Financial Literacy and Financial Management in Mineral-Mining Small and Medium-Sized Enterprises of Balochistan, Pakistan

Abstract

Small and medium-scale enterprises (SMEs) in the mineral mining sector in Balochistan are deployed in a financially constrained environment where capital intensity, low cash flow, commodity price fluctuations, regulatory requirements, and lack of managerial specialization expose the SMEs to financial constraints. In this study, the researchers investigate whether SME owner/managers’ financial literacy improves financial management in this regard. The concept of financial literacy is regarded as a multi-dimensional managerial competence of financial knowledge, financial attitude, financial skills, and financial behaviour, and financial management refers to budgeting, liquidity management, investment appraisal, financial planning, financial risk management, capital decision, and financial control. The experimental design that was adopted was positivist, cross-sectional quantitative design. A structured questionnaire was used to collect data from the 83 owners, owner-managers, managers, and financial managers of mineral-mining SMEs in Balochistan, which were analysed in SPSS software. The reliability was acceptable for all constructs, with a Kaiser-Meyer-Olkin statistic of .953, which is considered to have good sampling adequacy. The multiple regression model was statistically significant with a value of F(4,75)=93.344, p<.001(83.3% variance explained; adjusted R²=.824) for financial management. Financial skills were the strongest predictor (β=.397, p<.001), followed by financial attitude (β=.227, p=.001) and financial behaviour (β=.222, p=.006). The financial knowledge variable had a positive correlation with the dependent variable, but this correlation was insignificant at the 5% level (β=.178, p=.053). The results reveal that financial capability which goes beyond knowledge but applied is the key to good financial management in mining SMEs.

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