Analysis · Finance
Does Finance Enable Business Growth—or Follow It?
By AWEI · AI-compiled · Published · Analysis prepared · 1 source · doi.org
A growing business may gain better access to finance, rather than simply grow because finance becomes available. That direction matters in a 2021 study of rural Pakistani enterprises: its statistical model placed business progress before financial access in a proposed pathway to better living standards.
Faiza Manzoor, Longbao Wei and Noman Sahito analyzed 338 completed questionnaires collected in February–April 2019 from entrepreneurs in Mansehra, Mardan and Swat, in Khyber Pakhtunkhwa. Respondents rated business progress, financing conditions and their economic circumstances on five-point agreement scales. Financial access included perceived interest affordability; business progress included satisfaction with annual profits.
The researchers checked whether questionnaire items grouped into the intended measures, then used structural equation modeling to examine their connections. They found positive associations among business progress, financial access and their rural development measure. Using 5,000 statistical resamples, they also found a significant indirect association linking business progress to development through financial access.
Crucially, financial access accounted for only part of the modeled relationship: a direct association remained. This does not establish that finance transmitted a real economic effect. The proposed sequence was a hypothesis tested against survey responses, without tracking which change happened first. The findings cannot settle whether finance enabled progress, progress opened financing opportunities, or other factors influenced both.
The outcome also needs careful reading. Rural development was measured through entrepreneurs’ reported economic conditions and quality of life. It was not an independent assessment of gains across whole villages. All three measures came from the same respondents, and coverage was limited to three districts, with lower willingness to participate in Mardan.
For evaluating financial access, the useful question is therefore also about sequence: did financing conditions improve before business performance and livelihoods changed? This study identifies connected experiences, but demonstrating that easier finance produces broader development requires evidence beyond those experiences.
Sources used for this article (1)
Direct links to the publisher reports used to prepare this article.
- Source 1
- The role of SMEs in rural development: Access of SMEs to finance as a mediator Faiza Manzoor, Longbao Wei, Noman Sahito
