Financial Literacy as a Barrier to Entrepreneurial Ambitions? Students from Disadvantaged Backgrounds

The UK Government has set out its ambitions to increase the level of financial literacy through training within the UK (Money and Pensions Service, 2020; Roberts, 2023), but there is mixed evidence of its success (APPG, 2023). International evidence suggests that those from disadvantaged groups may also be left behind (Angrisani et al., 2020; Artavanis and Karra, 2021), , even when considering a sub-sample of educationally more successful young people that are studying at university (Leone and Thompson, 2023).

The consequences of this could be important in terms of alleviating wider deprivation as financial literacy is associated with engagement with entrepreneurship (Riepe et al., 2022) and better performance where enterprises are started (Hasan et al., 2022). Entrepreneurship has been perceived as one way of alleviating deprivation, but existing support has been less successful in assisting those from disadvantaged groups (Blackburn and Ram, 2006). At this particular moment in time high rates of inflation leading to rising costs make financial literacy all the more important for the enterprises started by disadvantaged groups which are often more marginal in the first place (Carter et al., 2015).

Building on the work of studies such as Leone and Thompson (2023) the research will seek to further explain the lower financial literacy of those from disadvantaged groups, but also the consequences for the entrepreneurial aspirations of these groups. In gaining more insight into both the relationship of lower financial literacy with entrepreneurial aspirations, but also the causes of this lower financial literacy, more effective interventions can be devised to boost financial literacy in a manner that boosts entrepreneurship. The focus will be on those from disadvantaged groups who are more highly educated and are studying on university courses, representing an underexploited pool of entrepreneurial potential (van der Sluis, 2008).

In order to undertake the research, it is envisaged that the project would build from the ‘Student Financial Literacy: Skills and Awareness’ survey conducted at Nottingham Trent University and De Montfort University (Leone and Thompson, 2023), but incorporating insights from models of entrepreneurial motivation and aspiration pertinent to deprived areas (Zhao and Thompson, 2023). This will allow statistical analysis of the relationships between the perceptions held, advice sought, financial literacy skills developed, and entrepreneurial motivation/aspirations to be explored, using approaches such as regression analysis or structural equation models (SEMs).

References

Angrisani, M. Barrera, S. Blanco, L. R. and Contreras, S. (2020) ‘The racial/ethnic gap in financial literacy in the population and by income’, Contemporary Economic Policy, 39 (3), 524-536.

APPG (2023) Building Beyond Barriers – A Roadmap for Enhancing Financial Education in Schools, London: All Party Parliamentary Group on Financial Education for Young People.

Artavanis, N. and Karra, S. (2021) ‘Financial literacy and student debt’, in J. O. S. Wilson, A. Panos and C. Adcock (eds.), Financial Literacy and Responsible Finance in the FinTech Era, Abingdon: Routledge, pp. 382-401.

Blackburn, R. and Ram, M. (2006) ‘Fix or fixation? The contributions and limitations of entrepreneurship and small firms to combating social exclusion’, Entrepreneurship and Regional Development, 18 (1), 73-89.

Carter, S. Mwaura, S. Ram, M. Trehan, K. and Jones, T. (2015) ‘Barriers to ethnic minority and women’s enterprise: existing evidence, policy tensions and unsettled questions’, International Small Business Journal, 33 (1), 49-69.

Hasan, R. Ashfaq, M. Parveen, T. and Gunardi, A. (2022) ‘Financial inclusion – does digital financial literacy matter for women entrepreneurs?’, International Journal of Social Economics, 50 (8), 1085-1104.

Leone, V. and Thompson, P. (2023) ‘Financial literacy and advice perceptions among UK higher education students: an ethnicity tale?’, Review of Economics of the Household. Doi: 10.1007/s11150-023-09667-5.

Money and Pensions Service (2020) The UK Strategy for Financial Wellbeing, London: Money and Pensions Service.
Riepe, J. Rudeloff, M. and Veer, T. (2022) ‘Financial literacy and entrepreneurial risk aversion’, Journal of Small Business Management, 60 (2), 289-308.

Roberts, N. (2023) Financial and Enterprise Education in Schools, London: House of Commons Library.
van der Sluis, J. van Praag, M. and Vijverberg, W. (2008) ‚Education and entrepreneurship selection and performance: a review of the empirical literature’, Journal of Economic Surveys, 22 (5), 795-841.

Zhao, Y. and Thompson, P. (2023) ‘Time effect and shifted motivations in deprived areas: an overall perspective of entrepreneurial process’, International Journal of Entrepreneurial Behaviour and Research. doi: 10.1108/IJEBR-04-2022-0381.

Entrants must have subject expertise in at least one of the following: economics; finance; entrepreneurship.

This is a self-funded PhD project for UK applicants.