Access to Finance and Performance of Small Firms in South Africa: the Moderating Effect of Financial Literacy
Author(s): Olawale Fatoki
Abstract: The failure rate of small medium and micro enterprises (SMMEs) is very high in South Africa. One of the challenges faced by SMMEs is inaccessibility to external finance. There is a general low level of financial literacy amongst small business owners in South Africa leading to ill-informed financial decisions. Financial literacy is an important knowledge resource for financial decision-making but little research has focused on how financial literacy affects the performance of SMMEs. The aim of the study was to examine if financial literacy moderates the relationship between access to finance and performance of SMMEs in South Africa. The cross-sectional survey method was used for data collection in a quantitative study. Descriptive statistics, Pearson correlation and hierarchical regression were used for data analysis. The Cronbach’s alpha was used as a measure of reliability. The findings indicated that the relationship between access to finance and financial literacy is significant. The findings also showed that financial literacy moderates the relationship between access to finance and performance of SMMEs. Empirically, the study added to the body of literature on financial literacy, access to finance and performance of SMMEs. Practically, recommendations to improve the financial literacy of SMMEs are suggested.
Keywords: financial literacy, access to finance, performance, SMMEs, moderating, South Africa
DOI: 10.37394/23207.2021.18.9WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 18, 2021, Art. #9