Financial Inclusion and Financial Condition: The Mediating Effect of Financial Self-efficacy and Financial Literacy

The belief of individuals and access to useful, affordable financial resources by small and medium businesses, especially to manage their finances to improve their financial condition, is limited. This study investigates the impact of financial inclusion on the financial condition of small and medium enterprises in south-west Nigeria through financial self-efficacy and financial literacy. This study employs the purposive sampling technique to employ a quantitative method on the active population of registered small and medium-scale enterprises (SMEs). Two statistical software were used; statistical package for social sciences and structural equation modelling to test the mediating effect of financial self-efficacy and financial literacy on relationship between financial inclusion and financial capability of SMEs. The component effectively measures all its constructs with the confirmatory factor analysis measure. Based on the structural model, financial inclusion directly and indirectly through financial self-efficacy and financial literacy positively influences financial capability. This shows that financial inclusion amplifies the financial condition of SMEs in south-west part of Nigeria. It was recommended that managers of the firms should encourage and implement suitable and appropriate financial inclusion strategies to enhance financial conditions. Likewise, management of the SMEs when making decision on the product and service offered should strategically create thoughtful ideals that will increase their ability to manage their financial condition through financial self-efficacy and literacy. However, it was suggested that similar studies be conducted in other sectors of the economy.