access to finance research paper

• DOI: 10.1787/9789264305328-10-en
• Corpus ID: 9144384

Access to finance

• Dean S. Karlan , J. Morduch
• Published in SME Policy Index 21 September 2018
• Business, Economics

34 Citations

Bank concentration, competition, and financial inclusion, economic determinants of financial service accessibility, navigating credit access: uncovering the dynamics within poor households in vietnam, does household access to financial services help reduce poverty in indonesia, does access to finance alleviates poverty: a systematic review, does access to formal finance matter for welfare and inequality micro level evidence from nigeria, information frictions and take-up of government credit programs, increasing retirement savings through access points and persuasive messages, impact of financial literacy on access to finance and firm performance: an analysis of growing industry cluster in pakistan, selection into credit markets: evidence from agriculture in mali, 211 references, experimental evidence on returns to capital and access to finance in mexico.

• Highly Influential

Finance for all? : policies and pitfalls in expanding access

Expanding credit access: using randomized supply decisions to estimate the impacts, savings constraints and microenterprise development: evidence from a field experiment in kenya, the economics of microfinance, second edition, does microfinance really help the poor new evidence from flagship programs in bangladesh, banking services for everyone barriers to bank access and use around the world, the unbanked: evidence from indonesia, credit constraints and productivity in peruvian agriculture, financial performance and outreach: a global analysis of leading microbanks, related papers.

Showing 1 through 3 of 0 Related Papers

Indirect Effects of Access to Finance

We created experimental variation across local markets in China in the share of firms having access to a new loan product, to measure the direct and indirect effects of access to finance. We find that: (1) Access to finance had a large positive direct effect on the performance of treated firms. (2) Access to finance had a similar-sized negative indirect effect on the performance of firms with treated competitors. The two effects offset in the aggregate and imply no detectable gains in producer surplus. (3) Access to finance had a positive direct effect on business practices, service quality, and consumer satisfaction, and a negative effect on price. None of these effects were offset by indirect effects, suggesting net gains in consumer surplus. (4) Two additional indirect effects were active: diffusion of borrowing to firms with treated peers, and diffusion of demand to firms with treated neighbors. (5) Combining several effects in a model-based evaluation, we estimate that the loan had a private return of 74%, most of which was offset by losses to competitors, and a social return of 60%, most of which was driven by gains to consumers.

We thank David Atkin, Abhijit Banerjee, Lauren Bergquist, Nick Bloom, Arun Chandrasekhar, Shawn Cole, Dave Donaldson, Sean Higgins, Jonas Hjort, Dean Karlan, Miklos Koren, David McKenzie, Timea Molnar, Ben Olken, Martin Rotemberg, Antoinette Schoar, Eric Verhoogen, Chris Woodruff, and seminar and conference participants for helpful comments. We thank for funding the Private Enterprise Development in Low-Income Countries, the University of Michigan, Central European University, the European Research Council under the European Union’s Seventh Framework Program (FP7/2007-2013) grant agreement number 283484, and the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme grant agreement number 724501. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

MARC RIS BibTeΧ

Download Citation Data

Published Versions

Jing Cai & Adam Szeidl, 2024. " Indirect Effects of Access to Finance, " American Economic Review, vol 114(8), pages 2308-2351.

Working Groups

More from nber.

In addition to working papers , the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter , the NBER Digest , the Bulletin on Retirement and Disability , the Bulletin on Health , and the Bulletin on Entrepreneurship  — as well as online conference reports , video lectures , and interviews .

The Impact of Access to Finance on the Micro-enterprises’ Growth in Emerging Countries Towards Sustainable Industrialization

• Conference paper
• First Online: 18 February 2023
• pp 1010–1025
• Cite this conference paper

• M. A. Mapunda 8 &
• M. A. Tambwe 8  

Included in the following conference series:

• Applied Research Conference in Africa

435 Accesses

Purpose: The effect of access to finance on microenterprises growth was assessed using financial literacy as a moderator in emerging countries, particularly, Tanzania.

/Methodology/Approach : This research paper applied a quantitative research design and the data were collected from owners and managers of microenterprises in the city of Dar Es Salaam using a structured questionnaire. Structural Equation Modeling (SEM) using IBM AMOS version 23 and the Statistical Package for the Social Sciences (SPSS)version 26 were both used in the analysis of the 262 respondents who were randomly selected. Before starting to analyze the data, concerns about data screening, reliability, and validity were all addressed.

Findings: The results show that financial literacy has a positive and significant effect on the growth of micro-enterprises, although access to financing and terms of interaction are not statistically significant. This suggests that financial literacy directly impacts micro-business expansion rather than moderating the relationship between access to credit and micro-business growth.

Implications/Research Limitations: The study can be expanded further by combining micro, small, and medium-sized businesses and by applying a resource-based view theoretical lens to examine the moderating role of financial literacy between financial access and the growth of microenterprises. This can be equally crucial in identifying the impact of financial literacy on the relationship between financial access and business growth.

Practical Implications: The study's findings will be useful for microbusiness owners and managers, legislators, and other stakeholders in the facilitation and regulation of financial services to develop strategic training programs on financial literacy. As a result, microbusiness owners and managers may have improved their financial literacy knowledge and capabilities, giving them access to more financial resources.

Originality/Value: Past research has demonstrated that there scarce literature on the use of financial literacy to increase access to financing for micro, small, and medium enterprises in emerging countries, including Tanzania. The study is anticipated to contribute to knowledge and literature in the fields of financial literacy, access to financing, and micro-enterprise enterprises in developing nations based on past empirical and theoretical lenses. Similarly, financial literacy promotes the long-term growth of microenterprises through its impact on access to financing.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Subscribe and save.

• Get 10 units per month
• Download Article/Chapter or eBook
• 1 Unit = 1 Article or 1 Chapter
• Cancel anytime
• Available as PDF
• Read on any device
• Instant download
• Own it forever
• Available as EPUB and PDF
• Compact, lightweight edition
• Dispatched in 3 to 5 business days
• Free shipping worldwide - see info
• Durable hardcover edition

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

Financial literacy in SMEs: a bibliometric analysis and a systematic literature review of an emerging research field

A Study of Financial Literacy as a Sustainable Factor Among Micro-entrepreneurs in Coimbatore District of Tamil Nadu

Do Women’s Financial Literacy Accelerate Financial Inclusion? Evidence from Pakistan

Adomako, S., Danso, A., Ofori Damoah, J.: The moderating influence of financial literacy on the relationship between access to finance and firm growth in Ghana. Ventur. Cap. 18 (1), 43–61 (2016)

Article   Google Scholar  

Aduda, J., Kalunda, E.: Financial inclusion and financial sector stability with reference to Kenya: A review of literature. J. Financ. Bank. 2 (6), 95–120 (2012)

Google Scholar  

Afriyie, S., Du, J., Ibn Musah, A.-A.: Innovation and marketing performance of SME in an emerging economy: the moderating effect of transformational leadership. J. Glob. Entrep. Res. 9 (1), 1–25 (2019). https://doi.org/10.1186/s40497-019-0165-3

Amoah, S. K., Amoah, A. K.: The role of small and medium enterprises (SMEs) to employment in Ghana. Int. J. Bus. Econ. Res.7(5), 151–157 (2018).

AU. African Union:agenda 2063, First 10 years implementation plan 2014 –2023

Ayyagari, M., Juarros, P., Martinez Peria, M.S., Singh, S.: Access to finance and job growth: firm-level evidence across developing countries. Rev. Finan. 25 (5), 1473–1496 (2021)

Article   MATH   Google Scholar  

Barakabitze, A.A., Kitindi, E.J., Sanga, C., Shabani, A., Philipo, J., Kibirige, G.: New technologies for disseminating and communicating agriculture knowledge and information: challenges for agricultural research institutes in Tanzania. Electron. J. Inf. Syst Developing Countries 70 (1), 1–22 (2015)

Barney, J.: Firm resources and sustained competitive advantage. J. Manag. 17 (1), 99–120 (1991)

Bongomin, G.O., Munene, J.C., Ntayi, J.M., Malinga, C.A.: Determinants of SMMEs growth in post-war communities in developing countries: Testing the interaction effect of government support. World J. Entrep. Manage. Sustain. Dev. 14 (1), 50–73 (2018)

Bongomin, G.O., Ntayi, J.M., Munene, J.C., Malinga, C.A.: The relationship between access to finance and growth of SMEs in developing economies: Financial literacy as a moderator. Rev. Int. Bus. strategy 27 (4), 520–538 (2017)

Buchdadi, A.D., Sholeha, A., Ahmad, G.N.: The influence of financial literacy on SMEs performance through access to finance and financial risk attitude as mediation variables. Acad. Acc. Financ. Stud. J. 24 (5), 1–15 (2020)

Drexler, A., Fischer, G., Schoar, A.: Keeping it simple: Financial literacy and rules of thumb. Am. Econ. J. Appl. Econ. 6 (2), 1–31 (2014)

Eniola, A.A., Entebang, H.: SME managers and financial literacy. Glob. Bus. Rev. 18 (3), 559–576 (2017)

Hair Jr, J. E., Black, W. C., Babin, B. J., Anderson, R. E.: Multivariate Data Analysis ( (Eight edition). ed.). United Kingdom: Cengage Learning EMEA . (2019)

Haji, M.: Tanzania: Skills and Youth Employment A Scoping Paper. International Development Research Centre, Ottawa (2015)

Hansen, M.W., Langevang, T., Rutashobya, L., Urassa, G.: Coping with the African business environment: Enterprise strategy in response to institutional uncertainty in Tanzania. J. Afr. Bus. 19 (1), 1–26 (2018)

Hossain, M. M., Ibrahim, Y., Uddin, M. M.: Finance, financial literacy and small firm financial growth in Bangladesh: The effectiveness of government support. J. Small Bus. Entrep. 1–26. Retrieved from (2020). https://doi.org/10.1080/08276331.2020.1793097

Hox, J.J., Bechger, T.M.: An introduction to structural equation modeling. Fam. Sci. Rev. 11 , 354–373 (1999)

Hussain, J., Salia, S., Karim, A.: Is knowledge that powerful? Financial literacy and access to finance: An analysis of enterprises in the UK. J. Small Bus. Enterp. Dev. 25 (6), 985–1003 (2018)

Huston, S.J.: Measuring financial literacy. J. Consum. Aff. 44 (2), 296–316 (2010)

Isaga, N., Masurel, E., Van Montfort, K.: Owner-manager motives and the growth of SMEs in developing countries: Evidence from the furniture industry in Tanzania. J. Entrep. Emerg. Econo. 7 (3), 190–211 (2015)

Israel, B., Kazungu, I.: The Role of Public Procurement in Enhancing Growth of Small and Medium Sized-Enterprises: Experince from Mbeya Tanzania. J. Bus. Manage. Econo. Res. 3 (1), 17–27 (2019)

Khan, F., Siddiqui, M.A., Imtiaz, S.: Role of financial literacy in achieving financial inclusion: A review, synthesis and research agenda. Cogent Bus. Manage. 9 (1), 1–37 (2022)

Khan, R.U., Salamzadeh, Y., Kawamorita, H., Rethi, G.: Entrepreneurial orientation and small and medium-sized enterprises’ performance; does ‘access to finance’moderate the relation in emerging economies? Vision 25 (1), 1–16 (2021)

Krejcie, R.V., Morgan, D.W.: Determining sample size for research activities. Educ. Psychol. Measur. 30 (3), 607–610 (1970)

Kumar, S.: Structure Equation Modeling Basic Assumptions and Concepts: A Novices Guide. Asian J. Manage. Sci. 3 (7), 25–28 (2015)

Lusimbo, E.N.: Relationship between financial literacy and the growth of micro and small enterprises in Kenya: A case of Kakamega Central sub-county (Doctoral dissertation, cohred, JKUAT). Jomo Kenyata University of Agriculture and Technology, Nairobi (2016)

Mabula, J. B., Ping, H. D. (2018). Financial literacy of SME managers’ on access to finance and performance: The mediating role of financial service utilization. ,. Int. J. Adv. Comput. Sci. Appl. 9(9), 32–41

Madhani, P., Madhani, P. M.: Resource based view (RBV) of competitive advantage: an overview. Resource based view: concepts and practices (2010).

Makina, D.: Introduction to the financial services in Africa special issue. Afr. J. Econ. Manag. Stud. 8 (1), 2–7 (2017)

Mazana, M. Y., Tambwe, M. A., Mapunda, M. A., Kirumirah, M. H. (2021). ICT and Marketing for Agricultural Products: Determinants of Mobile Phone usage to Small Scale Orange Farmers in Tanzania. J. Bus. Educ.

Mbani, M., & Mirondo, R. (2019, February 6). Tanzania Economy to Grow at 6.6 percent in 2019. Retrieved from The Citizen: https://www.thecitizen.co.tz/news/Tanzania-economy-to--grow-at-6-6pc-in-2019--/1840340-4969384-ajc6ia/index.html

Megersa, K.: Improving SMEs’ Acc'4ess to Finance Through Capital Markets and Innovative Financing Instruments: Some Evidence from Developing Countries. Institute of Development Studies (2020).

Mhando, D.G., Ikeno, J.: Production and Marketing of Orange in Two Villages in Muheza District, Tanzania. African Study Monographs 55 , 85–98 (2018)

Mutegi, H.K., Njeru, P.W., Ongesa, N.T.: Financial literacy and its impact on loan repayment by small and medium entrepreneurs. Int. J. Econo. Commer. Manage. 3 (3), 1–28 (2015)

Nanziri, L.E., Wamalwa, P.S.: Finance for SMEs and its effect on growth and inequality: evidence from South Africa. Transnational Corporations Rev. 13 (4), 1–17 (2021)

NBS. United Republic of Tanzania, House Hold Budget Survey 2017–18. Dodoma: National Bur. Stat. (2019).

NBS, & MITI. (2016). National Bureau of Statistics (NBS) and the Ministry of Industry, Trade and Investment (MITI). The 2013 Census of Industrial Production . Analytical Report, Dar Es Salaam. Retrieved 2022

Nkwabi, J., Mboya, L.: A review of factors affecting the growth of small and medium enterprises (SMEs) in Tanzania. Eur. J. Bus. Manage. 11 (33), 1–8 (2019)

Nyikos, G., Béres, A., Laposa, T., Závecz, G.: Do financial instruments or grants have a bigger effect on SMEs’ access to finance? Evidence from Hungary. J. Entrep. Emerging Econo. 12 (5), 667–685 (2020)

Ortega, M.J.: Competitive strategies and firm performance: Technological capabilities’ moderating roles. J. Bus. Res. 63 (12), 1273–1281 (2010)

Prasanna, R.P., Jayasundara, J.M., Naradda Gamage, S.K., Ekanayake, E.M., Rajapakshe, P.S., Abeyrathne, G.A.: Sustainability of smes in the competition: A systemic review on technological challenges and sme performance. J. Open Innov. Technol. Markets Complexity 5 (100), 1–18 (2019)

Quartey, P., Turkson, E., Abor, J.Y., Iddrisu, A.M.: Financing the growth of SMEs in Africa: What are the contraints to SME financing within ECOWAS? Rev. Dev. Financ. 7 (1), 18–28 (2017)

Rahaman, M.M.: Access to financing and firm growth. J. Bank. Financ. 35 (2), 709–723 (2011)

Rasheed, R., Siddiqui, S.H., Mahmood, I., Khan, S.N.: Financial inclusion for SMEs: Role of digital micro-financial services. Rev. Econ. Dev. Stud. 5 (3), 571–580 (2019)

Rogath, H., Mwidege, A.M.: Analysis of Value Chain for Pigeonpea in Tanzania. Int. J. Phys. Soc. Sci. 4 (6), 419 (2014)

Runyan, R. C., Huddleston, P., & Swinney, J. (2006). Entrepreneurial orientation and social capital as small firm strategies: A study of gender differences from a resource-based view. The International Entrepreneurship and Management Journal (2), 455–477

Saunders, M.N., Lewis, P., Thornhill, A.: Business Research for Business Students, 7th edn. Pearson Education Ltd., Harlow (2016)

Simoes, N., Crespo, N., Moreira, S.B.: Individual determinants of self-employment entry: What do we really know? Journal of economic surveys 30 (4), 783–806 (2016)

Sitorus, D.: Improving access to finance for SMEs in Tanzania: Learning from Malaysia’s experience . The world Bank (2017).

Susan, M.: Financial literacy and growth of micro, small, and medium enterprises in west java, indonesia. Int. Symp. Econ. Theor. Econometrics 27 , 39–48 (2020)

Tanzania Economy . (2022, March 2). Retrieved April 1, 2022, from Tanzania Investment: https://www.tanzaniainvest.com/economy

TanzaniaInvest. (n.d.). SME- Tanzaniainvest . Retrieved from TanzaniaInvest: https://www.tanzaniainvest.com/sme

Thaba, K. L., & Leshilo, T. T. (2016). An investigation into the challenges faced by micro-enterprises Turfloop Plaza, in South Africa. Proceedings of Annual South Africa Business Research Conference 11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978–1–922069–95–5. Cape Town

Torero, M.: A Framework for Linking Small Farmers to Markets. Conference on New Directions for Smallholder Agriculture. 24–25 January . Rome,: IFAD HQ (2011).

Turyakira, P., Kasimu, S., Turyatunga, P., Kimuli, S.N.: The joint effect of firm capability and access to finance on firm performance among small businesses: A developing country perspective. Afr. J. Bus. Manage. 13 (6), 198–206 (2019)

UNDP. (n.d). Sustainable Development Goals. Retrieved Dec 12, 2019, from https://www.undp.org/content/dam/undp/library/corporate/brochure/SDGs_Booklet_Web_En.pdf

URT. (2013). United Republic of Tanzania Small and Medium Enterprises Development Policy, November. Policy Document

Wasiuzzaman, S.: Resource sharing in interfirm alliances between SMEs and large firms and SME access to finance: A study of Malaysian SMEs. Manag. Res. Rev. 42 (12), 1375–1399 (2019)

WEF. (2020, 02 15). These are fifteen fastes growing cities in the world . Retrieved March 17, 2022, from World Economic Forum: https://www.weforum.org/agenda/2020/02/15-fastest-growing-cities-world-africa-populations-shift/

Ye, J., Kulathunga, K.: How Does Financial Literacy Promote Sustainability in SMEs? Developing Country Perspect. Sustain. 11 (2990), 1–21 (2019)

Zarrouk, H., Sherif, M., Galloway, L., El Ghak, T.: Entrepreneurial orientation, access to financial resources and SMEs’ business pl4erformance: The case of the United Arab Emirates. J. Asian Financ. Econ. Bus. 7 (12), 465–474 (2020)

Download references

Author information

Authors and affiliations.

Department of Marketing, College of Business Education, P.O Box 1968, Dar Es Salaam, Tanzania

M. A. Mapunda & M. A. Tambwe

You can also search for this author in PubMed   Google Scholar

Corresponding author

Correspondence to M. A. Mapunda .

Editor information

Editors and affiliations.

CIDB Centre of Excellence, University of Johannesburg, Johannesburg, South Africa

Clinton Aigbavboa

University of Lagos, Lagos, Nigeria

Joseph N. Mojekwu

Department of Civil Engineering, University of South Africa (UNISA), Gauteng, South Africa

Wellington Didibhuku Thwala

Cape Coast Technical University, Cape Coast, Ghana

Lawrence Atepor

Department of Construction Technology and Management, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana

Emmanuel Adinyira

Gabriel Nani

Emmanuel Bamfo-Agyei

Rights and permissions

Reprints and permissions

Copyright information

© 2023 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this paper

Cite this paper.

Mapunda, M.A., Tambwe, M.A. (2023). The Impact of Access to Finance on the Micro-enterprises’ Growth in Emerging Countries Towards Sustainable Industrialization. In: Aigbavboa, C., et al. Sustainable Education and Development – Sustainable Industrialization and Innovation. ARCA 2022. Springer, Cham. https://doi.org/10.1007/978-3-031-25998-2_78

Download citation

DOI : https://doi.org/10.1007/978-3-031-25998-2_78

Published : 18 February 2023

Publisher Name : Springer, Cham

Print ISBN : 978-3-031-25997-5

Online ISBN : 978-3-031-25998-2

eBook Packages : Business and Management Business and Management (R0)

Share this paper

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

• Publish with us

Policies and ethics

• Find a journal
• Track your research

A Systems View Across Time and Space

• Open access
• Published: 07 November 2022

Influence of access to finance on the competitive growth of SMEs in Lesotho

• Donald O. E. Amadasun   ORCID: orcid.org/0000-0002-1611-5983 1 &
• Ashley T. Mutezo 2  

Journal of Innovation and Entrepreneurship volume  11 , Article number:  56 ( 2022 ) Cite this article

12k Accesses

3 Citations

Metrics details

Access to finance has been identified as one of the biggest problems faced by small and medium-sized enterprises (SMEs) in most developing economies. Similarly, access to finance has been identified as a dominant constraint facing the SME sector in Lesotho. This paper established the factors related to access to finance that influence the competitive growth of the SME sector in Lesotho. The factors that were identified include financial information access, bank and business support services, the structure of banks, and the collateral requirements of the financial sector.

The results from our analysis indicated that a relationship exists between the independent variables of financial information access, bank and business support services, the structure of banks, and the collateral requirement by commercial banks. As such these independent variables are associated with SMEs’ capacity to attain competitive growth in Lesotho. Explicitly, the results indicated that Basotho entrepreneurs and managers see the predictors (collateral requirement, financial information access, and bank and business support services) as critical factors of access to finance that constrain most enterprises from accessing the necessary credit from banks, which ultimately influence the SMEs’ capacity to attain competitive growth in Lesotho.

Conclusions

The study concludes that access to finance significantly affects the competitive growth of SMEs in Lesotho. Thus, this study suggests that several specific and harmonized financial policy actions are needed in the Lesotho financial market to establish an enabling policy that will ease enterprises’ access to adequate funding programs. These funding programs should target improved financial schemes that are coordinated, competitive, and directed towards Basotho SMEs’ access to finance, and enables a harmonized credit policy that guarantees a win–win for SME loan applicants and the financial market operators.

Introduction

There is an immense body of literature on access to finance in entrepreneurship. However, with the current rapid upsurge in many market-driven economies, most small and medium-sized enterprises (SMEs) face inadequate access to finance, which constrains their capacity to attain competitive growth. According to the entrepreneurship literature, SMEs foster economic development in developed and developing countries, for example, by driving creativity and innovation, and making a significant contribution to countries’ GDPs when they have access to finance (Ghosh, 2016 ). Unfortunately, most SMEs in developing countries continue to face difficulties related to access to finance from banks, which constrains their growth.

According to Mazanai and Fatoki ( 2013 ), access to finance, mainly from banks, is one of the biggest problems SMEs face in most developing countries. Going by the general norm that the availability of finance is a critical source factor of SMEs’ competitive operation, commercial banks, as the main source of finance, tend to be less responsive to them. Singh and Kaur ( 2014 ) maintained that this can be attributed to many commercial banks, in their efforts to make profits, considering SMEs as too much of a risk, and consequently, showing little interest in establishing critical credit schemes to allow SMEs access to loans. In the same context, some studies highlighted that most SMEs suffer from limited access to financial resources that constrains their capacity to grow, respond to competitors in the market, and diversify their business operations (Ghosh, 2016 ; Subairu, 2016 ).

In the context of Lesotho, SMEs are those enterprises that employ from 6 to 50 employees (GoL, 2016 , p. 5). A study by the European Union (EU) ( 2013 ) in Lesotho confirmed that access to finance is highly problematic for locally owned private SMEs. Similarly, a survey carried out by the EU (GoL, 2013 ) for the Ministry of Trade in Lesotho revealed that most SMEs owned and operated by Basotho (citizens of Lesotho) face difficulty in accessing the bank loans that are necessary to effectively operate their businesses. According to the EU’s ( 2013 ) study, 71% of small enterprises and 56% of medium enterprises indicated constraints in accessing bank credit. The factors that constituted high constraints to the SMEs’ access to finance were high interest rates and lack of appropriate collateral, as indicated by 89% and 86% of the respondents, respectively. In addition, the phenomenon of ‘discouraged borrowers’ is high, as issues attributed to socio-economic and institutional factors prevent many SMEs from qualifying for credit from banks in Lesotho.

The Government of Lesotho has recognized that many Basotho SMEs face high constraints in accessing the needed finance, which as a result, contributes to the high failure rate of such enterprises (GoL, 2016 ). A literature search indicated that there has been less focus on the critical factors that constrain most SMEs’ access to finance, and which are seen to influence their capacity to attain competitive growth in Lesotho. Thus, this paper argues that such critical factors are constraints to adequate access to finance, causing most local (Basotho-owned and operated) SMEs to suffer from severe market ineffectiveness, business ineptness, and to suffer various setbacks in the market environment that prevent them from attaining growth. Evidence currently indicates that the number of SMEs in Lesotho has decreased by 39.15%, from the 125,000 in 2010 to 76 067 in 2016 (GoL, 2016 , p. 10). Of the 39.15%, Basotho SMEs seem to be most affected. In addition, records show that less than 10% of Basotho SMEs survive, thrive, and attain substantial growth (EU, 2013 ; Mokoatleng, 2015 ), and this may be attributed significantly to SMEs’ inadequate access to finance from banks.

Despite SMEs’ remarkable and indisputable contribution to Lesotho’s aggregate economic performance, specifically in terms of employment generation, business creation, and development, they are still victims of credit constraints and rationing from banks (Amadasun, 2013 , 2020 ). Thus, this paper opines that access to finance remains a major obstacle, and may have worsened the prospects for most SME businesses to attain competitive growth in Lesotho.

According to entrepreneurship literature, access to finance plays a major role in SMEs’ capacity to effectively operate and achieve significant growth. Therefore, this paper considers the four core factors, namely, financial information access (FIA), bank and business support services (Bbss), the structure of bank (SoB) and collateral requirement (COLLATA) as predictors that constrain SMEs’ access to finance, and as such, influence their capacity to attain competitive growth in Lesotho. This is because we cannot avoid the fact that the finance access crisis exists and is affecting SMEs’ effective operations, particularly if seen in the light of the independent variables in various economies, particularly in the context of Lesotho.

In Lesotho, current data indicate that formal SMEs make up about 18% of the total number of the micro, small and medium-sized enterprise (MSMEs) sector, while the rest (82%) operate as informal businesses (GoL, 2016 , p. 6). It seems that this percentage is not improving, particularly for Basotho SMEs, most likely because most of them find it challenging to raise adequate funds from most banks, as they are often viewed as relatively risky and lack pragmatic and standardized track records.

Thus, this paper considers the four core constructs, namely, financial information access, bank and business support services, structure of bank and collateral requirement, as factors of access to finance, that influence SMEs’ capacity to attain competitive growth in Lesotho. This is because, to the best of the researcher’s knowledge, hardly any study has considered the four core constructs as joint factors that constrain SMEs’ access to finance in the context of Lesotho. Therefore, the four factors mentioned above form the gauge to measure SMEs’ access to finance from banks that constrain their competitive growth in Lesotho.

Literature review

The literature review for this paper will consist of a theoretical review and an empirical review.

Theoretical review

The credit rationing theory.

Theoretically, finance literature indicates a well-documented explanation that elucidates finance issues as related to the SMEs, and to assess the aforementioned is to review its fits to the enterprise. To the best of the researcher’s knowledge, the review of strategic literature indicates that no universally accepted theory in the entrepreneurship literature has been adopted as the sole influence on SMEs’ access to finance. Hence, it is essential to review an existing strategic theory, such as ‘the credit rationing theory’ on an enterprise’s access to finance to guide the current study’s analysis.

According to the strategic literature, the ‘financing gap analysis’ is the credit rationing theory by Stiglitz and Weiss ( 1981 ), and is one of the major theories that argues the agency problem (a conflict of interest between bank (agent) and the owners of the enterprise, and the information asymmetries, as significant reasons why SMEs are constrained in terms of access to finance. Stiglitz and Weiss ( 1981 ) argued that the presence of financial constraints on SME businesses is due to informational problems (that is, principal–agent issues) and transactional costs. Therefore, this paper assumed that due to the lack of collateral/income, most banks classify SMEs as ‘non-bankable’ enterprises and high-risk borrowers that are likely to be less interested in programs that favor them.

Further analysis shows that rationing discourages most SMEs, even in a competitive credit market using interest rates and bank charges as weapons that affect demand and the risk profile of the bank’s customers (Kremp & Sevestre, 2013 ). Despite this, Stiglitz and Weiss’ analysis focuses on the ‘informational problem and transactional cost’ paradigms. Both paradigms are skewed to the borrower’s capabilities to repay the loan. This suggests that asymmetrical information exists when the credit officers do not have ‘perfect’ information of the funding proposal base.

Although Stiglitz and Weiss ( 1981 ) provided compelling explanations of why credit rationing behavior still exists with financial institutions, the theory has not addressed the pecuniary issues of access to finance, such as bank and business support services, the structure of banks and the collateral requirement that may have caused banks to ration potential customers, even in a competitive credit market. Hence, banks insisting on high interest rates and bank charges may have affected demand and the risk profile of the bank’s customers. Subsequently, the fact remains that, in many developing economies like Lesotho, most banks may not have perfect information about the creditworthiness of prospective borrowers. Thus, there is a likelihood of the supply of loans to be backward bending at rates above the bank’s optimal rate (Mazanai & Fatoki, 2013 ). This implies that financial exclusion may persist even in optimal markets. Whether such an enterprise is excluded based on the price barriers, or financially excluded due to high idiosyncratic risk or poor project quality could be due to a market imperfection such as asymmetric information. This paper considers that these are peculiar to the four factors of access to finance: financial information access, bank and business support services, the structure of banks, and collateral requirement as constraints to SMEs’ access to bank loans.

In Lesotho, the constraints suffered from lack of access to finance tend to be common among SMEs (EU, 2013 ). While there have been some empirical studies, such as that of Makhetha and Sebolelo ( 2015 ), and Mokoatleng ( 2015 ), on SME access to finance in Lesotho, these previous studies omitted constructs, such as financial information access, structure of bank, and bank and business support services, as critical factors of access to finance that limits bank funding that negatively influences the competitive growth of SMEs.

To bridge the gap of access to finance, this paper suggests that although various studies have considered access to finance a huge challenge to SMEs in most developing economies, there is a gap in the entrepreneurship literature that has omitted the four factors related to access to finance mentioned above in Lesotho context. Thus, this study aims to determine the constructs (financial information access, bank and business support services, structure of bank and collateral requirement) as factors of access to finance that influence the competitive growth of SMEs in Lesotho.

Empirical review

The four factors of access to finance as related to SMEs are discussed in this section.

• Financial information access

Compared to large enterprises, many SMEs face intense competitive disadvantages in accessing the financial information needed to access adequate credit from banks, typically due to the nature of their businesses. Although the nature of SMEs and their capacity do influence the constraints they face regarding access to the needed funds, they require adequate information to identify potential suppliers of credit funds (Osano & Languitone, 2016 ). According to Aleksandr et al. ( 2016 ), SMEs’ access to the necessary credit funds is highly influenced by the degree of access to adequate financial information about potential suppliers and the available credit products of the bank. Many SMEs are denied access to financial credit by banks because they lack the necessary information and awareness related to funding from the financial market. Following the Stiglitz and Weiss ( 1981 ) credit rationing theory, seen from the lender’s perspective, banks cannot distinguish among borrowers based on the limited financial information available to them. As a result, it leads to acute information asymmetry between the credit officers and SME applicants.

In addition, due to inadequate information about potential SME applicants, banks are unwilling to take the risk of financing them. In many cases, commercial banks consider most SMEs as high risk, in the sense that they are considered highly indebted and lack the capacity to meet prompt debt repayments (Aleksandr et al., 2016 ). Consequently, most commercial banks are reluctant to provide the necessary information that could encourage demand from SMEs, and it becomes problematic for these enterprises to obtain a commercial loan. Based on fewer options, many SMEs are forced to access bank credit under stringent circumstances that are not favorable to their enterprises’ flexible repayment capacity, which, as a result, affects their competitive growth in the market.

However, the following are socio-economic reasons why most banks consider limited financial information as a strategic tool to control credit extension to SMEs:

High administrative costs of lending to small business applicants;

Information asymmetries in the financial market; and

The loan officer’s perception of the SMEs being highly risky, including bias related to business ownership.

Therefore, since many bankers lack perfect knowledge of potential borrowers’ solvency, SMEs may continue to face credit exclusion from the financial market.

Therefore, the following hypothesis was formulated for the study:

Hypothesis 1

H0: Financial information access has no statistically significant influence on SME competitive growth.

H1: Financial information access has a statistically significant influence on SME competitive growth.

• Bank and business support services

SMEs’ access to financial and business support resources influences the enterprises’ quality in the business environment (Fetisovová et al., 2013 ). According to Zeebaree and Siron ( 2017 ), the main reason for government and agency support for enterprises is to enhance their operational capacity, competitiveness and to assist them to attain market growth. While there are enabling support programs that cover a wide range of services, for example, programs related to creating, developing, training, marketing and consultancy services for SMEs, many of these enterprises are worse hit by a lack of crucial enabling resources, such as a bank loan, that can be a major challenge that hinders their survival and growth (Mazanai & Fatoki, 2013 ).

By extension, SMEs are constrained by a lack of bank and business support resources that should include the granting of direct and indirect financial credits; managing and advisory services related to the various aspects of the enterprises to enable them to become competitive; and promoting start-up businesses by granting them resources to strengthen their operational bases, such as subsidies and training programs (Amadasun, 2020 ). According to Zeebaree and Siron ( 2017 ), such enabling resources are management training skills and improving the integrated technology capabilities of SME entrepreneurs or managers that can influence the performance of enterprises. A study by Gathii and Ngura ( 2015 ) found that few SME entrepreneurs possessed management training skills, and displayed integrated technology capability in their business operations. As a result, this lack of skills impedes their chances of qualifying and obtaining bank loans.

Most SMEs are exceptionally susceptible to the whims and dynamics of the business environment where there is less business support and a lack of guarantees from the government and agencies. This paper found that the inability of enterprises to access loans should be considered a fundamental institutional weakness of bank and business support services, and as such, constrains most the competitive growth of SMEs in Lesotho. The lack of bank and business support services further makes SMEs more vulnerable to bank credit, which could be another reason why credit rationing persists in the competitive credit market of Lesotho.

In addition, inadequate support programs designed for, and strive to make SMEs attractive and competitive, seem to constrain their access to finance and competitive growth. A study indicates that bank lenders simply attach high bank charges and high interest rates to a loan to discourage SME entrepreneurs who lack adequate operational support guarantee schemes (Moro & Fink, 2013 ). Although banks aim to minimize loans to risky borrowers, it appears that there is a lack of the types of banking schemes and insurance institutions able to bridge the link of credit to SMEs in many smaller and developing economies, and this implies that the lenders’ supply of credit funds will indicate a backward curve, even at rates higher than the bank’s equilibrium rates.

Hypothesis 2

H0: Bank and business support services have no statistically significant influence on SME competitive growth.

H1: Bank and business support services have a statistically significant influence on SME competitive growth.

Structure of bank

Most SMEs’ limited access to financial credit is a consequence of the financial structure of banks, because competition in the financial market is an antidote for the competitive costs of financial products and services in the banking sector (Amadasun, 2020 ). As such, this grossly affects the competitive growth of enterprises in many developing economies.

Although many factors can be considered in explaining SMEs’ constraints related to access to finance, the level of competition in the banking industry, in particular, determines the price of financial services or products offered to loan applicants or customers. For example, Osano and Languitone ( 2016 ) suggested that the lack of competition in the financial sector acts as an obstacle for SMEs in accessing credit. Low competition in the banking sector may affect the overall stability in the financial market. It may affect the effectiveness of the financial service delivery to applicants (SMEs) who need financial credit the most. Thus, direct competition in the banking sector may positively influence new entry, growth, and the existing banks’ effectiveness, and affect SME applicants’ credit for bank loans.

Low competition in the banking sector is an implication of a high regulatory regime, where the financial market’s competitiveness does not rely on the actual market structure but relies on the country’s regulatory regime. Although there may not be a clear relationship between the interference of government on the intermediation process of the banking system’s effectiveness and the enterprises’ access to credit, regulatory restrictions probably affect the overall effectiveness and efficiency in the financial market (Osano & Languitone, 2016 ). Substantively, El-Said et al. ( 2015 ) argued that the low competition in the banking sector implies a high regulatory regime that excludes many SME borrowers from access to bank finance. This effectively forces SMEs to utilize micro-credit loans from informal lenders that are barely adequate, assuming that there would be an enabling environment for their enterprises.

Although SMEs are considered important actors in economic growth in Lesotho, the non-standardized designs of its credit guarantee scheme could result from the bank’s structure. Lesotho has three major banks (First National Bank, Nedbank and Standard Lesotho Bank), of which the primary ownership is foreign-owned, and as a result, the banks are less likely to pursue more information and better enforcement mechanisms. This probably excludes many Basotho SMEs from the financial mainstream through the enforcement of stringent credit conditions.

Therefore, the bank structure that does not promote direct competition in the financial market may severely impact the banking sector’s effective, efficient stability, and as such, constrain SMEs’ access to finance and affect their competitive growth in Lesotho.

Hypothesis 3

H0: Structure of banks has no statistically significant influence on SME competitive growth.

H1: Structure of bank has a statistically significant influence on SME competitive growth.

• Collateral requirement

For many SMEs, the situation is exacerbated by the banks’ collateral requirement on the loan before any credit is granted (Mazanai & Fatoki, 2013 ). A study by Osano and Languitone ( 2016 ) in the Maputo CBD in Mozambique, found that the collateral requirement is one major significant factor that hinders SMEs from accessing bank credit. Mazanai and Fatoki ( 2013 ) confirmed that 45% of SMEs are denied access to finance due to a lack of collateral security; hence, the survival rate of SMEs is less than 20% in South Africa. Kihimbo et al.’s ( 2013 ) study in the Kakamega Municipality in Kenya indicated that before banks consider loan requests from SMEs, they demand equivalent collateral deposits. This implies that banks in Kakamega Municipality require collateral of 100% or above, to consider credit loan proposals (Kihimbo et al., 2013 ). A study by Bhalla and Kaur ( 2013 ) showed that banks’ collateral requirements discourage most SMEs from accessing credit loans, and even more, they are disenfranchised due to banks’ perception that they are very risky borrowers with a low capacity to repay borrowed loans. A study by Ingabire et al. ( 2016 ) in Rwanda also considered lack of collateral to be one of the major challenges facing SMEs.

Though it may be justifiable for banks to see this as a strategic approach to avoiding losses in lending to borrowers with a lower repayment capacity SMEs need to access adequate credit to ensure the enterprises’ effective and efficient performance to attain competitive growth in the dynamic business environment, like in Lesotho.

Hypothesis 4

H0: Collateral requirement has no statistically significant influence on SME competitive growth.

H1: Collateral requirement has a statistically significant influence on SME competitive growth.

Competitive growth of SMEs

According to Matharu et al. ( 2016 ), competitive growth is a fundamental criteria measure that includes autonomy, independence, and effectively managing the enterprise’s future. However, an enterprise’s competitive growth is generally defined based on its pecuniary, trade, and commerce performance, such as turnover, outputs, profitability, employee turnover rates, and asset return. In this paper, SME competitive growth is defined as the ability of the enterprise to access the needed credit for its operational proficiency, innovativeness, and expert business, which as such, allows it to consistently increase its market share, maintain productivity, increase staff retention, and consistently increase sales growth and profit. This implies that this paper sees an enterprise’s competitive growth from the perspective of the four factors related to access to finance for SMEs to attain competitive advantage in the context of Lesotho.

Conceptual framework

Figure  1 shows the conceptual framework of the study, as indicated by the four selected factors of access to finance that influence the competitive growth of SMEs.

Selected factors of access to finance

Methodology

This study adopted the descriptive-correlation research design to analyze the influence of access to finance factors, namely, financial information access, bank and business support services, the structure of bank, and collateral requirements, on the competitive growth of SMEs.

Participants

The survey sample size was 400 SMEs from Lesotho’s four main districts (Butha-Buthe, Leribe, Mafeteng and Maseru). These four districts were chosen from the ten available districts because Basotho SMEs are more represented in the selected districts than other districts (Berea, Mohales-Hoek, Mokhonlong, Qachas-Nek, Quthing, Thaba-Tseka) that make up Lesotho.

However, the study considered Basotho SMEs that employed from 6 to 50 people and that are registered with the Ministry of Small Business Development Cooperative and Marketing (GoL, 2016 ). The stratified random sampling technique was used to select respondents in the four designated districts. The reliability level of 95% and sampling error of ± 5% indicated that the sample size of 400 was adequate.

The response rate was 96%, and this gave a total valid response of 384 respondents that were used in the study analysis. The high response rate was because the researcher and research assistants were familiar with the four districts, and 8 weeks were spent collecting feedback without placing any duress on the respondents.

The scale proposed by Aleksandr et al. ( 2016 ) was considered as a measure for financial information access. The financial information access predictor considered inadequate financial information related to the following: available credit funding, financial programs, and agency provision items. Bank and business support services and bank structure considered selected items from the study of Zeebaree and Siron ( 2017 ). The items considered for bank and business support services relate to inadequate policy initiatives, support programs, financial schemes and funding programs. Structure of bank considered items such as low competition, system regulation, legal status and ownership patterns that were selected from Osano and Languitone ( 2016 ). The collateral requirement scale adopted selected items from Mazanai and Fatoki ( 2013 ), Kihimbo et al. ( 2013 ), and Ingabire et al. ( 2016 ).

The predictor items from various authors were selected because they represent access to finance in the context of the study. This suggests that the measure of the four factors of access to finance (financial information access, bank and business support services, structure of bank and collateral requirement) considered some scale of items that measure the bank perception of SMEs, and the experience and behavior of banks to SME operators as related to the aforementioned four items.

The research tool comprised a 19-item questionnaire (Amadasun, 2020 ). The predictor scale measured four facets: financial information access (3 items, e.g., “inadequate information available on credit opportunities and programs to SMEs”); bank and business support services (3 items, “inadequate support programs such as financial schemes and credit programs are in my district designed to support my enterprise”); structure of bank (5 items, e.g., “low competition in the banking sector has greater constrains on SMEs access to credit”); collateral requirement (4 items, e.g., “collateral requirement is a major constraint to my enterprise’s access to credit funding from the bank”); and competitive growth (4 items, e.g., “it is very difficult for my enterprise to retain customer patronage, maintain sale growth and profit, and manage staff turnover”).

The study adopted the seven-Likert scale response rate format, ranging from 1 = “strongly disagree” to 7 = “strongly agree”. The research tool indicated that the higher the scores, the higher the level of agreement by respondents. The Cronbach’s alpha ranged from 0.755 to 0.861 for all the variables in this study.

Data analysis

Before the analysis, to ensure that the test indicated minimal measurement error, the necessary validity tests, such as content validity and reliability tests, were first performed to ensure that quality was maintained. The confirmatory factor analysis was first adopted to measure how the items came together to form the factors of access to finance of financial information access (FIA), bank and business support services (Bbss), structure of bank (SoB), and collateral requirement (COLLATA). This was followed by tests to calculate the coefficients of variation for and between the explanatory variables, and between the explanatory variables and dependent variables with a view to eliminating quasi-constant variables and checking for the concern of multicollinearity.

The correlation and regression analysis and results are presented in subsequent tables in the analysis section.

This paper opines that understanding the concept of “access to finance” is explained by the effect of critical factors such as financial information access, bank and business support services, bank structure, and collateral requirement on SME competitive growth in Lesotho. This study’s results indicated that all tests and analyses are in line with the study’s objectives, and are consistent with the descriptive and explorative statistics used in the study.

Validity and reliability scale

Confirmatory measures.

The CFA test results first indicated that all items in each of financial information access, bank and business support services, structure of bank, and collateral requirement scale items sufficiently measured variables that represent each construct. The CFA results, combined with the construct validity test, showed analytically the quality of their measures and confirmed that the theoretical specification of factors of access to finance matches the actual data, hence, confirming the study’s theoretical model.

The eigenvalues of all the factors of access to finance showed that each loads within each construct of a particular predictor factor. The results from a summary of communalities indicated that the 15 items extracted represented all the factors of access to finance, and the amount of variance accounted for by the common factors was above 0.3. All the observed items’ extraction values ranged from 0.354 to 0.894 which suggests that there is an adequate association among the 15 items, and it is acceptable (Hair et al., 2014 ).

Furthermore, the exploratory factor analysis (EFA) was used to identify the underlying constructs that explain the correlations among a set of factors. Since there were no preceding theories and factor loadings, the EFA was used to identify the factor pattern of the data. Bartlett’s test of sphericity and the Kaiser–Meyer–Olkin (KMO) results showed that all observed factors of access to finance in the analysis loaded as anticipated. The total value of KMO was found to be 0.840, and it is meritorious, according to the guidelines of Hutcheson and Sofroniou ( 1999 ). Bartlett’s test of sphericity was significant at 105 degrees of freedom. The determinant of the association matrix was 0.000, which showed no multicollinearity in the factors (significant at p  < 0.001).

The total variances indicated that all four factors (i.e., financial information access, bank and business support services, structure of bank, and collateral requirement) are appropriate to retain because they had a minimum of three significant loadings. The principal component analysis (PCA) of the factor loading of the four observed variables converged after five iterations of rotation; hence, they were retained for further analysis. The EFA was used for the rotation, followed by the PCA using the Varimax with Kaiser normalization.

Reliability scales

Cronbach’s alpha was used to assess the reliability of factors and the internal consistency of the scale of the data. This paper followed Babbie et al.’s ( 2011 ) postulation on reliability measures for exploratory research, which asserts that a minimum of 0.7 Cronbach’s alpha is acceptable. Five factors were obtained after running the Cronbach’s alpha and EFA tests, and the values obtained were all above 0.7. Hence, they were considered acceptable for exploratory analysis (Hair et al., 2014 ) (see Table 1 ).

In line with the descriptive-correlation method, further reliability tests were run to ascertain the coefficients of variation for the explanatory factors with a view to eliminating quasi-constant variables, and to test for coefficients of variation between all four explanatory factors. The results indicated that the association between each of the explanatory factors was below 0.60, which suggests no multicollinearity concern between the four predictors in the data (Hair et al., 2014 ).

To decide which rotation to use for the EFA, a component correlation matrix was run to see if the four factors of access to finance are correlated, and the results indicated that none of the correlations was less than − 0.5 or greater than + 0.5. This suggests that the components are not correlated, therefore, the principal component analysis was run using a Varimax rotation. The test for normality adopted the Shapiro–Wilk test because it is known to have more power in detecting differences from normality (Field, 2018 ). The normality test indicated that none of the p -values in the data is greater than 0.05, which suggests that the data differ from normality, hence, the nonparametric test was used. Therefore, the nonparametric Spearman’s correlation analysis was adopted.

Spearman’s correlation analysis

Spearman’s correlation shows the association analysis of all access to finance factors (financial information access, bank and business support services, structure of bank and collateral requirement) and the degree to which each is associated with SME competitive growth. Table 2 indicates that there is a medium and higher effect of correlation between the four independent constructs to the dependent factor Footnote 1 (competitive growth), which suggests a direct relation to SME competitive growth .

Table 2 indicates that the following list addresses the aim of the paper for further analysis:

The results showed a positive association between financial information access (FIA) and competitive growth (large effect), r  = 0.54, p  < 0.05.

The analysis indicated a positive correlation between bank and business support services (Bbss) and competitive growth (medium effect), r  = 0.36, p  < 0.05.

There is a positive association between the structure of bank (SoB) and competitive growth (medium effect) r  = 0.31, p  < 0.05.

The analysis indicated a positive correlation between collateral requirement and competitive growth (large effect), r  = 0.74, p  < 0.05.

In addition, the results showed a positive association between financial information access and bank and business support services ( r  = 0.44, medium effect p  < 0.05). There is a positive association between financial information access and collateral requirement ( r  = 0.37, medium effect p  < 0.05), and a positive association between bank and business support services and structure of bank ( r  = 0.33, medium effect p  < 0.05). The structure of bank is positively related to collateral requirement ( r  = 0.389, medium effect p  < 0.05), there is a positive association between financial information access and collateral requirement ( r  = 0.37, medium effect p  < 0.05), and the association is positive and significantly related to SME competitive growth (COMPGRO) (a large effect, r  = 0.54).

The medium and high association between the predictors of access to finance and the dependent variable of competitive growth indicated a relatively positive and significant level of agreement among the respondents that the predictors are related to the SMEs’ capacity, and are associated with competitive growth. This probably suggests that the factors mentioned above are critical facets of access to finance that SMEs need in order to operate dynamically and attain competitive growth.

Regression analysis

Regression techniques, such as coefficient of determination, analysis of variance, and standardized coefficient, were adopted to establish the level of the relationship between factors (i.e., predictors and dependent variable) and their validity fit. The specification of the regression model of access to finance was significant at the 95% level and with a p -value less than 0.05. The analysis showed a positive and significant relationship between some of the independent factors and explained variables.

However, the regression model adopted in this paper subscribes to the following econometric model:

where COMPGROW = dependent factor (competitive growth); β 0 = constant, β 1– β 4 = model coefficients; FIA = financial information access, Bbss = bank and business support services, SoB = structure of bank, and COLLATA = collateral requirement are predictors; and ε  = error term.

The regression results presented in Table 3 show the degree of variance in the four predictors of access to finance explained in the analysis. The results presented in Table 3 (the model summary) below show R  = 0.888 and R 2 of 0.788. The R  = 0.888 shows the degree of relatedness of the four predictors to the explained variable (competitive growth). The R 2 of 0.788 shows the total variance of competitive growth explained by the regression model. This means that the model fitness is 0.788, which indicates that 79% of the variability of the dependent factor (competitive growth) is explained by the independent factors of collateral requirement, financial information access, and bank and business support service, and it fits well.

Adjusted R 2 gives the correct estimation of the variance predicted by the covariates included in the model. The results indicate that the predictor factors, namely, collateral requirement, financial information access and bank and business support service predict SME competitive growth (adjusted R 2  = 0.786), and expressed as a percentage, the model explains 79% of the variance in competitive growth.

The F -ratio analysis explains the overall model fit. The F -ratio output explains that factors of access to finance reduce the error by 78.8% (163.968 ÷ 207.979). This is statistically significant with the F -ratio of 353.008, and it explains that the group’s analysis is not similar. This suggests significant differences between variations within the groups, and the p  < 0.001 shows strong evidence between group means, which justifies that the model is suitable at a p  < 0.05 significance level (the data fit the model).

In addition, the outputs presented in Table 4 suggest that the regression model directly explains the positive influence of the three predictors on the competitive growth of SMEs. Thus, the null hypothesis (H0) was rejected for the three factors (collateral requirement, financial information access, and bank and business support services) as related to access to finance, and the alternative hypothesis was accepted, and is consistent with the outputs of Table 5 .

H1: Collateral requirement) has a statistically significant influence on SME competitive growth.

H1: Bank and business support services have a positive and significant influence on SME competitive growth.

Table 5 presents the Standardized coefficient analysis that established the regression coefficient ( β ) for the four predictors. To assess how well each of the four predictors (collateral requirement, financial information access, bank and business support services, and structure of bank) contribute to the final equation, the tolerance value test indicated that the four predictors exceeded the 0.10 cut-off point, proof that multicollinearity was not violated (Field, 2018 ).

The results presented in Table 5 indicate that collateral requirement, financial information access, and bank and business support services have a unique statistically significant contributory influence (at p  < 0.05 and at t -statistic > 2) on SME competitive growth. Accordingly, SME entrepreneurs are more likely to be constrained regarding finance due to the current collateral requirement factor (magnitude 77%). This is followed by the inadequate financial information access needed by most SMEs from banks (the magnitude of 27%). Next was the inadequate financial schemes, funding programs and other enabling resources which support SME attractiveness for bank credit (level 6%).

These results suggest that for every 1% competitive growth an SME anticipates attaining, it will require 77% harmonized bank collateral requirement to the applicant’s access to a bank loan. Similarly, every 1% competitive growth an SME intends attaining would require a 26% improvement in adequate information available to the enterprises to identify potential suppliers of credit funds. Furthermore, the result suggests that for every 1% competitive growth an SME anticipates attaining, it will require a 6% improvement in the bank and business support services to boost their operational capacity and competitiveness to access needed loans from the financial market. (i.e., if all other independent factors remain constant in each case) and will likely influence the enterprise’s capacity to attain competitive growth in Lesotho. However, as seen in Table 5 , ‘structure of banks’ did not positively influence SME competitive growth, a finding that went against the researcher’s expectations in the analysis.

The analysis suggests that structure of bank does influence SME access to bank loans but it does not affect the enterprise’s capacity to attain competitive growth in Lesotho. This result is inconsistent with Osano and Languitone’s ( 2016 ) findings in Maputo, Mozambique. Thus, the results suggest that the construct ‘structure of bank’ is probably a new concept not familiar to SME respondents in Lesotho.

Therefore, the equation below indicates the extent that the four predictors contribute to the regression analysis and the substitution to the final equation of the study:

This paper followed a descriptive and explorative approach, factor analysis, and employed the Spearman correlation matrix and the regression analyses to address its objective. The initial analysis showed that the four constructs related to access to finance, namely, financial information access, bank and business support services, structure of bank and collateral requirement, form the measure of access to finance of SMEs in Lesotho. The correlation analysis showed that the explanatory factors, such as financial information access, bank and business support services, structure of bank and collateral requirement showed a positive and statistical association with the enterprises’ access to the needed finance and their capacity to attain some competitive growth in Lesotho. The analysis also suggests that SMEs’ access to finance is significantly linked to the positive and significant association between the explanatory factors to potentially gear enterprises’ ability to attain some competitive growth in Lesotho. Thus the correlation results indicate that the four predictors of access to finance are factors that hinder most Basotho SME from accessing credit and are correlated to their growth in the enterprise.

For further robust analysis, various regression analysis techniques, such as coefficient of determination, analysis of variance, and the standardized regression coefficient, were used to establish the strength of the relationship between the factors that explained competitive growth, as in the objectives of the study. The results of the regression analysis summarily indicated that the collateral requirement, financial information access, and bank and business support services factors have a unique statistically significant contributory influence (at p  < 0.05) on SMEs’ capacity to attain competitive growth in Lesotho. In explicit terms, the positive and statistical significance of the collateral requirement’s influence on competitive growth in the analysis suggests that most SMEs face a huge constraint in the financial market to access the needed credit. The results suggest that the collateral requirement is a major significant factor that hinders and discourages most Basotho SMEs from seeking credit from banks, since the banks insist on collateral almost equivalent to the credit needed, and as such, disenfranchises most SME applicants.

Although it is the bank’s prerogative to use a strategic approach to avoid losses in lending to borrowers, SMEs need to access the necessary credit. It is therefore evident that alternative sources of finance outside the conventional banking services, such as credit guarantee schemes, venture funds, and business angels, specific to the SME sector are needed to ameliorate the situation in the financial market. Thus, this result is consistent with the findings of Mazanai and Fatoki’s ( 2013 ) and Ingabire et al. ( 2016 ).

Furthermore, the significant positive relationship between financial information access and competitive growth shown in the analysis suggests that many Basotho SMEs face an intense competitive disadvantage in accessing the financial information needed to access adequate credit from banks, which affects their capacity to attain some competitive growth in Lesotho.

Although the nature and capacity of many SMEs actually constrain their access to credit from the financial market, the following possibilities indicate that the availability of adequate financial information on the financial market will decrease the lenders’ perception of SMEs applicants as being too highly risky, and harmonize the lending costs to loan applicants. Thus, the positive significance between access to financial information and competitive growth is consistent with the findings of Aleksandr et al. ( 2016 ).

In addition, the analysis suggested a positive relationship between bank and business support services and competitive growth. The result suggests Basotho SMEs lack adequate access to business support resources which affects their operational capacity, causes them to be unattractive to banks in terms of loans, and consequently, affects their ability to attain some competitive growth. Business support and enabling resources, such as training programs, advisory, financial management training, machinery, and equipment support, are significant enough to ease SMEs’ access to finance and may enable them to operate effectively to attain some competitive growth. This significance between bank and business support services and competitive growth is congruent with the findings of Zeebaree and Siron ( 2017 ) and Osano and Languitone ( 2016 ).

However, the structure of bank construct did not have a positive significant influence on SME competitive growth, and this was contrary to the researcher’s expectations. According to the strategic management literature, lack of competition in the financial sector constrains most SMEs’ access to needed loans, and this grossly affects the enterprises’ competitive growth in many developing countries. This finding suggests that although there are three main banks in Lesotho, as indicated in the literature, while bank structure does have a significant influence on SME applicants in securing a loan from banks, it does not influence the enterprises’ capacity to attain competitive growth in Lesotho. This finding was also in contrast to that of Osano and Languitone ( 2016 ). As indicated earlier, the results suggest that the construct ‘structure of bank’ is probably a new concept not familiar to most SME respondents in Lesotho.

Moreover, the positive and statistical significance of the predictors (collateral requirement, financial information access, and bank and business support services) with competitive growth, as found in the analyses, indicates that SMEs’ ability to access the needed loans and possibly attain competitive growth depends on various factors. For example, it depends on whether the policy on the collateral requirement in the financial market is harmonized, and whether the banks adopt practice and technology that decreases information asymmetry between lenders (banks) and SME applicants, and promote practices that encourage financial and business support resources to enterprises in Lesotho.

These findings further elucidate the critical issues related to access to finance, namely, collateral requirement, financial information access, and bank and business support services that SMEs face, which constrain their application and access to funds, and affect their capacity to attain competitive growth in Lesotho.

Nonetheless, the entrepreneurial literature indicates that similar studies have been carried out in some sub-Saharan African countries, such as the study by Ingabire et al. ( 2016 ) in Rwanda; Kihimbo et al. ( 2013 ) in Kenya; Osano and Languitone ( 2016 ) in Maputo’s Central Business District in Mozambique; and Mazanai and Fatoki ( 2013 ) in South Africa. These studies have considered some and similar factors of access to finance that are regarded as a critical influence on SMEs’ access to loans that affect enterprise growth. Thus, the positive and significant influence of collateral requirement, financial information access, and bank and business support services suggest that with less constraint from the aforementioned factors, SMEs may likely have access to needed finance from the financial market and attain some significant competitive growth in Lesotho.

Limitation and outlook

This study limited the factors related to access to finance to four predictors that were considered critical factors that constrain SMEs from accessing the needed loans from the financial market, as indicated in the review and in the analysis. The analysis focused on SMEs registered with the Ministry of Small Business Development, Cooperative and Marketing (MSBDCM), which constitutes 18% of the total MSME sector in Lesotho. This implies that 82% of SMEs in Lesotho are classified as micro and informal businesses that are not registered with MSBDCM, and that were not included in the study. Due to their informal status, banks consider them highly risky and unfit for bank loans.

However, this study found that the construct ‘structure of bank’ did not positively influence the competitive growth of SMEs. In further research, a similar investigation may be conducted in other districts of Lesotho to see if better outcomes might be achieved. In addition, to explore the solution to the identified constraints of access to finance that most SMEs face in Lesotho, future studies could investigate the suitability of alternative sources of finance outside the conventional banking services, such as the improvement of government incentive programs and credit guarantee schemes (i.e., Partial Credit Guarantee Scheme in Lesotho), venture funds and business angel funding, specific to Basotho SMEs, even at the start of the business and at low cost.

In sum, the analysis suggests that the critical factors of access to finance, such as collateral requirements by banks, inadequate access to financial information, and inadequate bank and business support services constrain most SMEs from attaining competitive growth in Lesotho. Thus, the analysis showed that the mentioned factors of access to finance significantly hinder SMEs’ from accessing adequate funds from banks, and affect their capacity to attain competitive growth. Therefore, to reduce the constraints of access to finance that SMEs face, the study opines the need to promote the financial inclusion of credit to enterprises.

This suggests the need for policy interventions geared to harmonizing the collateral requirements by the banks, promoting adequate access to financial information to SMEs in all rural and urban districts of Lesotho, and improving bank and business support services to SMEs to enhance their capacity, and to enable them to stand a chance to access adequate loans from banks. This will gradually ease the problems of asymmetric information between SME loan applicants and the banks, ease access to loans, and influence enterprises’ chances to attain competitive growth in Lesotho. Furthermore, due to the banks’ conservative and risk-averse policies, bank loans remain a limited source of finance for most SMEs in developing market economies. For these reasons, there is a need for a call to develop diversified sources of finance as an alternative and suitable source of finance outside the conventional banking services. Such specific programs for SMEs could include improving government incentive programs and credit guarantee schemes, venture funds, business angels investing in the business right from the start of business and at low cost, to address the specific financial needs of enterprises properly and in a timely fashion, and to support their capacity to attain competitive growth in Lesotho.

Availability of data and materials

The data generated and analyzed in the current study are included in this published article (and in the additional files).

Briefly, the multivariate techniques of the correlation and regression analyses are focused on complementary issues and were used to analyze multiple independent factors and a single dependent factor. In each case, the multivariate technique adopted explains that all the facets are seen to be random and interrelated to the extent that their different effects cannot meaningfully be interpreted separately and do not determine the causality in cases of identified positive correlations.

Abbreviations

• Small and medium-sized enterprises

Aleksandr, K., Jaroslav, B., Ludmila, K., & Pavla, P. (2016). The entrepreneurial perception of SME business environment quality in the Czech Republic. Journal of Competitiveness, 8 (1), 66–78.

Article   Google Scholar  

Amadasun, E.O.D. (2013). An assessment of small enterprises access to finance and information in Lesotho . Unpublished Master’s thesis. National University of Lesotho (Nul). Roma.

Amadasun, E.O.D. (2020). The influence of market-driven strategies and access to finance on competitive growth of small and medium-sized enterprises in selected districts of Lesotho . Unpublished doctoral thesis University of South Africa (Unisa). Pretoria.

Babbie, E., Mouton, J., Vorster, P. & Prozesky, B. (2011). The Practice of Social Research (South Africa edition). Cape Town: Oxford University Press.

Bhalla, A., & Kaur, M. (2013). SMEs’ access to finance: An analysis of attitude and decision-making criteria of commercial banks. Asia-Pacific Journal of Management Research and Innovation, 8 (1), 69–76.

El- Said, H., Al-Said, M., & Zaki, C. (2015). Trade and access to finance of SMEs: Is there a nexus? Journal of Applied Economics, 47 (39), 4184–4199. https://doi.org/10.1080/00036846.2015.1026583

EU (European Union). (2013). Improving access to credit under credit guarantees . The Remark by the Head of the European Union to Lesotho, Maseru.

Fetisovová, E., et al. (2013). Current problems of finances of SMEs . Bratislava: Ekonom. ISBN 978-8-02-253366-9.

Google Scholar  

Field, A. (2018). Discovering statistics using IBM SPSS statistics (5th ed.). SAGE Publishers.

Gathii, K. J., & Ngura, M. W. (2015). Socio-economic determinants of performance of Small and Medium Enterprises (SMEs) in Gilgil Town of Nakuru County, Kenya. Journal of Humanities and Social Sciences, 20 (8), 109–115.

Ghosh, S. (2016). Small business, lending relationships and crisis: Evidence from Indian microdata. Indian Institute of Management Calcutta, 43 (1), 1–15.

GoL (Government of Lesotho). (2013). Kingdom of Lesotho: Ministry of Trade, Industry, Cooperatives and Marketing; Trade Capacity Assessment and Action plan . Maseru.

GoL (Government of Lesotho). (2016). The FinScope MSME survey Lesotho 2015 . Maseru.

Hair, J. F., Hultt, G. T. M., Ringle, C., & Sarstedt, M. (2014). A primer on partial least squares structural equation modeling (PLS-SEM) . SAGE Publications Inc.

Hutcheson, G., & Sofroniou, N. (1999). The multivariate social scientist: Introductory statistics using generalized linear models . Sage Publication.

Book   Google Scholar  

Ingabire, J. F., Shukla, J., & Memba, F. (2016). Effects of rural small and microenterprise promotion project—Phase II on growth of SMEs in Rwanda: A case of Nyange Sector—Musanze District. The International Journal of Business and Management, 4 (2), 429–441.

Kihimbo, B., Ayako, B. A., & Omoka, K. W. (2013). Collateral requirement for financing of Small and Medium Enterprises (SMEs) in Kakamega Municipality in Kenya. International Journal of Current Research, 4 (6), 21–26.

Kremp, E., & Sevestre, P. (2013). Did the crisis induce credit rationing for French SMEs? Journal of Banking and Finance, 37 , 3757–3772.

Makhetha, L., & Sebolelo, P. (2015). Problems and prospects of SMEs loan management: Case of Lesotho. International Journal of Recent Research in Interdisciplinary Sciences, 2 (1), 24–31.

Matharu, S. K., Changle, R., & Chowdhury, A. (2016). A study of motivational factors of women entrepreneurs. The IUP Journal of Entrepreneurship Development, 34 (1), 33–46.

Mazanai, M., & Fatoki, O. (2013). Access to finance in the SME sector: A South African perspective. Asian Journal of Business Management, 4 (1), 58–67.

Mokoatleng, M.A. (2015). Small and Medium Enterprises’ access to external finance in Lesotho . Unpublished MBA thesis, University of the Free State, Bloemfontein.

Moro, A., & Fink, M. (2013). Loan Managers’ Trust and Credit access for SMEs. Journal of Banking and Finance, 37 , 927–936.

Osano, H. M., & Languitone, H. (2016). Factors influencing access to finance by SMEs in Mozambique: Case of SMEs in Maputo Central Business District. Journal of Innovation and Entrepreneurship, 5 (13), 1–16. https://doi.org/10.1186/s13731-016-0041-0

Singh, F., & Kaur, M. (2014). Small and Medium Enterprises’ awareness regarding export credit delivery system. Management and Labour Studies, 39 (1), 63–79.

Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The American Economic Review, 71 , 393–419.

Subairu, H. T. (2016). Analysis of relationship between SMEs employment growth and firm specific characteristics. Arabian Journal of Business and Management Review (OMAN Chapter), 5 (8), 30–39.

Zeebaree, M. R. Y., & Siron, R. B. (2017). The impact of entrepreneurial orientation on competitive advantage moderated by financing support in SMEs. International Review of Management and Marketing, 70 (1), 43–52.

Download references

Acknowledgements

Mrs. Retha Burger, the editor, Pretoria, South Africa.

We kindly solicit a waiver of publication costs, as the corresponding author is from a developing country, Lesotho.

The University of South Africa funded the survey as a bursary for the candidate’s Ph.D. study. Therefore, this paper utilizes the data obtained during the survey from the four districts of Lesotho (namely, Butha-Buthe, Leribe, Mafeteng and Maseru) in 2019.

Author information

Authors and affiliations.

Limkokwing University of Creative Technology, Maseru, Lesotho

Donald O. E. Amadasun

University of South Africa, Pretoria, South Africa

Ashley T. Mutezo

You can also search for this author in PubMed   Google Scholar

Contributions

The first author, DOEA did the preliminary writing, and the co-author ATM, supervised the study and reviewed the manuscript. Both authors read and approved the final manuscript.

Corresponding author

Correspondence to Donald O. E. Amadasun .

Ethics declarations

Ethics approval and consent to participate.

This paper has been drawn from the candidate’s Ph.D. thesis submitted to the University of South Africa on 26 June 2020.

Consent of publication

Not applicable.

Competing interests

There are no competing interests from the authors. The University of South Africa funded the survey as a bursary for the candidate’s Ph.D. study from 2017 to 2020. Hence, there are no financial and non-financial interests from the authors.

Additional information

Publisher's note.

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/ .

Reprints and permissions

About this article

Cite this article.

Amadasun, D.O.E., Mutezo, A.T. Influence of access to finance on the competitive growth of SMEs in Lesotho. J Innov Entrep 11 , 56 (2022). https://doi.org/10.1186/s13731-022-00244-1

Download citation

Received : 04 November 2021

Accepted : 28 September 2022

Published : 07 November 2022

DOI : https://doi.org/10.1186/s13731-022-00244-1

Share this article

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

• Structure of the bank
• Competitive growth

Information

• Author Services

Initiatives

You are accessing a machine-readable page. In order to be human-readable, please install an RSS reader.

All articles published by MDPI are made immediately available worldwide under an open access license. No special permission is required to reuse all or part of the article published by MDPI, including figures and tables. For articles published under an open access Creative Common CC BY license, any part of the article may be reused without permission provided that the original article is clearly cited. For more information, please refer to https://www.mdpi.com/openaccess .

Feature papers represent the most advanced research with significant potential for high impact in the field. A Feature Paper should be a substantial original Article that involves several techniques or approaches, provides an outlook for future research directions and describes possible research applications.

Feature papers are submitted upon individual invitation or recommendation by the scientific editors and must receive positive feedback from the reviewers.

Editor’s Choice articles are based on recommendations by the scientific editors of MDPI journals from around the world. Editors select a small number of articles recently published in the journal that they believe will be particularly interesting to readers, or important in the respective research area. The aim is to provide a snapshot of some of the most exciting work published in the various research areas of the journal.

Original Submission Date Received: .

• Active Journals
• Find a Journal
• Proceedings Series
• For Authors
• For Reviewers
• For Editors
• For Librarians
• For Publishers
• For Societies
• For Conference Organizers
• Open Access Policy
• Institutional Open Access Program
• Special Issues Guidelines
• Editorial Process
• Research and Publication Ethics
• Article Processing Charges
• Testimonials
• Preprints.org
• SciProfiles
• Encyclopedia

Journal Description

International journal of financial studies.

• Open Access — free for readers, with  article processing charges (APC) paid by authors or their institutions.
• High Visibility:  indexed within Scopus , ESCI (Web of Science) , EconLit , EconBiz , RePEc , and other databases .
• Journal Rank:  JCR - Q2 ( Business, Finance ) / CiteScore - Q2 ( Finance )
• Rapid Publication: manuscripts are peer-reviewed and a first decision is provided to authors approximately 29.4 days after submission; acceptance to publication is undertaken in 5.9 days (median values for papers published in this journal in the first half of 2024).
• Recognition of Reviewers: reviewers who provide timely, thorough peer-review reports receive vouchers entitling them to a discount on the APC of their next publication in any MDPI journal, in appreciation of the work done.

Latest Articles

Journal Menu

• Aims & Scope
• Editorial Board
• Instructions for Authors

Special Issues

Topical collections.

• Article Processing Charge
• Indexing & Archiving
• Editor’s Choice Articles
• Most Cited & Viewed
• Journal Statistics
• Journal History
• Journal Awards
• Editorial Office

Journal Browser

• arrow_forward_ios Forthcoming issue arrow_forward_ios Current issue
• Vol. 12 (2024)
• Vol. 11 (2023)
• Vol. 10 (2022)
• Vol. 9 (2021)
• Vol. 8 (2020)
• Vol. 7 (2019)
• Vol. 6 (2018)
• Vol. 5 (2017)
• Vol. 4 (2016)
• Vol. 3 (2015)
• Vol. 2 (2014)
• Vol. 1 (2013)

Highly Accessed Articles

Latest books, e-mail alert, conferences, further information, mdpi initiatives, follow mdpi.

Subscribe to receive issue release notifications and newsletters from MDPI journals

A Review on Access to Agriculture Finance by Farmers and its Impact on their Income

26 Pages Posted: 26 May 2022

Ujwala Kambali

Srinivas university, niyaz panakaje.

Yenepoya (Deemed to be University)

Date Written: May 9, 2022

Purpose: Agricultural financing is a critical component of all agricultural development operations aimed at improving the productivity. Farmers must have access to sufficient and timely financing for irrigation, farm mechanisation, and land expansion. The main goal of the study is to identify and explore the factors affecting agriculture finance, understand the challenges faced by the farmers, to compare the growth of farmer’s income before and after availing finance support and the strategies required to improve the agriculture credit to farmers. Design/Methodology/Approach: The study is based on secondary data gathered from several publications, websites, and other pertinent substance from NABARD and RBI annual reports. Findings: The study revealed that smallholder systems, policies, and investments are meant to improve infrastructure, boosting efficiency to expand and finance services, and increasing labour availability or automation; formal financial outlets have improved in region regions; financial institution violations are regulated by regulatory frameworks, such as charging exorbitantly high interest rates or taking excessive risks with people’s savings or investors’ assets; and financial institution violations are controlled by regulatory frameworks, such as charging exorbitantly high interest rates or taking unnecessary. Originality/Value: This study is infrequent in that it endeavours to trace the access of agricultural finance by farmers, as well as its impression on farmer’s income level varying to numerous agricultural strategies that have been enacted as a result of agricultural finance.

Keywords: Agriculture Finance, Farmers, Income, Growth, Strategies, ABCD Analysis

Suggested Citation: Suggested Citation

Niyaz Panakaje (Contact Author)

Yenepoya (deemed to be university) ( email ).

Mangalore Mangalore Dakshina Kannada, KS 575018 India 08971689771 (Phone) 575001 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics, related ejournals, decision-making in economics & finance ejournal.

Subscribe to this fee journal for more curated articles on this topic

Decision-Making in Public Policy & the Social Good eJournal

Agricultural economics ejournal, political economy - development: domestic development strategies ejournal, agricultural food science & food groups ejournal.

• Center for Financial Research
• Researchers
• Research Fellows
• Senior Advisor
• Special Advisor
• 2023 Fellows
• 2022 Fellows
• Visiting Scholar

Working Papers

• 23rd Bank Research Conference
• Conference Videos
• Speaker Information
• Poster Videos
• Poster Session Videos
• Previous Conference Programs
• Other Conferences
• 2021-2022 FDIC Academic Challenge
• 2020-2021 FDIC Academic Challenge
• Prior Years
• Research Assistants
• Internships
• Visiting Scholars

The FDIC is a preeminent banking research institution. The FDIC established the Center for Financial Research to promote research on topics important to the FDIC's mission including deposit insurance, bank supervision, making large and complex financial institutions resolvable, and resolution of failed financial institutions. The Center has an active seminar series and maintains contacts with preeminent scholars in the industry, academics, and the public sector. Its research follows banking industry developments, risk measurement and management methods, regulatory policy, and related topics. The Center sponsors an annual Bank Research Conference, hosts short-term visiting scholars, and manages a Visiting Scholars Program. The work of our researchers helps the FDIC maintain a safe, sound, and vibrant banking sector.

Papers, Studies, and Survey Reports

The Center publishes working papers, staff studies, survey reports, and other analyses to prompt discussion among the FDIC's many stakeholders to expand knowledge and understanding of issues that affect the banking system.

The Center hosts an annual Bank Research Conference and other events throughout the year to foster dialogue among banking regulators and supervisors, academics, and the private sector.

The Center includes a team of highly qualified economists and researchers, who conduct and publish empirical and theoretical research on the banking industry, bank regulation, and deposit insurance. They also develop statistical and financial models to support FDIC operations. The Center is also supported by advisors, scholars, and fellows who advise senior management and coauthor research papers with economists.

Career opportunities are available for interns, fellowships, and economists.

For additional information about the FDIC Center for Financial Research, please contact us .

Have a Paper You Want to Present at the FDIC?

The FDIC offers a seminar series to present interesting and informative papers. If you would like to present a paper, please e-mail your paper and available presentation dates to [email protected] .

Presenters will be reimbursed for their travel expenses.

About the Symposium

Staff Studies

September 19-20, 2024

Last Updated: May 20, 2024

How to Write a Research Proposal: (with Examples & Templates)

Table of Contents

Before conducting a study, a research proposal should be created that outlines researchers’ plans and methodology and is submitted to the concerned evaluating organization or person. Creating a research proposal is an important step to ensure that researchers are on track and are moving forward as intended. A research proposal can be defined as a detailed plan or blueprint for the proposed research that you intend to undertake. It provides readers with a snapshot of your project by describing what you will investigate, why it is needed, and how you will conduct the research.  

Your research proposal should aim to explain to the readers why your research is relevant and original, that you understand the context and current scenario in the field, have the appropriate resources to conduct the research, and that the research is feasible given the usual constraints.  

This article will describe in detail the purpose and typical structure of a research proposal , along with examples and templates to help you ace this step in your research journey.  

What is a Research Proposal ?  

A research proposal¹ ,²  can be defined as a formal report that describes your proposed research, its objectives, methodology, implications, and other important details. Research proposals are the framework of your research and are used to obtain approvals or grants to conduct the study from various committees or organizations. Consequently, research proposals should convince readers of your study’s credibility, accuracy, achievability, practicality, and reproducibility.   

With research proposals , researchers usually aim to persuade the readers, funding agencies, educational institutions, and supervisors to approve the proposal. To achieve this, the report should be well structured with the objectives written in clear, understandable language devoid of jargon. A well-organized research proposal conveys to the readers or evaluators that the writer has thought out the research plan meticulously and has the resources to ensure timely completion.  

Purpose of Research Proposals  

A research proposal is a sales pitch and therefore should be detailed enough to convince your readers, who could be supervisors, ethics committees, universities, etc., that what you’re proposing has merit and is feasible . Research proposals can help students discuss their dissertation with their faculty or fulfill course requirements and also help researchers obtain funding. A well-structured proposal instills confidence among readers about your ability to conduct and complete the study as proposed.  

Research proposals can be written for several reasons:³  

• To describe the importance of research in the specific topic  
• Address any potential challenges you may encounter  
• Showcase knowledge in the field and your ability to conduct a study  
• Apply for a role at a research institute  
• Convince a research supervisor or university that your research can satisfy the requirements of a degree program  
• Highlight the importance of your research to organizations that may sponsor your project  
• Identify implications of your project and how it can benefit the audience  

What Goes in a Research Proposal?    

Research proposals should aim to answer the three basic questions—what, why, and how.  

The What question should be answered by describing the specific subject being researched. It should typically include the objectives, the cohort details, and the location or setting.  

The Why question should be answered by describing the existing scenario of the subject, listing unanswered questions, identifying gaps in the existing research, and describing how your study can address these gaps, along with the implications and significance.  

The How question should be answered by describing the proposed research methodology, data analysis tools expected to be used, and other details to describe your proposed methodology.   

Research Proposal Example  

Here is a research proposal sample template (with examples) from the University of Rochester Medical Center. 4 The sections in all research proposals are essentially the same although different terminology and other specific sections may be used depending on the subject.  

Structure of a Research Proposal  

If you want to know how to make a research proposal impactful, include the following components:¹  

1. Introduction  

This section provides a background of the study, including the research topic, what is already known about it and the gaps, and the significance of the proposed research.  

2. Literature review  

This section contains descriptions of all the previous relevant studies pertaining to the research topic. Every study cited should be described in a few sentences, starting with the general studies to the more specific ones. This section builds on the understanding gained by readers in the Introduction section and supports it by citing relevant prior literature, indicating to readers that you have thoroughly researched your subject.  

3. Objectives  

Once the background and gaps in the research topic have been established, authors must now state the aims of the research clearly. Hypotheses should be mentioned here. This section further helps readers understand what your study’s specific goals are.  

4. Research design and methodology  

Here, authors should clearly describe the methods they intend to use to achieve their proposed objectives. Important components of this section include the population and sample size, data collection and analysis methods and duration, statistical analysis software, measures to avoid bias (randomization, blinding), etc.  

5. Ethical considerations  

This refers to the protection of participants’ rights, such as the right to privacy, right to confidentiality, etc. Researchers need to obtain informed consent and institutional review approval by the required authorities and mention this clearly for transparency.  

6. Budget/funding  

Researchers should prepare their budget and include all expected expenditures. An additional allowance for contingencies such as delays should also be factored in.  

7. Appendices  

This section typically includes information that supports the research proposal and may include informed consent forms, questionnaires, participant information, measurement tools, etc.  

8. Citations  

Important Tips for Writing a Research Proposal  

Writing a research proposal begins much before the actual task of writing. Planning the research proposal structure and content is an important stage, which if done efficiently, can help you seamlessly transition into the writing stage. 3,5  

The Planning Stage  

• Manage your time efficiently. Plan to have the draft version ready at least two weeks before your deadline and the final version at least two to three days before the deadline.
• What is the primary objective of your research?  
• Will your research address any existing gap?  
• What is the impact of your proposed research?  
• Do people outside your field find your research applicable in other areas?  
• If your research is unsuccessful, would there still be other useful research outcomes?  

  The Writing Stage  

• Create an outline with main section headings that are typically used.  
• Focus only on writing and getting your points across without worrying about the format of the research proposal , grammar, punctuation, etc. These can be fixed during the subsequent passes. Add details to each section heading you created in the beginning.   
• Ensure your sentences are concise and use plain language. A research proposal usually contains about 2,000 to 4,000 words or four to seven pages.  
• Don’t use too many technical terms and abbreviations assuming that the readers would know them. Define the abbreviations and technical terms.  
• Ensure that the entire content is readable. Avoid using long paragraphs because they affect the continuity in reading. Break them into shorter paragraphs and introduce some white space for readability.  
• Focus on only the major research issues and cite sources accordingly. Don’t include generic information or their sources in the literature review.  
• Proofread your final document to ensure there are no grammatical errors so readers can enjoy a seamless, uninterrupted read.  
• Use academic, scholarly language because it brings formality into a document.  
• Ensure that your title is created using the keywords in the document and is neither too long and specific nor too short and general.  
• Cite all sources appropriately to avoid plagiarism.  
• Make sure that you follow guidelines, if provided. This includes rules as simple as using a specific font or a hyphen or en dash between numerical ranges.  
• Ensure that you’ve answered all questions requested by the evaluating authority.  

Key Takeaways   

Here’s a summary of the main points about research proposals discussed in the previous sections:  

• A research proposal is a document that outlines the details of a proposed study and is created by researchers to submit to evaluators who could be research institutions, universities, faculty, etc.  
• Research proposals are usually about 2,000-4,000 words long, but this depends on the evaluating authority’s guidelines.  
• A good research proposal ensures that you’ve done your background research and assessed the feasibility of the research.  
• Research proposals have the following main sections—introduction, literature review, objectives, methodology, ethical considerations, and budget.  

Frequently Asked Questions  

Q1. How is a research proposal evaluated?  

A1. In general, most evaluators, including universities, broadly use the following criteria to evaluate research proposals . 6  

• Significance —Does the research address any important subject or issue, which may or may not be specific to the evaluator or university?  
• Content and design —Is the proposed methodology appropriate to answer the research question? Are the objectives clear and well aligned with the proposed methodology?  
• Sample size and selection —Is the target population or cohort size clearly mentioned? Is the sampling process used to select participants randomized, appropriate, and free of bias?  
• Timing —Are the proposed data collection dates mentioned clearly? Is the project feasible given the specified resources and timeline?  
• Data management and dissemination —Who will have access to the data? What is the plan for data analysis?  

Q2. What is the difference between the Introduction and Literature Review sections in a research proposal ?  

A2. The Introduction or Background section in a research proposal sets the context of the study by describing the current scenario of the subject and identifying the gaps and need for the research. A Literature Review, on the other hand, provides references to all prior relevant literature to help corroborate the gaps identified and the research need.  

Q3. How long should a research proposal be?  

A3. Research proposal lengths vary with the evaluating authority like universities or committees and also the subject. Here’s a table that lists the typical research proposal lengths for a few universities.  

Q4. What are the common mistakes to avoid in a research proposal ?  

A4. Here are a few common mistakes that you must avoid while writing a research proposal . 7  

• No clear objectives: Objectives should be clear, specific, and measurable for the easy understanding among readers.  
• Incomplete or unconvincing background research: Background research usually includes a review of the current scenario of the particular industry and also a review of the previous literature on the subject. This helps readers understand your reasons for undertaking this research because you identified gaps in the existing research.  
• Overlooking project feasibility: The project scope and estimates should be realistic considering the resources and time available.   
• Neglecting the impact and significance of the study: In a research proposal , readers and evaluators look for the implications or significance of your research and how it contributes to the existing research. This information should always be included.  
• Unstructured format of a research proposal : A well-structured document gives confidence to evaluators that you have read the guidelines carefully and are well organized in your approach, consequently affirming that you will be able to undertake the research as mentioned in your proposal.  
• Ineffective writing style: The language used should be formal and grammatically correct. If required, editors could be consulted, including AI-based tools such as Paperpal , to refine the research proposal structure and language.  

Thus, a research proposal is an essential document that can help you promote your research and secure funds and grants for conducting your research. Consequently, it should be well written in clear language and include all essential details to convince the evaluators of your ability to conduct the research as proposed.  

This article has described all the important components of a research proposal and has also provided tips to improve your writing style. We hope all these tips will help you write a well-structured research proposal to ensure receipt of grants or any other purpose.  

References  

• Sudheesh K, Duggappa DR, Nethra SS. How to write a research proposal? Indian J Anaesth. 2016;60(9):631-634. Accessed July 15, 2024. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5037942/  
• Writing research proposals. Harvard College Office of Undergraduate Research and Fellowships. Harvard University. Accessed July 14, 2024. https://uraf.harvard.edu/apply-opportunities/app-components/essays/research-proposals  
• What is a research proposal? Plus how to write one. Indeed website. Accessed July 17, 2024. https://www.indeed.com/career-advice/career-development/research-proposal  
• Research proposal template. University of Rochester Medical Center. Accessed July 16, 2024. https://www.urmc.rochester.edu/MediaLibraries/URMCMedia/pediatrics/research/documents/Research-proposal-Template.pdf  
• Tips for successful proposal writing. Johns Hopkins University. Accessed July 17, 2024. https://research.jhu.edu/wp-content/uploads/2018/09/Tips-for-Successful-Proposal-Writing.pdf  
• Formal review of research proposals. Cornell University. Accessed July 18, 2024. https://irp.dpb.cornell.edu/surveys/survey-assessment-review-group/research-proposals  
• 7 Mistakes you must avoid in your research proposal. Aveksana (via LinkedIn). Accessed July 17, 2024. https://www.linkedin.com/pulse/7-mistakes-you-must-avoid-your-research-proposal-aveksana-cmtwf/  

Paperpal is a comprehensive AI writing toolkit that helps students and researchers achieve 2x the writing in half the time. It leverages 21+ years of STM experience and insights from millions of research articles to provide in-depth academic writing, language editing, and submission readiness support to help you write better, faster.  

Get accurate academic translations, rewriting support, grammar checks, vocabulary suggestions, and generative AI assistance that delivers human precision at machine speed. Try for free or upgrade to Paperpal Prime starting at US$19 a month to access premium features, including consistency, plagiarism, and 30+ submission readiness checks to help you succeed.  

Experience the future of academic writing – Sign up to Paperpal and start writing for free!  

Related Reads:

How to write a phd research proposal.

• What are the Benefits of Generative AI for Academic Writing?
• How to Avoid Plagiarism When Using Generative AI Tools
• What is Hedging in Academic Writing?  

How to Write Your Research Paper in APA Format

The future of academia: how ai tools are changing the way we do research, you may also like, dissertation printing and binding | types & comparison , what is a dissertation preface definition and examples , how to write your research paper in apa..., how to choose a dissertation topic, how to write an academic paragraph (step-by-step guide), maintaining academic integrity with paperpal’s generative ai writing..., research funding basics: what should a grant proposal..., how to write an abstract in research papers..., how to write dissertation acknowledgements.

Character.AI CEO Noam Shazeer returns to Google

In a big move, Character.AI co-founder and CEO Noam Shazeer is returning to Google after leaving the company in October 2021 to found the a16z-backed chatbot startup. In his previous stint, Shazeer spearheaded the team of researchers that built  LaMDA  (Language Model for Dialogue Applications), a language model that was used for conversational AI tools .

Character.AI co-founder Daniel De Freitas is also joining Google with some other employees from the startup. Dominic Perella, Character.AI’s general counsel, is becoming an interim CEO at the startup. The company noted that most of the staff is staying at Character.AI.

Google is also signing a non-exclusive agreement with Character.AI to use its tech.

“I am super excited to return to Google and work as part of the Google DeepMind team. I am so proud of everything we built at Character.AI over the last 3 years. I am confident that the funds from the non-exclusive Google licensing agreement, together with the incredible Character.AI team, positions Character.AI for continued success in the future,” Shazeer said in a statement given to TechCrunch.

Google said that Shazeer is joining the DeepMind research team but didn’t specify his or De Freitas’s exact roles.

“We’re particularly thrilled to welcome back Noam, a preeminent researcher in machine learning, who is joining Google DeepMind’s research team, along with a small number of his colleagues,” Google said in a statement. “This agreement will provide increased funding for Character.AI to continue growing and to focus on building personalized AI products for users around the world,” a Google spokesperson said.

Character.AI has raised over $150 million in funding, largely from a16z.

“When Noam and Daniel started  Character.AI , our goal of personalized superintelligence required a full stack approach. We had to pre-train models, post-train them to power the experiences that make  Character.AI  special, and build a product platform with the ability to reach users globally,” Character AI mentioned in its blog announcing the move.

“Over the past two years, however, the landscape has shifted; many more pre-trained models are now available. Given these changes, we see an advantage in making greater use of third-party LLMs alongside our own. This allows us to devote even more resources to post-training and creating new product experiences for our growing user base.”

There is a possibility that different regulatory bodies, such as the Federal Trade Commission (FTC), and the Department of Justice (DoJ) in the U.S. and the EU will scrutinize these reverse acqui-hires closely. Last month. the U.K’s Competition and Markets Authority (CMA) issued a notice saying that it is looking into Microsoft hiring key people from Inflection AI to understand if the tech giant is trying to avoid regulatory oversight. The FTC opened a similar investigation in June to look into Microsoft’s $650 million deal.

You can reach out to this reporter at [email protected] by email and on signal at ivan.42 .

More TechCrunch

Get the industry’s biggest tech news, techcrunch daily news.

Every weekday and Sunday, you can get the best of TechCrunch’s coverage.

Startups Weekly

Startups are the core of TechCrunch, so get our best coverage delivered weekly.

TechCrunch Fintech

The latest Fintech news and analysis, delivered every Tuesday.

TechCrunch Mobility

TechCrunch Mobility is your destination for transportation news and insight.

Nancy Pelosi criticizes California AI bill as ‘ill-informed’

Congresswoman Nancy Pelosi issued a statement late yesterday laying out her opposition to SB 1047, a California bill that seeks to regulate AI. “The view of many of us in…

Palantir CEO Alex Karp is ‘not going to apologize’ for military work

Data analytics company Palantir has faced criticism and even protests over its work with the military, police, and U.S. Immigration and Customs Enforcement, but co-founder and CEO Alex Karp isn’t…

Why Porsche NA CEO Timo Resch is betting on ‘choice’ to survive the turbulent EV market

Timo Resch is basking in the sun. That’s literally true, as we speak on a gloriously clear California day at the Quail, one of Monterey Car Week’s most prestigious events.…

Google takes on OpenAI with Gemini Live

Made by Google was this week, featuring a full range of reveals from Google’s biggest hardware event. Google unveiled its new lineup of Pixel 9 phones, including the $1,799 Pixel…

OpenAI’s new voice mode let me talk with my phone, not to it

I’ve been playing around with OpenAI’s Advanced Voice Mode for the last week, and it’s the most convincing taste I’ve had of an AI-powered future yet. This week, my phone…

X says it’s closing operations in Brazil

X, the social media platform formerly known as Twitter, said today that it’s ending operations in Brazil, although the service will remain available to users in the country. The announcement…

Ikea expands its inventory drone fleet

One of the biggest questions looming over the drone space is how to best use the tech. Inspection has become a key driver, as the autonomous copters are deployed to…

Keychain aims to unlock a new approach to manufacturing consumer goods

Brands can use Keychain to look up different products and see who actually manufactures them.

Microsoft Copilot: Everything you need to know about Microsoft’s AI

In this post, we explain the many Microsoft Copilots available and what they do, and highlight the key differences between each.

How the ransomware attack at Change Healthcare went down: A timeline

A hack on UnitedHealth-owned tech giant Change Healthcare likely stands as one of the biggest data breaches of U.S. medical data in history.

Gogoro delays India plans due to policy uncertainty, launches bike-taxi pilot with Rapido

Gogoro has deferred its India plans over delay in government incentives, but the Taiwanese company has partnered with Rapido for a bike-taxi pilot.

A16z offers social media tips after its founder’s ‘attack’ tweet goes viral

On Friday, the venture firm Andreessen Horowitz tweeted out a link to its guide on how to “build your social media presence” which features advice for founders.

OpenAI shuts down election influence operation that used ChatGPT

OpenAI has banned a cluster of ChatGPT accounts linked to an Iranian influence operation that was generating content about the U.S. presidential election, according to a blog post on Friday.…

Apple reportedly has ‘several hundred’ working on a robot arm with attached iPad

Apple is reportedly shifting into the world of home robots after the wheels came off its electric car. According to a new report from Bloomberg, a team of several hundred…

Another week in the circle of startup life

Welcome to Startups Weekly — your weekly recap of everything you can’t miss from the world of startups. I’m Anna Heim from TechCrunch’s international team, and I’ll be writing this newsletter…

Researchers develop hair-thin battery to power tiny robots

MIT this week showcased tiny batteries designed specifically for the purpose of power these systems to execute varied tasks.

The Nevera R all-new electric hypercar can hit a top speed of 217 mph, and it only starts at $2.5 million

Rimac revealed Friday during The Quail, a Motorsports Gathering at Monterey Car Week the Nevera R, an all-electric hypercar that’s meant to push the performance bounds of its predecessor.

A hellish new AI threat: ‘Undressing’ sites targeted by SF authorities

While the ethics of AI-generated porn are still under debate, using the technology to create nonconsensual sexual imagery of people is, I think we can all agree, reprehensible. One such…

African e-commerce company Jumia completes sale of secondary shares at $99.6M

Almost two weeks ago, TechCrunch reported that African e-commerce giant Jumia was planning to sell 20 million American depositary shares (ADSs) and raise more than $100 million, given its share…

Only 7 days left to save on TechCrunch Disrupt 2024 tickets

We’re entering the final week of discounted rates for TechCrunch Disrupt 2024. Save up to $600 on select individual ticket types until August 23. Join a dynamic crowd of over…

‘Fortnite’ maker Epic Games launches its app store on iOS in the EU, worldwide on Android

Epic Games, the maker of Fortnite, announced on Friday that it has officially launched its rival iOS app store in the European Union. The Epic Games Store is also launching…

Google is bringing AI overviews to India, Brazil, Japan, UK, Indonesia and Mexico

After bringing AI overviews to the U.S., Google is expanding the AI-powered search summaries to six more countries: India, Brazil, Japan, the U.K., Indonesia and Mexico. These markets will also…

Meta draws fresh questions from EU over its CrowdTangle shut-down

The Commission is seeking more information from Meta following its decision to deprecate its CrowdTangle transparency tool. The latest EU request for information (RFI) on Meta has been made under…

What is Instagram’s Threads app? All your questions answered

Twitter alternatives — new and old — have found audiences willing to try out a newer social networks since Elon Musk took over the company in 2022. Mastodon, Bluesky, Spill…

UK neobank Revolut valued at $45B after secondary market sale

Revolut has confirmed a new valuation of $45 billion via a secondary market share sale, shortly after the U.K.-based neobank secured its own banking license in the U.K. and Mexico.…

Ben Horowitz declares war on Michael Moritz

A social media spat between billionaire tech investors is raising questions about the journalistic independence of three-year-old news outfit SF Standard, after a reporter representing the outlet reached out to…

California AI bill SB 1047 aims to prevent AI disasters, but Silicon Valley warns it will cause one

SB 1047 has drawn the ire of Silicon Valley players large and small, including venture capitalists, big tech trade groups, researchers and startup founders.

California weakens bill to prevent AI disasters before final vote, taking advice from Anthropic

California’s bill to prevent AI disasters, SB 1047, has faced significant opposition from many parties in Silicon Valley. Today, California lawmakers bent slightly to that pressure, adding in several amendments…

Meta axed CrowdTangle, a tool for tracking disinformation. Critics claim its replacement has just ‘1% of the features’

Journalists, researchers and politicians are mourning Meta’s shutdown of CrowdTangle, which they used to track the spread of disinformation on Facebook and Instagram. In CrowdTangle’s place, Meta is offering its…

Rivian launches smaller $1,400 camp kitchen, 5 years after initial demo

The Rivian camp kitchen attracted buzz from almost the moment it appeared as a prototype in 2019 at Overland Expo West. Despite interest in the accessory, Rivian never actually sold…

Grab your spot at the free arXiv Accessibility Forum

Help | Advanced Search

Computer Science > Computation and Language

Title: mutual reasoning makes smaller llms stronger problem-solvers.

Abstract: This paper introduces rStar, a self-play mutual reasoning approach that significantly improves reasoning capabilities of small language models (SLMs) without fine-tuning or superior models. rStar decouples reasoning into a self-play mutual generation-discrimination process. First, a target SLM augments the Monte Carlo Tree Search (MCTS) with a rich set of human-like reasoning actions to construct higher quality reasoning trajectories. Next, another SLM, with capabilities similar to the target SLM, acts as a discriminator to verify each trajectory generated by the target SLM. The mutually agreed reasoning trajectories are considered mutual consistent, thus are more likely to be correct. Extensive experiments across five SLMs demonstrate rStar can effectively solve diverse reasoning problems, including GSM8K, GSM-Hard, MATH, SVAMP, and StrategyQA. Remarkably, rStar boosts GSM8K accuracy from 12.51% to 63.91% for LLaMA2-7B, from 36.46% to 81.88% for Mistral-7B, from 74.53% to 91.13% for LLaMA3-8B-Instruct. Code will be available at this https URL .

Submission history

Access paper:.

• HTML (experimental)
• Other Formats

References & Citations

• Google Scholar
• Semantic Scholar

BibTeX formatted citation

Bibliographic and Citation Tools

Code, data and media associated with this article, recommenders and search tools.

• Institution

arXivLabs: experimental projects with community collaborators

arXivLabs is a framework that allows collaborators to develop and share new arXiv features directly on our website.

Both individuals and organizations that work with arXivLabs have embraced and accepted our values of openness, community, excellence, and user data privacy. arXiv is committed to these values and only works with partners that adhere to them.

Have an idea for a project that will add value for arXiv's community? Learn more about arXivLabs .