Access to Finance, Micro financing, Financial Literacy and Growth of Small and Medium Sized Enterprises: A Critical Review of Literature

Abstract

Access to finance, micro financing, and financial literacy are critical drivers of SME growth, enabling investment, innovation, and effective financial management. This study reviews theoretical and empirical literature to examine how access to finance influences SME growth, focusing on the mediating role of micro financing and the moderating effect of financial literacy. It also compares their relative impact on this relationship. The findings aim to guide SME owners and managers in understanding barriers to financing and the value of microfinance in meeting their funding needs, while offering scholars insights to expand research on finance accessibility and SME development. Grounded in credit rationing theory, supported by financial growth life cycle theory, resource-based view, and stages of growth theory, the study addresses gaps in existing research, which often overlooks the combined effects of mediators and moderators. The results underscore that microfinance strengthens the finance–growth link, and financial literacy enhances it, emphasizing the importance of education initiatives that empower entrepreneurs.

Keywords:       Access to Finance, Micro Financing, Financial Literacy, SME Growth and Credit Rationing Theory, Small and Medium Enterprises (SMEs