Financial literacy of entrepreneurs: a systematic review

Abstract

Purpose This paper aims to study the level of financial literacy of entrepreneurs across the globe and its role in financial access and performance of micro, small and medium enterprises (MSMEs) based on a systematic review. The present study identifies the measures to enhance the level of financial literacy for increasing financial access and performance of enterprises.Design/methodology/approach Systematic literature review has been undertaken by identifying 358 studies from various sources. After removing the 237 studies based on selection criteria, 67 studies have been found relevant for the present study.Findings The level of financial literacy of entrepreneurs around the world is generally low. It has been found that financial literacy improves performance of an enterprise, particularly when the funds are readily available as insufficient funds disrupt the operating efficiency of the firm, thereby hindering its growth and survival. The other most important factors i.e. access to formal finance, lending policies of financial institutions, ease of doing business and training programmes have a substantial influence on the survival of the firms. The literature also revealed that there is no standardised methodology to measure the financial literacy of entrepreneurs.Research limitations/implications The study conceptualises a research model which can be used by the policymakers to develop training modules for entrepreneurs. These training modules will contribute to the nation’s economic growth by virtue of enhanced performance and superior financial access.Originality/value This study proposes a hypothesised research model which is one of its kinds to demonstrate the influence of financial literacy on financial access and performance of MSMEs.