Impact of microcredit on the performance of micro and small enterprises (MSEs) in Yemen

This study examines the impact of microcredit on the performance of Micro and Small Enterprises (MSEs) in Yemen, focusing on the mediating role of beneficiary satisfaction. Data was collected using a structured questionnaire from 398 MSE proprietors in Yemen who have accessed microcredit from Microfinance Institutions (MFIs). The study implemented a proportionate stratified random sampling technique to determine the sample size, and based on the sample size determination formula. The study employed descriptive analysis using SPSS and Partial Least Squares Structural Equation Modeling (PLS-SEM) with Smart PLS 3.2.9 software to analyze the relationships between microcredit, beneficiary satisfaction, and MSE performance. Findings indicate that microcredit significantly affects profitability, sales growth, and employment expansion among MSEs in Yemen. However, microcredit does not show a significant association with asset growth. Furthermore, beneficiary satisfaction mediates the relationship between microcredit and profitability, sales growth, and asset growth, highlighting its crucial role in maximizing the benefits of microfinance services. The study suggests policy recommendations to enhance microcredit effectiveness, including reducing interest rates, simplifying loan processes, enhancing beneficiary satisfaction, and integrating technology into MFI services.This study provides critical insights into the role of microcredit in enhancing the performance of Micro and Small Enterprises (MSEs) in Yemen, with a specific focus on beneficiary satisfaction as a mediating factor. By employing robust statistical techniques, the research establishes that microcredit positively influences profitability, sales growth, and employment expansion, while also underscoring the importance of beneficiary satisfaction in maximizing these benefits. The findings highlight key policy recommendations, such as lowering interest rates, streamlining loan processes, and leveraging technology in microfinance services, to enhance the effectiveness of microcredit programs. This study offers valuable guidance for policymakers, financial institutions, and development agencies seeking to optimize microfinance initiatives for sustainable economic growth.