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The role of SMEs in rural development: Access of SMEs to finance as a mediator

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  • Faiza Manzoor
  • Longbao Wei
  • Noman Sahito

Abstract

Small and Medium Enterprises (SMEs) are considered as the fundamental tool for economic growth, nevertheless, they face continuous financing challenges. SMEs are a major source for generating employment, creation of wealth and alleviating poverty from the rural regions in developing countries. Their access to finance is key to the expansion of this sector. The paper aims to discover the intervening role of “access of SMEs to finance” in the link between SME’s evolution and rural development, in the context of Pakistan. In total 338 entrepreneurs operating SMEs in rural areas completed a survey for the study. Through a multi-stage stratified random sampling technique, entrepreneurs were selected from three districts. Confirmatory factor analysis and structural equation modeling were used to test hypotheses. This study shows that SME’s evolution has a positive and optimistic influence on rural development. Further, the study also reveals that on SME’s progress a positive influence happens by the “access of SMEs to finance”. Particularly, the study finds that “access of SMEs to finance” significantly mediated the effect of SME’s evolution on rural development. The findings of this paper hold significant implications for both the research society and loan-issuing institutions and departments.

Suggested Citation

  • Faiza Manzoor & Longbao Wei & Noman Sahito, 2021. "The role of SMEs in rural development: Access of SMEs to finance as a mediator," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-18, March.
    • Handle: RePEc:plo:pone00:0247598
    DOI: 10.1371/journal.pone.0247598
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    Cited by:

    1. Shankar Ghimire & Bharat Singh Thapa & Rong Zheng, 2025. "Microfinance for change: how financial innovation enables structural transformation," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-20, December.
    2. Salem Ahmed Alabdali & Salvatore Flavio Pileggi & Dilek Cetindamar, 2023. "Influential Factors, Enablers, and Barriers to Adopting Smart Technology in Rural Regions: A Literature Review," Sustainability, MDPI, vol. 15(10), pages 1-38, May.
    3. Ikenna Franklin EZE & Thobekani LOSE, 2023. "Consequences Of Failure And Challenges Of Small Business In South Africa: A Theoretical Review," Business Excellence and Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(3), pages 18-32, September.
    4. Abdijabbar Ismail Nor, 2024. "Entrepreneurship Development as a Tool for Employment Creation, Income Generation, and Poverty Reduction for the Youth and Women," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 19387-19410, December.
    5. Azal Mahboob & Akila Rathnasinghe & Anushika Ekanayake & Piyumi Tennakoon, 2024. "Evaluating BIM’s Role in Transforming Cash Flow Forecasting Among Construction SMEs: A Saudi Arabian Narrative," Sustainability, MDPI, vol. 16(23), pages 1-23, November.
    6. Hongwei Zhang & Zhanqi Wang & Ji Chai, 2024. "Understanding government support for rural development in Hubei Province, China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-11, December.
    7. Oscar Chakabva & Robertson Tengeh & Job Dubihlela, 2021. "Factors Inhibiting Effective Risk Management in Emerging Market SMEs," JRFM, MDPI, vol. 14(6), pages 1-12, May.
    8. Soelchan Arief Effendi & Eko Ganis Sukoharsono & Lilik Purwanti & Rosidi, 2023. "Building Partnership or Competition: Village Business Sustainability in Indonesia," Sustainability, MDPI, vol. 15(18), pages 1-16, September.
    9. João Henrique Paulino Pires Eustachio & Walter Leal Filho & Amanda Lange Salvia & Yana Medeiros Guimarães & Luciana L. Brandli & Laís Viera Trevisan & Jelena Barbir & Adriana Cristina Ferreira Caldana, 2024. "Implementing sustainability in teaching: The role of sustainability leadership and transformational leadership in the context of higher education institutions," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(5), pages 5331-5347, October.
    10. Msomi Thabiso Sthembiso & Olarewaju Odunayo Magret & Ngcobo Xolani, 2021. "Sustaining South African Small and Medium-sized Enterprises Through Monetary Access and Literacy in the COVID-19 ERA," Folia Oeconomica Stetinensia, Sciendo, vol. 21(2), pages 57-75, December.

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