The Role of Financial Literacy as Mediator between Human Capital, Social Capital and MSME Access to Finance/ Hajah Siti Nor Suriana bte Haji Abd Talip

Submitted in PHD fulfilment of the requirements for the degree of Doctor of Philosophy.

Abstract

Micro, small and medium enterprises (MSMEs) around the world have consistently reported many obstacles in accessing finance. The difficulties that MSMEs encounter when trying to access financing can be because of a lack of financial literacy. Consequently, financial literacy may be a result of the level of human capital and social capital acquired by an individual. Thus, the study investigates whether human capital and social capital can influence access to finance of MSMEs in Brunei. This also includes the mediating effect of financial literacy on the relationship between human and social capital with access to finance. The study employed the quantitative method with simple random sampling. A total of 2639 questionnaires were distributed to all MSMEs, in which 390 responses were gathered. From these 390 responses, only 337 were deemed appropriate for analysis. In the data analysis, this study used frequency analysis and descriptive statistics to obtain a better understanding of the participants in this study. Exploratory Factor Analysis was also carried out to ensure the appropriateness of the item measurements for each variable. Research hypotheses were derived from the study’s theoretical framework and were tested using Partial Least Squares Structural Equation Modelling. The findings from the Structural Equation Modelling showed that human capital and social capital are insignificant in influencing MSMEs access to finance. However, financial literacy is found to have a significant influence on access to finance. Subsequently, financial literacy served as the fully mediating variable for the relationship between human capital, social capital, and MSMEs access to finance. Further analysis was conducted to assess the role of the components of financial literacy – financial knowledge and financial skills – on MSME access to finance. Financial knowledge is found to play a greater role in gaining access to external financing, apart from influencing access to finance and acting as a mediating role in human capital, social capital and access to finance. On the other hand, financial skills do not have a significant influence on MSME access to finance and additionally, it does not play a mediating role in the relationship between human capital, social capital, and financial access. From these main findings and analyses, a comprehensive theoretical framework was created, which contributed to the body of knowledge regarding MSMEs from a financial perspective. The findings offer implications and benefits for practitioners involved in the MSME environment. This study emphasizes the significance of sustaining favorable human capital and social capital for MSME owners/managers to improve the financial literacy, in particular financial knowledge, of MSMEs so that the problem of access to finance can be alleviated, especially in developing countries.

Keywords: Access to finance, financial literacy, financial knowledge, financial skills, Human capital and social capital.

Dissertation (Doctor of Philosophy) - Universiti Teknologi Brunei (2022)

Includes bibliographical references and index.