SMALL MEDIUM ENTREPRISES FINANCIAL INNOVATION IN THE AGE OF UNCERTAINTY

Abstract

This article objective is to collect and analyze new information on the effects of SME finance innovations from the year 2000 to the present. To further our comprehension of this issue, we use the Partial Least Square (PLS-SEM) approach to look at the correlation between SME acquisitions and fresh investment. Testing for longitudinal correlations shows that new approaches to assisting SMEs have resulted in a more favorable business climate in the country. In addition, both long-term and short-term data support the feedback hypothesis between proxy measures of supporting innovation and the expansion of SMEs. Although all of the variables discussed here have an effect on SMEs over the long term at the national level, only trade openness provides short-term evidence for unidirectional causation. The research contends that for small and medium-sized enterprises (SMEs) to reach their full potential, a well-functioning SME financing system is necessary but not sufficient. To this end, the government should incentivise banks to provide new forms of SME financing, such as low-interest loans and stable fee structures.