Improving small and medium‐size enterprise performance: Does working capital management enhance the effectiveness of financial inclusion?

Abstract

Growth of the small and medium‐size enterprise (SME) sector is traditionally an important driver of overall economic growth, particularly in emerging economies. SME growth is enhanced by access to finance (financial inclusion). In this study, we show that efficient working capital management has a positive influence on performance that is independent of the effect of financial inclusion. Our results remain robust to alternative measurements and estimations, and may be useful to national policy‐makers in developing strategies for SMEs' greater access to finance and introducing ways of improving financial management education and training for SME managers.

Effect of Financial Literacy, Capital Capacity, and Network on the Performance of MSMEs in South Tangerang, Banten, Indonesia

“…MSMEs can invest in equipment, grow their operations, and seize growth opportunities thanks to easier access to cash, which boosts their overall business performance (Dela Cruz et al, 2023). This is especially crucial for MSMEs in developing and rising nations since their expansion is severely hampered by a lack of access to financing (Bhattacharyya et al, 2023). Thus, initiatives aimed at expanding MSME managers' knowledge and training in financial management as well as strengthening their access to capital will help MSMEs succeed and support general economic expansion.…”