@article{Nunoo:123418,
      recid = {123418},
      author = {Nunoo, Jacob and Andoh, Francis K.},
      title = {Sustaining Small and Medium Enterprises through Financial  Service Utilization: Does Financial Literacy Matter?},
      address = {2011},
      number = {323-2016-11592},
      pages = {28},
      year = {2011},
      abstract = {Promoting a dynamic operating environment for Small Medium  scale enterprises (SMEs) is seen as a priority amongst  economic development goals, in both developed and emerging  economies. SMEs are a primary driver for job creation and  GDP growth. They greatly contribute to economic  diversification and social stability and they play an  important role for private sector development. 
It must be  emphasized, that the utilization of these financial  products does not only promote the growth of the SMEs  themselves but also their active participation in the  financial services market leads to financial development  which is widely recognized as an important determinant of  economic growth and also recognized as important for  enhancing the social and economic impact of the financial  sector.
In the past, SMEs, particularly, in developing  countries, lacked access to financial products and  services. The SME market was perceived by banks as risky,  costly, and difficult to serve. However, with the advances  in information and communications technology, the cost  differential of serving poor customers has fallen and banks  now perceive significant opportunities in the SME sector.  Survey data from multiple studies show that banks have  begun to target SMEs as a profitable segment. For example,  a recent survey of 91 banks in 45developed and developing  countries – Bank Financing for SMEs around the World –  found that these banks overwhelmingly perceived the SME  sector as a large market with good prospects. There exists  an array of financial products - microcredit, savings, and  loans, insurance, mutual funds, etc. – in both the formal  and informal sectors in Ghana. Opportunities to utilize  these financial services are now plentiful than about a  decade ago. However, available studies have shown that  about 44% of Ghanaians are financially excluded and  have/use no financial products. This paper uses a direct  measure of financial knowledge to empirically investigate  the linkage between financial literacy and utilization of  financial services by SMEs.  However, since people’s level  of knowledge can improve through utilization of financial  service, we establish a bi-causality problem. In the  analysis, two equations were estimated: (1) financial  literacy level, and (2) utilization of financial service  which includes financial literacy as an endogenous  variable.  The equation determining the level of financial  literacy was estimated using the OLS while the equation for  the utilisation of financial service was estimated using  logistic regression.  The IV method was used to correct for  the problem of endogeneity.
 Overall, the results show that  there was modest level of financial literacy among small  and medium entrepreneurs in Ghana. Moreover, it was  discovered that the better and more financially literate  entrepreneurs were more likely to utilize financial  service. The most commonly utilized financial service was  operating a bank account. This has important policy  implication.  Finally, the instrument for financial  literacy, recipient of financial education, also had  positive relationship with utilization of financial  service.},
      url = {http://ageconsearch.umn.edu/record/123418},
      doi = {https://doi.org/10.22004/ag.econ.123418},
}