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Microfinance services and MSE growth in Pakistan: The mediating perspective of social and psychological capital

Author

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  • Muhammad Farhan Jalil

    (Lecturer, School of Business School, University of Technology Sarawak, Sibu, Sarawak, Malaysia)

  • Azlan Bin Ali

    (Associate Professor, School of Business and Management, University of Technology Sarawak, Sibu, Sarawak, Malaysia)

  • Zeeshan Ahmed

    (Assistant Professor, Lahore Business School, University of Lahore Gujrat Campus, Gujrat, Punjab 50700, Pakistan)

Abstract

PURPOSE: In the era of globalization and competition in a vigorous market, micro and small enterprises (MSEs) look for sustainable growth by consuming diverse resources. Previous studies have identified that financial services of microfinance are essential drivers for SMEs’ survival. Yet, the feature role of other microfinance services, such as micro-credit, micro-savings, micro-insurance, training, and social networking, to achieve substantial growth of the MSE sector is still lacking, which explains why MSEs make such a small contribution to Pakistan’s economy. Therefore, the main purpose of the research is to consider the impact of microfinance services on the growth of MSEs in Pakistan, as MSEs are the most vulnerable group in the country and throughout the world. Moreover, this study also identified the mediating role of social and psychological capital in enhancing the productivity of microfinance services for MSEs. METHODOLOGY: 770 respondents from metropolitan cities in Pakistan were contacted for the survey, and the response rate was 64%. After screening the data, only 357 questionnaires appeared to be completed in all respects, so they were initially fed into the computer spread and then imported for further analysis. Structured questionnaires were used to collect the data from 357 micro and small enterprises operating in the developing market of Pakistan. Derived hypotheses were verified through Structural Equation Modelling (SEM) using AMOS 21. FINDINGS: The study’s findings revealed that microfinance services have an essential role in promoting MSE growth. Microfinance institutions’ services, such as micro-credit, micro-savings, micro-insurance, and training, play an important role in the development of MSEs. Moreover, social and psychological capital are the crucial factors that partially mediate the relationship between microfinance services and MSE growth in Pakistan. The limitation of this study is the adaptation of a crosssectional design to collect the data. Longitudinal research at different time frames may present diversified results. IMPLICATIONS: The study gives the impression that institutions of microfinance, practitioners, and other policymakers should enhance their perimeter to offer microfinance services and support group-based lending or training to maximize their social and psychological capital, through which MSEs may be able to attain substantial growth. ORIGINALITY/VALUE: This empirical study contributes to the literature on microfinance services and MSE growth by focusing on the mediating effect of social and psychological capital, and providing the foundation for further studies.

Suggested Citation

  • Muhammad Farhan Jalil & Azlan Bin Ali & Zeeshan Ahmed, 2022. "Microfinance services and MSE growth in Pakistan: The mediating perspective of social and psychological capital," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 18(1), pages 93-130.
    • Handle: RePEc:aae:journl:v:18:y:2022:i:1:p:93-130
    DOI: 10.7341/20221814
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    References listed on IDEAS

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    1. Anglin, Aaron H. & Short, Jeremy C. & Drover, Will & Stevenson, Regan M. & McKenny, Aaron F. & Allison, Thomas H., 2018. "The power of positivity? The influence of positive psychological capital language on crowdfunding performance," Journal of Business Venturing, Elsevier, vol. 33(4), pages 470-492.
    2. Yan, Yan & Guan, JianCheng, 2018. "Social capital, exploitative and exploratory innovations: The mediating roles of ego-network dynamics," Technological Forecasting and Social Change, Elsevier, vol. 126(C), pages 244-258.
    3. Panagiotis Piperopoulos & Mario Kafouros & Murod Aliyev & Emma Yan Liu & Alan Au, 2021. "How does informal entrepreneurship influence the performance of small formal firms? A cross-country institutional perspective," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 33(7-8), pages 668-687, August.
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    Cited by:

    1. Piotr Å asak, 2022. "The role of financial technology and entrepreneurial finance practices in funding small and medium-sized enterprises," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 18(1), pages 7-34.
    2. Catherine W. Gathitu & Dr David Kabata & Dr Grace Kiiru, 2024. "Influence of Government Sponsored Enterprise Funds-Credit Services on the Growth of Group-Based Micro and Small Enterprises in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(2), pages 1326-1340, February.

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