Financial literacy and SME loan repayments in South Africa during the COVID-19 era

  • Received August 12, 2022;
    Accepted October 5, 2022;
    Published November 4, 2022
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/imfi.19(4).2022.09
  • Article Info
    Volume 19 2022, Issue #4, pp. 113-121
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Small and medium-sized enterprises (SMEs) are the primary victims of the COVID-19 outbreak because they lack adequate resources and are poorly prepared for such interruptions. For SMEs to expand, they need financial assistance such as loans and advances from financial service providers. However, they struggle to repay these loans and advances because they are small in size and do not make large turnovers, and owners lack adequate financial literacy. This study aims to investigate the relationship between financial literacy and loan repayment of SMEs. The study followed a positivist paradigm, and a quantitative approach was employed. A total of 110 self-completed Likert questionnaires were distributed, only 107 were filled correctly and analyzed using SPSS. The results from Pearson’s correlation coefficient showed a strong and significant relationship between financial literacy and SME loan repayments at r = 0.324, P < 0.0005. Regression analysis showed a significant linear relationship between financial literacy and SME loans repayments, F (1.152) = 17.806; P < 0.0005. P < 0.0005 is less than the independent variable (SME loans repayments), B = 0.324, P < 0.0005. The results imply that if SME owners are well-versed in finance, they will be capable of repaying outstanding loans and advances timely.

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    • Figure 1. Conceptual framework
    • Table 1. Loan repayment information
    • Table 2. Correlation between financial literacy and SME loan repayments
    • Table 3. Linear regression
    • Data curation
      Thabiso Sthembiso Msomi
    • Formal Analysis
      Thabiso Sthembiso Msomi
    • Methodology
      Thabiso Sthembiso Msomi
    • Software
      Thabiso Sthembiso Msomi
    • Supervision
      Thabiso Sthembiso Msomi
    • Writing – original draft
      Thabiso Sthembiso Msomi
    • Conceptualization
      Smangele Nzama
    • Investigation
      Smangele Nzama
    • Validation
      Smangele Nzama
    • Writing – review & editing
      Smangele Nzama