DefinePK

Abstract

This study examines the various factors that make small business owners and traders in Khyber Pakhtunkhwa, Pakistan, reluctant to engage with formal financial services. Whereas formal financial facilities are available, most such small enterprises still depend on informal systems of finance. The paper aims to identify major constraints that impede the ability of small business owners to access formal banking services and underpin such limitations at the social, technical, and behavioural levels. Detailed interviews conducted among members of the Chamber of Small Business and Traders in Peshawar revealed a lack of confidence in financial institutions, cultural preference for informal systems, and a general lack of access to banking infrastructure as some of the major issues. Further, limited digital literacy and security concerns of the digital platforms contribute to low adoption of mobile and online banking solutions. It also identifies that some target interventions are required in terms of enhancing financial literacy, improving the structure of banking at the village level, and appropriate security measures for using digital services. This study fills in the complex dynamics that underpin non-banking behaviour with practical recommendations aimed at improving financial inclusion among small businesses in KPK.
Keywords: Non-Banking Behavior, Financial Inclusion, Small Businesses