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

Abstract

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.