Role of financial literacy on sustainability of smes in pakistan
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Date
2025
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UMT.Lahore
Abstract
The detrimental consequences of sustainability on human health and climate change have resulted in a developing global concern. This concept incorporates the aspects of economic performance, social contributions, and environmental practices to lead the countries towards a green nation. However, there are some constraints faced by the businesses of Pakistan in achieving the goal of sustainable development and growth. Hence, the core objective of the current study is to examine the role of financial literacy on the sustainability of SMEs in Pakistan with the mediating role of green technological innovation. Access to Finance is also tested as a moderator. To analyze this relationship, cross-sectional study is conducted. Data is collected from 152 SMEs through online questionnaires filled in by owners of SMEs classified in the manufacturing sector. For data analysis, the two-stage technique structural equation modeling (SEM) is applied to test the objectives of the current study. Firstly, the first-order measurement is assessed which reveal that the items meet the threshold of reliability and validity. Secondly, the second-order measurement model is assessed which also reveals that the latent variables meet the reliability and validity threshold. Finding of the structural model reveal that the financial literacy has a positive and significant influence on the sustainability of SMEs. Results show that financial literacy and green technological innovation have a positive and significant impact on each other. Green technological innovation and business sustainability have a positive and significant relationship with each other. Green technological innovation positively and significantly mediates the relationship of financial literacy and business sustainability. Lastly, the study found no moderation of access to finance on the relationship of financial literacy and green technological innovation. Institutions should ensure the training and development programs to integrate financial literacy into SMEs policies for investment decision. Government should provide subsidies and incentives in credit to SMEs owners, which are adopting eco-friendly production process and using renewable energy.