The impacts on informal financing strategy of small and micro enterprises by interest rate risks and public health emergencies

Abstract

Informal finance is a crucial financing method for small and micro enterprises (SMEs) in most developing countries. Interest rate risks (IRS) should be a vital component of SMEs' informal finance strategies (IFS), and public health emergencies (as COVID-19) is likely to modify IFS due to increased liquidity risks for SMEs. This article examines the relationship between IRS and IFS and its moderated effects by COVID-19. The study develops a structural equation model of SMEs' IFS to investigate SMEs' IFS, the causal relationship between IRS and SMEs' IFS, mediator effects of SMEs' corporate financial status and regional financial and economic conditions, and moderating effects of SMEs' variables. The empirical data is from Wenzhou, China, distributed between 2016 and 2021. The study concludes that IFS will continue to be a financing technique for Chinese SMEs, even if it may have a deterrent effect due to COVID-19. Additionally, there is a strong positive causal association between IFS and SMEs' IRS, as well as moderator and mediator effects. Recommendations for government policy include clarifying the connection between SMEs' IFS and influencing variables, providing scientific and methodical analysis tools for evaluating factors impacting SMEs' IFS, and encouraging the optimization and upgrading of SMEs' IFS.

Inventiveness as a Driver of Small and Medium-Sized Business Profitability in South Africa: A Quantile Regression Method

“…Naicker (2023) discovered that rapidly expanding small enterprises contributed more to inventiveness and the creation of an overall boost to the economy than slow-growing organizations. According to Yang et al (2023), R&D intensity positively and significantly impacts job growth for enterprises in the medium and higher quartiles of (0.4-0.9). Chikosi (2022) discovered that inventiveness is positively associated with company profitability using trademarks and R&D investment as metrics of inventiveness for rapidly expanding organizations.…”

“…The perspective on resource theory outlines the internal strengths and assets that differentiate businesses, relaxing the premise of financial comparability (Udeagha & Muchapondwa, 2023). Yang et al (2023) were the first to develop the notion. Materials are defined as a business's pool of information, equipment, worker skills, and intangible and tangible properties.…”