Financial Literacy and Lending Constraints of Small and Micro Enterprises

Abstract

As the cornerstone of national economic development, small and micro enterprises play an important role in promoting economic growth, expanding employment, promoting innovation and releasing market. This paper uses the national survey data of China Household Finance Survey (CHFS) in 2015 to empirically test the specific impact of financial literacy on the lending constraints of small and micro enterprises. The results show that financial literacy can effectively alleviate the lending constraints of small and micro enterprises. And it has a significant inhibitory effect on the bank lending constraints and private lending constraints of agricultural, industrial and commercial small and micro enterprises. Gender, health, risk preference and family size have significant positive effects on loan constraint. Educational background, marital status, risk aversion, assets and income have significant negative effects on loan constraints. This study provides some policy implications for easing the lending constraints of small and micro enterprises.