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Access to financial resources or Access to Finance (ATF) plays a crucial role in the
growth and sustainability of Micro-Enterprises (MEs), which are vital drivers of
economic development and job creation, particularly in emerging economies. MEs
often face significant challenges in securing adequate funding, including limited
access to formal financial institutions, high collateral requirements, and lack of
Financial Literacy (FL). This study explores the relationship between ATF and the
growth of MEs, focusing on the demand-side factor which restricts entrepreneurs from
accessing finance, i.e., a lack of FL level. This study highlights the relevance of FL to
enhance ATF, which is conducive to the growth of MEs.
The study’s primary goal was to examine the impact of FL and ATF on the growth
of MEs. It also attempted to identify the influence of MEs’ demographic profiles on FL
and ATF. FL includes its components: Financial Knowledge (FK), Financial Behavior
(FB), Financial Attitude (FA), and demographic profiles embrace gender, age,
education, area of operations, experience of MEs, and district in which MEs operate.
Financially literate entrepreneurs can leverage FinTech (Financial Technology)
solutions (e.g., digital payments, automated accounting, online marketplaces) to make
informed financial decisions, optimize resource allocation, and pursue the growth of
firms. The study used FL as an independent variable, Growth of MEs as a dependent
variable, ATF as a mediator, and FinTech Adoption (FinA) as a moderator.
Through the review of extensive literature, the research gaps were identified and
research objectives were framed accordingly. For the accomplishment of research
objectives, the study collected primary data from 386 MEs in the Faridabad and Palwal
districts of Haryana. After data cleaning, the reliability and validity were ensured. For
the analyses of data, SPSS and SMART-PLS version 4.1 were used. The study
conducted an independent sample t-test, one-way ANOVA, and PLS-SEM to test the
specified research hypotheses.
The study’s results showed no difference in the FK of males and females of the
sampled MEs. However, females lag when it comes to applying that knowledge
practically. The present study exhibits a significant difference between male and
female MEs concerning their FB and FA. Males possess more positive FB and FA than
females. The study provides empirical evidence that highly educated, experienced,
MEs operating in urban areas and middle-aged (30-49 years) entrepreneurs were more
financially literate than their counterparts.
In the Faridabad and Palwal districts, MEs were indifferent concerning their FK
but MEs in the Faridabad district had more positive FB and FA than the Palwal district.
Overall, the MEs found a low FL level in the sampled districts, i.e., 53.38%. The
results also revealed that no significant difference between male and female MEs
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concerning ATF. It implies that both face similar types of barriers to access finance.
The empirical evidence of the study demonstrates that MEs with high education,
experience, age above 50 years or more, operating in urban areas, and in Faridabad
District, found less difficulty to access finance than their counterparts. MEs in
Faridabad and Palwal districts face lot of barriers in accessing finance from the
Government schemes, wherein less awareness and knowledge, and the lack of
collateral were the top two listed barriers.
Through PLS-SEM results, the study found ATF, an important contributor to the
growth of MEs. Moreover, FL had a significant influence on ATF and the growth of
MEs. Furthermore, the study found that FL had a statistically significant indirect
influence on the growth of MEs, suggesting that ATF functions as a mediator between
FL and the growth of MEs. The effect of FinA as a moderator was insignificant in the
relationship between FL and ATF, and ATF and the growth of MEs. However, FinA
was a significant and negative moderator in the relationship between FL and the
growth of MEs, suggesting that overreliance on fintech without proper digital skills
may expose financially literate MEs to cybercrime, data misuse, or excessive
borrowing, which could outweigh the advantages of their FL.
This study highlights that FL is not merely a skill but a critical enabler that
empowers MEs to effectively manage resources, adopt technology, access credit, and
make informed financial decisions. A lack of awareness or understanding of financial
tools and technology can limit access to crucial resources, stifling business expansion
and sustainability. The findings underline the importance of targeted financial
education programs and policies that bridge knowledge gaps and ensure fintech tools
are adopted in ways that truly facilitate access to affordable credit and support firm
growth. Strengthening the ecosystem for financial inclusion, coupled with increased
literacy, can accelerate the growth of MEs, and contribute to regional economic
development. |
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