Financial Management Literacy and Costing Practices: Evidence from Micro-Entrepreneurs in Kelantan

Abstract

This study investigated the relationship between financial management literacy, costing practices, and business sustainability among micro-entrepreneurs in Kelantan, focusing on those registered with TEKUN Nasional, Amanah Ikhtiar Malaysia (AIM), and MARA. Using a quantitative survey, data were collected from 200 respondents across four districts, and analyzed using SPSS and PLS-SEM. The findings revealed that while financial literacy levels were moderate, the adoption of structured costing practices remained low, with fewer than one-third of entrepreneurs applying formal tools such as budgeting or break-even analysis. Structural modeling confirmed that financial literacy had a significant effect on costing practices (β = 0.43, p < 0.001) and, indirectly, on business sustainability. Costing practices were also found to significantly influence sustainability (β = 0.37, p < 0.01), validating the Resource-Based View (RBV) and Contingency Theory. The study concluded that financing support alone is insufficient unless complemented by financial literacy and practical costing adoption. The results provide theoretical contributions to SME literature and practical insights for policymakers and agencies in strengthening micro-enterprise resilience in Kelantan.