FINANCIAL MANAGEMENT IN WOMEN OWNED BUSINESS ENTERPRISES IN MANIPUR (A CASE STUDY OF IMPHAL WEST AND THOUBAL DISTRICTS)

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1 FINANCIAL MANAGEMENT IN WOMEN OWNED BUSINESS ENTERPRISES IN MANIPUR (A CASE STUDY OF IMPHAL WEST AND THOUBAL DISTRICTS) L. BIMOLATA DEVI L. BIMOLATA DEVI, RESEARCH SCHOLAR, DEPTT. OF ECONOMICS, MANIPUR UNIVERSITY. ABSTRACT This paper is an attempt to study the financial management of women owned enterprises by collecting a sample of 400 women entrepreneurs from 5 different units viz, Embroidery, Tailoring, Jewellery, Beauty Parlour and Kids Care Centre in Imphal West and Thoubal district of Manipur. The stratified random sampling and the questionnaire cum interview methods were adopted to collect the data. The main objective of the present study are to identify the source of finance, to study the nature of investment and its decision, and to study whether they follow proper planning of finance. KEYWORDS: Enterprise, Entrepreneurs, Finance, Management Introduction: Finance is a very powerful developmental instrument which improves the functioning of the productive channels of an enterprise and stimulates their smooth operation. Every kind of problem faced by an entrepreneur, in its ultimate analysis, turns out to be a problem of finance (Panda, 2003). So, it is the prime requisite for an entrepreneur to raise finance up to an optimum level so as to enable to kicks off and run an enterprise efficiently and effectively. As a matter of fact, entrepreneurs tend to hold or need more wealth than wage-labourers. In American context, while entrepreneurs comprised 7.6 percent of population in 1989, they owned 33 percent of total wealth (Cagetti and De Nardi: 2005). Also 89 percent of those in the top 1 percent of the wealth distribution were entrepreneurs. Hurst and Lusardi(2006) report that the median wealth of households owning a business is three times higher than those not owning a business. However, women entrepreneurs in Indian in general and Manipur in particular, have the stringent handicap of lacking in finance. They generally do not have property in their name to use them as security for obtaining funds from external sources. The banks also consider women less credit worthy and discourage women borrowers on the belief that they can at any time leave their business. Further, our society still practices a deeply rooted traditional male dominated mindset that overlooked the economic freedom of women. As a result, finance remains one of the most difficult obstacles faced by the women entrepreneurs whether at the time of establishment or at the time of running day-to-day operations. Meanwhile, many studies have revealed that women entrepreneurs are usually lack of proper knowledge regarding the management of financial resources. Their style of functioning tends to be fire fighting approach, dealing with problems as arise on a day-to-day basis. Interestingly, 83

2 studies of the reasons for small business failure inevitably show poor or careless financial management to be the most important cause (Chittenden et al, 1999). It is worthwhile to mention that there is a close relationship between finance and its management in the progress of an enterprise. Stating finance as a galvanizing force, John F. Childs says the best business plans are worthless if the right amount of money can not be make available at the right time at the right price. On the other hand, only applying or pouring money in organization does not ensure success. Therefore, an entrepreneur should know how to handle money and wealth in order to gather success. However, many women entrepreneurs are good in business, but not in handling money (Belinda Funchs, 2009). Therefore, in addition to acquire optimum finance, employing efficient and scientific management of finance in an enterprise is also of prime importance for achieving the ultimate goal of the entrepreneur. All in all, an entrepreneur should have proper knowledge of financial management as it not only helps the entrepreneur to analyst and identify the financial needs and their sources but it also protects the business against any financial setbacks. Through efficient financial management, an entrepreneur can eliminate unnecessary and unproductive expenditures. Objective: The main objectives of the study are 1. to identify the source of finance, 2. to study the nature of investment and its decision and 3. to study whether they follow proper planning of finance. Methodology A sample of 400 women entrepreneurs was selected from 5 different units viz, Embroidery, Tailoring, Jewellery, Beauty Parlour and Kids Care Centre in Imphal West and Thoubal district. The sample was selected using stratified random sampling and the questionnaire cum interview methods was adopted to collect the data. The survey was conducted during 1 st January 2009 to 31 st December Result and Discussion This section will identify the nature of financial management of business enterprises owned by the women entrepreneurs in Manipur. Source of Finance: It is a primary function of an entrepreneur to mobilize adequate finance from the most economical sources because she has to pay interest on the money borrowed from any financial institutions, banks, co-operatives credit societies, private money lenders, and even on the borrowings from friends and relatives. Hence, she has to bear in mind the cost of borrowings and returns on her investment. It is beneficial for her to keep the cost of borrowings as low as possible. So, an entrepreneur has to identify the sources which will facilitate her i.e., the sources that provide the lowest rate of interest. With regard to the sources of finance the table-1 reveals that, out of 400 women entrepreneurs, maximum number of women entrepreneurs ( i,e per cent) are not getting financial supports from any sources. Only 20.5 per cent of women entrepreneurs acquire financial support from various sources such as nationalized public banks, friends and relatives, and private banks. Amongst these sources, private banks are the most popular source of finance. Only a few number of women entrepreneurs prefer to use nationalized banks because it is really difficult to acquire financial assistances from such type of sources. Finally, it can be said that women entrepreneurs 84

3 used to approach sources that are easily accessible undecided about other factors such as interest rate etc. Table-1: Different source of financial aid FINANCIAL SUPPORT Sources: Field Survey f = no. of women entrepreneurs Table No 2 shows the level of amount borrowed by the women entrepreneurs from various sources. As most of the women own enterprises are tiny, majority of the entrepreneurs borrow money in the range of Rs.10,001-20,000. Only a few women entrepreneurs (8.53 per cent) borrow money in the range of Rs. 1,00,001-above. In general, they use to borrow only a mean of Rs.41,830. Thus, the table reveals that most of the women entrepreneurs are experimental at the start up period and they begin with tiny enterprises. Also it is visible that their capacity of raising funds is very low. Lastly it can be stated that small is beauty for women entrepreneurs as they perform dual functions. Table-2: Level of Money Borrowed SOURCE OF FINANCE f % Source f % Beneficiary Nationalized Public Bank Non-Beneficiary Friends/Relatives TOTAL Private bank TOTAL Level of amount f % mean ABOVE TOTAL

4 Fixed Capital Structure: The table-3 manifests that the investment of fixed capital for acquisition of fixed assets at initial periods differs from one unit to another. For instance, beauty parlour units invest highest amount of money with a mean value of Rs. 67,569 and kids care units is in the second place regarding to the investment at initial period. Meanwhile embroidery units are found to require less money for fixed assets with a mean value of Rs.27,945. This finding shows that different types of enterprises need varied infrastructure resulting significant variations in fixed capital investment structure. Table-3: Start-up Fixed Capital Structure Fixed Capital BP KDS EMB TAI JW TOTAL UNIT (Rs) f Avg f Avg f Avg f Avg f Avg f Avg Above Avg.- average, BP- Beauty Parlour, KDS- kids care Centre, EMB- Embroidery, T-Tailoring, JW-Jewellery Working capital Structure: Working capital management is one of the most important aspects of overall financial management. If it is weak, the enterprise cannot prosper and even survived, although there is a large investment in fixed assets. Working capital, therefore, needs to be maintained at an adequate level. Because, both excessive and inadequacy working capitals are harmful for an enterprise. The working capital structure of women entrepreneurs are discussed as follows. (a) Monthly expenditure on workers salary: If it is on the matter of monthly expenditure on workers salary, jewellery tops the list with a sum of Rs on average as in such type of enterprises salary is dependent of how much effort the worker paid to his/her duty. And 86

5 also rate of wage is considerably larger than other trades. The table-4a also depicts the monthly expenditure pattern of various other trades on workers salary. Table 4a: Monthly Expenditure on Workers Salary Working BP KDS EMB TAI JW TOTAL Capital UNIT (Rs) f Avg f Avg f Avg f Avg f Avg f Avg Above Total (b) Monthly expenditure on maintenance: Beauty parlour units and kids care centre units utilize highest maintenance expenditure whereas jewellery units need least monthly expenditure on maintenance. Beauty parlour units have recorded an average sum of Rs and kids acre centre, an average sum of Rs On the other hand, Jewellery units have recorded an average sum of Rs only. Table 4b: Monthly Expenditure on Maintenance Working BP KDS EMB TAI JW TOTAL Capital UNIT (Rs) f Avg f Avg f Avg f Avg f Avg f Avg above Total

6 (c) Expenditure on material used per day: Be it at initial period or current, the P=.000 (in both the cases) indicates a highly significant variations amongst the various trades regarding to the material use per day. Amongst the five trades, jewellery units required maximum amount of money for day to day material used. It is recorded as having a mean value of Rs at the initial period and a mean of Rs at the current shape. On the contrary, beauty parlour units need less money for material i.e., a mean of Rs at initial period and Rs at present. From the table 4c, it can also be observed that as the investment of working capital on material is too low, the production is also definitely low resulting in low income and hence low profit. If this trend continues for long, then our entrepreneurs can neither survive long nor compete with their well established counterparts from either other states or outside the country. Table 4c: Daily Expenditure on Material Name of unit Material use at initial period (Rs.) Material use at present (Rs.) Embroidery Mean N Std. Deviation Jewellery Mean N Std. Deviation Beauty parlour Mean N Std. Deviation Tailoring Mean N Std. Deviation Kids care centre Mean N Std. Deviation Total Mean N Std. Deviation F-value d.f. (4, 395) (4, 395) P-value Financial control: Most of the women entrepreneurs (58.75 per cent) in the study sample do not conform budget planning. Similar picture can be drawn regarding expenditure plan and account maintenance. Only 33 percent of entrepreneurs follow expenditure plan as against 66 percent who do not accept the principle. Regarding the nature of account maintenance, only 38 percent of women entrepreneurs are found to exercise systematic accounting and the 62 per cent of women entrepreneurs do not have the habit of accounting at all. 88

7 Table5: Means of Financial Control Means YES NO f % f % Budget plan Expenditure plan Account maintain SUGGESTION: (1) Women entrepreneurs should be very calculative in selecting the source of finance and should possess fair knowledge of classifying all the sources of finance regarding which will provide benefit most in the long run or in the prevailing situation or in both. (2) Government should propose and execute comprehensive initiatives and policies for the welfare of women entrepreneurs. Regular Entrepreneurship Development Programmes devoted mainly to motivations, skill development, marketing analysis and strategies, and various management principles and practices will be of great usefulness. (3) Women entrepreneurs should participate in any programs related to skill base and proper management of resources including finance. (4) Women entrepreneurs should extend their enterprises by investing more money and also should expand production and sales not only in the state but also outside the state. (5) Women entrepreneurs should have proper knowledge of budgeting, expenditure planning and also proper accounting. CONCLUSION: Lastly it can be concluded that at present our women entrepreneurs face various challenges namely lack of finance, infrastructure, favourable environment and more importantly, knowledge of financial management which are the keys to the success of an enterprise. If these elements could be injected into the present entrepreneurial system, then they can be one of the major players of the economic development of the state as well as the nation. References Belinda Funchs(2009), The importance of Managing Money for Women Entrepreneurs, Isabel Cagetti, M. And De Nardi, M. (2005). Entrepreneurship, Frictions, and Wealth, Journal of Political Economy, 114(5): Chittenden, F., Poutziouris, P. and Michaelas, N. (1999). Financial Management and Working Capital Practices in UK SMEs, Research Report, Manchester, Manchester Business School. Hurst, E. and Lusardi, A. (2006). Do Household Savings Encourage Entrepreneurship?Household Wealth, Parental Wealth, and the Transition in and out of Entrepreneurship, available at SSRN ( Kaulgud Aruna(2003), Entrepreneurship Management, Vikash Publishing House Pvt. Ltd., New Delhi, pp Patro Sachidananda (2002), Financing Small Scale Industries, Mohit Publications, New Delhi, p79. Panda Shiba Charan(2003), Entrepreneurship Development in small scale Industries, Anmol Publications Pvt. Ltd. New Delhi, pp