Assessing the Influence of Green Finance on the Financial Sustainability Performance of Small and Medium Enterprises (SMEs): Comparative Analysis of Malaysia and Indonesia

In response to global environmental concerns and the growing emphasis on sustainability, small and medium-sized enterprises (SMEs) have emerged as significant players in promoting environmentally responsible practices. This paper investigates the impact of green finance on the financial sustainability performance of SMEs, with a specific focus on Malaysia and Indonesia, two prominent Southeast Asian economies. Through a comparative analysis, the study examines the challenges and opportunities encountered by SMEs in each country as they navigate the landscape of green finance, highlighting key factors influencing adoption rates and outcomes. Utilizing self-administered online questionnaires, data were collected from 212 owner-managers in Malaysia and 123 owner-managers in Indonesia. Statistical analyses using SPSS and Smart PLS-SEM software were conducted to test the hypotheses and explore the mechanisms through which green finance influences sustainability performance among SMEs. This research contributes to Sustainable Development Goal 13, “climate action,” by providing insights into how SMEs in Malaysia and Indonesia engage with green finance to enhance their financial sustainability performance. By identifying the drivers and barriers associated with green finance adoption, this study offers valuable implications for policymakers, financial institutions, and SMEs seeking to promote environmentally responsible practices and achieve sustainable development goals.