The Role of Culture on SME Access to Credit: Implications for Developing Nations

The literature suggests that small and medium-sized enterprises (SMEs) are critical to the advancement of developing economies. Yet, SMEs in developing nations are constrained with capital accessibility, which is complicated by societal values (culture). In this paper, we examine the impact of cultu...

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Bibliographic Details
Published inJournal of Accounting and Finance Vol. 21; no. 5; pp. 41 - 62
Main Authors Asare, Enoch Kusi, Nketia, Joseph, Beldona, Sri, Wysong, Scott
Format Journal Article
LanguageEnglish
Published West Palm Beach North American Business Press 01.01.2021
Subjects
Accounting
Audited financial statements
Banks
Collectivism
Credit scoring
Culture
Developing countries
Economic development
Economic growth
Emerging markets
Funding
GDP
Gross Domestic Product
Individualism
LDCs
Small & medium sized enterprises-SME
China
India
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Summary:The literature suggests that small and medium-sized enterprises (SMEs) are critical to the advancement of developing economies. Yet, SMEs in developing nations are constrained with capital accessibility, which is complicated by societal values (culture). In this paper, we examine the impact of culture (as a moderating variable) on firm size and funding source (independent variables) with regard to access to capital (dependent variable) by looking at 2,185 SMEs from 27 developing economies. Our results indicate that state-owned banks, set up with the objective of providing capital to SMEs in developing economies, have not lived up to expectations. Governments of developing economies should put mechanisms in place to address this challenge.