FINANCIAL INCLUSION ROLE IN THE GROWTH OF SMALL AND MEDIUM ENTERPRISES IN PAKISTAN THROUGH MEDIATING EFFECT OF FINANCIAL INTERMEDIATION

This study aims to investigate the impact of FI on SME growth by using financial intermediation as a mediator between them in the case of Pakistan. Based on cluster sampling, the sample of 600 respondents was taken from twelve major cities of Pakistan. We circulated questionnaires to 50 respondents belonging to each city. The independent variable is Financial Inclusion and its indicators. At the same time, SME growth and its dimensions are a dependent variable. Financial intermediation (market penetration as its dimension) is a mediating variable. Structural equation modeling is employed to estimate the study. The direct results show that FI positively and significantly impacts the dimensions of the SMEs' growth. Still, financial intermediation negatively impacts the dimensions of the SME’s growth and is statistically insignificant. PG and MSG have a negative but significant effect on sales growth and workforce growth. In direct results of the mediating effect, financial intermediation as a mediator impacts negatively between FI and the dimensions of the SME’s growth, is statistically insignificant on PG and MSG, and has a negative and significant effect on sales growth and workforce growth.