Abstract
Microfinance is critical for the development of micro-enterprises and alleviating poverty. However, micro-enterprises are able to get microfinance services, they would face a variety of obstacles, due to the misunderstandings among many stakeholders, microfinance has not acquired widespread acceptance. Therefore, the purpose of this study is to investigate microfinance's impact on the sustainable development of Malaysia’s rural micro-enterprises. Besides, digital finance is integrated into the conceptual model to further investigate their mediating impact. Data was collected from 563 rural micro-enterprises using structured questionnaires, which were then statistically analyzed using AMOS-21. The findings of the study reveal that microfinance has a positive substantial influence on rural micro-enterprises development. Moreover, digital finance partially mediates the relationship. Thus, the study concludes that microfinance institutions are needed to adopt digital finance to enhance micro enterprises’ productivity through low transaction costs. The findings of the study can be useful to policymakers in the micro-enterprise sector who have a long-term vision and expect the sector to develop steadily. The study also provides scope and space for future academics and scholars to conduct further research.
Highlights
Malaysia is one of the fastest growing economies in the world, but the majority of its small business owners remain impoverished [42]
The findings indicated a substantial relationship between microfinance and rural Micro enterprises (ME) development, which was consistent with prior research [15, 19, 20, 40]
Microfinance is critical for improving the living conditions of poor MEs and alleviating poverty, since they require financial services to increase enterprise output and expand entrepreneurial intention
Summary
Malaysia is one of the fastest growing economies in the world, but the majority of its small business owners remain impoverished [42]. One of the most widely held beliefs in the bottom of the pyramid (BOP) studies for decades has been that impoverished people would always have restricted access to financial services [10]. A market-based approach to poverty reduction is provided by the BOP viewpoint [47]. The BOP theory provides a comprehensive and effective framework for understanding the characteristics of micro-enterprises (MEs) in Malaysia. Successful BOP initiatives help MEs to develop more sustainably through microfinance services [71]. The adoption of digital finance within the BOP sector is the most serious impediment to the poor into long-term development [5]. Baishya and Samalia [17], on the other hand, argued against this conventional wisdom, claiming that there is a high need for financial technology in the BOP market. MEs have access to a mobile banking through phones, allowing
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