Figure 8

Financial Attitude Score Distribution

Source: Researcher (2020)

The figure above visibly presents that most of the respondents scored two points. The

graph shows that managers/owners of SMEs in Dubai posses a low to moderate level of

financial savvy attitude.

4.2.7 Total Financial Literacy Level Score. All three dimensions related to financial

literacy discussed above are aggregated to know the overall literacy level of respondents. As

per the OECD guidelines, the higher the total score, the greater the level of financial literacy.

After adding the scores, they are classified into three categories, namely lower, moderate, and

higher FLL, as done in the study by Potrich et al. (2015). This helps in analyzing the data and

understand the education level of the respondent. The participants who scored 0 to 11 lie in

the lower literacy range, 12 to 16 lie in the moderate range, and 17 to 23 lie in the higher

financial literacy range. Based on this scale, the data is presented in the table given.
 43

Table 15

Financial Literacy Level (FLL)

Valid Cumulative
Frequency Percent Percent Percent
Valid Lower Financial
22 21.4 21.4 21.4
Literacy Level
Moderate Financial
73 70.9 70.9 92.2
Literacy Level
High Financial Literacy
8 7.8 7.8 100.0
Level
Total 103 100.0 100.0
Source: Researcher (2020)

As depicted in Table 15, from a total of 103 participants, 22 participants (21.4%)

possess lower FLL while 8 participants (7.8%) have a high FLL. It can be stated that the

majority of the participants lie in the moderate range, as 73 respondents (70.9%) lie in this

group. the results of all the three dimensions were in moderate range; thus, their aggerate also

points out to the moderate level of knowledge among SMEs managers/owners in Dubai. The

results are presented in the form of a pie chart, representing the frequency distribution.

Figure 9

Financial Literacy Level Distribution

 44

Source: Researcher (2020)

In Figure 9, it can be seen that most of the subjects possess a moderate FLL.

Therefore, it can be inferred that the managers/owners of SMEs in Dubai possess a moderate

FLL.

4.3 Financial Literacy and Socio-Demographics

Other than measuring FLL, the aim was to study the association of socio-demographic

attributes to the literacy level. Therefore, this section focuses on finding the relationship

between these variables. For this purpose, cross-tabulation and chi-square are performed on

the categorical data. The second research question is answered in the sections below.

4.3.1 Gender and Financial Literacy. The crosstabulation table between gender and

FLL is presented below in Table 16.

Table 16

Gender * FLL Crosstabulation

Financial Literacy Level

Lower Moderate High
Financial Financial Financial
Literacy Literacy Literacy
Level Level Level Total
Gender Male Count 15 55 6 76
Expected Count 16.2 53.9 5.9 76.0
% within
19.7% 72.4% 7.9% 100.0%
Gender
Female Count 7 18 2 27
Expected Count 5.8 19.1 2.1 27.0
% within
25.9% 66.7% 7.4% 100.0%
Gender
Total Count 22 73 8 103
Expected Count 22.0 73.0 8.0 103.0
% within
21.4% 70.9% 7.8% 100.0%
Gender
Source: Researcher (2020)
 45

It can be observed that 19.7% of males and 25.9% of females lie in the lower financial

literacy category whereas 72 .4% males and 66.7% of females lie within moderate financial

literacy groups. Similarly, 7.9% of males and 7.4% of females are in the higher literacy

group. these figures imply that the proportion of males and females are similar in each group.

furthermore, the table above depicted the actual count and the expected count frequency,

whose differences can predict the association between the two variables. If the expected and

actual numbers are close to each other, it depicts that there is no correlation between the

variables. However, to understand the association, the chi-square test is done, as presented in

the table given.

Table 17

Chi-Square Tests (FLL and Gender)

Asymp. Sig. (2-

Value Df sided)
a
Pearson Chi-Square 0.455 2 0.797
Likelihood Ratio 0.441 2 0.802
Linear-by-Linear
0.322 1 0.570
Association
N of Valid Cases 103
a. 1 cells (16.7%) have expected count less than 5. The minimum
expected count is 2.10.
Source: Researcher (2020)

According to Table 14, the FLL is not associated with gender in managers/owners of

Dubai based SMEs. The Pearson significance value 0.797 (>0.05) indicates that gender does

not influence FLL. Therefore, it can be said that the alternate hypothesis (H1) is rejected,

meaning that males do not have greater FLL in contrast to females.

4.3.2 Age and Financial Literacy. In comparison with different age groups, the FLL

is presented in the following table.

 46

Table 18

Age * FLL Crosstabulation

Financial Literacy Level

Lower Moderate High
Financial Financial Financial
Literacy Literacy Literacy
Level Level Level Total
Age 21-30 Count 2 3 0 5
Expected
1.1 3.5 .4 5.0
Count
% within Age 40.0% 60.0% 0.0% 100.0%
31-40 Count 4 10 2 16
Expected
3.4 11.3 1.2 16.0
Count
% within Age 25.0% 62.5% 12.5% 100.0%
41-50 Count 5 20 2 27
Expected
5.8 19.1 2.1 27.0
Count
% within Age 18.5% 74.1% 7.4% 100.0%
51-60 Count 2 19 3 24
Expected
5.1 17.0 1.9 24.0
Count
% within Age 8.3% 79.2% 12.5% 100.0%
61-70 Count 9 16 1 26
Expected
5.6 18.4 2.0 26.0
Count
% within Age 34.6% 61.5% 3.8% 100.0%
71 and above Count 0 5 0 5
Expected
1.1 3.5 0.4 5.0
Count
% within Age 0.0% 100.0% 0.0% 100.0%
Total Count 22 73 8 103
Expected
22.0 73.0 8.0 103.0
Count
% within Age 21.4% 70.9% 7.8% 100.0%
Source: Researcher (2020)

As depicted in the above table, 71+ and 21-30 age group does not have any member

in the higher frequency range; however, 71+ age group does not have any member in the
 47

lower FLL either. In all the remaining age groups, i.e., 31 to 70, the majority of the

proportion lies in the moderate financial literacy level. Moreover, all the groups have the

lowest proportions in the high FLL. The association between these variables can be inferred

from the table as follows.

Table 19

Chi-Square Tests (FLL and Age)

Asymp. Sig. (2-

Value Df sided)
Pearson Chi-Square 10.010a 10 0.440
Likelihood Ratio 11.811 10 0.298
Linear-by-Linear
0.001 1 0.981
Association
N of Valid Cases 103
a. 11 cells (61.1%) have expected count less than 5. The minimum
expected count is .39.
Source: Researcher (2020)

As presented above, 11 cells have less than 5 count accounting to 61.1%, which

means that the Pearson value is not significant for this case. This is because this value should

be below 20 % for Pearson test assumptions to be valid. Therefore, the likelihood ratio will

be considered for this condition, which shows that the significance value is 0.298. As this

value is > 0.05, it can be said that FLL and age are not correlated. The proposed hypothesis

(H2) is rejected., implying that middle-age managers/owners in Dubai based SMEs have

higher FLLs in comparison to young ones.

4.3.3 Education Level and Financial Literacy. It is a perception that people

possessing higher qualifications have higher FLLs. The cross-tabulation of education and

financial literacy is as follows.

 48

Table 20

Education Level * FLL Crosstabulation

Financial Literacy Level

Lower Moderate High
Financial Financial Financial
Literacy Literacy Literacy
Level Level Level Total
Education Apprenticeship/ Count 3 7 0 10
Level Qualification/ Expected Count 2.1 7.1 .8 10.0
Diploma
% within
30.0% 70.0% 0.0% 100.0%
Education Level
University Count 6 20 2 28
degree Expected Count 6.0 19.8 2.2 28.0
(Undergraduate)
% within
21.4% 71.4% 7.1% 100.0%
Education Level
Postgraduate Count 9 31 3 43
Qualification Expected Count 9.2 30.5 3.3 43.0
% within
20.9% 72.1% 7.0% 100.0%
Education Level
Professional Count 4 15 3 22
Qualification Expected Count 4.7 15.6 1.7 22.0
% within
18.2% 68.2% 13.6% 100.0%
Education Level
Total Count 22 73 8 103
Expected Count 22.0 73.0 8.0 103.0
% within
21.4% 70.9% 7.8% 100.0%
Education Level
Source: Researcher (2020)

As depicted in the table, the highest proportion (13.6%) of participants in the higher

FLL lie in the group having professional qualifications. However, there is a marginal

difference in the proportion of postgraduate and undergraduate groups in higher FLLs,

making up 7% proportion. Furthermore, it can be noticed that the highest proportion in all

education levels lies in the moderate range, followed by lower-level financial literacy. Hence,

no considerable differences can be observed against the education levels. To validate if there

exists any association or not, the following table displays the chi-square test.
 49

Table 21

Chi-Square Tests (FLL and Education Level)

Value Df Asymp. Sig. (2-sided)

Pearson Chi-Square 2.292a 6 0.891
Likelihood Ratio 2.856 6 0.827
Linear-by-Linear Association 1.300 1 0.254
N of Valid Cases 103
a. 6 cells (50.0%) have expected count less than 5. The minimum expected count
is .78.
Source: Researcher (2020)
As presented in Table 21, the Pearson chi-square is not relevant for this case due to

the 50% indicated below the table. Hence, the Likelihood ratio is valid, which is 0.827, quite

greater than the significance value of 0.05. Thus, it can be said that there is no association

between FLL and education level. However, it is important to notice that all the education

levels taken in this study are considered as higher education levels. This means that the

statement can be different for individuals with secondary or primary education level. The

result indicates that the proposed hypothesis (H3) is rejected, inferring that education level

among managers/owners of Dubai based SMEs does not have an association with the FLL.

4.3.4 Business Experience and Financial Literacy. The business experience across

with the three FLLs is presented in the following table by cross-tabulation.

 50

Table 22

Business Experience * FLL Crosstabulation

Financial Literacy Level

Lower Moderate High
Financial Financial Financial
Literacy Literacy Literacy
Level Level Level Total
Business Less than Count 0 1 0 1
Experienc 1 year Expected Count .2 .7 .1 1.0
e
% within Business
0.0% 100.0% 0.0% 100.0%
Experience
1-5 years Count 7 10 1 18
Expected Count 3.8 12.8 1.4 18.0
% within Business
38.9% 55.6% 5.6% 100.0%
Experience
6-10 years Count 7 21 2 30
Expected Count 6.4 21.3 2.3 30.0
% within Business
23.3% 70.0% 6.7% 100.0%
Experience
11-15 Count 4 30 3 37
years Expected Count 7.9 26.2 2.9 37.0
% within Business
10.8% 81.1% 8.1% 100.0%
Experience
16 years Count 4 11 2 17
and more Expected Count 3.6 12.0 1.3 17.0
% within Business
23.5% 64.7% 11.8% 100.0%
Experience
Total Count 22 73 8 103
Expected Count 22.0 73.0 8.0 103.0
% within Business
21.4% 70.9% 7.8% 100.0%
Experience
Source: Researcher (2020)

As portrayed in the table above, there is a pattern in the higher literacy level section

because the values are increasing from the options less than a year experience to 16 years or

higher experience. This indicates that higher the experience, the greater the FLL. However,

this statement is true for only a single category because the other value does not follow any
 51

pattern. Most of the proportions in all options lie in the moderate level group, followed by a

lower financial education level. The lowest proportions lie in the higher FLL category. The

association among FLLs and years of experience is tested by Chi-square test as presented

below.

Table 23

Chi-Square Tests (FLL and Business years)

Asymp. Sig. (2-

Value df sided)
Pearson Chi-Square 6.770a 8 0.562
Likelihood Ratio 6.958 8 0.541
Linear-by-Linear
2.245 1 0.134
Association
N of Valid Cases 103
a. 9 cells (60.0%) have expected count less than 5. The minimum
expected count is .08.
Source: Researcher (2020)

The indication below the table indicates that the Likelihood ratio should be considered

to examine this association. The ratio is 0.541 that is 10 times higher than the significance

value of 0.05. Hence, it can be claimed that the years of experience did not affect the FLL.

The proposed hypothesis (H4) is rejected, implying that business experience among

managers/owners of Dubai based SMEs does not have an association with the FLL.
 52

CHAPTER 5: ANALYSIS AND DISCUSSION

This section brings into consideration the pertinent literature and assists in

understanding the similarities and differences in the results of this study as compared to the

literature. Moreover, the section ends with identifying the limitation or weaknesses of this

study.

5.1 Discussion

The results revealed that FLL of the managers/owners of SMEs in Dubai is average,

implying that they have a moderate knowledge level. In Turkey, Yıldırım, Bayram, Oğuz,

and Günay (2017) investigated the employees’ financial literacy and found very low levels of

financial education. On the other hand, Al‐Tamimi (2009) proposed that the UAE investors’

financial literacy is very low. Similarly, Felipe, Ceribeli, and Lana (2017) also claimed that

university students have a very low level of education related to financial concepts. Potrich et

al. (2015) also identified lower levels of financial literacy among Brazilian people.

Considering the evidence, it can be stated that our study results differ from the previous

literature. However, the results of a national study by Nanziri and Leibbrandt (2018) found

similar results to our study, indicating a moderate FLL among the population.

Furthermore, given the effect of soc-demographic attributes, the results indicate that

gender, age, education level, and business years does not have any influence on FLL of

managers/owners of SMEs in Dubai. Similar to these findings, Yıldırım, Bayram, Oğuz, and

Günay (2017) found that age does not have any association with financial literacy. However,

the author claimed that financial education level is associated with adequate financial

decisions. On the other hand, Al‐Tamimi (2009) also stated that age is not related to FLL

while education level has an impact on it. In a similar context, the results of Nanziri and

Leibbrandt (2018) study is opposite to this study results, stating that age, gender, and

education level influence FLL among people. Similarly, Potrich et al. (2015) also identified
 53

that education level influences FLL. These findings suggest that the outcome of our research

is different than the previous literature. This is a novel study in the context of Dubai based

SMEs measuring the FLL. The difference in the results might be due to small sample size of

the study, which was due to the time and resources limitation. Therefore, the results of the

statistical tests might differ when larger sample size is taken. Thus, it is essential to conduct

more studies in this research area and understand the FLL and its association with the socio-

demographic attributes.

Moreover, it has also been highlighted in the literature that the FLL is an imperative

dimension as it affects the performance of the companies. Particularly in SMEs, Eniola and

Entebang (2016) stated that FLL issues can lead to the bankruptcy of the business. Adomako

and Danso (2014) also stated that firm performance can significantly improve with higher

FLLs. Additionally, the author also indicates that resource flexibility also aids financial

performance. In the context of SMEs, Agyei (2018) also identified that high financial

education aid the business owners to benefit from growth opportunities. Hence, literacy

training should be developed for SMEs managers/owners all the evidence highlighted the

significance of financial literacy for managers/owners considerably affect the financial

monetary of the firm.

In the context of Dubai based SMEs, the research is very limited; hence, it is

suggested to find the literacy level among the business managers and owners in Dubai. This

will aid in understanding the effect of literacy level and firm performance. It has been

identified that SMEs in Dubai serves as a backbone of the economy and influence the GDP

growth (Dubai SME, 2019). Therefore, it is important that research should be conducted in

this area to comprehend the significance of financial literacy and its impact on the

productivity of the firm.

 54

CHAPTER 6: CONCLUSION AND RECOMMENDATIONS

6.1 Conclusion

Financial education can be considered an important factor in the construction and

maintenance of an enterprise, since the lack of precariousness of it can encourage the

inappropriate use of resources, leading to early indebtedness and possible bankruptcy of the

enterprise. The study was conducted to explore the FLL of managers/owners of SMEs in

Dubai and inspect the correlation between socio-demographic attributes and FLL. To attain

this aim, the quantitative research methodology was implemented by means of a survey

questionnaire. The questionnaire was given to 120 participants, from which 103 respondents

returned the completed survey. The data was evaluated via descriptive statistics and chi-

square tests along with cross-tabulations. For quantifying the FLL, three different dimensions

were investigated, namely financial behavior, financial attitude, and financial knowledge. The

score from these dimensions is added to quantify the FLL.

Financial knowledge of participants related to basic finance conceptions was

measured with the help of nine questions. Basic finance knowledge is critical for making

reasonable and sensible financial decisions. The present study results showed that most of the

participants have a moderate FLL. Hence, it can be claimed that SMEs managers/owners who

participated in the study have a moderate level of financial knowledge related to basic finance

issues. SMEs owners/managers in Dubai possess the capability to make sensible decisions.

They can make effective decisions but require more knowledge to make the most of the

opportunities present in the market.

The second dimension was measured with the help of five Likert scales and five

choice-based questions. Financial behavior is associated with the decisions and actions

people make considering the well-being of financial matters of their business. The daily

financial decisions affect daily activities and long-term financial stability. The present study
 55

revealed a higher number of participants have a medium level of financial behavior, implying

that the respondents have moderate financial savvy behavior. Therefore, it can be stated that

the behavior of managers/owners of SMEs in Dubai neither very low nor higher, implying

that their decisions sometimes lead to financial stability and sometimes not.

The last dimension is a financial attitude, which refers to the attitude of respondents in

making decisions for long-term financial stability. This construct was measured with the help

of four Likert scale questions investigating their attitude towards decision making for the

future. The participants aiming for long-term goals consider having a financially savvy

attitude. In the present study, most of the subjects have moderate financial literacy attitude,

implying that SMEs managers/owners have a reasonable financial savvy attitude.

Moreover, all the scores of these three dimensions were aggregated to quantify the

FLL. The study results showed that managers/owners of SMEs in Dubai possess a moderate

of FLL. Most of the participants scored moderately on all three constructs of the FLL.

Besides, considering the socio-demographic attributes of the participants. The results

of Chi-square presented no correlation between any of the socio-demographic attributes and

FLLs among the respondents. This implies that the SMEs managers/owners in Dubai do not

have considerable differences in their literacy level due to gender, age, education level, and

business experience.

6.2 Recommendations

Currently, financial knowledge is becoming a basic skill for everyone. To cope with a

dynamic, digital and globalized financial world, everyone must have sufficient financial

knowledge. In particular, SMEs managers/owners must have the necessary financial

knowledge level to get their desired goals and stimulate the progress of their business. The

study findings offer information about FLLs to the entrepreneurs, managers, or owners of

SMEs in Dubai. The study emphasized the significance of financial education for the stability
 56

of the business. The financial literacy improvement process involves several steps that can be

followed. Based on the findings, recommendations can help improve the financial knowledge

of SME managers/ owners, especially in Dubai.

 Organizations and individuals should be supported to develop a basic knowledge base

related to financial issues.

 A structured learning program might be designed by financial advisors including

basic concepts of finance to increase the knowledge of the managers/owners of SMEs.

The educational session should be designed and delivered in a way that business

owners can implement the finance principles in their daily activities. This will ensure

the change in behavior and attitude of the people rather than just reading the concepts.

 To advance financial knowledge level of the general consumer, in particular the

managers/ owners of SMEs, governments, enterprises, and other relevant bodies must

cooperate to develop strategies for financial education, organize and conduct various

seminars and educational programs. Moreover, there is a need to conduct research on

financial knowledge to get feedback and evaluate the effectiveness of these programs.

This helps to make the necessary changes to the plan for improving financial literacy

and makes efforts to effectively implement the necessary changes.

 It is best to include a financial knowledge course as a separate course at all

educational levels (from the first year to university). This can help an individual grow

with the necessary financial skills, behavior, and attitude. This allows them to make

responsible and informed financial decisions and improve their financial situation at a

later age when they are engaged in socio-economic activities, including running their

own business.

 Using social networks and the Internet to promote financial education, counseling,

and seminars can be a good way to think about this. This allows governments, SME
 57

development agencies, and other relevant institutions to increase the financial

knowledge of SME managers/ owners, at least with minimal cost, in a short time.

 The government should develop standard financial literacy measures to reflect a

financial environment. In addition, it is best to establish a standard assessment to

adequately assess individuals ‘financial knowledge to help them succeed in financial

matters.

5.3 Further Research

Future research on financial knowledge is best done at the national level. The mean

can then be used as a criterion for cross-comparison. In addition, it is best to measure

financial knowledge by comparing it with averages in other countries. When conducting a

financial literacy study, include ‘News literacy’ meaning having knowledge of the new

changes in the financial domain. The ability to search for information and understand

financial indicators (news and ratio) is crucial for any financial decision-making process.

Therefore, the ability to follow the news and understand their potential impact on the

financial and economic environment is an important skill. This can help consumers take

advantage of opportunities and minimize threats associated with news. Therefore, in future

studies, it is best to use this opportunity to measure financial knowledge. Moreover, for future

studies, it is suggested to apply the instrument in other types of enterprises and to evaluate in

greater depth the entrepreneur’s/owner’s expectations and his performance as a manager. The

study had its main limitation related to the sample size, restricting the application of

statistical tests that could reveal other findings.

 58

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Appendix

Survey Questionnaire
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AUTHORIZATION OF DIFFUSION DECLARATION

I undersigned
Mr Hazar Khan
Supervisor’s name: Mr Rajeshwar Nalimela
Declare that I have written the thesis in the UBIS MBA program

FINAL THESIS TITLE

FINANCIAL LITERACY LEVEL OF MANAGERS / OWNERS OF SMALL AND

MEDIUM ENTERPRISES IN DUBAI

I, Hazar Khan, declare that this thesis is an original report of my research; has been written

by me and has not been submitted for any previous degree. The research work is entirely my

own work; the cooperative contributions have been indicated clearly and acknowledged. Due

references have been provided on all supporting literatures and resources.

Signature(s) & date