Does self-control moderate financial literacy and savings behavior relationship? A case of micro and small enterprise owners

Abstract

It is vital to understand Saving Behavior at an individual level, since an individual member of society initiates capital accumulation / mobilization. Micro and Small Enterprises (MSEs) have been provided credit facilities solely as a source of financing for a long time, but there has been increasing concern lately that MSEs require not only credit but also savings that have risen to the top of the financial services for this market. Micro and small business owners, however, often struggle to save, even if they have surpluses. This is attributed to the lack of incorporation of cognitive factors, financial indiscipline and lack of vision. This study examines the moderating effect of self-control on the relationship between financial literacy and saving behavior using cross-sectional data from 395 micro and small business owners in Kampala, Uganda.The study used a quantitative, positivist research approach. Process macro was used as a statistical tool for analyzing the data gathered using a questionnaire. The study was guided by the social cognitive theory. Results indicate that both financial literacy and self-control significantly predict saving behavior. Besides, the relationship between financial literacy and saving behavior is moderated by self-control. Furthermore, the findings suggest that individuals with low self-control require a lot of financial literacy in order to have a positive effect on their savings behavior relative to those with high self-control because even though they go through financial literacy training, its effect on savings behavior would be negligible. This means that first evaluation of their self-control levels is required before individuals are taken for financial literacy training. Therefore it is advised to determine the self-control of an individual before they are taken for training in financial literacy.