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Manuscript type: Research article Research aims: This study investigates the impact of cognitive ability, money management skills, and cultural norms on the financial literacy of women working in the cottage industry. Design/Methodology/Approach: The study employs a cross-sectional research design. Quantitative data were collected through questionnaires and analysed using Smart-PLS. Research findings: The results revealed that cognitive ability and money management was positively related to financial literacy. There was also substantial evidence to demonstrate the negative effect of cultural norms on financial literacy. Theoretical contribution/Originality: The findings provide empirical evidence on the importance of cognitive ability, money management skills, and cultural norms on financial literacy among women in the cottage industry. Practitioner/Policy implication: The government should emphasises policies that not only provide education, but also training and programmes that would improve cognitive functions. Cultural norms need to be changed in such a way that females being held accountable for financial decisions from an early age. There is a need to recognise, inspire, and empower women in the field of the cottage industry. Research limitation/Implications: This study uses a cross-sectional research design. Future researches can supplement the existing study by conducting studies with longitudinal research design and interviews.
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Asian Journal of Business and Accounting 14(2), 2021 255
Financial Literacy of Women Working in the Cottage Industry
Manuscript type: Research article
Research aims: This study investigates the impact of cognitive ability,
money management skills, and cultural norms on the nancial
literacy of women working in the cottage industry.
Design/Methodology/Approach: The study employs a cross-
sectional research design. Quantitative data were collected through
questionnaires and analysed using Smart-PLS.
Inuence of Cognitive Ability, Money
Management Skills, and Cultural Norms on
the Financial Literacy of Women Working
in the Cottage Industry
Aqsa Fazal, Hadi Hassan Khan*, Bilal Sarwar, Wahab Ahmed,
Noor Muhammad and S.M. Nabeel ul Haq
* Corresponding Author: Hadi Hassan Khan is an Assistant Professor at the Department of
Management Sciences, Faculty of Management Sciences, Balochistan University of Information
Technology Engineering & Management Sciences, Quetta, Balochistan, Pakistan. Email:
Aqsa Fazal is Master of Science Scholar at the Department of Management Sciences, Balochistan
University of Information Technology Engineering & Management Sciences, Quetta,
Balochistan, Pakistan. Email:
Bilal Sarwar is an Assistant Professor at the Department of Management Sciences, Faculty
of Management Sciences Balochistan University of Information Technology Engineering &
Management Sciences, Pakistan. Email:
Wahab Ahmed is a Lecturer at the Department of Management Sciences, Muslimbagh Campus,
Balochistan University of Information Technology Engineering & Management Sciences,
Quetta, Balochistan, Pakistan. Email:
Noor Muhammad is an Associate Professor at the Department of Management Sciences,
Faculty of Management Sciences, Balochistan University of Information Technology
Engineering & Management Sciences, Pakistan. Email:
SM Nabeel ul Haq is an Assistant Professor at the Department of Economics, Faculty of
Management Sciences Balochistan University of Information Technology Engineering &
Management Sciences, Pakistan. Email:
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
256 Asian Journal of Business and Accounting 14(2), 2021
Research ndings: The results revealed that cognitive ability and
money management was positively related to nancial literacy. There
was also substantial evidence to demonstrate the negative effect of
cultural norms on nancial literacy.
Theoretical contribution/Originality: The ndings provide empirical
evidence on the importance of cognitive ability, money management
skills, and cultural norms on nancial literacy among women in the
cottage industry.
Practitioner/Policy implication: The government should emphasises
policies that not only provide education, but also training and pro-
grammes that would improve cognitive functions. Cultural norms
need to be changed in such a way that females being held accountable
for nancial decisions from an early age. There is a need to recognise,
inspire, and empower women in the eld of the cottage industry.
Research limitation/Implications: This study uses a cross-sectional
research design. Future researches can supplement the existing
study by conducting studies with longitudinal research design and
Keywords: Cottage Industry, Cognitive Ability, Culture, Financial
Literacy, Money Management Skills, Sustainability Development
JEL Classication: C83, C88, G53
1. Introduction
Cottage industries are referred to as small scale enterprises that pro-
duce local hand-made products and employ a small number of skilled
workers. Despite being small, cottage industries play an important
role in the economic development of developing countries, as they
provide employment opportunities to the local communities (Aslam,
2013). These establishments help in reducing poverty, since they offer
economic prospects for the poor and middle-income groups (Soriano &
Dobon, 2009). In Pakistan alone, the total number of people employed in
this sector is recorded at 80 per cent of total employment opportunities
to the country’s population (Hasan et al., 2017). Since the cottage
industry is spread across the entire country, it can serve as an agent
for overcoming regional economic disparities and distributing national
income in a more efcient and equitable manner.
Previous literature (Tasneem & Biswas, 2016; Yunis et al., 2019) has
acknowledged the importance of the cottage industry as an instrument
to improve the lives of women. Cottage industry development helps
bring women out of poverty as well as improve their own wellbeing and
Asian Journal of Business and Accounting 14(2), 2021 257
Financial Literacy of Women Working in the Cottage Industry
that of their families (Raziq et al., 2010; Dar et al., 2017). In developing
countries such as Pakistan, women have a signicantly lower labour
participation rate than men in formal employment (Chowbey, 2016).
Thus, it is not surprising that they are predominantly found in the
cottage industry. Despite the importance of cottage industry develop-
ment in reducing the inequalities between genders and improving
sustainable development, some scholars have challenged these ndings.
They argued that cottage industry development is not able to enhance
women’s wellbeing, social status, and incomes due to poor educational
backgrounds with little experience as well as lack of management and
nancial skills (Junejo & Chand, 2008; Mustafa et al., 2016).
Within the literature, nancial literacy has become a signicant
concern of academic research, community groups, individuals, and
governments worldwide (Morgan & Trinh, 2019). Adoption of national
strategies that aim to reduce gender inequalities should focus on nancial
literacy, as these knowledge and skills are critical to an individual when
making decisions, especially in day-to-day activities such as making
a savings decision or investing to achieve a predetermined objective
(Faulkner, 2017). Murendo and Mutsonziwa (2017) evaluated the level of
nancial literacy between genders and found that such knowledge and
skills are higher amongst males compared to females. Similar results
were also recorded in Brazil (Potrich et al., 2015), Hong Kong (Yu et al.,
2015), and India (Rai et al., 2019). Low nancial literacy among women
may hinder them from making responsible nancial decisions, leaving
the cottage industry at a potential disadvantage (Lusardi et al., 2014;
Tasneem & Biswas, 2016). While many studies have empirically shown
the link between nancial literacy and genders, relatively few have
examined the factors that affect nancial literacy. Using the augmented
stochastic life cycle model, Lusardi and Mitchell (2017) found that
nancial literacy among U.S. individuals can be attributed to nancial
knowledge. In another study, Haliassos et al. (2020) argued that nancial
knowledge built through social interactions act as a mediating effect on
nancial literacy. Several studies (Kadoya & Khan, 2020; Gill & Prowse,
2016) have investigated the role of psychology in determining nancial
literacy, and found that condence, trust and anxiety about life in the
future are some of the factors affecting it.
This study expands on the previous empirical works by inves-
tigating the determinants of nancial literacy among women involved in
the cottage industry. To the best of our knowledge, no study has thus
far comprehensively examined the factors affecting nancial literacy in
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
258 Asian Journal of Business and Accounting 14(2), 2021
Pakistan’s cottage industry. As there is a high participation of women
in the cottage industry, it is important to identify how their nancial
literacy could be developed. The extent of their nancial literacy could
somehow affect the development of the cottage industry in future. Given
their exposure to a multitude of uninsured risks and uncertainties, they
are more prone to the adverse affects of poor nancial planning. This
study extends the existing literature (Alkan et al., 2020; Sharif et al., 2020)
by incorporating additional factors, namely, cognitive ability, money
management skills and cultural norms.
The organisation of this paper is as follows. Section 2 discusses the
theoretical dimensions and prior research works which were conducted
in the area. Section 3 explains the methodology while Section 4 reports
the analysis. Section 5 discusses the ndings and Section 6 concludes
the paper.
2. Literature Review and Hypotheses Development
2.1 Financial Literacy
Empirical literature shows that there is no specic denition of nancial
literacy, with certain studies including information on nancial literacy
and others afrming that individuals must have the option to settle
on sound nancial decisions to be nancially literate (Hung et al.,
2009; Huston, 2010). Financial literacy can be described as having two
dimensions: the knowledge of nancial concepts and the skills to use
that knowledge in making sound nancial decisions. Financial literacy
is more than just the convenience of knowing nancial terms; it is an
essential tool that individuals need to survive in today’s modern society
(Jacob et al., 2000). Individuals who are more nancially literate tend
to make fewer mistakes in nancial decisions and can achieve better
nancial conditions (Meier & Sprenger, 2013). Within the context of
small scale businesses, nancial literacy is argued to be important, since
it enriches the owners’ decision-making resources. Financially literate
owners are more capable in nancial planning, ensuring proper sourcing
and chanelling of funds (García-Pérez-de-Lema et al., 2021; Adam et al.,
2017), allowing them to alleviate nancial constraints. For this reason, it
is important to investigate the mechanisms that have to be promoted to
enhance the nancial literacy of the cottage industry’s owners.
Within the existing literature, several studies have attempted to
investigate the determinants of nancial literacy. The majority of them
Asian Journal of Business and Accounting 14(2), 2021 259
Financial Literacy of Women Working in the Cottage Industry
focused on socioeconomic and demographic factors such as gender, age,
income, education and occupation (Hastings et al., 2013; Lusardi et al.,
2010; Van Rooji et al., 2011). With the exception of Kadoya and Khan
(2020) as well as Sharif et al. (2020), very few studies have attempted
to explain nancial literacy from the perspectives of psychology and
behaviour. Thus, while nancial literacy is an important topic, many
countries have difculties in dealing with this issue due to failure in
addressing the salient factors.
In psychological literature, several behavioural theories have sug-
gested the importance of skills in understanding certain concepts and
applying them in daily life. The theory of planned behaviour introduced
by Ajzen (2002) for instance, contends that an individual is able to
perform certain tasks when he/she possesses skills and knowledge as
these would help in building up condence. In nancial management
behaviour, the acquisition of nancial knowledge is considered as
a human capital investment, whereby individuals devote time and
resources to learning in order to increase their stock of human capital;
to gain nancial knowledge, one has to process complex information
(Muñoz-Murillo et al., 2020). Thus, people with higher levels of cognitive
ability skills and money management skills may learn more easily as
well as face fewer hurdles and costs in the production of knowledge.
Their differences may affect the amount of information they can process,
the intensity of that information and the self-condence on the decisions
that they reached (Szumowska & Kossowska, 2017). Besides knowledge
and skills, the impact of culture on economic outcomes has also received
considerable attention in the literature. Culture is not only argued to be
impacting the effectiveness of institutions (Licht et al., 2007; Tabellini,
2008). Yet, it has also been documented as an antecedent towards
economic development (Davis & Abdurazokzoda 2016; Gorodnichenko
& Roland, 2017) and nancial behaviour (Haliassos et al., 2020). Few
studies have attempted to investigate the impact of culture on nancial
literacy. For instance, in Ghana, Agyei (2018) reported culture to have
a negative relationship with nancial literacy. The study found that
more religious SME owners were less nancially literate. Brown et al.
(2018) conducted a comparative study between secondary students
of German and French. Their study concluded that German-speaking
students were more nancially literate as compared to French-speaking
students. This was because German-speaking students were more likely
to receive pocket money at an early stage, and had independent access
to banking services. The impact of culture on nancial literacy has also
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
260 Asian Journal of Business and Accounting 14(2), 2021
been observed using Hofstede’s (2001) cultural dimension. De Beckker
et al. (2020) found that individuals in countries with more uncertainty-
avoiding cultures were more nancially literate. They preferred to take
fewer risks, and thus were more willing to invest in nancial education.
They considered nancial literacy as insurance against unexpected
events. These studies showed that some determinants of nancial
literacy are deeply rooted in a country’s culture.
Based on the existing literature, this study built a framework
suggesting that the nancial literacy of women involved in Pakistan’s
cottage industry is affected by their cognitive abilities, money
management skills and cultural norms. It expands on previous works
by testing the variables in the context of Pakistan. As a low-income
country, the nancial outreach in Pakistan is very limited, whereby more
sophisticated products are typically accessible only to a small percentage
of the population. In this regard, nancial literacy plays a role in the
ability to increasingly access and take-up nancial services. Furthermore,
as a huge percentage of the population is reliant to a much greater extent
on cottage industries for their livelihood, acquiring nancial literacy
is badly needed, compared to the typical wage-earning workers in
developed countries. This issue is becoming signicant in Pakistan as
the majority of people involved in the cottage industry are women, who
are known to have low nancial literacy as compared to men (Potrich
et al., 2015). Majority of the existing studies have explored nancial
responsibilities of women based on data from developed countries such
as Europe or the U.S. where women are already more empowered than
in developing countries. Yet, the effects of culture on nancial literacy
might be even stronger in emerging economies such as Pakistan where
social norms and intra-household roles are relatively strict. Hence, we do
not only provide new evidence in the context of a developing country,
but also complement studies arguing that institutions, social ties and
norms are relevant for individuals’ behaviours and in the acquisition
of nancial knowledge. The theoretical framework and hypotheses
development are discussed in the following subsections.
2.2 Cognitive Ability and Financial Literacy
Piaget (1936) stated that the term cognitive is derived from the word
cognition which means understanding. Cognition is described as gain-
ing, managing and applying information (Wadsworth, 1996). As one of
the areas of human psychology, cognitive terms generally encompass all
Asian Journal of Business and Accounting 14(2), 2021 261
Financial Literacy of Women Working in the Cottage Industry
forms of knowledge, including all mental behaviours that are related to
understanding, caring, giving, speculating, and contemplating manag-
ing information, problem-solving, imagining, predicting, thinking and
Within the behavioural nance literature, cognitive ability is argued
to be a critical element for individuals to make wise nancial decisions
(Agarwal & Mazumder, 2013; Christelis et al., 2010). Individuals with
cognitive abilities are less likely to make nancial mistakes (Gerardi
et al., 2010). New information gained by an individual tends to have
little effect, and would only be effective when the behaviour is under
cognitive control. People with higher cognitive abilities are not only
likely to seek more nancial information, but are able to apply infor-
mation as compared to those with lower levels of cognition (Kahneman
& Tversky, 2013). Lusardi and Mitchell (2007) stated that the ability to
determine and avoid logical mistakes in decision making, the ability to
make intellectual computations involving cognitive evaluation, and the
ability to understand and use numbers are essential skills to become
nancially literate. Based on these arguments, this study postulates the
following hypothesis.
H1: Cognitive ability has a positive impact on nancial literacy.
2.3 Money Management Skills and Financial Literacy
Money management is referred to the process of budgeting, saving,
investing, spending, or managing the cash usage of an individual
(Bamforth et al., 2018). It encompasses a wide range of skills. These skills
include an understanding of computation and record-keeping as well as
budgeting, including how much money one can spend, how to make price
comparisons, awareness of purchasing patterns, and how to use money
to create savings and investments (Browder & Grasso, 1999). Effective
money management behaviours allow individuals to handle and control
their nances. As nancial literacy relates to a person’s competency for
managing money, effective money management skills promote healthier
nancial conduct. People with better money management skills have
been found to make more rational and informed nancial decision
making (Taylor & Wagland, 2011; Xiao, 2008). They have a higher ability
to use knowledge and skills for personal nance management.
Prior studies have demonstrated the positive association between
money management skills and nancial literacy (French & McKillop,
2016; Kotze & Smit, 2008). Beal and Delpachitra (2003) argued that
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
262 Asian Journal of Business and Accounting 14(2), 2021
people who are equipped with money management skills are able to
better handle their nancial resources. They are more likely to think
about savings and retirement planning at the start of a new job, than at a
later stage. They are also able to comprehend how nancial institutions
work, learn to handle their nancial affairs, and are more nancially
accountable. Based on these arguments, this study postulates that:
H2: Money management skills have a positive impact on nancial
2.4 Cultural Norms
Cultural norms could be referred to as the shared expectations, beliefs,
and values that guide a specic ethnic, religious, or social group (Guiso
et al., 2006). Several studies have discussed the impact of culture on
nancial literacy (Vitt, 2009; Gudmunson & Danes, 2011; Falk et al.,
2018). They argued that cultural factors inuence the mind-set of a
population, which may ultimately affect the nancial strategies adopted.
For example, in some cultures, people tend to avoid taking loans to
purchase homes or cars, as they view carrying debt as a negative
nancial practice (Klapper & Lusardi, 2020). In another study, Brown
et al. (2018) reported that students in the German-speaking region were
more likely to access nancial services as they tend to receive pocket
money at an early age, as compared to those in the French-speaking
area. The ndings show that people’s beliefs and habits about money
are embedded in their family socialisation and form their attitudes and
behaviours, which are also related to cultural beliefs.
From studies on the gender gap, it was found that culture inuences
nancial literature through several ways (Rink et al., 2021). First, given
that education plays a role in nancial literacy, a society that promotes
male education relative to female education tends to produce more -
nancially literate men than women. Men could be more nancially savvy
than women in a culture that allows men to have freedom to access mass
media, as well as engage in public and informal discussion on different
nancial services. Second, the impact of culture on nancial literacy is also
demonstrated through its effect on household nancial responsibilities. In
a culture where women have a lower degree of nancial responsibility,
they tend to possess lower levels of nancial knowledge in comparison
to men. Based on these arguments, this study posits that:
H3: Cultural norms have a signicant impact on nancial literacy.
Asian Journal of Business and Accounting 14(2), 2021 263
Financial Literacy of Women Working in the Cottage Industry
Based on the previous literature and developed hypotheses, the follow-
ing framework was developed.
3. Methodology
The research framework developed was tested using a quantitative
survey. The instruments used were adapted from previous studies.
In line with Atkinson and Messy (2012), Lusardi (2003), Lusardi and
Mitchell (2017), this study used two dimensions, namely, nancial
knowledge and nancial skills to measure the nancial literacy construct.
These items measure the extent of individuals’ ability to understand both
basic and advanced nancial concepts as well as their ability to apply
nancial knowledge to manage nancial situations. In this study, the
cognitive ability construct was assessed using 13 items as adapted from
Okello et al. (2016) and Scott (2013). These items were categorised into
two different constructs, namely, declarative cognition and procedural
cognition. To measure money management skills, this study adopted
nine items from Garðarsdóttir and Dittmar (2012). Cultural norms
were measured using eight indicators adapted from Danes et al. (2016).
The seven-point Likert scale, ranging from 1 = strongly disagree to 7 =
strongly agree, were utilised to measure the constructs used in this study.
The sampling frame for this study comprised of women working in
the cottage industry of Balochistan, Pakistan. Balochistan makes up 44
Figure 1: Research Framework
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
264 Asian Journal of Business and Accounting 14(2), 2021
per cent of the total land area of Pakistan. Yet, this province has been
declared to have the highest poverty rate (Iqbal & Nawaz, 2017). Women
in Balochistan are involved in various home-based income generation
activities, with the majority of them having skills in embroidery. They
tend to be marginalised by their culturally rigid society, where women
in this area face severe gender inequality and social-cultural restriction.
The samples included both young adults and middle-aged women,
and were drawn using purposive sampling. They were involved in
various cottage industries such as embroidery, knitting and other handi-
crafts. Illiterate subjects were excluded during the selection process.
A brief introduction related to the main purpose of this survey and its
information utilisation was provided to the potential respondents. They
were assured that the collected information would only be utilised for
academic purposes. Primary data were collected from the respondents
by employing a self-administered questionnaire. The sample size for
the study was 299, which is more than the minimum sample size of 160
respondents calculated from G-power, a power analysis program used
in social and behavioural research for statistical tests (Erdfelder et al.,
1996). The minimal sample size for this investigation was derived by
using the effect size (f2) by 0.1, the chance of type-I (α) error by 0.05, and
the power by 0.99, yielding a sample size of 160 for the three predictors
employed in the model.
Data collected were analysed using partial least square structural
equation modeling (PLS-SEM), which has been widely used in manage-
ment studies and other disciplines (Ringle et al., 2020). Furthermore,
PLS is predictive oriented while other methods are parameter oriented
(Sarstedt et al., 2017), and the present study aims to demonstrate an
interactive model of factors inuencing nancial literacy. Applying
SEM to test the relationships between factors enables all hypothesised
relationships to be thoroughly investigated simultaneously (Byrne, 2013).
4. Results
4.1 Descriptive
Table 1 depicts the respondents’ proles. As indicated by the table,
majority of the respondents were between 18 to 35 years old (82.3%).
Most of them had completed their primary school education (60.2%).
This is not surprising considering that many of the local communities,
particularly women are illiterate (Jabeen et al., 2020). About half of
Asian Journal of Business and Accounting 14(2), 2021 265
Financial Literacy of Women Working in the Cottage Industry
them earned between Rs21000 to Rs30000. More than 80 per cent of the
respondents were single. This shows that the cottage industry serves as a
useful source of income generation for single women.
4.2 Structural Equation Modelling
Structural equation modelling was employed using Smart PLS, with
a two-step approach (Anderson & Gerbing, 1988). This technique was
utilised to decrease the interactional impact of the measurement and
structural model. A measurement model analysis was rst performed
to examine the convergent and discriminant validity of the observed
items and their respective constructs. Following this, a composite
structural model was built. The structural model was used to examine
the relationship between exogenous variables and endogenous variables.
4.2.1 Measurement Model
Since assessing nancial literacy and cognitive ability consists of reec-
tive measurements, this study rst evaluated declarative cognition,
procedural cognition, nancial knowledge and nancial skills as rst
order constructs before assessing them as second order constructs (Hair
et al., 2013). As indicated in Table 2, all items loaded signicantly in
Table 1: Respondents’ Proles
Demographic Categories Frequencies Percentage
Age 18 to 35 246 82.3
36 to 54 53 17.7
Education Primary 180 60.2
Middle 45 15.1
Secondary 05 16.7
Others 24 8.0
Marital Status Single 241 80.6
Married 58 19.4
Income Less than 10000 28 9.4
10000 – 20000 83 27.8
21000 – 30000 147 49.2
31000 or above 41 13.7
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
266 Asian Journal of Business and Accounting 14(2), 2021
Table 2: Reliability and Validity (First Order)
Latent Constructs Factor Loadings Composite Reliability AVE
Declarative Cognition 0.887 0.530
CAD1 0.660
CAD2 0.786
CAD3 0.780
CAD4 0.697
CAD5 0.766
CAD6 0.649
CAD7 0.743
Procedural Cognition 0.941 0.726
CAP1 0.876
CAP2 0.858
CAP3 0.849
CAP4 0.878
CAP5 0.834
CAP6 0.816
Financial Knowledge 0.950 0.612
FLK1 0.803
FLK2 0.761
FLK3 0.801
FLK4 0.810
FLK5 0.744
FLK6 0.789
FLK7 0.752
FLK8 0.759
FLK9 0.737
FLK10 0.795
FLK11 0.812
FLK12 0.820
Financial Skills 0.953 0.669
FS1 0.774
FS2 0.732
FS3 0.878
FS4 0.907
FS5 0.892
FS6 0.859
FS7 0.841
FS9 0.872
FS10 0.705
FS11 0.683
Note: Financial literacy and cognitive ability were measured as 2nd order constructs.
Asian Journal of Business and Accounting 14(2), 2021 267
Financial Literacy of Women Working in the Cottage Industry
the range of 0.649 to 0.907. The results also showed that the composite
reliability and average variance extracted (AVE) were above the
threshold values of 0.5 (Hair et al., 2014). The ndings conrmed that
all constructs were valid and reliable. These items were then tested for
the second-order constructs, and all were found to meet the cutoff points
(factor loadings >0.4; AVE >0.5; composite reliability >0.5). These results
indicate that all the measures used have satised the convergent validity.
Apart from convergent validity, the items were also tested for
discriminant validity using Fornell and Larcker‘s approach (1981)
and heterotrait-monotrait (HTMT) ratio technique. Using Fornell and
Larcker’s (1981) approach, the discriminant validity was examined by
comparing the correlation values between the variables and their square
root of AVE. As shown in Table 4, the square root of AVE values of all
the constructs seemed to be higher than the correlation values, indicating
that discriminant validity was achieved. Similarly, as indicated in Table
5, the HTMT values for all the constructs appeared to be below 0.9,
indicating adequate discriminant validity (Henseler et al., 2015).
Table 3: Reliability and Validity (Second Order)
Latent Constructs Factor Loadings Composite Reliability AVE
Cognitive Ability 0.932 0.873
CAD 0.911
CAP 0.957
Cultural Norms 0.912 0.635
CN1 0.781
CN3 0.741
CN4 0.834
CN5 0.851
CN7 0.714
CN8 0.850
Financial Literacy 0.791 0.654
Financial Knowledge 0.793
Financial Skills 0.825
Money Management 0.912 0.599
MM1 0.822
MM2 0.709
MM3 0.780
MM4 0.804
MM7 0.717
MM8 0.782
MM9 0.797
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
268 Asian Journal of Business and Accounting 14(2), 2021
4.2.2 Assessment of Structural Model
Assuming that all the constructs used are valid and reliable, a structural
model was constructed to test the hypotheses. In line with Hair et al.
(2019), a 5,000 resample of bootstrapping procedure was performed to
test the hypotheses and developed model. Table 6 and Figure 2 depict
the results. As highlighted by Table 6 and Figure 2, the effect of cognitive
ability on nancial literacy was signicant (β = 0.168, t = 3.689, p <
0.000). Therefore, H1 was supported. The ndings also demonstrated
substantial evidence on the relationship between money management
skills = 0.276, t = 5.040, p < 0.000) and nancial literacy, providing
Table 4: Discriminant Validity using Fornell and Larcker’s Approach
Constructs 1 2 3 4
Cognitive Ability (1) 0.934
Cultural Norms (2) -0.001 0.797
Financial Literacy (3) 0.154 -0.232 0.809
Money Management Skills (4) 0.049 -0.105 0.289 0.774
Note: The diagonal elements represent the square roots of AVE values.
Table 5: Discriminant Validity using HTMT’s Approach
Constructs 1 2 3 4
Cognitive Ability (1)
Cultural Norms (2) 0.040
Financial Literacy (3) 0.238 0.355
Money Management Skills (4) 0.058 0.120 0.435
Table 6: Structural Model
Hypotheses and β Standard t-value p-value Decision
Paths Errors
H1: CA → FL 0.168*** 0.045 3.689 0.000 Supported
H2: MMS → FL 0.276*** 0.054 5.040 0.000 Supported
H3: CN → FL -0.203*** 0.055 3.80 0.000 Supported
Asian Journal of Business and Accounting 14(2), 2021 269
Financial Literacy of Women Working in the Cottage Industry
support for H2. In this study, cultural norms were found to have a
negative effect on nancial literacy (β = -0.203, t = 3.80, p < 0.000). Thus,
H3 was supported.
For the assessment of the PLS structural model, Chin (2010)
suggested researchers to consider the value of R2. For the present study,
the value of R2 was at 0.153 (Table 7), suggesting that cognitive ability,
money management skills, and cultural norms explain 15 per cent of the
nancial literacy variance. In line with Hair et al. (2013), this study also
employed a cross-validated redundancy test (Q2) to assess the predictive
validity of the model. As stated by Henseler et al. (2009), the research
Figure 2: Structural Model Assessment
Table 7: In-Sample Prediction Criterion
R2 Adjusted R2 Q2
Financial Literacy 0.153 0.144 0.253
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
270 Asian Journal of Business and Accounting 14(2), 2021
model is deemed to have a predictive relevance in research when the
value of Q2 is greater than zero. As depicted in Table 7, the Q2 value was
0.253, indicating that the model has predictive relevance.
5. Discussion
This study has investigated the relationship between cognitive ability,
money management skills, cultural norms and nancial literacy. The
results highlighted the important roles played by cognitive ability,
money management skills and cultural norms in promoting nancial
literacy among women in Pakistan’s cottage industry.
Respondents in this study viewed cognitive ability as an important
determinant for them to enhance their nancial literacy. This nding
is expected since nancial decisions involve complex consideration
and have both short and long-term impact on individuals. With
new nancial products and services rapidly being introduced to
markets, individuals, specically women may face difculties in pro-
cessing the amount of information. At a basic level, they need to
possess simple knowledge about interest rate calculation and interest
compounding to manage their loans and debts (Lusardi, 2012). They
are also required to make an assessment of the probabilities, timing
and costs of uncertainties to make sound nancial decisions. Thus,
women who develop higher cognitive abilities tend to have a greater
capacity to absorb the knowledge and skills acquired. Cognitive ability
helps women to achieve the full benets of nancial training provided
(Lusardi & Mitchell, 2017). This nding corroborates with previous
works conducted by Agarwal and Mazumder (2013), Christelis et al.
(2010), as well as Cole and Shastry (2009).
This study found that money management skills possessed by
women involved in the cottage industry inuenced their nancial
literacy. Women with money management skills were more likely
to engage in rational and informed decision-making. They tended to
invest, save and spend their earnings wisely. Those who were equipped
with money management skills were more likely to keep record of all
revenues and expenditures regularly, thus helping them curb irrational
purchases and manage their nance prudently. In this study, majority of
the respondents were single women and they were expected to manage
their own nances. Thus, they could see the importance of acquiring
money management skills in order to manage not only their household
nancial issues, but their small handcraft businesses. These results are
Asian Journal of Business and Accounting 14(2), 2021 271
Financial Literacy of Women Working in the Cottage Industry
consistent with the ndings of French and McKillop (2016) as well as
Kotze and Smit (2008).
As expected, cultural norms were found to negatively affect the
nancial literacy of women involved in the cottage industry. This nding
could be due to the contextual setting. Varghese (2012) stated that
Pakistan practices a patriarchal dominated social structure, which does
not give the right to women to make decisions at any position or level.
In this culture, women are less engaged in nancial-decision making
within the household, and thus, there is less motivation to equip them
with nancial knowledge as society may not see the use in acquiring
this specic knowledge (Lusardi et al., 2014). In fact, boys learn that men
have a strong intra-household standing since early childhood. Therefore,
they are more likely to obtain nancial information and take steps to
achieve greater control of nancial resources.
6. Conclusion, Implications and Limitations
The literature indicates that certain demographic factors inuence the
level of nancial literacy in people. This study has expanded on the
existing literature by providing empirical evidence about the importance
of other attributes such as cognitive ability, money management skills,
and cultural norms in promoting nancial literacy among women.
Unlike previous studies, the present research focused on women
engaged in the cottage industry. In less developed economies such
as Pakistan, employment opportunities among females are limited.
Being a society that practices a patriarchal social structure, women are
not encouraged to work outside their homes. They are more involved
in smaller or cottage industry trades such as carpet weaving and
handicrafts. Thus, their participation in this industry is seen as a means
to reduce the poverty levels in the country. As such, it is very important
to provide them with necessary nancial literacy. Low levels of nancial
literacy may increase their vulnerability to poverty, due to the limited
ability to seek and use appropriate nancial resources. Hence, the
present study shall add to current literature on nancial literacy and
offer a unique perspective in this area. The ndings of this study would
also provide valuable data to support other researchers in this area.
Three main policy implications can thus be derived from our
empirical ndings. Firstly, cognitive ability is a relevant determinant to
mitigate the nancial literacy gender gap in Pakistan. Policies should
therefore focus not only providing education, but also training and
A. Fazal, H.H. Khan, B. Sarwar, W. Ahmed, N. Muhammad and S.M.N. ul Haq
272 Asian Journal of Business and Accounting 14(2), 2021
programmes that would improve cognitive function. They may also
need to design public information campaigns that are comprehensive,
digestible and easy to follow through. A simplied plan selection
process which is easier and concrete with accessible information would
help them in absorbing and applying the nancial knowledge gained.
Secondly, investment in expanding access to mass media could also
enhance women’s money management skills. It is imperative for the
government to provide nancial education through effective channels
for women. Thirdly, cultural norms need to be changed in such a way
that females anticipate being held accountable for nancial decisions
from an early age. There is a need to recognise, inspire, and empower
women in the cottage industry eld. The current study argues that more
workshops and seminars at regional and national levels need to be
used to raise awareness of the importance of the cottage industry, and
to develop the different skills needed by women workers in the cottage
industry. Regardless of caste, religion, and creed or other deliberations,
the government need to empower women in the cottage industry.
There are some limitations of this study which must be noted. First,
the study was conducted by focusing only on the females working in the
cottage industry of Quetta which denotes a micro-level demonstration of
population. Second, this research only investigated the impact of cogn-
tive ability, money management skills, and cultural norms on nancial
literacy. Further research can be done by taking other constructs such as
environmental and religious inuences. More in-depth research using
qualitative methods can also be carried out to gain rich insights.
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This paper examines the effect of national culture on adult financial literacy levels in 12 countries. Contrary to earlier financial literacy studies, our results are directly comparable across countries given that we use the standardized OECD/INFE financial literacy survey data and Hofstede's (2001) cultural dimensions to capture financial literacy and national culture. In line with the financial socialization theory, we find that uncertainty avoidance positively influences financial literacy, while individualism negatively influences financial literacy. We conclude that national culture affects financial literacy and that it is important to account for cultural dimensions in future international financial literacy research. This article is protected by copyright. All rights reserved.
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Article History Keywords Financial literacy Undergraduate student Socio-demographic factors Questionnaire Categorical data analysis Ordered logistic regression Ordered probit regression Atatürk University Turkey. JEL Classification: C10; C25; G53; I22. Financial literacy is a factor that has a significant effect on financial development, stabilization and the economy. This study determined the factors affecting the financial literacy levels of formal and secondary education undergraduate students at Atatürk University. The study population was formal and secondary education undergraduate students at Atatürk University. A questionnaire was sent to 1,008 students who agreed to participate in the survey in the last quarter of 2018. In the study, factors affecting the financial literacy levels of undergraduate students were determined by ordered logistic regression and ordered probit regression analysis. The ordered logistic regression model was the best according to model comparison criteria. According to the results of this model, age, class, basic science field, gender, marital status, monthly personal income, watching eco-finance news status, and economic knowledge variables were found to be factors that affected financial literacy levels. In the study, it was determined that the financial literacy levels of women, those under 25 years old, university students in science, in the fourth year and above, having a monthly personal income of ₺1251 and below, single, not watching economic and financial news and with lower economic literacy were low. This study emphasizes the need to target these groups. These groups' financial literacy levels need to be improved.
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In Pakistan, as in other developing countries, rural women make ample contributions to the economy through vital productive and reproductive roles. This study aimed to evaluate the impact of women's traditional economic activities that supplement their household economy directly through earning income and indirectly through savings expenditure and to assess the factors that influence their productivity performance. For this purpose, six rural areas from Khyber, which is located in the Pukhtoonkhwah province, were chosen to represent the south, north, and the central plain regions. About 480 women responded out of 600, which were selected using a snowball sampling technique from the entire three regions. The data was collected by conducting face-to-face interviews and focus group discussions (FGDs). About 68.33% respondents were illiterate, 47.71% were 31 to 40 years old, and 47.92% lived in a joint family system. Due to the strict Purdah (veil) culture, about 71.88% of the women's economic activities were confined indoors, such as stitching; embroidery; basket and candle making; preparing pickles, jams, and squash; dairy products; apiculture; sericulture; livestock; poultry; nursery raising; and some agriculture-related off-farm activities. It was reported that the major decisions in the household are made by the male members due to the strong patriarchal norms and values. Development projects by the NGOs and the government have played a significant role to provide credit, training, and awareness that has arisen specifically in the north and the south regions. All of the women were aware of the positive effects of economic independence, but some of them also revealed the negative effects on their physical and psychological health as well as the social ties within the households and communities due to the extensive workload and time issues. The study concluded that many demographic social, cultural, religious, and economic factors negatively influence the women's productive potential.
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This research aimed to examine the impact of gender on the mechanism that translates family financial socialisation to financial literacy and behaviour among Malaysian young adults and also to examine the role of financial information-seeking behaviour and its antecedents in this mechanism. A cross-sectional survey was undertaken. A total of 572 young Malaysian adults from four major universities participated in the study. The results revealed that both parents’ teaching and behaviour directly inform young adults’ financial behaviour. However, among females, parents’ teaching through planned behaviour drove their financial information-seeking behaviour, which in turn informed their financial literacy. Contrary to popular notions, financial literacy had no influence on financial behaviour. Moreover, a negative relationship between parental teaching and financial literacy among males was found.
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Financial literacy is an ability of individual to take considerable decisions in respect of the effective and efficient utilization of money. In present study, authors have presented an association of financial knowledge, financial behaviour and financial attitude towards the financial literacy level among working women in Delhi, India. The sample size of 394 working women from various public and private organizations of Delhi has been incorporated for the research. A structured questionnaire designed on a 5-point Likert scale has been used based on purposive sampling, and the goodness of fit is determined by analysis of moments structures (AMOS) by applying structural equation modeling approach (SEM). The association between three independent variables is investigated applying path analysis for hypothesis testing. The findings revealed that financial attitude and financial behaviour have strong association with financial literacy of working women than financial knowledge.
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Our paper extends the literature on the determinants and impacts of financial literacy by conducting the OECD/INFE survey in two relatively low-income Asian economies—Cambodia and Viet Nam—and analyzing the determinants of financial literacy and the effects of financial literacy on savings and financial inclusion. Generally, our study corroborates the findings of studies of other countries, but uncovers some differences as well. The main determinants of financial literacy are found to be educational level, income, age, and occupational status. Both financial literacy and general education levels are found to be positively and significantly related to savings behavior and financial inclusion, and these results generally hold even when correcting for possible endogeneity of financial literacy.
This paper empirically investigates the role of culture in explaining the frequently reported differences in financial literacy between women and men. Using nationally representative survey data from India, we find that women are significantly less financially literate than men. This gender gap is not observable, however, when we only consider matrilineal states. Moreover, matrilineal women are more financially knowledgeable than patriarchal women. Using the Blinder-Oaxaca decomposition method, we find that education, English language skills and the use of different information sources, such as newspapers and TV, are key transmission channels in explaining differences in financial knowledge between men and women in patriarchal states, and between patriarchal and matrilineal societies.
Drawing on human capital and upper echelons theories, this study analyses how CEO's financial literacy influences a firm's technological innovation and investigates the mediating role of alleviating financial constraints of Small and Medium-sized Enterprises (SMEs) in the former relationship. We develop and test hypotheses applying a Structural Equation Model to a sample of 310 Spanish SMEs. The results show that CEO's financial literacy exerts both a direct and an indirect impact, through alleviating financial constraints, on a firm's technological innovation.
Financial literacy research focuses on why, how, and when people acquire financial knowledge, shape their financial attitudes, and adapt their financial behaviors. The literature demonstrates that some demographic characteristics highly correlate with financial literacy. However, demographic factors often mask the ultimate determinants of financial literacy acquisition such as risk aversion, time preferences, cognitive and behavioral biases, personality traits, cognitive and non-cognitive abilities, among others. Theory suggests that cognitive ability is one of the fundamental factors in explaining financial literacy. We offer experimental evidence supporting the key role of cognitive ability in financial literacy acquisition. Our experimental setting allows us to (a) overcome particular limitations of the traditional multiple-choice questions survey designs, (b) provide compatible incentives to make participants exert an appropriate level of effort to solve the assigned tasks, and (c) use a well-known measure of cognitive abilities. We find that individuals with higher cognitive abilities are more financially literate. Our main result holds even after controlling for some of the main confounding factors identified in the literature. In contrast to previous studies, we find no role for gender in explaining financial literacy once we control for cognitive abilities.
We measure financial literacy using questions assessing basic knowledge of four fundamental concepts in financial decision making: knowledge of interest rates, interest compounding, inflation, and risk diversification. Worldwide, just one in three adults are financially literate—that is, they know at least three out of the four financial concepts. Women, poor adults, and lower educated respondents are more likely to suffer from gaps in financial knowledge. This is true not only in developing countries but also in countries with well‐developed financial markets. Relatively low financial literacy levels exacerbate consumer and financial market risks as increasingly complex financial instruments enter the market. Credit products, many of which carry high interest rates and complex terms and conditions, are becoming more readily available. Yet only around half of adults in major emerging countries who use a credit card or borrow from a financial institution are financially literate. We discuss policies to protect borrowers against risks and encourage account holders to save.