EFFECT OF FINANCIAL INCLUSION ON GROWTH OF SMALL AND MEDIUM ENTERPRISES IN PAKISTAN THROUGH MODERATING EFFECT OF SHARIAH-COMPLIANT FINANCING

Abstract

The key objective of this study is to check the impact of financial inclusion on the SME's growth by taking Shariah-compliant financing as a moderator. The sample has been based on cluster sampling, the sample comprised the SMEs operating in nine major cities of Pakistan and its size is 600 in total. Structural equation modeling has been employed on the responses of the respondents through SmartPLS4. The direct results shows that the impact of financial inclusion is positive and significant on dimensions of the SME's sales growth and workforce growth, while insignificant on profit growth and market share growth. Similarly, Shariah-Compliant Financing impacts Market Share Growth and Sales Growth positively and are statistically significant, while insignificant effect on profit growth and workforce growth. Indirect results, Shariah-Compliant Financing is moderating between Financial Inclusion and dimensions of the SMEs growth has a positive and significant effect on market share growth and sales growth. The Shariah-compliant financing could be increased by adopting effective strategies and financial knowledge. The financial institutions campaign an awareness program about the products and services offered for SME sectors, rules and regulations of loans, and loan documentation and provide financial literacy to them.