Financial literacy, asymmetric information and credit accessibility: case study of Lao's small and medium enterprise

Abstract

Small and Medium Enterprise (SMEs) is a fundamental part of economic growth worldwide, ensuring sustainable growth, job creation, reducing income inequality, poverty reduction and highly conductive to economic growth in the Lao PDR. However, consistently with other SMEs worldwide, SMEs in Laos are also confronting with many obstacles especially financial access. So, this study aims to investigate the impact of financial literacy, reduction in asymmetric information and credit access for SMEs in Lao PDR. The questionnaire used to survey the financial literacy is the combination of financial knowledge, financial behavior, financial attitude, and some advanced financial concepts. Besides that, to assess the level of asymmetric information, this study uses the satisfaction of both lender and borrower about the information that provided and received from both parties. The methodology used in this study is binary logistic regression and the SMEs owners who running their business in Vientiane were used as samples. The results reveal positive and significant relationship between financial literary, reduction in asymmetric information and credit access for SMEs. Furthermore, we found that education level is positive and significantly related to financial literacy. Higher financial literacy then lowers the level of asymmetric information which in turn affects the credit access of SMEs.