Financial Literacy of SME Managers' on Access to Finance and Performance: The Mediating Role of Financial Service Utilization

Considering financial literacy as a central factor for consumer demand for financial services, we analyze its impact on access and actual use of financial services and its ultimate consequential reflections on SMEs performance in developing economies. By recognizing the important distinction between access and actual use of financial services this study uses the partial least square-structural equation modelling (PLS-SEM) to estimate the conceptual model. The study reveal significant positive impact of financial literacy to financial access and performance of the firm. It was also discovered that there is significant positive direct impact of access to financial services into actual use of financial services and positive significant effect of the use of financial service on firm performance. The firm use of financial services has a significant mediating role on firm access to financial services-firm performance relationship. The implications of these findings offers foretastes on the need to deepen and widen the scope of SMEs managers' financial literacy for effective financial management and financial financing decisions. We argue distinct contributions of access and actual use of financial services construct on firm performance has to be given attention in attempt to avoid generalizing the phenomenon.