Examining the Interplay of Access to Finance, Financial Literacy, and SMEs Growth: A Comprehensive Analysis

Abstract

Purpose - In the dynamic and ever-changing global economy, the significance of financial literacy cannot be emphasized enough. As individuals and businesses maneuver through the intricate financial landscape, comprehending essential financial concepts and making well-informed decisions becomes paramount for sustained success, particularly for small and medium-sized enterprises (SMEs). In a recent study, the objective was to examine the role of financial literacy as a moderator in the relationship between access to finance and the growth of SMEs.

Design/methodology/approach–The study used primary data taken from Lahore, Pakistan through a well-structured questionnaire. The study took the data from 206 SMEs and employed moderating regression.

Findings-The results showed that financial access has a straight and positive influence on financial growth. Additionally, the findings showed that financial literacy moderates the association between financial access and SME growth.

Limitations/Implications–Policymakers can use insight from this research to design targeted programs and initiatives that enhance financial literacy among entrepreneurs. Findings might be context-specific and not easily generalizable across different industries, regions, or economic conditions. Establishing a direct causal relationship between financial literacy and firm growth can be complex. Other external facts might also affect growth outcomes.

Originality/value –Using the resource-based view, this study highlights the importance of financial literacy for the growth of Pakistani SMEs. It draws SME owners' attention toward financial literacy.