Access to finance and its impact on operational efficiency of MSMEs: mediating role of entrepreneurial personality and self-efficacy

What is it about?

The present study aims to investigates the factors of loan access that affect entrepreneurial self-efficacy and operating efficiency of Indian MSMEs. Furthermore the study intended to investigate the influence of entrepreneurial self-efficacy on operating efficiency of Indian MSMEs and its mediating role. In this study, exploratory research design is used. The study heavily relies on the primary data which has been collected by using survey research method from a cross-section of 617 women-owned MSMEs, located in urban, rural, suburban, and exurban areas of Haryana, Uttarakhand, Himachal Pradesh, and NCR-Delhi. The partial least square structural equation modeling (PLS-SEM) method version 3.3.3 has been used to evaluate. Findings-In terms of the selected factors affecting access to finance, it has been established that the Loan Formalities, Banking Process, Loan Process, Staff Responsiveness, and Incentive Scheme have a positive and significant influence in enhancing accessibility to finance and improving the self-efficacy and operating performance of firms. The findings also show the entrepreneurial self-efficacy mediates the relationship between various factors of loan access and operating efficiency of MSMEs. The results of the study demonstrate that attitudes toward entrepreneurship, entrepreneurial self-efficacy, perceived access to findings, and business operations all have a significant and positive impact on entrepreneurial ability. Furthermore, it has been shown that entrepreneurial ability has a strong and positive influence on entrepreneurial intentions to access the commercial bank financing for small businesses and the impact of the same on the women owed MSMEs in India. It also revealed unfavorable loan terms, limited collateral, fear of repaying of loan, and intricate loan application were among the many reasons for loan denial. The study presents an integrated framework that takes into account entrepreneurial self-efficacy and financial accessibility at the same time. This all-encompassing method offers a thorough grasp of the variables affecting MSMEs' operational efficiency. In contrast to earlier research that might have concentrated only on direct relationships, this study explores the mediating mechanisms involved. Offering a nuanced view of the underlying mechanisms, it investigates how entrepreneurial and self-efficacy mediate the effect of access to finance on operational efficiency. By taking into account particular MSME sector characteristics like size, industry, or regional variations, the study may provide a unique contextual lens. Understanding how these contextual factors interact with entrepreneurial attributes and access to finance adds depth to the analysis.

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