'Entrepreneurship' and 'Financial Literacy' are interconnected, but is financial literacy required for an entrepreneur? Is it possible to manage a business effectively and efficiently without having a basic knowledge of finance? The logical response would be that one may manage a business without even having any business knowledge, but some financial understanding helps an entrepreneur to be effective not only in managing a business but also in her personal finance. There is evidence that financially savvy entrepreneurs are more likely to plan better for their business ventures as well as retirement saving patterns. Without financial planning entrepreneurs often face capital deficiency and create obstacles as they do not set aside sufficient cash savings to meet immediate needs. Moreover, they are often unaware about the new policies and loan schemes provided by banks to promote entrepreneurship on a large scale.
When people have low financial literacy, they cannot manage and gather capital efficiently. To explore further the correlation between entrepreneurship and financial literacy, a primary survey data has been used for various analyses to get a glimpse of Bangladeshi entrepreneurs' thought processes. An independent primary study has been conducted by the Research and Professional Development Center (RPDC) of BRAC Business School, where 40 surveyors were employed across Bangladesh in 8 different districts, revealing insights about the Financial Literacy and Financial Access of Bangladesh. A total of 3121 responses were collected through random sampling technique and among them 1241 respondents were entrepreneurs.
Figure 1: Entrepreneur's Bank Account Accessibility
An entrepreneur should always separate their personal and business capital through a bank account. Tracking cash flow and managing budget would be easier this way. For instance, a current account just does not save an entrepreneur from hiccups by keeping track of vendors and customers; rather, it is more like an easy medium for regular business activities. However, from our primary survey, we found that in Bangladeshi prospective entrepreneurs' banking activity is quite scarce. They are either unaware or uninterested in lucrative deals and offers available to small and medium scale entrepreneurs.
In figure 1, it is visible that the difference is quite huge among male and female entrepreneurs in terms of banking activity. Over 64 per cent of surveyed males have access to bank account while only about 55 per cent of females have the same. Policy reformation or framework will not be advantageous if entrepreneurs do not have the minimum knowledge about financial access or activities.
Figure 2: Entrepreneur's Online Banking Vs Mobile Wallet usage
In today's digital age, banking is not as backward as it used to be in past as the mobile banking and internet banking facilities makes banking experience easier. In this regard, BB report shows that entrepreneurs are tending to use mobile wallets such as Bkash or Nagad more than internet banking. This is because regular transactions are much more convenient over mobile wallet services. Through mobile wallets, people can avail a lot of financial services at convenience through an application.
Furthermore, during an online Women Entrepreneurship Programme 'Venture Maestras' (September 18,2021- January 19, 2022) by Research and Professional Development Centre, BRAC Business School, a session has been taken to train around 30 participants on the Bank Lending Process. There many entrepreneurs expressed that they were so unaware of the facilities banks are giving to entrepreneurs as now they visit bank less often as mobile wallet made life easier now. And also, many banks online banking functions are not easier in practice.
Figure 3: Entrepreneur's Money Saving Method
There is a saying that 'Little drops make the mighty ocean'. We all save some amount of money little by little when we can. Most entrepreneurs start their own business with their savings and create a big empire. Some people deposit at the bank, some at Mobile wallet while others save at home. In our survey, we found that nearly half of the entrepreneurs save money at home, especially large portion of male entrepreneurs, which is quite shocking. A female entrepreneur making baby food mentioned during Venture Maestras training session on Financial Management that she did not think about saving money from her hard-earned profit until she attended that session on Finance. That session made them think about budgeting and saving for the future, no matter what the amount is. Due to inexplicit ideas about saving many people do not have a proper retirement plan or investment plan. If entrepreneurs start saving some money in a bank or investing in any bank's scheme, then the money will not only give them a greater return but also will help the economy alongside.
When an entrepreneur is financially literate to some extent, it creates an easy path of success comparatively than those who are lacking. These two combinations are the key that help an individual to run the business sustainably. Starting a business is very easy. One just needs some capital and some courage. However, to sustain the business proficiently in the long run through hurdles is the main challenge for an entrepreneur. While the ongoing onslaught of COVID 19 has made this goal of entrepreneurial success just a bit harder to attain, the basics remain the same-- innovation, bravery and just a pinch of knowledge in the relevant areas.
Disclaimer:The article belongs to Research and Professional Development Center (RPDC)- BRAC Business School and the detail version of this article can be found in RPDC's website.
nafisa.ali@bracu.ac.bd