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Cited by 149Microfinance and Financial InclusionFinancial Literacy and BehaviorBanking stability, regulation, efficiency

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Lending terms, financial literacy and formal credit accessibility

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Korutaro Nkundabanyanga, Stephen, Kasozi, Denis, Nalukenge, Irene, Tauringana, Venancio·2014·International Journal of Social Economics
DOI 10.1108/ijse-03-2013-0075
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Abstract

Purpose: – The purpose of this paper is to investigate the relationship between commercial bank lending terms, financial literacy and access to formal credit by small and medium enterprises (SMEs). Design/methodology/approach: – In this cross-sectional study, the authors surveyed 384 business owners or managers of SMEs in Uganda. The authors applied confirmatory factor analysis to reduce the number of factors and identify the important elements that capture commercial lending terms, financial literacy and access to formal credit. The authors put forward and tested two hypotheses relating to the significance of the relationship between perceived commercial bank lending terms, financial literacy and access to formal credit using structural equation modelling with analysis of moment structures 18. Findings: – The results suggest a positive and significant relationship between perceived commercial bank lending terms, financial literacy and access to formal credit. Moreover, the ANOVA results serendipitously show that access to formal credit varies with type of business and turnover. However, collateral and loan repayment periods are not observed variables for commercial bank lending terms. The most significant observed variable for commercial bank lending terms is interest rates. This, together with financial literacy, explains 31 per cent of the variances in access to formal credit by SMEs in Uganda. Research limitations/implications: – The study is limited to the SME firms registered and operating in Kampala, Uganda and it is possible that the results are only applicable to these firms in Uganda. Nevertheless, the findings have implications to commercial banks wishing to improve the turnover of their micro-lending schemes. Practical implications: – Efforts by the stakeholders to improve financial literacy of SMEs owners and managers must be matched with favourable interest rates if access to formal credit is to be enhanced. Social implications: – The findings also have implications for governments aiming at improving access to finance to overcome income inequality problems, and also improve their growth. Originality/value: – The results provide initial evidence of the aggregate explanatory power of interest rates and financial literacy for the criterion variable, access to formal credit by SMEs.

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Metadata

Authors
Korutaro Nkundabanyanga, S., Kasozi, D., Nalukenge, I., & Tauringana, V.
Affiliations
  • Makerere University (UG)
  • Bournemouth University (GB)
ORCID
Venue
International Journal of Social Economics
Publisher
Emerald
Published
2014-05-06
Volume
41
Issue
5
Pages
342-361
ISSN
0306-8293 (ISSN-L)
DOI
10.1108/ijse-03-2013-0075
OpenAlex
W1976967360
Cited by
149
References
4
Citations by year
2026: 16 · 2025: 16 · 2024: 24 · 2023: 23 · 2022: 22 · 2021: 13 · 2020: 12 · 2019: 9 · 2018: 2 · 2017: 6 · 2016: 5 · 2015: 1
FWCI
9.23
Type
journal article
Language
en
Open access
Licence
www.emerald.com/insight/site-policies (tdm)
Locations
  • International Journal of Social Economics (publishedVersion)
  • Bournemouth University Research Online (Bournemouth University) (acceptedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • ePrints Soton (University of Southampton) (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Microfinance and Financial Inclusion
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Literacy and Behavior
  • Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
Keywords
financial literacy, access to formal credit, small and medium-sized enterprises, interest rates, SME financing, collateral, loan repayment period, Uganda

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CoChat. (2026). Citation check: Lending terms, financial literacy and formal credit accessibility. https://app.cochat.ai/papers/10.1108/ijse-03-2013-0075
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Korutaro Nkundabanyanga, S., Kasozi, D., Nalukenge, I., & Tauringana, V. (2014). Lending terms, financial literacy and formal credit accessibility. International Journal of Social Economics. https://doi.org/10.1108/ijse-03-2013-0075