Financial Literacy and Access of Microfinance among Small Scale Fisheries Entrepreneurs
Abstract
Financial literacy is a key factor in improving access to microfinance by small-scale fisheries entrepreneurs. Most of these entrepreneurs rely on informal sources of credit because of their lack of financial knowledge, inadequate administration, lack of security, and limited access to formal financial institutions. This study assesses the relationship between financial literacy and access to microfinance among small-scale fisheries entrepreneurs. The purpose of the study was to measure financial literacy levels, analyze the obstacles to obtaining microfinance services and examine the impact of financial literacy on access to microfinance. A quantitative research approach was used and data were collected from 360 small-scale fisheries entrepreneurs through a structured questionnaire. Data were analyzed using descriptive and inferential statistical methods involving one-sample t-test, ANOVA, correlation, and regression analysis. Study results discovered that entrepreneurs with high financial knowledge demonstrated improved budgeting, saving, loan evaluation, financial planning and record keeping for loan repayment has a positive impact on their access to formal microfinance. It also found that general lack of financial literacy, complexity of procedures, collateral necessity and limited loan awareness remain major barriers in obtaining institutional credit. Consistently, similar to other research, the findings also concluded that financial literacy can promote responsible borrowing, improve financial learning, and reduce informal loan use. Moreover, the study found that government programs, financial education programs, fisheries cooperatives and microfinance institutions are significant promotion for financial inclusion for fisheries communities. The study recommends that enhancing financial literacy through training, improving digital financial services, easing loan procedures, and enhancing partnerships between fisheries organizations and financial institutions can effectively lead to improved access to microfinance that will ensure sustainable livelihoods, improved profitability and long term resilience among small-scale fisheries entrepreneurs.
Keywords
Download Options
Introduction
1.1 Background
Small-scale fisheries are critical ecological areas that support livelihoods and promote economic development. These entrepreneurs significantly support their communities by providing food security and generating income through capturing, processing, selling, and catching activities. However, despite their overall positive contribution to the economy, small-scale fisheries entrepreneurs face several financial constraints, including low levels of saving, limited access to alternative financial services, and restricted access to formal credit institutions.
Financial literacy is an essential aspect of financial management that empowers individuals with the necessary knowledge to make informed financial decisions and promote business growth. Microfinance institutions offer various financial services to entrepreneurial individuals and organizations while helping them overcome some of the financial barriers they encounter.
Conclusion
This study concludes that financial literacy plays a vital role in improving access to microfinance among small-scale fisheries entrepreneurs. Entrepreneurs who have a better understanding of financial concepts are more confident in managing their income, budgeting, saving, borrowing, investing, and repaying loans. As a result, they are more likely to access formal microfinance services, maintain accurate financial records, and use credit effectively to expand fisheries-related activities such as fish production, processing, and marketing.
The correlation analysis confirmed a significant positive relationship between financial literacy and access to microfinance (r = 0.684, p < 0.01). The SEM analysis further revealed that access to microfinance and financial management partially mediate the relationship between financial literacy and business income growth. On the other hand, limited financial knowledge, low awareness of available financial products, complicated loan procedures, and inadequate institutional support continue to prevent many entrepreneurs from obtaining the financial assistance they need.
The findings emphasize the importance of support from governments, financial institutions, fisheries cooperatives, and development organizations in promoting financial inclusion. Providing financial education, simplifying loan procedures, and ensuring the availability of affordable financial services can significantly improve access to microfinance. Strengthening financial literacy helps entrepreneurs make better financial decisions, reduces their dependence on informal lenders, and improves the long-term sustainability of their businesses.
References
[1] Atkinson, A., & Messy, F.-A. (2012). Measuring financial literacy: Results of the OECD/International Network on Financial Education (INFE) pilot study. OECD Publishing. https://doi.org/10.1787/5k9csfs90fr4-en
[2] Food and Agriculture Organization of the United Nations. (2022). The state of world fisheries and aquaculture 2022: Towards blue transformation. FAO. https://doi.org/10.4060/cc0461en
[3] Ledgerwood, J. (2013). The new microfinance handbook: A financial market system perspective. World Bank. https://doi.org/10.1596/978-0-8213-8927-0
[4] Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, *52*(1), 5-44. https://doi.org/10.1257/jel.52.1.5
[5] Organisation for Economic Co-operation and Development. (2020). OECD/INFE 2020 International Survey of Adult Financial Literacy. OECD Publishing. https://www.oecd.org/financial/education/launchoftheoecdinfeglobalfinancialliteracysurveyreport.htm
[6] World Bank. (2022). World development report 2022: Finance for an equitable recovery. World Bank. https://doi.org/10.1596/978-1-4648-1897-4.