So this study aims to investigate the impact of financial literacy, reduction of asymmetric information and access to credit for SMEs in Lao PDR. Higher financial literacy then reduces the level of asymmetric information, which in turn affects SME credit access. Although many researches have been done on the access constraints for SMEs, but the constraints studies have addressed the factors influencing the credit decision, especially there are limited empirical studies on the financial education of the SME owner or manager and formal access to credit. in Laos.
Due to their limited number of studies and little research on national financial literacy for SMEs in the Lao People's Democratic Republic, previous studies indicate that there are two points that can explain the volatility in SMEs' financial access: the presence of asymmetric information between lenders and borrowers (Berger & Scott, 2006). While current asymmetric information and financial literacy are important for accessing formal credit, this work is being undertaken to explore the impact of financial literacy and the reduction of asymmetric information on access to credit for SMEs in Laos. This study will fill the gap in the limitation of national financial literacy surveys, especially in the area of financial literacy.
LITERATURE REVIEW
- select the significant level
- start the model with all variables
- Remove the variables with highest p- value
- Final model without the predictor with highest p-value
Because the problem between lender and borrower in the financial market is related to the presence of asymmetric information and is recognized as a major obstacle in access to credit. 2015) examined the impact of reducing asymmetric information and credit access for small and medium-sized enterprises. The aim is to investigate a relationship between the reduction of asymmetric information and bank lending to SMEs.
Ordinary rent square was used to test the relationship between the reduction of asymmetric information and access to credit. The current asymmetric information is inherently and subjective, so measuring the degree of this imbalance may depend on individual aspects. Moro and Fink (2013) use the relationship between financial institutions and the borrower as a proxy measure of asymmetric information.
Higher satisfaction with information prepared by borrower and lender lower level of asymmetric information and more appropriate and timely information greater decrease in asymmetric information level. Depending on the literature above, both financial knowledge and asymmetric information on credit access are affected. Financial literacy is an essential skill that improves the understanding of accounts, helps to prepare and useable financial information that reduces the level of asymmetric information and in turn increases the possibility of access to credit.
Examining the existence of asymmetric information means measuring someone's opinion or attitude. A higher score or greater satisfaction with the exchange of information by the lender and the borrower lowers the level of asymmetric information. Thus, this study will use respondent data to assess the existence of asymmetric information.
Higher level of information they provide and receive higher level of reduction in asymmetric information.
RESULT AND DISCUSSION
This figure shows us the average score of financial literacy and main subcategory for our respondents with the average score of Lao PDR (P. According to this data, the average score for both financial literacy and its main subcategories of our study is slightly higher than the average score of Lao PDR.On the other hand, there is some difference when we compare our results with adult financial literacy of OECD.
Financial knowledge, financial behavior and financial literacy from this study are lower than the average score of adult financial literacy calculated by OECD. According to our literature reviews, most of the researcher found that demographic characteristics such as gender, age, education and income have a significant impact on financial literacy. Where FL is financial literacy calculated by the combination of financial knowledge, financial behavior and financial attitude of each respondent.
The factors that significantly influence the level of financial literacy are gender, education and income. Because education or field of study is positive and important for the level of financial literacy, respondents who have obtained a bachelor's and master's degree are more financially literate than others who have only completed primary school. As we mentioned earlier, the main objectives of this study are to find out the impact of financial literacy and reducing asymmetric information on credit accessibility of SMEs and in relation to these objectives. This research has highlighted two.
In the case of the financial literacy variable, the results from Table 4.6 above show that access to credit is positive and significant, as expected. Holding other variables constant, a one point increase in financial literacy will increase the odds ratio or probability of accessing credit by 1.322. In addition to the conceptual framework I presented above, most studies (Moro et al., 2015; Motta, 2016) use information from financial statements as a rough measure of the reduction in the extent of asymmetric information, so this study implies that a higher level of financial literacy reduces level of asymmetric information.
The result found that financial knowledge is positive and significant for reduction in asymmetric information, and we can start the equation as Asym FL, so we can interpret that when one-point increase in FL, the reduction in asymmetric information increases by 0.073 or the size of asymmetric information reduced by 0.073.
CONCLUSION AND RECOMMENDATION
The result shows that the score of three main sub-categories and financial literacy calculated by this study is slightly higher than those who studied financial literacy in Laos. In addition, the results find that women are less financially literate compared to men, and education level and income are positively and significantly related to financial literacy, strongly supporting this result (Lusardi & Mitchell, 2011; Morgan & Trinh, 2019). an individual with a higher level of education and income increases the probability of access to external credit for SMEs. When financial literacy increases by one point, the odd ratio or the probability of accessing credit will increase by 1.322, a financially literate individual who has the ability of financial concept, the ability to understand and apply various aspects of financial skills, increases the possibility of accessing credit.
So this result supports the hypothesis that there is a positive and significant relationship between financial knowledge and access to credit. So this result also supports the hypothesis that reduction in asymmetric information is positive and significant for credit access. In addition, this study also found that financial literacy could reduce the level of asymmetric information, when one-point increase in FL the amount of asymmetric information reduced by 0.073.
To interpret the implication of this finding, a person who has a higher level of financial knowledge that contains with some basic and advanced skills with related to the information from accounts and. Furthermore, we found that education level is a factor that positively and significantly for financial literacy and higher financial literacy lowers the level of asymmetric information, which in turn affects SMEs' access to credit. Depends on the result that financial knowledge is positive and significant for credit access for SMEs, so this study suggests that to improve access to finance for SMEs, the indirect way of increasing the level of financial knowledge should be a concern.
Because of this, education not only affects financial literacy, but implicitly lowers the level of asymmetric information according to the channel of financial literacy. Sometimes villagers may face the lack of training program that can be useful for their business and it is reasonable to believe that low education in rural communities may further reduce financial literacy.
BIBLIOGRAPHY
Levels of financial literacy of small business owners and its correlation with firms' operating performance [Press release]. Retrieved from https://www.google.co.th/search?q=Financial+Literacy+Levels+of+Small+Busi nesses+Owners+and+it+Correlation+with+Firms%E2%80%99+Operating +Perf ormance&oq=Levels+of+Financial+Literacy+of+Small+Business+Owners+and+Correlation+with+Firms%E2%80%99+Operational+Performance&aqs=chrome. Determinants of access to credit and choice of loan source by micro, small and medium enterprises in Nekemte, Ethiopia.
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APPENDIX
Questionnaire
You do not make any further payments to this account and do not withdraw any money. It is usually possible to reduce the risk of investing in the stock market by buying a wide range of stocks and shares. A collection of reports on the firm's well-being, financial performance, and fund resources and use.
Balance sheet is compiled to give an overview of assets, equity and liabilities as a certain period of time. Balance sheet is compiled to give an overview of income, expenses as well as net profit. Balance sheet is performed to give an overview of fluctuations of employees of the firm.
Which financial statement most accurately reflects whether the company was profitable in the given period. I know the effect of interest well. costs for the loan that I borrow for my business. I have sufficient knowledge about maintaining and balancing a general ledger account 27. especially for both balance sheet and income statement) and usually use it as an important guideline before making a decision.
You will provide extensive and timely financial information requested by banks or financial institutions when obtaining a formal loan. Bank or financial institutions regularly visit your firm to audit assets Section D: Access to credit.
BIOGRAPHY
