SMEs’ Access to Finance, Growth, and Jobs

Evidence shows that unlike large businesses, SMEs are more constrained in their access to financial services (Beck et al., 2005; Ayyagari et al., 2007; Mugano, 2024). With respect to the SMEs and growth nexus, weak legal and financial institutions which are normally prevalent in developing countries are one of the major hindrances preventing SMEs from growing into large firms (Mugano, 2024). Ironically, from an empirical underpinning perspective, existing finance and growth literature shows that finance is critical for SMEs’ growth and ultimately economic growth. For example, the first-generation studies which inter alia include Levine and Zervos (1998), Rajan and Zingales (1998), and Demirgüç-Kunt and Maksimovic (1998) used aggregate data to showcase that financial development affects economic growth.