Alfabetizzazione finanziaria dei microimprenditori e accesso al credito = Financial literacy of micro-entrepreneurs and access to credit

This paper investigates the relationship between the financial literacy of micro-entrepreneurs and their access to bank credit, drawing on data from a survey conducted by the Bank of Italy among a representative sample of Italian companies with fewer than 10 employees. Among those who require some external finance, we explore whether micro-entrepreneurs’ financial literacy influences (i) the propensity to apply for the necessary bank loan, and (ii) the likelihood of bank approval. We find that micro-entrepreneurs with higher financial literacy are more likely to apply for a loan, i.e. they are less likely to be ‘discouraged borrowers’. However, financial literacy does not significantly affect the likelihood of loan approval. We also shed light on two mechanisms underlying the relationship between financial literacy and borrowers’ discouragement: entrepreneurs with higher financial literacy are more likely to seek professional advice and to be aware of the existence of public guarantee schemes in support of SMEs’ access to credit, which in turn improve the chances of them applying for a bank loan.