LEASING, FINANCIAL LITERACY AND FINANCIAL PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN KADUNA STATE

Abstract

Small and Medium Enterprises (SMEs) play a vital role in driving economic development globally
and within Nigeria. Despite this, a significant number of formal SMEs face substantial challenges
in accessing formal sources of capital, which hinders their growth and operational performance.
This research explores the moderating role of financial literacy in the relationship between leasing
and the performance of SMEs. The study analysed data collected from 214 SMEs in Kaduna State
using the Partial Least Squares Structural Equation Modelling (PLS-SEM) technique to test the
proposed framework. The results indicate that leasing exerts a positive influence on the
performance of SMEs, and that financial literacy significantly moderates this relationship,
particularly with regard to financial performance. Theoretically, the study enhances the
application of the Resource-Based View (RBV) by deepening the understanding of how leasing and
financial literacy interact to influence SME performance. From a practical standpoint, the findings
offer valuable insights to policymakers, SME owners and managers, and development stakeholders
on the importance of promoting financial literacy to maximize the benefits of leasing. The study
recommends that the government and relevant agencies should invest in expanding leasing
opportunities and prioritize financial literacy training to support SME development.