Micro and Small Businesses Access to Finance and Financial Literacy of their Owners: Evidence from Latvia, Estonia and Georgia

Lack of financial literacy of micro, small and medium-sized enterprises (MSMEs) owners/managers is often mentioned among the reasons of their financial exclusion. The main objective of the article is to verify whether the targeted group - MSMEs - access to finance and financial literacy of their owners/managers are closely linked in observed countries – Latvia, Estonia and Georgia. As a supportive objective, analysis of the relationship between financial literacy of MSMEs owners, adult literacy and the level of general education in a country is also analyzed. The research is exploratory in its nature, based on intensive literature review, analysis of the countries’ statistics and the case study. The main findings are as follows: Analysis of financial literacy scores and financial inclusion in Latvia and Estonia evidences a constantly positive association between these two indicators.Positive cause-effect relationships are observed between the level of general education of the population, personal literacy, financial literacy of MSMEs owners/managers and MSMEs access to finance.In the observed countries, the level of general education of the population is quite high, but the owners of micro and small businesses do not have sufficient specialized business education, skills and competences.Due to high general level of education, Georgia has a good chance to improve financial literacy of MSMEs owners in a short time. The paper has the potential to impact policy decision-makers to consider the recommendations made.