Abstract:
Small and medium-sized plant nurseries are critical actors in Sri Lanka’s agri enterprise sector, contributing to rural employment, environmental sustainability, and
crop system diversification. Despite their growing importance, these enterprises face
persistent challenges in accessing formal credit and managing finances effectively.
While credit constraints are widely recognized, limited empirical research has
examined how financial literacy influences agribusiness performance within the Sri
Lankan context.This study investigates the combined effect of credit accessibility and
financial literacy on the performance of nursery enterprises, while also identifying
key credit-related challenges and potential mitigation strategies. A cross-sectional
survey was conducted among 220 nursery operators in the North Western and North
Central Provinces. Stratified random sampling was applied based on business size
and district location. Data were collected using a structured, pre-tested questionnaire,
and reliability was confirmed. Firm performance was measured using a combination
of financial and non-financial indicators. Binary Logistic Regression (BLR) was used
to identify significant predictors of performance, while the Relative Importance Index
(RII) was applied to rank credit related constraints and mitigation strategies. Results
indicated that credit accessibility significantly influenced firm performance.
Financial literacy showed a significant positive association, with moderate and high
literacy levels contributing to better firm performance. Firm size had a marginally
significant effect, with small-scale nurseries outperforming micro scale ones. Key
challenges included high interest rates, strict collateral requirements, and complex
loan procedures. Recommended solutions were low-interest loans , simplified loan
processes, and reduced collateral requirements. This study highlights the critical
importance of improving financial literacy and enhancing credit accessibility to
support the performance of rural plant nursery enterprises.
